Saturday, February 21, 2009

USA Economy and its Financial Crisis............

I am trying to look through US economy and the financial crisis.My interpretation maybe wrong as I am no Economics guys.I am science student and by default came to stock market and then I get interested in stocks and cos and went on making certain rules for investing in market .What ever I have written about the investing and what to look and when to look , maybe they are age old saying of investing in stock market but then I have never read any book on stock market nor read any Masters like Wareen Buffet ,Benjamin Graham,Peter Lynch or Charli Munger etc etc.....
I always thought that learning by mistakes is the best process and hence never bought those books where scores or thousands of investor use to read and follow.
Moreover, investing is a RISK and one needs to be daring in nature to invest in certain co at very early stage when no one is looking at.This type of investing needs lots of daring and this Daring comes from within or say it comes with birth.One can't learn it and that is why there is only one Dhirubhai Ambani or one Warren Buffet.
I also feel that more the person is acadamically qualified more he is defensive in nature and that is a big negative for investing.When person starts thinking in defensive manner, like say what will happen if the cos do not do well according to what is said by management then he will never invest in it.That is a draw back.Well,those who invested thinking that A gr stocks are the best to invest must also be repenting in this scenario.
There is nothing like good co or bad co, good management or bad management.Market is the slave of earnings and as soon as market sees that the stocks starts moving.Maybe sometime market takes time to show that but patience is always rewarded.
In both the above example eg Dhirubhai Ambani and Warren Buffet , they were average in studies.They were no great scholars.Actually Dhirubhai Ambani was just a matriculate.Just try to read any big business man they were very mediocre in studies and the likes of Bills Gates , oh! they were dropouts from college.Bill Gates even didn't complete his colloge.
What makes them successful?The Vision and clarity of what they wants to do.....and the way they stick to their Goals.
Anyway, coming back to US Crisis, I feel that US economy can still go down.They have deficit of $700 bn and how they are going do that ?How they are going to fill the gap?Their export is just arms and ammunations.US do not make anything they imports everything from world over.US has taken billions of dollars of loan from all over the world through treseury bills and they will have to pay it back.How they are going to do that?Not a single American belives in saving.They just save for Old age , and that too if they have good job otherwise they live on paycheck to paycheck.I just read today that a 90 year old man lost $7,00,000 in this financial crisis and now at the age of 90 he has to work at $10/hr! That is just rediculous.How can a person at 90 has to work at this age at just $10/hr when he needs to sit with his great grandsons and have leisure and have great time he has to go out and do the job?
Is this the American System and is this the way people are going to have to bear the brunt?I think there needs to be some radical changes in the whole thinking at the Top man at White House.The CEO's became arrogant that they didn't see what was happening in the financial world and went on creating mistakes after mistakes and to cover one mistake they went to do other mistakes.These CEO's were just interested in their fat salaries and they are the culprit to bring the economics crisis.I just am not able to understand that after infusing $700 bn still the US crisis is not taking name to subside anyway.Obama is ready with another $700 bn stimulous pacakage but will it end there!Bear Stren, UBS,Citi,Lehman,Goldman Scahs etc etc are all drowned in the credit crunch.New skeleton is coming out one by one and there seems to be no end.People are loosing money in 401k and IRD.People who put their money in these plans have lost $1,00,000 to $7,00,000 and more and the pity is that these are people who are in very old age and they needs the money badly and they have lost everything.How this type of incident are going to be averted is a big big problem.Now US government is thinking of nationalizing all banks but what about the money lost?Who will pay that?Being sick is a CRIME in USA.The bills goes so big that never a person can pay it in his whole life.If do not have Medical Insurance you are gone.Even with Medical Insurance one has to still dole out money and that can go to 5000 to 10000 dollars according to the treatment.
Obama is saying he will takecare of this thing but what he will be able to do needs to be seen as the Pharmaceutical Lobby with Doctors is very powerful.They will never let happen that way.
Printing money and infusing in system makes no sense.That will give rise to inflation and that will increase the turmoils of people in America.What America does is SPENDING, they just spend and nothing else.The Auto sector eg GM,Ford , Landrover,Jaguar etc are good for nothing and all had gone bankrupt.Thousands of people has been laidoff.The unemployment figures that has come is highest since many decades.Housing is down and that is the biggest stimulous of USA.When that is down who will survive.Obama is talking of putting a brake on outsourcing but who will do these jobs ass cheap as Indians?Any IT Eng gets no less then $70,000 and that is Rs 35 lacs.Who is going to pay this type of salary to the IT Eng in USA?Where as same jobs is done in India with just RS 60,000 at any BPO ceentre .Just compare the figures.Maybe IT Eng gets more salary but is no where near to the pay USA will have to pay in USA perticularly when the chips are down for US company and economy.
I am just giving an example.I bought a Lexmark printer , a wireless one.I installed the software but didn't do it correctly and hence with UBS cord it was working but not without it.I called Lexmark and asked for the assitance and you know where I was connected?I was connected to Banglore.Now why Lexmark has to give customer service work to Indians?Naturally it is coming very cheap.That is the catch and to put it properly, the things were done very nicely and precisely.The wireless software was installed again very properly and the job was done greatly.Now tell me where in the world US will get this type of work done with 100% customer satisfaction and that too so CHEAP?Nowhere in the world but India.
There are almost 50% of population who do not goes for College.They drops out from school or just complete 12th and leave the school and start earning at $9-10 /hr.They think that they will earn and then go for college but that never happens as once you start earning it is diffcult to leave that job because the money that comes in the pocket makes you feel not to go for further studies.I have seen that once you leave the study it needs lots of guts and determination to go back there and hence I feel that Indian way is the best way for all children.First complete the studies and then take the job.Focus only on studies and nothing else.
On every new day I am hearing newer and newer scams coming out.I am not sure where it is going to end as still the credit card crisis is still to surface.
Let us see, where we land............but on optimist note let me write, it has to end somewhere.....


  1. Hi Rajeev
    I find the following stocks interesting in terms of dividend yield and low risk. What is your opinion on thses?
    GIC Housing finance and Manugraph Industries.

  2. Dear Venu,
    Well, your view on low risk is good but dividend yield finds no place in my view.Because in coming quaters if the earnigs are not going to come good then div will also get trimmed down.
    On risk base yes,GIC and Manugraph is looking good as with election ahead the printing cos will have good order flows.
    But some how I feel that allthe cos with over 10 or 8 P/E will be battered down to 2-3 P/E and hence anything above 5-10 P/E is untouchable as of now.

    I am not tracking GIC and Manugraph now hence donno the P/E of both of them but if they are quoting at over 10-8 P/E then one needs to wait to buy...
    Ofcourse this is my personal opinion and may prove wrong...

  3. The World Economy will make it.....The question is when.

    I work for a corporation in the US and we are all hitting our customers and our vendors are hitting us hard for more business.

    Globally, the amount of business has shrunk, but overall, there is business to business buying that is still happening.

    Our numbers from Jan'2008 to Feb'2008 had a 10% shortfall......The world has NOT come to an end, since that means that we still sold 90% of the business that we sold in 2008. Sure it is not 105% or 110%, but it is NOT 80 or 70 or 60 or 50 or 40.....Get the point?

    Bottom-line is jobs need to improve, savings need to improve, leverage needs to slow down, but all of this is part of the Titanic ship that is turning. It is going to take time.....All of the variables (total debt, interest rates, borrowing, commodity prices, inflation, cost of doing business, salaries etc) all have come to 'favorable levels'. As soon as we have the 'hole in our economy' starting to fill (sometime in 2009), we should be getting back to a positive GDP globally.

    India and China needs to show the first signs of improvement, due to the local economy demand (less dependence on US and Europe). This will be a signal for rest of world to start picking up.

    When will that happen?

    When the packages being pushed out in the US, starts to make a 'believer' out of people.

    Just the same way that media has made the doom look like gloom, they will also make the gloom look like a recession and show the light at the end of the tunnel (I'm giving too much credit to them as analysts and not nay-sayers).

    Again, the people who have jobs are looking at this as recession, and the people who have lost jobs and/or house are looking at this as Economic-Pearl-Harbor situation (as Buffet put it).

    None-the-less, we have to eat, live, breathe, drive, clothe, drink and survive, and we are a planet of 6.6B people that will need to do B2C, B2B and P2P.....Hence, we are deemed to get out of the situation and survive......See the Independence Day movie again with an Economic Calamity in mind and you will get what I am saying. We are at the point where we are now trying to attack the "grid" surrounding the Alien Ship with the US President leading the Squadron.....When we punch through the Grid, things will look better (although there will be a fight that some of us will have to put up).

    Enjoy.....Work Hard by Putting Your Head Down, and Save EVERY DOLLAR/RUPEE.


  4. Dear Rajeev,

    I need ur advice on my portfolio. Just want to know if u can help me in deciding what to add , what to sell and what to average. I would deeply apreciate ur help. Thanks in advance.

    Ahmednagar Forging 500 @ 31
    Bhagawati gas 13K @ 12
    Ennore Coke 2K @ 27
    Gremach 2K @25
    Hind Construction 1250 @ 46
    Madhucon Pro 850 @ 50
    Neyveli 200 @ 59
    Noida Toll 1K @ 22
    Omm Metal 8K @ 6
    RDB Ind 300 @ 45
    Rolta 500 @ 90
    Roman tarmat 1200 @ 24
    Sika Interplant 2600 @ 27
    Sree Rayalseema 400 @ 16
    Sujana Twrs 10K @ 14

    I shall eagerly await for ur reply.


    Meetesh Kuhad

  5. Dear Meetesh,
    I am sorry to say that I do not give portfolio advice.
    I just discuss things and do not give any individual advice for portfolio.It is upto readers who has to decide what they needs to do.

  6. Hmm ... Alright. I appreciate ur views. However I am still awaiting more details bout urself. I would love to know more about urself , like how old you are n what you do and more stuff if possible.
    I mean I love interacting with you but have no idea about you and would like to know as much as possible.

    Thanks in advance.

  7. Dear Meetesh,
    In past also I have been asked for portfolio advice and my answer were the same.So it is not that I have done that specially for you.This goes for everybody.I give no PF advice.
    Well, about myself , I am a Gujarati and migrated to USA just a year back.I will not write my age but like you and others to find out how old I can be from my writing.
    More about me in details when the time comes.I think the time is not ripe for me to write about me in detail though it is not so big thing but still I feel that this is not the right time.

  8. Hey Rajeev,

    No issues for not informing me bout my portfolio changes. I understand that every one has a right to accept and reject requests from others.

    Difficult to know your age from your writing , except that you cant be too young. I dont think you would be too old too. So may be between 35 and 50. A wild guess would be 42 yrs ?( dont ask me how i arrive at this figure as its based on no logic . LOL )

    Have a great time and keep posting your informative views. Its very beneficial to all investors

  9. Gosh. I wish i would have just googled ur name before trying to second guess ur age. Would have been more easier and may be i wudnt have come across as a fool.
    You also seeem very famous and a very big expert on stocks. Cool !!!

    Though i am still figuring out your age by reading through several messages of urs (nakul).

    As you have stated that you are in stock markets since 1985. You must be atleast 20 then. so again the age group comes to about 44-50 yrs.

    Well atleast i am happy that my first guess was not way off the mark.

    Thanks for all your guidance and looking forward to your future posts.

  10. Dear Miteesh,
    Yes, I have been getting mails from my many friends that my post at our blog are copied many times by different blogs and different sites and these are ,believe me ,very welknown sites.
    But I never write such things here that ,someone is copying my post ,except in one instance I wrote that this whole post was mine.
    I would not go in deep on that topic which was that post but I have seen many people also just not purely copying my writeup but use to take sentences from my post and have given their view showing that that was their own expert view.
    I don't care for that and I even do not get disturb by that.
    Yes, I use to write at MMB as "nakul" but after starting my blog I stopped writing there.Sometimes I wants to copy my post there which I have written for mmb readers to read and discuss but mmb has got too less CHARACTERS TO POST OR WRITE.I think it is only 5000 Characters and my post sometimes becomes more then 5000 character and then mmb site says at the middle of the post that my characters are over.So it means I have to write in 2 parts and that I do not like as the continunity gets break and the real tempo get desudade.
    I actually tried to paste my last post here at mmb but while pasting it ,mmb said that my characters are over in the middle and hence I again dropped the idea of posting my last post there.

  11. Dear Rajeev,
    I can understand, it must hurt when someone copies your research and states as his own. Anyways the original thinker always wins in the end.

    The government today came out with some excellent announcements that should help the economy significantly. Excise duty reduced by 2%. Service Tax reduced by 2% and now in the evening they have come out with some more announcements that should immensely benefit the BPO and IT industry.

    So can you think there are any specific stocks that would benefit more from all these ??

    I have started realligning my portfolio and am adding more of Sujana Tower, Madhucon and HCC. This is just for your info as I am aware you would not comment on the same. :-)

  12. Meetesh,
    On individual stock I have always given my view.
    It is PF advice that I do not give and I have already written about Sujana Towers and Madhucon Pro here and hence no need to repeat them again.
    I have always written at mmb in past and here at our blog that I will not answer redundant question and that is why I have written many times here and also use to write at mmb that please read all my posting at mmb as well as this blog.Any reply in comments section or written at the blog or giving reply to some boaders at mmb because there is always something in my replies which one would like to know and maybe the answer is also there in it.
    It is just not like reading what I have written at my main page at this blog but one should also read the replies I give in Comments section where someone has asked me a query and I answered that.
    I am no big a guy but still I think I have enough experiance to tell something innovative to my readers.

  13. Rajeev ji
    Hope u r very fine, i want to know urs opinion on SUJANA TOWER, particular, its also in urs watching list, but this stock is falling continuue , at present its quoting at 1o, something wrong at this counter, even other stocks r stable , if possible please share ur views, whts the strategy if some one had bot it higher price, please help

  14. Vicky,
    The overall world scenario is such that there seems to be no respite anywhere.
    Market can go down more from here and even make a new low.
    It is all bad news coming out as USA economy is in bad shape.I donno how the financial crisis is going to be averted or come back to normal and how much time it will take.
    So can't say whether one has to average at this rate or Sujanaq Towers can even go below cmp.
    Try to do best what you can do.

  15. Hey Vikas,
    I am no expert to comment. But i have been in the markets for the last 7 yrs and i can tell you one thing, Sujana Tower is a great buy at this price for the next five years.
    Just a simple study of the stock for the last few days shows that 1) volumes have picked up 2) there is very high delivery ( 97.65% today )

    What it means is that there is some fund probably trying to exit but at the same time the entire sales are being absorbed by Operators/promoters/retail. Once this selling pressure subsides, sujana should start going up again.

    I have used this slide to pick up quite a bit of shares and infact now i have 14,400 shares with an average cost of Rs 12.50. I will add more shares next week by exiting from my other holdings

    My suggestion to you would be to average out your holdings by buying more. That is the only way where you can recover your cost and make profit.

  16. Rajeev,

    Mitzzzz is seeking your advice. Connect with him one on one (email/phone) and provide him your expertize for a fee. Isn't that one of the reason why you are sharing your knowledge so that at some point you have personal clients?

    Lucky people are at the right place at the right time and be prepared to create and grab the opportunities...;). You are missing the last piece.

  17. Dear Bravura,

    Many out here have been interacting with Rajeev for yrs in some forum or the other.. Its your right to be sarcastic to the core but we should also realise that we have opted to visit this blog. If you dont like it feel free to walk away but no one has the right to hurt others.