Wednesday, September 17, 2008

Nobody is too big to fail ( NTBF)!!!

The world financial market has undergone huge turbulence during the last few days... the biggest names of Investment banking- Lehman and ML exists no more.. The biggest insurance Company in the world AIG, has been nationalised for all practical purpose.. it is an institution with $ 1 trillion in assets and is one of the largest financial institutions in the world. So institutions which grew and and prospered for centuries had failed.. if we take the India equivalent it is something like LIC and SBI failing.

This brings out the moot question..what is the sort of regulation, risk management they have in the US? They are worse than any third world nation in terms of regulation.. US, the biggest economy and the most developed nation, has the control mechanism, which is shameful, to say the least. How can AAA rated papers by S&P, Moody turn into junk overnight? There will never be any answers.
I guess entire financial community is to be blamed - brokers, banks, rating agencies. The Dow is in bear market zone, which will have a huge impact on the real economy. India will also suffer, without any fault. The US Financials have successfully put the entire world at risk. The 1929 Great Depression started with the Wall Street crash.. This current mess will lead to job losses, and economic depression.
Hopefully, India will be able to avert the depression. But one can never say, as history shows that Dow levels and depression are greatly interlinked.

Thursday, September 11, 2008

Greed and Fear

  1. Back after a long hiatus.....
    The world has changed in the last quarter itself. Oil is back to sub $100 again, gold is back to 12 month's low, the commodity cycle is ending.
    Equity as an asset class, has underperformed during this period. Dow is close to bear market territory.
    The big boys of finance - Lehman Brothers, Freddie and Fannie have failed. It just goes to prove that no institution, how big and powerful it may be, is invincible.
    So greed is the cause of all failures in the world of finance.
    One point I want to make is that in US, "Losses are public and gains are private". I think this is a sheer desperate way to protect the 'interested' influential people in Wall Street.
    There is gloom and prediction of doom all around...
    So where do we go from here?
    My take is - if the world is to survive this credit crisis, which I am sure it will, Equity will again deliver. It may take time over the next 1-2 quarters. We will again have some storyline, just like films, and like the Pied Piper, all the mortal folks will flock back to equity.
    Let's wait and watch....
    Like-minded people please respond and share your viewpoints too!!!