What a difference! On Oct 10, at the height of the anxiety, markets looked like they were melting faster than a chocolate under the heat. Anxiety is now being relieved day by day. Good news is that much of the consequences of long standing systemic risk have been played out. Proper risk premiums have been or are being assigned to all real and financial assets. Financial assets boom and financial engineering of 1982-2007 has ended. Imbalances built up over the last two decades have finally begun to unwind. Anxiety, long held by a small minority of long-term thinkers, finally hit the masses. Long sought arrival of Armageddon has finally relieved this small minority of a huge anxiety as well. This same minority is starting to think ahead of the curve now and welcoming a level playing field to enjoy the fair game.
The real show begins now. So far swift and decisive actions by U.S. Government have stopped the complete meltdown of the U.S. and the world markets and immensely helped relieve anxiety of the masses. At the same time, the U.S. and world at large is quite fortunate to see a significant pullback in commodity prices feared by a global slowdown. That takes a tremendous amount of pressure off of an inflation front and brings a huge positive under such calamitous situation. This is calm after the storm. This is the time to pick up the left-over pieces and rebuild stronger than ever. U.S. is at the inflection point where its future market course will be dictated by its fiscal policies. If the policies are enacted to strengthen U.S. competitive position, U.S. will emerge even stronger. If not, U.S. will simply muddle along the path of gradually diminishing power at the world level. Power lies in the hands of our lawmakers and hence our population.
If U.S. embarks on the path of being a creditor nation versus a debtor nation, U.S. will restore its glory. Without that, it is hard to envision U.S. exercising the power it has wielded for the last fifty plus years. Much needed steps are curtailing and abolishing budget deficits, reducing corporate tax rate to increase its competitiveness, tackling Medicare and Social Security challenges head-on, investing in nation’s dilapidated infrastructure, setting and investing in long-term goals and visions instead of myopic actions, setting proper incentives for emerging industries, removing ill-targeted incentives for highly competitive industries, attracting foreign talent as opposed to shutting the doors on them, changing a culture of consumerism, etc. Let us wish ourselves luck. We are going to need a lot of it.
Friday, October 31, 2008
Friday, October 10, 2008
Have We Turned a Corner Yet?
My view is that this is it when it comes to this rampant fear and panic driven massive sell-off. Markets will probably make the bottom soon, if they have not already made it, yet. Current severe (understatement) sell-off eliminates the possibility of bottom in 2009, which could have been probable in absence of this insane sell-off. There is always this chance of further significant sell-off, however, I see it as a remote possibility.
That is for the market only, however. As for the economy, it is a different story altogether.
More financial institutions will fail and many more companies will go belly-up. Though, it seems reflected now in the major stock indices. That means, I do not envision more price adjustments for the markets as a whole.
Depression or not, it sure is going to be weak for years to come. There is no doubt about it. But, hey, you know what, that is not so bad. That only means we may be stuck in an old-fashioned bear market lot longer. There is nothing wrong with living in somewhat dismal times. The worst thing is to live in an abnormally good or bad time, since we may not be able to handle it right.
My biggest fear of inflation threat is subsiding, especially in light of a global slowdown. So, that is the good news lately, not to mention the swift action of government during this market atrocity. In one fell swoop, everything is turned upside down and that has brought government down to its knees, which could not have been possible without recent rout.
Some sacrificial lambs have been offered to the market gods and there are more on the way. Though, that should not deter investors to grab otherwise healthy companies which are being choked by tight credit and non-discriminatory treatment. I am not bearish anymore, at least for the markets!
Decoupling of economy and markets is important at times. That is the times now. Fear-mongers are doing just that; feeding fear without any rationale. I am afraid that they are going to miss this inflection point, as always.
For more details on how we got here and what is ahead, we have written a detailed report. To view this 10 page white paper, please click here.
That is for the market only, however. As for the economy, it is a different story altogether.
More financial institutions will fail and many more companies will go belly-up. Though, it seems reflected now in the major stock indices. That means, I do not envision more price adjustments for the markets as a whole.
Depression or not, it sure is going to be weak for years to come. There is no doubt about it. But, hey, you know what, that is not so bad. That only means we may be stuck in an old-fashioned bear market lot longer. There is nothing wrong with living in somewhat dismal times. The worst thing is to live in an abnormally good or bad time, since we may not be able to handle it right.
My biggest fear of inflation threat is subsiding, especially in light of a global slowdown. So, that is the good news lately, not to mention the swift action of government during this market atrocity. In one fell swoop, everything is turned upside down and that has brought government down to its knees, which could not have been possible without recent rout.
Some sacrificial lambs have been offered to the market gods and there are more on the way. Though, that should not deter investors to grab otherwise healthy companies which are being choked by tight credit and non-discriminatory treatment. I am not bearish anymore, at least for the markets!
Decoupling of economy and markets is important at times. That is the times now. Fear-mongers are doing just that; feeding fear without any rationale. I am afraid that they are going to miss this inflection point, as always.
For more details on how we got here and what is ahead, we have written a detailed report. To view this 10 page white paper, please click here.
Madness of Crowds
Stop this madness! Stop this craziness! Stop the presses!
Sellers today are no less fools than housing investors during 2000 to 2006 and tech investors in 1999 and early 2000.
Where is the sanity? Generally, insanity occurs quite slowly as it trickles down during the manias and in the typical bear markets. This is no bear market. This is a self-destructive market. This is a market gone haywire. Obviously, the mainstream media is doing its best to beat the drums of doom and gloom while they were all asleep just like our impotent politicians when all this could have been avoided in the first place and a regular joe could have been spared of this pain.
Market meltdown is not good for any society, be it a capitalistic or socialistic. This is about the whole world going insane at the same time. That is highly improbable, yet it is happening. Proper constituents need to be punished, but not innocent ones along with it. That is the madness I am talking about. Why punish the innocents along with imprudents? Where did our old fashioned bear market go? I would trade for it any moment.
Investors are scared and getting panicky. Why? Basic trust in our government and its ability to manage our financial affairs has been breached. Government is trying to fix it. However, we need to give these huge wounds a little time to heal. There is no panacea other than just time and patience, the only medicine we can take. Without that, we can only do more damage.
Sellers today are no less fools than housing investors during 2000 to 2006 and tech investors in 1999 and early 2000.
Where is the sanity? Generally, insanity occurs quite slowly as it trickles down during the manias and in the typical bear markets. This is no bear market. This is a self-destructive market. This is a market gone haywire. Obviously, the mainstream media is doing its best to beat the drums of doom and gloom while they were all asleep just like our impotent politicians when all this could have been avoided in the first place and a regular joe could have been spared of this pain.
Market meltdown is not good for any society, be it a capitalistic or socialistic. This is about the whole world going insane at the same time. That is highly improbable, yet it is happening. Proper constituents need to be punished, but not innocent ones along with it. That is the madness I am talking about. Why punish the innocents along with imprudents? Where did our old fashioned bear market go? I would trade for it any moment.
Investors are scared and getting panicky. Why? Basic trust in our government and its ability to manage our financial affairs has been breached. Government is trying to fix it. However, we need to give these huge wounds a little time to heal. There is no panacea other than just time and patience, the only medicine we can take. Without that, we can only do more damage.
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