Thursday, September 25, 2008

Worst yet to come –

I don’t know how many people follow my posts nevertheless as I stated in January 08, stock market has taken a substantial hit. If we assume that the worst is over, we are in for some surprise. Just like the Mortgage sub prime lending the next wave will the Credit Card sub prime lending.
So, for people who saw Bush’s speech yesterday and feel that by investing 700 Billion Tax Payer’s money will somehow magically bring economy back on track, all I can say is Good luck to you. I am sure that if this plan passes through (which I believe it will) they (greedy CEOs) will back tomorrow for another 700 Billion.
Almost everyone read about Iacocca, he proved to the world on how to manipulate a government to get what you want. All these new CEOs have grownup idealizing Iacocca so everyone is after Uncle Sam to bail them out.
The current trend in USA is on par with what happened when Soviet Union collapsed. When American forced communist Soviet Union to become a capitalist Russia, it was free buffet for the rich and famous. They took over industries and Oil fields which were on the verge of collapse and without any moral or financial liability, butchered the country’s wealth and minted money. It took a strong man named Putin to make some tough calls to get the country back on track (with a high success rate). I don’t think we can find a “Putin” here is states, both Obama and McCain have no clue, they don’t have any plan. Just like our Indian politician they promise change, without any plan. Neither of them is experienced in anything. Obama is riding on Minorities and liberal hippies, while McCain is riding on the KKK group. I don’t know who will win, if I am a betting man, I will say it’s going to be McCain (just going by history), but I don’t think it matters.
Next 5 years in American history is going to be tough. During the 80’s, Regan has spent so much money on Military (a fantasy based on Star Trek) by the time George Bush Senior took over the country was bankrupt. When George Bush cancelled all the military spending, there were wide spread job losses, people losing their money and houses. The current situation is eerily similar to the 80’s.
So you might ask why anyone should be worried about it. After all we can assume this as a market cycle and as any graph from S&P 500 might show, market always follows an upward trend. The real problem is globalization. Take for example country of ours, India. Be it real estate, job or stock market, everything is driven by foreign investment. An average India cannot buy a property in developed or developing states in India, heck they can’t even buy a share of Infosys. Is it possible to go back to the 80’s; where if you want to succeed in life, the only option is to get a government job. You feed caviar for 10 days; the 11th day your body expects caviar not left over. Somehow India has seen tremendous growth during the 90’s; we cannot go back to the 80’s now. When the global economy slowed down in the 80’s, India didn’t got exposed that much. Usage of petrol in eighties was considered luxury. For bikes you had bullets and Yezdi, which the elites drove not the common man. Things are different now, everyone drive a bike if not a car. How are you going to ask them to go back to cycle? It’s not going to work. Petrol is now an essential commodity.
Politicians like Modi had developed their states but same is not true for every state in India. So get ready boys and girls the fun ride is over, the real test starts now.
Can we predict? 6 months from now we will revisit and see how we did.

• (US) Market will correct itself, 5 years minimum.
• (India) Worst case, Property value could drop to 1996 value
• (India) People might (MIGHT) revolt against the politicians.
• (US and India) Price of Gas might drop
• (US) If you are betting man, high time to buy good stocks for cheap price. Looks like Warren Buffet has already started.
• (US) Property value could drop to 2001 value.
• (US and India) Job loss
• (US) Really bad for immigrants
• (US and India) Gold value will go up

1 comment:

Anonymous said...

Price of gas is going down...