Tight Credit Conditions Benefit Business Managers and Stock Investors

A corporation, a partnership, or a proprietary concern can all work with their own funds. They can also invite others to share in ownership. Merchant banking is not an essential service.

All countries have regulatory central banks. It would appear from media reports that they have nothing else to do apart from changing lending rates and conditions.

Economists say that interest rates and industrial growth are related. Bank funds do result in growth, but the benefits may not be distributed equitably. You and I are powerless to change this, but tight money conditions need not be all bad.

A serious stock investor can use difficult fund conditions to pick top stocks. Firstly, it is an appropriate occasion to shed under-performing stocks. A portfolio can change for the better in difficult stock market conditions.

Bank managers are generally slower in raising pay-outs on deposits than on raising charges for money they lend. Divert your savings to stocks with durable values, when banks pay less than the rate of inflation.

That is one example of how it can make sense to stand up to a stock market bear.

Tight money conditions encourage managers to think more about the cash they waste. Consider how the oil marketing companies have curtailed advertising during June 2008. Only M. S. Dhoni and Narain Kartikeyan lose if India does not promote branded fossil fuels.

Some sales-dominated companies buy customers with credit rather than with their own products and services. Banks do them favors by raising interest rates, and by refusing inflated credit lines.

It is the same with inventory. Which warehouse does not have slow-moving items? Tight credit conditions remind managers to visit their godowns once again.

Do you need some tailoring to adjust to your central bank directives? Post below or email StockWay.MyView@gmail.com