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Wednesday, November 14, 2007
Deciphering The Financial Markets
© theirEarth News Media

The Best Equity Is In The Environment

There are a number of elements impacting the state of the financial markets at present, like CDO's, sub-prime mortgages, currency exchange pricing, oil and gold pricing, plus short, medium and long term expectations. Most factors are now entered into the equation, but some are still working themselves through the system. The overall financial uncertainty is diminishing but the impact has not unfolded completely. With time there is more clarity, but this process will probably take another 3-6 months to settle.

Looking at global equities, the expected slowdown in the U.S. markets and hence in Europe as well, has not hit the Chinese and Indian markets yet. What is not clear is how significantly they will be impacted by the changing financial circumstances being experienced by the other world indices. One of the concerns is knowing the degree of leveraged investments that are in these markets, because if these indices start to head lower in a trend, there could be a large unwinding of equity positions there. If the majority of the investments in the Indian and Chinese markets have been long term, then the bottom to them will have a strong resilience, but if the investments are significantly speculative and leveraged, then there could be an adjustment downwards that is significant.

In all financial markets, the investment picture is changing rapidly to a New Economy that is based upon environmental technology and zero emissions products for the future. Wind and Solar Energy will be the significant growth investments of the future. Once all world indices settle and the volatility has come down to an average level, the currency exchange positions will start to move into a more stable equilibrium as well.

The best investments, once there is more stability, will be for investors who can make equity purchases using their overly strong currency and buy into some of the new environmental technology international companies traded on currently weak currency markets (an investment in the United States). The most difficult aspect is determining the timing of when to do this as buying while the purchase currency is strong has a short term risk of the stock price valuation still dropping further. This whole investment process of currency arbitrage equity investment will also help to push currency imbalances into an equilibrium, so the investor who takes a long position in the environmental company should achieve a significant return on their investment just from the strengthening of the other country's currency.

The key to the Indian and Chinese markets retaining some of their strength is for them to quickly start the move and announce ecosystem protection initiatives, and the development of the new environmental technology industries like Wind and CSP energy (Concentrating Solar Power - solar thermal energy) for internal power generation, rather than coal. All Countries will need to radically look inward to protect their environment in all areas, as international trading constraints, stronger that the 1997 Kyoto Protocol, are coming that are designed to protect all of us from environmental calamity, and safe guard our Earth environment.

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