Thursday, 3 June 2010

Catch-up post

After three weeks of plugging away and being busy handling some stuff I’m back and since now new posts will appear rather regularly. Now it’s all downhill – I took seven out of ten exams in this exam period and did my bit where I should have done. Today, on Corpus Christi I decided not to pore over any books nor notes, plus in the afternoon I’m stranded at home as the procession’s route this year is my street and one of the altars has been put in my neighbours’ gate. Time to sum up what has happened recently.

1) The PZU IPO…
…has turned out to be roaring success, not only in terms of bridging the gap between government’s spending and revenues but also in many other facets. This has been the biggest IPO this year and the triumph of new approach to privatisation taken by PO-PSL government. Leaving out the protracting conflict with Eureko which had hampered the IPO for years, this time it was a really “civic privatisation”. The flotation was mostly aimed at individual buyers (I deliberately don’t use the word ‘investors’), each of them could subscribe for maximum 30 stock, 312.50 PLN per each, what totalled to over 9,000 PLN per subscriber. This means that beneficiaries of the operation were 250,000 ordinary people, not only big foreign companies which many times bought Polish enterprises for a song.
PZU was floated on Warsaw Stock Exchange on Wednesday, 12 May, I sold my stocks within three days for no less than 355 PLN. I have to say minister Grad offered 250,000 subscribers something what should not occur in economics – a free lunch or in simple words the chance to reap high profits by taking relatively low risk. I’m looking forward to a next free lunch which will be the Tauron IPO, you can subscribe for the stocks in the value up to 9,450 PLN by 18 June and sell them on 30 June at the earliest, according to current plans.

2) The tension on financial markets…
…was moderately relieved. Risky asset markets bottomed out robustly on 26 May from the levels unseen for many weeks. The problem of Greece has been swept under the carpet, fears of fiscal crises in Europe eased, nobody mentions the imminent burst of property bubble in China. However, I’m wary of the situation when I look at some indicators. Stock markets climbed giving some (not missed) opportunities for quick profits, crude oil prices also picked up but the Zloty remains week, EUR/USD is still in the doldrums and doesn’t give much hope for a recovery. I predict a sideways trend as the greed and fear seem to balance each other out.

3) Flood in Poland.
It seems 2010 is giving Poland a rough ride. The bogey of first months was a harsh winter that impacted economic rebound (though it was observed across the whole northern hemisphere), then Poles suffered a shock after 96 people, including high-rank state officials died in plane crash near Smolensk. May brought frequent rainfalls that led up to the biggest flood since 1997. Thousands of people lost their property, several died and the presidential campaign began to revolve around the natural disaster. Will we be wiser after the event? I suppose there’s no other way of preventing the losses than not giving planning permissions for housing and any other type of development in the areas than might be flooded.

4) The record of flight recorders from presidential TU-154 was released to the public two days ago. The Polish government decided it would be best if everyone could read those documents. The full transparency of the investigation is essential for one crucial reason – to curb conspiracy theories, even though they will never be rooted out and even though there will always be those who don’t believe and know better. The record seems to indicate it was pilots’ recklessness that caused a tragedy, some also point at Russian flight controller’s belated warnings. This story is rather unlikely to be unravelled, also because much of the content is indecipherable. The pilots hoped there would be no tragedy, realised the touchdown would be horrific, the second pilot screamed out the most popular Polish word at the very end of the drama. Many Poles will probably utter the same word on 4 July 2010.

5) Cycling to school remained in the realm of declarations. I have four lame excuses why I didn’t commute to school by bike: either I had to wear a suit, or someone gave me a lift and I went by car, or it was dark the time I was returning home, or the rain was pouring down or forecasters had predicted rainfalls. Nevertheless I liked the weather, at least it wasn’t hot, but yesterday’s humid air (combined with broken down air conditioning in my school’s new building) and subsequent storm were the last straw. I’d be longing for some moderately warm (around +18C) and sunny days…


Anonymous said...

I am sure you know there is no free lunch in economy.

So I wonder - why not start with greater price and left smaller yields to the small investors.

After all most of them will sell the actions next week - the actions will end in big players' hands anyway.

Why National Treasury is giving its profits away?

student SGH said...

Anon, you bet :)

Usually you bring down a price of an item you want to sell to encourage buyers to make a purchase. It's to a great extent about PR - the government wanted to show privatisation is good cause everyone can profit from it - it was of course a political move. But if the "investors" or to give it straight, speculators weren't that sure they would have a return, they would be reluctant to subscribe for stocks and lower demand would send the price down anyway.

Yes, most of "temporary PZU co-owners" got rid of their share in the company within a few days, but they earned, not the big players who had to buy those stocks at a higher price, so who wins?

These are rather revenues than profits, probably because it is short of money in the budget and if you want to realise an asset quickly your cost is a lower price. And mind that this is also an example of redistibution. Stocks sold at lower price mean lower budget revenues, that results in higher budget deficit, what in turn leads us to higher taxes. So all taxpayers pay for profits of some taxpayers. The hitch is that a rational taxpayer will subscribe for stocks.