THE BUCHAREST STOCK EXCHANGE ON WIKILEAKS Three loads of baloney

The American Embassy doesn"t seem to take much interest in the Romanian stock market. The only report on the subject (and a pretty boring one at that), out of the thousands of pages revealed by "Wikileaks", only mentions a single meeting, which took place on June 9th, 2008, between the president of the BSE Stere Farmache and the embassy"s economic attachés.

What Farmache told them:

• 1. That the BSE is affected by the financial international turbulence and that it is trying to maintain its level, based on the growth of the Romanian economy (let"s remember that we only admitted on the next year that we entered the crisis);

• 2. That the BSE would launch new financial instruments, that taxes would be eliminated and that a corporate governance code would be drawn up for the listed companies;

• 3. That he intends to have 400-500 companies listed as part of a new category, called the "RASDAQ-Star".

That was all.

That is all a decade in the history of the Romanian stock market history, a decade in which I wrote about it daily, amounts to in the American embassy: three loads of baloney.

The economists of the Embassy had nothing to comment, no interest at all on the subject.

They just swallowed three loads of baloney raw.

• THE FIRST ONE: The stock exchange is the barometer of the economy

Farmache told them the logical thing - the Romanian economy is protected from "turbulence", meaning that we had the base for escaping the storm that toppled the foreign stock markets and that all that was left was to do was finding the way to do it.

In other words, he was trying to suggest that the BSE was in sync with the evolution of the Romanian economy.

The stock market is after all, the "barometer of the economy", isn"t it?!

The man has learned his meme and he keeps serving it, three years later; two days ago, in a seminar, he got all hot and bothered, saying that the stock market indexes are anticipating Romania"s exit from the recession, (some of our more innocent colleagues, in another editorial office, yesterday published an article called: "Stere Farmache: Stop waiting for the Q1 GDP, the stock exchange is already showing a positive evolution of the economy").

A first observation that needs to be made is that only an amateur such as Emil Boc could compare the first quarter of 2011 with the last quarter of 2010, and use that comparison to announce that Romania has exited the crisis.

A professional like Farmache, who worked in the Ministry of Finance, in the Stock Exchange and in a bank, should know that the comparison should be made between the first quarter of 2011 and the first quarter of 2010.

But that"s inconsequential.

Just pretend I haven"t said anything.

What"s really important is that the Bucharest Stock Exchange never succeeded in becoming the "barometer" of the Romanian economy, even though, in theory, that was indeed the role it was supposed to play.

What Farmache isn"t saying is, that, lately, the connection between the evolution of the Stock Exchange and Romania"s real economy is done via ... the Dow Jones!

Romanian brokers keep their eyes glued to the New York stock market and through a tacit convention with the entire community of the Romanian capital market, anticipate the moves of the BSE, depending on the evolution of the markets across the ocean.

So that means that the indexes of the BSE are just as connected with the Romanian economy, as the Romanian economy does with the world"s economy, which in turn bears the influence of the American economy (the evolution of which is trailed - to an extent, at least- by Dow Jones).

As evidence, please examine the evidence of the parallelism between the evolution of the BET-C and DJ indexes.

So... how?... what?

• THE SECOND LOAD OF BALONEY: SOME COMPANIES ARE MORE EQUAL THAN OTHERS

Yes, Farmache was concerned with corporate governance, on June 9th, 2008, when the discussion at the American embassy took place, because, just eleven days later, on June 20, the fourth edition of the international corporate governance seminar was held in Bucharest, organized by the Corporate Governance Institute of the Bucharest Stock Exchange (IGC-BVB) in collaboration with the Partners for Financial Stability (PFS) Program, a seminar which was titled "Issuers and Market Integrity".

Yes, in 2008, the BSE adopted a regulation of corporate governance.

That is quite an accomplishment.

But when did the BSE speak for the first time about corporate governance?

In September 2001 (between the 18th and the 21st, at the conference titled "Corporate governance in Romania and South Eastern Europe" organized by the OECD, in cooperation with the BSE, the CNVM, the World Bank and the Technical Cooperation Organization, at the Athenee Palace Hilton Hotel).

Seven years to elaborate a set of guidelines for corporate behavior that could have been copied anytime?!

You will say: "No, man!, It wasn"t the text that was the problem, it was the need to change the mentality of the managers, we fought this for seven years!"

Baloney!

If it were so, then Farmache wouldn"t have fought so hard to also get a position at the Central Depository, besides his position as president of the BSE, as the principles of corporate governance do not allow the principles of corporate governance.

In September 2010, Farmache was forced to give up his position at the Depository, because the CNVM rejected his request for the amendment of the CNVM"s disposition that prohibited cumulating leadership positions.

The CNVM had to force corporate governance down his throat!

So... what?... where is it?

• THE THIRD LOAD OF BALONEY: THE RASDAQ STAR

Hearing what Farmache was telling the Americans, that he was planning to list 400-500 issuers on the yet to be created "Rasdaq-Star" market, sounds really impressive - "That"s some ambitious plan!".

And the Americans don"t even raise an eyebrow when they hear about the "Rasdaq"...

Should I say more?

I feel a bit ashamed ...

The "Rasdaq" market was inaugurated (in secret) on October 26th, 1996, representing the "successful" project of the American consulting provided by the USAID, following the Memorandum of Understanding signed in August 1995, by PM Nicolae Văcăroiu with the American government.

Americans claimed that they allocated 23 million dollars out of their own taxpayers" money for this project (I never could figure out where that money went).

At the time, the Americans were promising that their project would make our stock market the largest in the region.

Where is the "Rasdaq" now?!

The CNVM could not even report it to the European Commission as a regulated market!

After unfairly competing with the BSE for eight years, the Rasdaq went belly up.

And to avoid having it disappear completely, it was absorbed by the BSE!

As expiation for its flaws - the rotten foundations that the USAID set it on.

When Farmache was telling the Americans that he would bring 400-500 issuers to the "Rasdaq-Star", he was acting like one of the characters of the book "1984" by George Orwell: "Did you see that they have announced the increase of the chocolate ration to 30 grams? It"s really something!".

Except that the chocolate ration had been 40 grams prior to the change...

Similarly, in its moments of "glory", the "Rasdaq" had almost 6,000 companies listed.

By force.

At the behest of the USAID, which needed to report an achievement to the US Congress, because otherwise they would see their funding cut.

Six thousand, as the BSE was struggling to get shareholders and managers to accept the requirements of getting listed on the stock market quota and as a result, it only has a few thousand issuers listed.

The shares of thousands of companies listed on the "Rasdaq" were never traded, thousands of companies hadn"t signed a contract with the exchange and weren"t complying with any of the transparency rules.

After the "merger" with the BSE, the Romanian National Securities Commission couldn"t get them delisted fast enough, at the request of the European Commission.

"Rasdaq"?!

What was the money of the American taxpayers spent on?!

Baloney ...

That Wikileaks website is really cool ...