11 Apr, 2010 | by

market-psychology

A friend of mine once told me Positive Attitude is the MANTRA for success.

Now some may say being positive is good but one has to be a REALIST too. Isn’t that just COMMON SENSE or maybe not. I believe human psychology plays a very important part in whatever we do as humans. And I do mean everything relationship, business, career etc.

Let us explore this more shall we?

Most of us who operate in the market or just watch the market have witnessed the markets going UP on bad news and vice-versa. And sometimes the strength of these irrational or unexpected moves will make you want to lose all your foresight, judgement, wisdom and commonsense. You will be tempted to abandon your own view and just follow the trend.  There are some who do follow the trend. And there is nothing wrong with that. You don’t need to beat the market consensus but just profit from it.  But sometimes bucking against the market consensus does pay well in the end.  We all know that the markets have a habit of getting either too optimistic or too pessimistic and this has a lot to do with the market psychology.  continue reading »

4 Feb, 2010 | by

exit-strategy

Although the economists still can’t agree on the real quantative impact of various stimulus packages that were adopted by economies from around the world but one cannot dispute the fact that the size of the stimulus did matter and did work in most cases.

To investigate this further let us look at the various stimulus packages that were adopted during the CRISIS.

Obviously by the sheer size and percentage of National GDP China’s US $ 586 billion stimulus Package which accounts for above 12.9% its GDP stands out from the REST. It is possibly followed by Saudi Arabia, Malaysia, and the mother of all STIMULUS thrown by United States under its American Recovery and Reinvestment Act of 2009 which is the largest by any measures (US$ 787 billion).

At the time there were market pundits who were debating the pros and cons and some even doubted if the stimulus packages will deliver and I am glad to admit that some of us including myself had a different view. Based on my judgement and commonsense I concluded in a piece that I wrote in March of 2009 titled “ Getting the Patient Out of Intensive – The Economy “ that it should deliver and put the US and the world economy back to growth. But having said we should have no illusion that the road ahead is still bumpy and uncertain. continue reading »

31 Jan, 2010 | by
Topics: Economy, Politics

democratsrepublicans1

I tend to shy away from politically focused posts as the feedback is generally overly intense, sometimes irrational and usually futile.  It’s almost as bad as trying to discuss the perennially hot topic of religion.  The discussion always begins amicably enough, but it inevitably seems to devolve into senseless argument.  I think Oscar Wilde said it best:  “Arguments are to be avoided; they are always vulgar and often convincing”. 

After watching the recent State of the Union address (embedded below; please watch it if you have not…It’s worth it) I felt compelled to share a few thoughts, given that much of the  focus of the speech is centered on the economy.  A harsh reality is that politics and business are firmly joined at the hip, whether you want to believe that or not.  A clear example of this would be the special bond between corporate entities and career politicians.  How many times have you heard of “gray-area” reciprocities that have transpired over the past few decades alone?  You know what I mean – transactions that just didn’t seem to pass the common sense test.  Remember the cozy relationship between Halliburton and former Vice President Dick Cheney?  Wiki “Political scandals of the United States,” and you’ll get a flavor of just how extensive the list is. 

I know, I know … you’re probably thinking I’m heading down the path of “all politicians are criminals” stereotype.  That’s really not my intention here, so please bear with me.  We all know that political malfeasance is much more commonplace then it should be.  When was the last time you had that following thought running through your head after news of a scandal broke:  “Wow, I can’t believe he or she would do something like that”?  It’s almost expected these days.  The only questions are:  “How egregious is the act?” and “Will the public ultimately accept the indiscretion for what it was?”  It’s that simple; however, variables that dictate the public’s appetite for forgiveness is not.  Blagojevich = Bad, Clinton = Not so bad or even good.  Go figure. continue reading »

9 Jul, 2009 | by

emerging-markets3

Developing countries’ share of global equity market capitalization jumped to a record 24 % in the first half of 09 from the past levels of 15% at the start of 07 as more investors flock attracted by the growth story.

Investors are now beginning to realize that developed nations are possibly faced with decades of very low growth and may need decades to work off the mountain of debt which is the biggest since World War II. According to IMF recent forecast the total debt of developed nations used to fund various bank bailouts and stimulus packages could reach above 113% of GDP by 2014. This is more then three times the estimated forecast of 34% for developing nations. Though one could argue that developed countries have had bigger debt burden in the past ( post World War II ) reaching close to 250% of GDP in case of U.K., and over 100% in case of USA but these debts were repaid pretty quickly. On the other hand, we have to take into account that developed nations recorded decades of high growth just after the World War II ended which allowed them to get their fiscal house in order. In the current circumstances it is highly unlikely that the developed economies will see growth levels of post World War II era going forward.

Developed countries are in a catch-22 situation if they spend more to keep stimulating the economy they risk running into a huge unsustainable fiscal deficit. The combination of low growth and ballooning budget deficit could be very damaging to developed economies. The talk of the town is now increasingly focused on getting the fiscal deficit under control. It looks like the Governments in the developed world have resigned to the fact that they are entering into a low growth era. World Bank is now forecasting the GDP of high-income countries to shrink by over 4.2% in 09 and the overall global economy to contract by 2.9% in 2009. continue reading »

10 Jun, 2009 | by
Topics: Economy, Global

stable_economy

The message from this global financial crisis is loud and clear; the system that we currently have is flawed, susceptible to produce crises and prone to systemic risk.

As a first step, we will have to fully address the SYSTEMIC RISK and the accumulation of excesses in global the economy that tends to build up during the period of strong growth. The hope is that the market participants, the governments and the regulators around the world have learnt their lessons from the ongoing crisis and will take this as an opportunity to reconstruct the financial system and the way it operates. Although one could argue whether it is safe put your faith in the ability of the market, the governments or the regulators to fix the SYSTEMIC RISK issue. No doubt, they have bungled up in the past and they would probably do it again. But that is not the point. We all make mistakes and learn from it. So we have to give them the benefit of the doubt. I hope we are all done with the blame game. The regulators and politicians were pretty quick to put all the blame on the banks, the investors, the insurance folks, the rating agencies and everybody else but not themselves. How convenient.

Honestly speaking, we are all to blame for this financial crisis including the folks on the main street who happily leveraged themselves not worrying about the shortcomings. In fact some folks on the main street got very comfortable with the idea of living on borrowed money without having the ability or resources to meet their obligations. And the reason for that was simple they figured that was the norm. continue reading »

28 May, 2009 | by
Topics: Economy, Global

istock_000003110246xsmall

Some of my friends and colleagues are busy trying to figure out what could be the shape of the most eagerly awaited recovery. The debate is whether we are going to see a V, W, and U or prolonged I__I shaped recovery.

 

There are some who are suggesting we are probably going to see a V shaped recovery then there are those who are predicting a U or prolonged U shaped recovery and yes there others who believe we might see a W shaped recovery. Boy! Go Figure. Someone has to be right but then I wonder isn’t this all a bit premature? Aren’t we getting ahead of ourselves on making such prognoses or am I simply being Silly?

 

Let’s find out, shall we?

The shape of the current economy could probably give us some clues as to what the shape of the recovery might be or at the least we could rule out some.  To get a good estimate of the health of the economy let us look at some of headline news during the week ending Friday, the 15th May 09.

We will start with the numbers out from the European Union.

According to European Union’s statistic office the GDP in the 16 member Europe region fell by over 2.5% from the fourth quarter, the steepest decline in over 12 years. This was above the market expectation of continue reading »

14 May, 2009 | by
Topics: Economy, Global

commonsense

I am begining to think that the lack common sense is what got all us into this Mega Mess. The problem is that common sense is still missing and I wonder why?

The markets are rallying and it’s good but shouldn’t we do a reality check before we get too carried away? I mean the expectation are so LOW that any number above the bottomless floor is sending the markets into rallies. We all want rallies but sustainable rallies please that are supported by solid fundamentals and not driven by speculative play. Folks are talking about recovery against the backdrop of some pretty bad numbers. Yes we are now seeing some mixed numbers ( some positives )come out from the 1st quarter but the real economy is still hurting.

To get some perspective let’s just look at the numbers out of UK released back on May 01, 2009 .

According to the Govt figures, nearly 5,000 companies in England and Wales went into liquidation in the first three months of 2009 and a record number of people succumbed to insolvency. continue reading »

17 Apr, 2009 | by
flowchart_image

 
All the talk about Recession and now DEPRESSION can make anyone nervous. Wall Street “ Pros “ make their  predictions, and in doing so, create more chaos. This sentiment is probably shared by most folks on the main street.  The market is behaving like a Yo-Yo. To get a perspective, let’s look at the rallies we had in the past week. One wonders, is this a sustainable rally or a one off, I want to feel good BEAR market rally. We are seeing markets rally despite of all the negative NEWS. One might argue that the Market is always FORWARD LOOKING. Which begs the question, is it forward looking or just SPECULATING?  Let us just look at some of the headline stories of March 09, to get a perspective. GE downgraded; Germany’s growth collapsing by a record since world war II; UK and France Industrial output at lowest in over four decades; Jobless rate in the US reaching 10% in at least three states; U.S. household net worth plunging by a record $ 5.1 trillion; Japan’s GDP shrinking by over 12% annually; World Bank is now predicting a negative global growth in 2009. In spite of all these very negative news we saw the markets rallied.

Though, we saw the markets back in the RED again on 27th of March 09 after 5-6 days of consecutive rallies one could argue, what was the basis of this rally? Well may be some “INVESTORS” were expecting the worst and they believed these news were not that BAD after all? The launch of TALF and TARP program also probably helped carry the positive sentiments. The consensus view is that these programs would help but the reality is, we have a lot of continue reading »

28 Mar, 2009 | by
Topics: Economy, Global

g20

The markets seem to be questioning the government’s ability to find a workable solution to this current turmoil in other words government’s ability to find a FIX. And this is becoming increasingly evident by the way markets have reacted in the past few weeks. Al though one might say that the market itself is INEFFICIENT by design and DYSFUNCTIONAL in the current environment. And there are also those who would say that the whole MESS was created by the same market participants themselves in the first place. People who thought the party would never end and carried on with their reckless business practice. So going by the norm that the market is always right is a probably flawed perception? Well, whatever one might say, it’s hard to entirely disagree especially when we have a market that is increasingly behaving like a yo-yo. It either gets too optimistic or finds itself in a fluke rally only to shed all its previous gains or it takes an extreme negative view on everything loosing foresight.

Some would disagree with the above observation and some might agree. Whatever side you are on, one can safely say that without government support the market may not have survived.

But even with government support the market is not working as it should. continue reading »