Share Market @ Crucial Time after 1929
hi.. all....
Today; like always we do all the things in our life for first time; I m writing my first blog.... So obviously I m feeling some excitement, but I can say the degree of excitment I m feeling right now is less compare to wht I hve felt earlier. I know this is something called maturity or understanding of changes that take place around u as per time changes or place changes or cultural changes and changing urself as per those changes.......
I heard abt blogging some 2 n half year ago, but today got to make it.
Coming to the Title Share Market @ Crucial Time after 1929
Since the start of this year (not FY-Financial Year) from Feb-Mar, the share market of India and whole world especially developing countries (BRIC nations) has been witnessing a very different phase of time compare to previous 2-3 years. Moreover, the period is in progress will continue for next four months or more.
As per Peter Lynch, many times in his lifetime while working in Fidelity or at other investment institution, he says so many times economist and fund managers predicted doomsday of the stock market; but it did not take place and patient investors got a safe escape. But, wht i see for this FY 2009 (Apr2008-Mar2009) is stock market would nt be able to come to the level where it was in the begging of this year.
In fact the whole scenario has changed, the wheel on which stock market moves has been facing head wind, I mean to say is Macro economic picture of the world and India as well is very scary.
Wht the whole world face during great depression of 1929, I m not saying something of the sort is going to happen again. The global macro economic picture this time; which has roots in sub-prime crisis of USA ; is very different this time and more disastarous.
Why I think so is based on following facts:
First, 3 out of 5 top investment banks of world has either turned bankrupt or US govt has taken steps to bailout them, and rest two have converted them to commercial banks.
Second, Fannie mae and Freddie Mac are not out of the woods. They're still on the hook for $5.4 trillion. Five times the GDP of India.
Third, Leave headlines related to residential mortgages and think of privte sector debt (auto, business, student, credit card loans etc) is more bigger side of the problem and adds $ 20 tln.
Fourth, the total amout under credit crisis is $ 41 tln, n GDP of US is $13 tln.
So, wht even if Paulson comes out with a $700 bln bailout plan. It seems paltry amount. The news of Bear Stearns, Lehmann Brothers, Merrill Lynch, AIG are few that has come to the public and just the tip of iceberg.
Why, its different and more disastarous from 1929?
There are two different face of the whole scenario and both are quite opposite to each other, so far the theory and practices of Economics and Great Economists.
One side, global commodity prices are rising, oil price has already surged much almost double compare to previous year (at present $100-110 around after touching $147 per barrel), world is facing high inflation rate this means people has much buying power in their pockets. There is enough money in the market to back up rising prices of different commodities.
On the other hand, Giant Companies are getting bankrupt and creating a situation of depression as most of the economist predicting about US, bcoz job cuts have started, most of the companies have stopped or extended their recruitment and expansion plan.
To curb former problem of inflation central banks need to take measures like increase in interest rate and all the financial policy that reduces money supply in the market. And they have in fact done so. For example in India only RBI has increased CRR and Repo rate by 2-3% in last 2 months. But, to deal the later problem or situation, the companies facing credit crunch need to be given loans at a low rate and need specific measures from Govt to help them come out of the problem. But, due to increasing rate of interest, Companies are not able to execute their expansion plan or at least to manage status quo situation.
The biggest supporter of capitalist US couldn't stop itself to help companies come out of market crisis, and couldn't leave them on market demand supply forces.
In a nut-shell, it is the first time in the history of Economics, economies are facing Inflation and probability of depression simultaneously.
Today; like always we do all the things in our life for first time; I m writing my first blog.... So obviously I m feeling some excitement, but I can say the degree of excitment I m feeling right now is less compare to wht I hve felt earlier. I know this is something called maturity or understanding of changes that take place around u as per time changes or place changes or cultural changes and changing urself as per those changes.......
I heard abt blogging some 2 n half year ago, but today got to make it.
Coming to the Title Share Market @ Crucial Time after 1929
Since the start of this year (not FY-Financial Year) from Feb-Mar, the share market of India and whole world especially developing countries (BRIC nations) has been witnessing a very different phase of time compare to previous 2-3 years. Moreover, the period is in progress will continue for next four months or more.
As per Peter Lynch, many times in his lifetime while working in Fidelity or at other investment institution, he says so many times economist and fund managers predicted doomsday of the stock market; but it did not take place and patient investors got a safe escape. But, wht i see for this FY 2009 (Apr2008-Mar2009) is stock market would nt be able to come to the level where it was in the begging of this year.
In fact the whole scenario has changed, the wheel on which stock market moves has been facing head wind, I mean to say is Macro economic picture of the world and India as well is very scary.
Wht the whole world face during great depression of 1929, I m not saying something of the sort is going to happen again. The global macro economic picture this time; which has roots in sub-prime crisis of USA ; is very different this time and more disastarous.
Why I think so is based on following facts:
First, 3 out of 5 top investment banks of world has either turned bankrupt or US govt has taken steps to bailout them, and rest two have converted them to commercial banks.
Second, Fannie mae and Freddie Mac are not out of the woods. They're still on the hook for $5.4 trillion. Five times the GDP of India.
Third, Leave headlines related to residential mortgages and think of privte sector debt (auto, business, student, credit card loans etc) is more bigger side of the problem and adds $ 20 tln.
Fourth, the total amout under credit crisis is $ 41 tln, n GDP of US is $13 tln.
So, wht even if Paulson comes out with a $700 bln bailout plan. It seems paltry amount. The news of Bear Stearns, Lehmann Brothers, Merrill Lynch, AIG are few that has come to the public and just the tip of iceberg.
Why, its different and more disastarous from 1929?
There are two different face of the whole scenario and both are quite opposite to each other, so far the theory and practices of Economics and Great Economists.
One side, global commodity prices are rising, oil price has already surged much almost double compare to previous year (at present $100-110 around after touching $147 per barrel), world is facing high inflation rate this means people has much buying power in their pockets. There is enough money in the market to back up rising prices of different commodities.
On the other hand, Giant Companies are getting bankrupt and creating a situation of depression as most of the economist predicting about US, bcoz job cuts have started, most of the companies have stopped or extended their recruitment and expansion plan.
To curb former problem of inflation central banks need to take measures like increase in interest rate and all the financial policy that reduces money supply in the market. And they have in fact done so. For example in India only RBI has increased CRR and Repo rate by 2-3% in last 2 months. But, to deal the later problem or situation, the companies facing credit crunch need to be given loans at a low rate and need specific measures from Govt to help them come out of the problem. But, due to increasing rate of interest, Companies are not able to execute their expansion plan or at least to manage status quo situation.
The biggest supporter of capitalist US couldn't stop itself to help companies come out of market crisis, and couldn't leave them on market demand supply forces.
In a nut-shell, it is the first time in the history of Economics, economies are facing Inflation and probability of depression simultaneously.
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