Journalists don’t understand the share market

It is increasingly worrying how little journalists understand about real-world and particularly economic issues, seeing that they write about them all the time. Hamish Rutherford, who, quite frankly, ought to know better, has come out with this article on?Stuff: quote.

Investors in New Zealand’s largest petrol company?have taken a hammering, with?shares plunging to the lowest level since mid-2016, as the market frets about both political intervention and already increasing competition.

As petrol prices have surged to record highs in recent months, the prime minister has made unprecedented comments about the sector as she effectively announced the fuel industry would face the first investigation under new powers from the Commerce Commission.

“Consumers,?in my?book, are?being fleeced,”?Ardern told reporters on October 8, as she announced planned changes to the Commerce Act would be rushed through the final stages. end quote.

Rutherford’s article was published on October 26th and Jacinda’s little tirade about motorists being ‘fleeced’ was on October 8th. The very strong implication in Rutherford’s article is that Jacinda’s words have caused the share price to fall… as if she had an influence on the performance of listed companies on the stock market.

Well, it is true that she has had a negative impact on business in general but, I’m sorry Hamish – Jacinda does not have that much influence on the stock market in New Zealand, except in the minds of journalists.

Because, for the last couple of weeks – coincidentally since about October 8th – stock markets of the world have all been going through a timely correction, with the Dow Jones leading the way. Are you trying to say, Hamish, that Jacinda can influence the Dow and the FTSE as well?

Let me just give you a few examples to show why the journalists are wrong.

Genesis Energy (GNE) – Share price October 8 – $2.45. Share price 26 October – $2.365

ANZ Bank (ANZ) – Share price October 8 – $29.50. Share price 26 October – $27.00

Fletcher Building (FBU) – Share price October 8 – $6.29. Share price 26 October – $5.74

Auckland Airport (AIA) – Share price 8 October – $7.265. Share price 26 October – $6.885

Z Energy (ZEL) – Share price October 8 – $6.99. Share price 26 October – $5.94

Z Energy’s price has fallen about 15%, but then the ANZ Bank’s share price has dropped about 9% and she hasn’t said anything about the ANZ so far.

So there is no reason to claim that since the prime minister has threatened oil companies with regulation that this has had a significant effect on the share price. Markets are fickle indeed, but there is no logical correlation here. We are in a bear market. Incidentally, it might be considered a good time to buy.

Heather du Plessis Allen waded in on the subject on Friday morning, demonstrating her ignorance on the subject as well. First, she echoed the theory that Jacinda had influenced the share price when there is no real evidence of it. If she had acknowledged the current market adjustment, but said that Z Energy Ltd’s share price fall was significantly higher than all the others (and I cannot confirm that, as I have not done sufficient research and have only taken a small sample of stock prices above), then she may have had a point but Heather, in her ignorance, went one step further . She went on to say that ‘we’ own Z Energy Ltd. Unless she is a major shareholder herself, and is not letting on, I think it is reasonable to assume that, by ‘we’, she means New Zealand citizens.

Wrong Heather. So very wrong.

The shareholders of Z Energy Limited own Z Energy Ltd. It is a public company, not government owned, and therefore it does not belong to the New Zealand populace. Just to rub salt in the wound, Heather, it is likely that a fair chunk of Z Energy Ltd’s owners are offshore.

The value of Z Energy Ltd is affected by a number of things, and high oil prices may well be one of them. Threats of regulation may be another, but the prospect of that is some way off. What is really worrying though is how journalists just shoot their mouths off on the subject without any concept of what they are talking about. That in itself could cause damage to a company when there is no truth to it at all.

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