Frances Horodelski’s blog is one that I continuously follow up on as I find it quite captivating and enriching. In one of her blogs specifically Merry-go-round equity markets she describes how the stock market has suffered dramatically due to landmines. Hordodelski uses the term landmine to illustrate the current downfalls in the global economy. The issues that have led to downward pressure on stocks include: the Japanese earthquake, a series of rate hikes in China and Congressional foot-dragging on raising the U.S. debt-ceiling. However, the most current and largest issue is due to the European crisis. Many corporations are becoming less profitable and their stock prices reflect the reduction in profits, since stock markets are quite efficient. A corporation’s main objective is to continue to build strong communication lines with its shareholders in order to keep them updated with current developments within the corporation. In this way, there are no surprises as to production, sales and ultimately earnings forecasts produced by the corporation. These forecasts are becoming more difficult to produce and meet because of the above noted factors. For example, because most companies operate in a global environment today, they may be affected by not only local events, but by global developments. This is especially true of actions taken in areas like China, India, the USA and Europe.  In this global environment, the best a corporation can do is to develop a forecast as accurately as possible based on all company specific internal and external information it has available to it.

Citation: Horodelski, Frances. “ Merry-go-round equity markets.” 11 October 2011. Web. 29 October. 2011. <http://www.bnn.ca/Blogs/2011/10/11/Merry-go-round-equity-markets.aspx>

Picture: “Warren Buffett one-on-one with BNN’s Kim Parlee” 25 June 2008. Web. 29 October. 2011. <http://everythingwarrenbuffett.blogspot.com/2008/06/bnncom-warren-buffett-one-on-one-with.html>