Life – a user's manual Part II - Boksidan

Chart 3.
Same as chart 2 but with ABB, AstraZeneca, and Ericsson excluded.
In retrospect, noted that many of the companies that raged extra in each crash, was clearly overvalued, and
that they had the potential was promised by their past stock prices.
Approximately 2/3 of the construction & real estate companies that were listed in 1990 (chart 4) were not on
the stock market five years earlier. Many of them had started in the late 1980s, as a result of that it then
became much easier to borrow money for extravagant real estate speculations. Their fall was triggered by a
international recession (partly due to the U.S. war in Iraq, which ended in February 1991). The recession
forced the central bank to further increase the, with today's standards already sky-high interest rates, to
prevent the Swedish currency from losing value (international investors did not believe in Sweden and
dumped the Swedish currency and to counter this, the Swedish national bank raised the interest rates so that
the again would be interesting to lend money to Sweden). In addition, the recession meant that property
values did no longer increase and the demand for premises fell. The former was perhaps the biggest problem
since it resulted in the property companies, not as before, could mortgage the properties further and create
capital to pay operating deficits in the business.
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