Tuesday, 10 March 2009

Icy tracks

It had to happen. The Norwegian Pension Fund – based on oil revenues, managed by the Central Bank and invested in shares and bonds abroad – has by now incurred losses in excess of its accumulated earnings since 1998. Since last year 60,000 US$ has gone down the drain of every Norwegian household! Admittedly we still have the shares, but how many of the companies invested in are guaranteed against going bust?

When the fund was set up share prices were soaring and portfolio investment seemed a good idea. Some maintained that more of it should be put into infrastructure and real estate. Building roads for instance, buying up the Borough of Chelsea like the Arabs did or purchasing a Canary Island. No one really knew what the best alternative would be. Portfolio investment looked good. It was what all other funds did and so we did it too. And we did it in an ethical way. No investment in tobacco, child labour or shady regimes. On hindsight it would probably have been more lucrative to keep the money in the bank – albeit not one of the Icelandic ones.

The petroleum fund has been very important to Norway. It freed us from external debt, made people feel they could afford to stay out of the EU and it provided mental insulation against the crisis. As it now shrinks, the oil price falls, new offshore fields become less viable, sub contractors go out of business and firms tumble all over the place that feeling may wane. Perhaps it is time to rethink the fund’s investment strategy? It seems that Wal-Mart, McDonalds, Johnnie Walker, Camel and Hustler are the best slump business opportunities.

What we really need now is a new gadget to turn gloomy sentiments into optimism. Samsung is due to put its new HD phone on the shelves soon. That might help. Also a ski trip is called for, although most of the new snow that came over the week end has melted. But not to worry, a new batch is due on Thursday.

Just beware of the risk of sliding down the icy tracks.

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