Experiences of an American woman who was married to a Serb.

Thursday, August 23, 2007

Serbs claim you can't lose on Belgrade Stock Market

In 2006 the Belgrade Stock Market was one of the top 10 fastest growing markets in the world although hardly anyone in the US ever heard of it. In fact roughly 60% of funds on the market are from foreign backers -- according to my husband this is mostly Croatian financial firms and expatriated Serbs.

Aside from real estate, the Belgrade Stock market is the hip hot thing for young people (by which I mean ages 25-35) to talk about getting rich on. I'm hearing about new brokerages being formed by former bank employees who want to get rich. The new brokerage I have a connection to say they'll either take 1% commission on all transactions for a client, or if you wish to invest a minimum of 100,000 Euros, they'll manage your funds personally, buying and selling as needed to get you the highest possible return. The latter service costs a straight 17% cut of the "profits" (I'm not sure how often it's calculated) and they say they "guarantee" at least a 20% return on investment pre-commission of course.

If you look at the annual growth charts in the latest monthly report (PDF here, it's in Serbian but the numbers are obvious to any English-speaker) , you can see why everyone's so bullish.

But I'm not. Whenever I hear about a "guaranteed sure thing" on the financial markets, I immediately grow wary and suspicious. I've heard of and seen too many bubbles fall. Heck, I lived through the dot-com blow out when so many of my friends lost their businesses (and some their marriages and homes to boot.)

Anyway, past performance is not a remotely solid indicator of the future. And this market has too FEW influencers. Only a few companies are represented, only a few brokers are involved, only a few million-Euro funds are investing, etc. When there are only a few influencers, the problems of any one of them could pull the entire market down. Plus, let's face it, Serbia is a pretty small country that's spent most of its history being batted around like a mouse toy by bigger powers (Russia, Turkey, Austria, Germany, NATO, etc.) who care little if anything for the fate of the little man - or average stockholder. Any of these could make a move that could squash the Belgrade market like a bug ... at least for a while.

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