TSX Bubble: The Research In Motion Effect

A Canadian stock exchange called the TSX (Toronto Stock Exchange) has about $400 Bil worth of foreign originated trades (that you might call foreign investors). That amounts to 40% of the value on the TSX, so the remaining 60% are domestic investors. A huge proportion of the TSX is mostly ‘Materials’, ‘Energy’ and ‘Financials’ (original post).

The Research In Motion effect goes like this. RIM was a major mobile technology company whose executives were charged with ‘creative accounting’. They back dated some stock options, so that the original price would have been much less than current stock market value. Blackberry, their product, was mostly geared toward the business community. When this scandal broke it alienated their customer base who are all business professionals. Though your IT guy might remember the ensuing service outages more readily.

Back to the TSX, not all of that $400 Bil, if it were in Materials and Energy might be recouped because mining and energy exploration can be a ‘bet’. When it has been recouped after the gold from the ground has been sold, then money is called ‘dry-powder liquidity’.

Currently Barrick Gold, one of Canada’s bigger gold mining companies, and Home Capital Group, a vast non-regulated mortgage company, is facing an onslaught of management controversy as bad as Research In Motion. From human rights abuse, cyanide spills and export bans to mortgage melt-down. These speculative investments and the money involved might shrink as much as the capitalization of Research in Motion, over night.