Tuesday, March 31, 2009

Really a class analogy..

Read somewhere and am posting for readers.....

Really a class analogy..
An Old Story:The Ant works hard in the withering heat all summer building its house andlaying up supplies for the winter.


The Grasshopper thinks the Ant is a fool and laughs & dances & plays thesummer away.

Come winter, the Ant is warm and well fed. The Grasshopper has no food orshelter so he dies out in the cold.Indian Version:The Ant works hard in the withering heat all summer building its house andlaying up supplies for the winter.The Grasshopper thinks the Ant's a fool and laughs & dances & plays thesummer away.Come winter, the shivering Grasshopper calls a press conference anddemands to know why the Ant should be allowed to be warm and well fedwhile others are cold and starving.NDTV, BBC, CNN show up to provide pictures of the shivering Grasshoppernext to a video of the Ant in his comfortable home with a table filledwith food.

The World is stunned by the sharp contrast. How can this be that this poorGrasshopper is allowed to suffer so?

Arundhati Roy stages a demonstration in front of the Ant's house.

Medha Patkar goes on a fast along with other Grasshoppers demanding thatGrasshoppers be relocated to warmer climates during winter .


Mayawati states this as `injustice' done on Minorities.

Amnesty International and Koffi Annan criticize the Indian Government fornot upholding the fundamental rights of the Grasshopper.

The Internet is flooded with online petitions seeking support to theGrasshopper (many promising Heaven and Everlasting Peace for promptsupport as against the wrath of God for non-compliance) .

Opposition MPs stage a walkout. Left parties call for 'Bengal Bandh' inWest Bengal and Kerala demanding a Judicial Enquiry.

CPM in Kerala immediately passes a law preventing Ants from working hardin the heat so as to bring about equality of poverty among Ants andGrasshoppers.


Lalu Prasad allocates one free coach to Grasshoppers on all Indian RailwayTrains, aptly named as the 'Grasshopper Rath'.

Finally, the Judicial Committee drafts the ' Prevention of TerrorismAgainst Grasshoppers Act' [POTAGA], with effect from the beginning of thewinter.

Arjun Singh makes 'Special Reservation ' for Grasshoppers in EducationalInstitutions & in Government Services.

The Ant is fined for failing to comply with POTAGA and having nothing leftto pay his retroactive taxes,it's home is confiscated by the Governmentand handed over to the Grasshopper in a ceremony covered by NDTV.

Arundhati Roy calls it ' A Triumph of Justice'.

Lalu calls it 'Socialistic Justice '.

CPM calls it the ' Revolutionary Resurgence of the Downtrodden '

Koffi Annan invites the Grasshopper to address the UN General Assembly.


Many years later....

The Ant has since migrated to the US and set up a multi-billion dollarcompany in Silicon Valley, 100s of Grasshoppers still die of starvation despite reservation somewherein India, .......AND

As a result of loosing lot of hard working Ants and feeding thegrasshoppers, . . . . . .


. . . . India is still a developing country…!!!

Monday, March 23, 2009

Bulls has taste the Blood............

Friends,
Bulls has taste the blood in Akruti Ltd.They have been able to win the game with bears while taking Akruti Ltd from 550 to 2500 , means 5 times in just 3 months.
Bears has been forced to give up.This shows that Bears has become overconfident and they thought that everything goes as per their whims and analysis.But they have been proved wrong and I am sure that this will go on happening in future as well.
The Cash gr has been so much down there is nothing to talk off other then just buying stocks that can become multibaggers .I have already listed them here.
Even heard that many big names who were bearish has cutoff their short position.I am of the view that stock specific approach will work.They can be battered or go up according to the interest of the operators.But we may not see sensex below 7k......
Preelection rally has started and will end on the eve of the day when Voting would start.There can be downside after that due to uncertainty in poll and bears may take full advantage of that and try to break the market.
But as soon as a new government takes oath we should see a new bull run unfolding in India.
I have written here that keep a tab on Crude prices.Crude is above $50 and that shows that demand is going to increase in the world and that is why Crude is going up.I need not to write what happens when demand increases in the world.
But one thing is sure and that is Bears are making mistakes and that is due to overconfidence and they are repeating the same mistake Bulls made in Jan 08.

Sunday, March 22, 2009

Some A gr stocks...........

Friends,
I have been asked to write some A gr stocks which can be multibagger.I usually do not write A gr stocks as I feel all A gr stocks are great in fundamentals hence there is no need to look at those.But when the valuations has come so much down and they are going abegging and when one of the reader Harpreet Kuar has asked me I thought let me write it here the list of my choice as many other would also be seeking such type of list.....

Here is my choice:
1)ABB
2) Seimens
3)L&T
4)Areva T&D
5)Alsthom Project
6)Punj Lloyd
7)Bhushan Steel
8)GMDC
9)HDIL
10)Jubiliant Orga
11)Madras Cement
12)Rolta
13)Sesa Goa
14)Torrent Power
15)Guj State Petro
16)Jindal Steel
The list has gone to 16 stocks and I hope that it is OK............
If someone can invest in these then they can earn multibagger returns, atleast 3-4 times in next 3-4 yrs.
I would like to make a special mention on Banking and Finance sector.
Banking stocks like Andhra Bank,Federal Bank, Karur Vysya ,Syndicate Bank,BOB,IDBI, IFCI are stocks worth looking in for......these sector can outperform in a big big way any time.
Let me write one more thing and that is I have discussed Satyam when it was around 20 .
Satyam has doubled from there and my assumption that L&T can takeover also coming true.If Satyam goes to L&T then we can see a price of Rs 150 for Satyam.The reason behind it is L&T has bought Satyam at around Rs 150 before the news broke of scam by Raju and L&T now owns 12% stake in Satyam.

Saturday, March 21, 2009

If someone is caught in shorting nifty.......will SEBI take out Nifty from F&O?...........

Friends,
I have been tracking Indain market very keenly.
I have seen that Akruti Ltd is out of F&O.According to me that is a bad decision by SEBI and I strongly protest it.
OK ,Now let us see how it works.
We have seen that Bears have been breaking the stocks since last 15 months and they were playing hand in glove with FII's who wanted to sell India.The Bears operators had shorted the stocks first in F&O along with FII's in market and then FII sold in market the delivary they wanted to sell.They sell in cash market the delivary and prices goes down and hence they earns in F&O as they have shortsold the stock and prices are going down due to selling in cash market , means delivary.
That is how bears have made billions of money and Bulls have lost billions as well.
That is a part of the game.Those who have information and support WINS!
And that is what happened in Akruti Ltd.The eq is around 6.6 cr and hence the shares are 66 lacs .Out of that 89% stake is with promoters and 5% is with private corporate bodies.Hence only 6% is with the public and that means that only 3.7 lacs shares was there as a floating stock.
But the Real Estate sector was down and hence all the stocks like DLF, Unitech,Unity Infra,Prajay,HDIL,etc etc were beated down without seeing at the fundamentals.Many have now bigger BV then the price quoting.That was rediculous.
But that was the part of the game and Bulls never complained about it nor went to SEBI to look into the matter and bail the culprit.Bulls took that loss in their stride.
Now in Akruti Ltd Bears tried to play the same game but they got trapped and that is also part of the game.It is heard that many FII's and a big operator who made billons of rupees in this bear market has lost almost 70 % of profit in just one stock and that is Akruti Ltd.
When SEBI annouced that Akruti Ltd will be taken off from the F&O I was surprised.What is the reason that Akruti is taken out from F&O?Because it went too high?Doubled in a month?But that is what is F&O is......it is all speculation and if SEBI do not wants to have that happen then they needs to ban the whole F&O and not only one stock.Suppose someone has shorted Nifty and got trapped and Nifty goes up and up, WILL SEBI BAN NIFTY FROM DEALING IN F&O?
That is the part of the game and who gets support wins.
Anything played within the rules is appropriate and no one has the authoritty to change it.SEBI step is just discrimination tilted in favour of Bears .
When SEBI declared that all promoters need to annouce how much shares they pledge , that decision went against Bulls but they never complained.They took it in their stride.Then why Bulls have to pay for the mistake they never made.It was bears who shorted Akruti and they miscalculated and they are losing.There is no need for SEBI to come inbetween.Let Bulls and Bears sort it out.That is their prerogative.

Wednesday, March 18, 2009

Fossil Fuel.................

ENERGY Sustaining Sustainability With VCs furiously pumping in billions, alternatives to fossil fuel seem more plausible

P. Hari in San Francisco13 March 2009

UNCLOGGING THE PIPE: The high environmental cost of fossil fuels such as oil is leading companies to invest in cleaner options (Bloomberg)The renewable energy industry is built on dreams. One of the fondest of these dreams is to produce a renewable hydrocarbon fuel, so that we can continue driving our cars without feeling any guilt. It is a dream that fuels several hundred companies globally, a large number of them in the US. Industry observers consider Sapphire Energy, a 2007 start-up based in San Diego in California, as one of the hottest of these biofuel companies. Sapphire has apparently developed a process to produce hydrocarbons petrol, diesel and aviation fuel directly from algae using sunlight, and they are chemically identical to those derived from crude oil. Sapphire says it is a few critical steps away from supplying the fuel to petrol stations.
In the past 18 months of its existence, Sapphire has supposedly proven the technology and supplied fuel for a few biofuel-based experiments, including test flights by Continental Airlines and Japan Airlines. The next few years would determine if this process would work on a commercial scale. Sapphires goal is to start producing 300 barrels per day (bpd) in three years, and 10,000 bpd in five years. Once we demonstrate the process and economics work in 10,000 bpd, ramping up to hundreds of thousands or more of barrels per day is simply a matter of investment, says Tim Zenk, Sapphires vice-president of corporate affairs.
We do not know yet whether it would work on a global scale, but several high-profile investors are backing the company ARCH Venture Partners, the Wellcome Trust, Venrock and Bill Gatess Cascade Investment. But then Sapphire has stiff competition from dozens of other VC-backed companies, also chasing much the same dream. Companies that claim similar results with different approaches include Solix Biofuels in Colorado, Solazyme in San Francisco and Synthetic Genomics in Sausalito in California. Florida-based PetroAlgae says it is close to completing a 5,000 gallon-per-acre plant to produce hydrocarbon fuel using algae. There are also many other firms trying to produce other environment-friendly fuels the label is essential such as ethanol from biomass.
A LONG JOURNEY
The search for clean fuel alternatives started more than a century ago
1876: William Adams discovers that Selenium produces electricity when exposed to sunlight1908: Ford makes a vehicle that can run on ethanol1954: Bell Labs develops the first photovoltaic cell1973: The Satellite Skylab is powered by solar cells1977: Brazilian scientists invent and patent the first industrial process for biodiesel1978: The US congress passes the Energy Tax Act, encourages households to invest in energy conservation, wind and solar energies1979: firm called Arco Solar embarks on a venture to create the worlds biggest photo voltaic manufacturing facility; Ethanol starts becoming popular1985: The University of New South Wales creates solar cells with 20 per cent efficiency1999: Installed Capacity of solar cells cross 1 gigawatt2005: VCs begin funding renewable energy companies in large numbers2006: Boeingspectrolab develops solar cells with 40 per cent efficiency
In the past one year, VCs in the US have been pouring money into biofuel firms. Biofuels Digest, a US publication that tracks investments in the sector, says that $680.2 million (about Rs 3,537 crore) of venture capital was invested in biofuel firms last year. Of this, $437 million was for cellulosic ethanol and $175.9 million for algae-based firms. That is a pittance compared to what is spent on searching for new oilfields to exploit, but a huge jump over the kind of funding biofuel start-ups could hope to attract five years ago. Still biofuel is only the second-most favourite area of renewable energy VCs. Their top choice is without doubt solar energy. In the past four years, VCs in the US invested $4.5 billion in solar energy start-ups.
VC investments in renewable energy continued throughout 2008 despite weak general economic conditions. According to the Cleantech Group, a research firm in San Francisco, $8.4 billion was invested in renewable energy globally in 2008. Greentech Media, a similar organisation, also based in San Francisco, puts the figure at $7.7 billion, but without including many deals in India and China. Solar energy firms mopped up $1.7 billion of VC money last year, and $4.5 billion in the past four years. A large number of these deals were at seed-stage, or Series A, funding. The money pumped into clean tech firms has resulted in a tremendous spurt in innovation. But industry watchers are worried that if the recession continues, the money might slow down and the momentum of innovation would also slow down. Says Brian Fan, senior director of research at the Cleantech Group, The overall funding will slow down this year, and we expect as much as 50 per cent valuations to be reset.
However, early-stage funding could be different. Early-stage VC deals in all sectors are still continuing, according to the MoneyTree report from PricewaterhouseCoopers. The number of VC deals dropped in the last quarter of 2008, but the number of seed and early-stage deals were larger than in any quarter between 2002 and 2006. Even during a recession, VCs are keen to fund innovative ideas. However, highly capital intensive late-stage deals may be a different matter. From among the thousand-odd clean tech start-ups funded in the past few years, only those with breakthrough technologies will get the investments necessary for commercial scale plants. Real innovation always gets funded, says Wilber James, managing partner of Rockport Capital Partners. Many corporate giants started during recessions. Would some of the companies funded in the past three years turn out to be the next Chevron or Shell or GE?Redefining The Solar Energy MapThere seems to be an inevitability to the solar energy industry that attracts entrepreneurs, investors and innovators. Selling solar energy modules and panels is in real danger of becoming a commodity business, but that does not prevent entrepreneurs and VCs from looking for innovation in a solar energy firm. One of the largest fund-raising ever in the sector was done by the Fremont-based Solyndra. It raised $600 million in its four years of existence. Solyndra has a plant that makes 120 megawatts of solar panels, and another one being built to make another 500 megawatts. It claims to have $1.2 billion worth of orders already.
Innovation in solar cells often focuses on science: to produce more efficient or cheaper solar cells. Solyndra relies on pure engineering to improve efficiencies of the system and reduce cost. All conventional solar modules are flat and mounted in flat panels. Solyndras module is cylindrical. This simple idea combined with some innovation has purportedly increased the efficiency of solar panels by roughly 25 per cent.
RAY OF HOPE: While companies such as Sapphire use algae to produce hydrocarbons (left), others use concentrators to tap solar energy
A flat panel, to be always perpendicular to the suns rays, has to keep tracking the sun, and thus has to change orientation. Solyndras way of tackling this is to make the modules cylindrical. These modules are designed in a way to capture light from all sides. Direct light from one side, diffused light from the other side, and reflected light from the bottom. The hollow cylindrical modules also allow wind to pass through them without damage. Solyndras panel is apparently tested for winds up to 120 miles per hour.
Solyndra and other solar panel firms are betting on one thing: commercial rooftop space across the world. In the US alone, there is 30 billion sq. ft of space available, which can translate into 150 gigawatts of power if fully used. The space available globally is probably three times as much. We need to optimise the cost for commercial rooftops, says Kelly Truman, vice-president of marketing in Solyndra.
As all observers of the industry know, the main problem with solar power is the high cost. Making more efficient solar cells is one way of tackling this problem. The other one is to drive efficiencies into the manufacturing process and to develop low-cost materials so that the total cost of the system comes down. Among established players, SunPower is an example of the first type of companies: for some time, it has been making the most efficient solar cells in the world. First Solar is an example of the second: its manufacturing techniques claim to make solar electricity cheaper than ever. Start-ups are challenging both sets of companies through multiple approaches and making a big impact on the solar energy map.


For example, the Oakland, California-based BrightSource is building the worlds largest solar power plant in Mojave Desert near Los Angeles. Capable of producing 1.3 gigawatts of power when complete in 2013, this plant would use mirrors called heliostats to concentrate solar radiation, which in turn is used to generate steam to drive turbines and generate electricity. The company sources its technology from a subsidiary in Israel, where it is building a 100-megawatt and a 200- megawatt plant.
Concentrating the suns rays is an approach followed by several firms around the world, and many of them are claiming efficiencies much higher than plain photovoltaic cells. In Israel, start-up Zenith Solar has licensed concentrator technology from the countrys Ben-Gurion University and Fraunhofer Institute in Germany. The firm claims to increase efficiency five times while reducing the cost of photovoltaic cells from 80 per cent of the system to 10 per cent.
Prism Solar Technologies in New York uses holograms to concentrate solar energy, and reduces the amount of silicon needed in a panel and, thus, the cost. In Australia, Sunengy uses concentrators to focus solar energy on to solar cells partially submerged in water. Water keeps the system cool and protects it from high winds. Research papers published from Sunengy claim that costs can go to less than $1 a watt (currently solar electricity costs roughly $2 a watt). Says Philip Connor, inventor of the system and founder of Sunengy, We need to achieve 50 per cent cost reductions in two years, 75 per cent in four, and coal replacement soon thereafter.
Companies described above represent a fraction of the innovation happening in this field. Nanosolar in the Silicon Valley literally prints solar cells on a substrate, which supposedly speeds up manufacturing by about 100 times; Nanosolar has received $500 million in VC funding. A start-up from MIT, 1366, is using very thin wires to reduce the cost of conventional silicon solar cells, and bring solar energy costs on a par with electricity from coal by 2012. And it is a sector that is attracting global corporate giants. Samsung, IBM and Intel are all nurturing plans to enter the solar energy market. Not surprisingly, Lux Research predicts the solar energy market to increase its size from $36 billion (5.5 gigawatts) to $70 billion (18.5 gigawatt) by 2013, with a few bumps on the way in the next two years. Some industry observers compare the advent of low-cost solar cells at lower efficiencies to the situation in the computer industry in the 1980s. The current state of thin film technology is like the time when PCs made their appearance, says Keshav Prasad, vice-president of business development at Signet Solar, a Silicon Valley firm. PCs were much slower than the mainframes, but they caught on because they were much cheaper.
Playing Catch-up While the solar energy industry seems to be on the verge of explosive growth, the biofuel industry seems set to catch up a few years later. For some time now, biomass energy, with ethanol from corn being the front-runner, has been criticised as not being so environment-friendly. In fact, studies had shown that corn-based ethanol creates more carbon emissions than fossil fuels in the long run. This is because of fertiliser use and land degradation, among other factors. Now, a Chicago-based company claims to put biomass-based ethanol as a top contender among carbon-neutral fuels.
It is difficult to manufacture ethanol economically with a low overall carbon footprint. One way to make ethanol economically is to learn how to convert any piece of biomass into a fuel, which obviates the need to use fertilisers or use areas meant for crops to generate the feedstock. There are several such research projects by firms, but Coskata is among the few that have processes that can use a variety of inputs. Its ethanol plants can take in any feedstock: scraps of wood, any twigs or leaves, old tyres or almost anything that has organic carbon in it.
The firm has proprietary microorganisms that can eat up carbon-based material and convert it finally to ethanol. But ethanol is not as energy dense compared to fossil fuels. We can compensate for this lower density through lower prices for ethanol, says Wes Bolson, chief marketing officer of Coskata. The company will be ready with a semi-scale plant by June, and is also designing a full-scale plant.
Biofuel firms have received a lot of investment, but many industry observers think that the sector has thrived on hype as well. Consider algae-based hydrocarbons, for example. There is no doubt that firms such as Sapphire, Synthetic Genomics and others are innovative. But their technology is still untested on a commercial scale. No one has been able to scale algae-based methods, says Eric Wesoff, senior analyst at Greentech Media. There is the additional issue of land area necessary to manufacture these fuels. However, recent studies have shown that biofuels are sustainable on a global scale. In a paper published two months ago, scientists Jürgen Metzger of University of Oldenburg and Aloys Huettermann from Germanys University of Goettingen, showed that the world demand of energy by 2030 based on projections by the International Energy Agency can be met by cellulosic biomass grown in degraded land.

GAINING HEIGHTS: Companies are driving efficiencies into manufacturing of solar panels to tackle the problem of high costs(Bloomberg)The economical viability of biofuels is difficult to calculate as the price of oil keeps fluctuating. Sapphire, for example, claims to make its bio-crude compete with oil when at prices of $60-80 per barrel (not considering subsidies). The price of crude is currently around $47 a barrel. So at current prices, bio-crude cannot compare with traditional crude. On the other hand, if crude oil prices are consistently over $100 a barrel, bio-crude suddenly becomes a very viable option. Observers cite the instability in the oil market as the major reason why renewable energy investments do not make economic sense (electricity prices, although different in different markets, are not so volatile). However, in spite of this volatility, biofuel companies have developed an impressive range of lab-scale technologies.
Several firms are developing technologies for biomass ethanol. POET, a grain-based ethanol firm in South Dakota, US, is building a 25-million gallon biomass ethanol plant in Iowa, to be ready in two years. Range Fuels, a Colorado-based firm backed by Khosla Ventures, will finish building its cellulosic ethanol plant in Georgia, US, by the end of this year. Sekab in Sweden is also close to commercialising cellulosic ethanol. As mentioned, Sapphire, Solis and Solazyme are developing renewable crude.
Seambiotic, whose parent company is in Israel, uses flue gas from coal power plants to grow algae, which in turn is used to produce biodiesel. The California-based Amyris Biotechnoloiges tries to reprogram the DNA of microbes to make renewable diesel and jet fuel. In a few years time, we may know if these processes succeed, or whether one of these companies can become an energy industry giant.
The Buck Doesnt Stop Here Solar Energy and biofuels have got the attention of VCs in the past few years, but there are a few other promising technologies too. Wind power and geothermal energy are no longer the hot favourites of VCs. There are, however, technologies within these areas that look promising. One is the enhanced geothermal systems (EGS), where water is pumped into cracks in rocks and taken out at high temperature. A report from MIT last year concluded that there is enough geothermal energy that can serve the earths energy needs for several thousand years, with the only long-term drawback being non-hazardous induced seismicity.
The largest EGS system being developed is in South Australia, which can one day generate 10,000 megawatts of electricity. EGS technology is, however, still inchoate and expensive. Google.org has funded two companies in this area: Potter Drilling and AltaRock Energy. Both are in early stages. Says Gregory Miller, managing director of investments at Google.org, We deliberately choose areas that are not getting enough attention from VCs.
High-altitude wind is another area with high potential. A demonstration project in Delft University in the Netherlands has shown feasibility by flying kites at high altitudes. Makani Power in California, in which Google.org has invested $15 million, is developing the technology to fly kites at altitudes between 800 metres and 10 km, and attach them to gensets. A medium-sized kite farm can generate 100 megawatts of energy. Like EGS, this is a technology that will serve the world in the long term. The seeds for both have already been sown.

Sunday, March 15, 2009

Whether GOD Exist or NOT?

Friends ,
I have come through a good conversation between a Professor and a Student.There is a talk on GOD...............I would like to have different views from readers what they think about this conversation and whether they agree or disagree in any way....totally or partly.
I will give my views after reading your comments....but would like to hear from you all how you all look at this conversation and how much you all agree and disagree with it.....

READ ON:

An atheist professor of philosophy speaks to his class on the problem science has with God, The Almighty.
He asks one of his new students to stand and.....

Prof: So you believe in God?
Student: Absolutely, sir.
Prof : Is God good?
Student: Sure.
Prof: Is God all-powerful?
Student : Yes.
Prof: My brother died of cancer even though he prayed to God to heal him. Most of us would attempt to help others who are ill. But God didn't. How is this God good then? Hmm?
(Student is silent.)
Prof: You can't answer, can you? Let's start again, young fella. Is God ood?
Student: Yes.
Prof: Is Satan good?
Student : No.
Prof: Where does Satan come from?
Student: From...God...
Prof: That's right. Tell me son, is there evil in this world?
Student: Yes.
Prof: Evil is everywhere, isn't it? And God did make everything. Correct?
Student: Yes.
Prof: So who created evil?
(Student does not answer.)
Prof: Is there sickness? Immorality? Hatred? Ugliness? All these terrible things exist in the world, don't they?
Student: Yes, sir.
Prof: So, who created them?
(Student has no answer.)
Prof: Science says you have 5 senses you use to identify and observe the world around you. Tell me, son...Have you ever seen God?
Student: No, sir.
Prof: Tell us if you have ever heard your God?
Student: No, sir.
Prof: Have you ever felt your God, tasted your God, smelt your God? Have you ever had any sensory perception of God for that matter?
Student: No, sir. I'm afraid I haven't.
Prof: Yet you still believe in Him?
Student: Yes.
Prof: According to empirical, testable, demonstrable protocol, science says your GOD doesn't exist. What do you say to that, son?
Student: Nothing. I only have my faith.
Prof: Yes. Faith. And that is the problem science has.

Thursday, March 12, 2009

Freddie Mac Lost $265 Million Every DayPosted Mar 12, 2009 08:46am EDT by John Carney in Recession, Banking, Housing Related: FRE
From
The Business Insider, March 12, 2009:

Freddie Mac reported yesterday that its liabilities now exceed its assets, in part because the fair value of its loan portfolio declined by a massive $120 billion. It has said it will need to draw another $30.8 on the loan facility established to keep it afloat. All told it lost just a smidge under $24 billion in the fourth quarter.
Those a mind-boggling numbers. Regular readers know we have a special way of breaking these down to more comprehensible numbers.
Freddie Mac Losses By The Calendar
Full Quarter: $24. billionEach Day: $265 millionEach Hour: $11 millionEach Minute: $184,000Each Second: $3000
Each and every day in the last quarter of 2008--including weekends Thanksgiving and Christmas--Freddie Mac lost $265 million. That beats out General Motors, which lost just $85 million a day. It means that every second, Freddie Mac lost more than two weeks worth of the average American's income. Every 90 seconds, Freddie Mac lost as much as the average home price in the most expensive region in the country.
The main skill required to run Freddie Mac seems to be the ability to light three one thousand dollar bills on fire every second of every day. If these guys keep it up, they may even be able to get a job at AIG one day.

Total $ 587 bn loss in derivatives...from Citi,BoA,HSBC,Wells Fargo..and JP Morgan....

15 Companies That Might Not Survive 2009

February 06, 2009 09:29 AM ET Rick Newman Permanent Link Print
Corrected on 2/9/09:


An earlier version of this article used the wrong company name for Apollo Management and gave the wrong year for real estate declines.
Whos next?
With consumers shutting their wallets and corporate revenues plunging, the business landscape may start to resemble a graveyard in 2009. Household names like Circuit City and Linens n Things have already perished. And chances are, those bankruptcieswere just an early warning sign of a much broader epidemic.

Moodys Investors Service, for instance, predicts that the default rate on corporate bonds which foretells bankruptcies will be three times higher in 2009 than in 2008, and 15 times higher than in 2007. That could equate to 25 significant bankruptcies per month.
We examined ratings from Moodys and data from other sources to develop a short list of potential victims that ought to be familiar to most consumers. Many of these firms are in industries directly hit by the slowdown in consumer spending, such as retail, automotive, housing and entertainment.
But there are other common threads. Most of these firms have limited cash for a rainy day, and a lot of debt, with large interest payments due over the next year. In ordinary times, it might not be so hard to refinance loans, or get new ones, to help keep the cash flowing. But in an acute credit crunch its a different story, and at companies where sales are down and going lower, skittish lenders may refuse to grant any more credit. Its a terrible time to be cash-poor.
[See how Wall Street continues to doom itself.]
Thats why Moodys assigns most of these firms its lowest rating for short-term liquidity. And all the firms on this list have long-term debt that Moodys rates Caa or lower, which means the borrower is considered at least a very high credit risk.
Once a company defaults on its debt, or fails to make a payment, the next step is usually a Chapter 11 bankruptcy filing. Some firms continue to operate while in Chapter 11, retaining many of their employees. Those firms often shed debt, restructure, and emerge from bankruptcy as healthier companies.
But it takes fresh financing to do that, and with money scarce, more bankrupt firms than usual are likely to liquidate - like Circuit City. Thats why corporate failures are likely to be a major drag on the economy in 2009: In a liquidation, the entire workforce often gets axed, with little or no severance. That will only add to unemployment, which could hit 9 or even 10 percent by the end of the year.
[Want to land a plum job without paying taxes? Heres how.]
Its possible that none of the firms on this list will liquidate, or even declare Chapter 11. Some may come up with unexpected revenue or creative financing that helps avert bankruptcy, while others could be purchased in whole or in part by creditors or other investors. But one way or another, the following 15 firms will probably look a lot different a year from now than they do today:
Rite Aid. (Ticker symbol: RAD; about 100,000 employees; 1-year stock-price decline: 92%).
This drugstore chain tried to boost its performance by acquiring competitors Brooks and Eckerd in 2007. But there have been some nasty side effects, like a huge debt load that makes it the most leveraged drugstore chain in the U.S., according to Zacks Equity Research. That big retail investment came just as megadiscounter Wal-Mart was starting to sell prescription drugs, and consumers were starting to cut bank on spending. Management has twice lowered its outlook for 2009. Prognosis: Mounting losses, with no turnaround in sight.
Claires Stores. (Privately owned; about 18,000 employees.)
Leon Blacks once-renowned private-equity firm, Apollo Management, paid $3.1 billion for this trendy teen-focused accessory store in 2007, when buyout funds were bulging. But cash flow has been negative for much of the past year and analysts believe Claires is close to defaulting on its debt. A horrible retail outlook for 2009 offers no relief, suggesting Claires could follow Linens n Things another Apollo purchase and declare Chapter 11, possibly shuttering all of its 3,000-plus stores. (Update: See this response from Claire's.)
[See 5 pieces missing from Obamas stimulus plan.]
Chrysler. (Privately owned; about 55,000 employees).
Its never a good sign when management insists the company is not going out of business, which is what CEO Bob Nardelli has been doing lately. Of the three Detroit automakers, Chrysler is the most endangered, with a product portfolio thats overreliant on gas-guzzling trucks and SUVs and almost totally devoid of compelling small cars. A recent deal with Fiat seems dubious, since the Italian automaker doesnt have to pony up any money, and Chrysler desperately needs cash. The company is quickly burning through $4 billion in government bailout money, and with car sales down 40 percent from recent peaks, Chrysler may be the weakling that cant cut it in tough times.
Dollar Thrifty Automotive Group. (DTG; about 7,000 employees; stock down 95%).
This car-rental company is a small player compared to Enterprise, Hertz, and Avis Budget. Its also more reliant on leisure travelers, and therefore more susceptible to a downturn as consumers cut spending. Dollar Thrifty is also closely tied to Chrysler, which supplies 80 percent of its fleet. Moodys predicts that if Chrysler declares Chapter 11, Dollar Thrifty would suffer deeply as well.
Realogy Corp. (Privately owned; about 13,000 employees).

Its the biggest real-estate brokerage firm in the country, but thats a bad thing when there are double-digit declines in both sales and prices, as there were in 2008. Realogy, which includes the Coldwell Banker, ERA, and Sothebys franchises, also carries a high debt load, dating to its purchase by Apollo Management in 2007 the very moment when the housing market was starting to invert from a soaring ride into a sickening nosedive. Realogy has been trying to refinance much of its debt, prompting lawsuits. One deal was denied by a judge in December, reducing the firms already tight wiggle room. [Update: See this response from Realogy.]
Station Casinos. (Privately owned, about 14,000 employees).
Las Vegas has already been creamed by a biblical real-estate bust, and now it may face the loss of its home-grown gambling joints, too. Station - which runs 15 casinos off the strip that cater to locals - recently failed to make a key interest payment, which is often one of the last steps before a Chapter 11 filing. For once, the house seems likely to lose.
[See why Wall Street talent is an oxymoron.]
Loehmanns Capital Corp. (Privately owned; about 1,500 employees).
This clothing chain has the right formula for lean times, offering womens clothing at discount prices. But the consumer pullback is hitting just about every retailer, and Loehmanns has a lot less cash to ride out a drought than competitors like Nordstrom Rack and TJ Maxx. If Loehmanns doesnt get additional financing in 2009 a dicey proposition, given skyrocketing unemployment and plunging spending the chain could run out of cash.
Sbarro. (Privately owned; about 5,500 employees).

Its not the pizza thats the problem. Many of this chains 1,100 storefronts are in malls, which is a double whammy: Traffic is down, since consumers have put away their wallets. Sbarro cant really boost revenue by adding a breakfast or late-night menu, like other chains have done. And competitors like Dominos and Pizza Hut have less debt and stronger cash flow, which could intensify pressure on Sbarro as key debt payments come due in 2009.
Six Flags. (SIX; about 30,000 employees; stock down 84%).
This theme-park operator has been losing money for several years, and selling off properties to try to pay down debt and get back into the black. But the ride may end prematurely. Moodys expects cash flow to be negative in 2009, and if consumers arent spending during the peak summer season, that could imperil the companys ability to pay debts coming due later this year and in 2010.
Blockbuster. (BBI; about 60,000 employees; stock down 57%).
The video-rental chain has burned cash while trying to figure out how to maximize fees without alienating customers. Its operating income has started to improve just as consumers are cutting back, even on movies. Video stores in general are under pressure as they compete with cable and Internet operators offering the same titles. A key test of Blockbusters viability will come when two credit lines expire in August. One possible outcome, according to Valueline, is that investors take the company private and then go public again when market conditions are better.
Krispy Kreme. (KKD; about 4,000 employees; stock down 50%).
The donuts might be good, but Krispy Kreme overestimated Americans' appetite - and that's saying something. This chain overexpanded during the donut heyday of the 1990s - taking on a lot of debt - and now requires high volumes to meet expenses and interest payments. The company has cut costs and closed underperforming stores, but still hasn't earned an operating profit in three years. And now that consumers are cutting back on everything, such improvements may fail to offset top-line declines, leading Krispy Kreme to seek some kind of relief from lenders over the next year.
Landrys Restaurants. (LNY; about 17,000 employees; stock down 66%).
This restaurant chain, which operates Chart House, Rainforest Café, and other eateries, needs $400 million in new financing to finalize a buyout deal dating to last June. If lenders come through, the company should have enough cash to ride out the recession. But at least two banks have already balked, leading to downgrades of the company's debt and the prospect of a cash-flow crunch. (Update: Moody's recently upgraded its long-term outlook for Landry's - but maintained the company's short-term liquidity rating - after the company refinanced some of its debt.)
Sirius Satellite Radio. (SIRI - parent company; about 1,000 employees; stock down 96%).
The music rocks, but satellite radio has yet to be profitable, and huge contracts for performers like Howard Stern are looking unsustainable. Sirius is one of two satellite-radio services owned by parent company Sirius XM, which was formed when Sirius and XM merged last year. So far, the merger hasn't generated the savings needed to make the company profitable, and Moody's thinks there's a "high likelihood" that Sirius will fail to repay or refinance its debt in 2009. One outcome could be a takeover, at distressed prices, by other firms active in the satellite business. (Update: Sirius recently averted a bankruptcy filing when Liberty Media took a 40 percent stake in the company.)
Trump Entertainment Resorts Holdings. (TRMP; about 9,500 employees; stock down 94%).
The casino company made famous by The Donald has received several extensions on interest payments, while it tries to sell at least one of its Atlantic City properties and pay down a stack of debt. But with casino buyers scarce, competition circling, and gamblers nursing their losses from the recession, Trump Entertainment may face long odds of skirting bankruptcy. (Update: Trump Entertainment declared bankruptcy on Feb. 17 but said it will continue to operate normally.)
BearingPoint. (BGPT; about 16,000 employees; stock down 21%).
This Virginia-based consulting firm, spun out of KPMG in 2001, is struggling to solve its own operating problems. The firm has consistently lost money, revenue has been falling, and management stopped issuing earnings guidance in 2008. Stable government contracts generate about 30 percent of the firm's business, but the firm may sell other divisions to help pay off debt. With a key interest payment due in April, management needs to hustle - or devise its own exit strategy. (Update: BearingPoint declared bankruptcy in February.)
With Carol Hook, Danielle Burton, Jenny O'Shea, Bobbie Kyle Sauer and Stephanie Salmon

Saturday, March 7, 2009

What is success.........


Friends,
I have gone offtopic today.I am going to try to give different aspects on the defination for a big big word named "SUCCESS".
What is success?Whom you call a successful man?How one would see a success?
I have seen people saying that the success he got is the only way one can get and not any other way.They are not ready to accept the otherway of success of others.
Is Success is related to only Money?Is success is related to achievement? Is success only related to Fame?Is Success related to living in big house and having many cars and many servants?
Is success related on to the what place one possess where he works ?A position like Officer or Manager or Area Sales Manager makes a successful person?Is the position everything that is counted in society?
I have been asked by many of my friends and relatives that Why I use to be a simple Head Cashier in Bank and not an officer or a Manager of any branch?Does it means that if I am a manager or a officer then only I am deemed to be successful?Is succes related to the position in society?If one has no such position is that man worth not taken note of?There can be many reaons why a person may not opt for certain decision.Does it means he is not worth taking note of?
I would like to discuss what are the parametres of being Successful?Having salaries over 1,00,000 in dollar is called success?Or having 40-50-100 people working under ones hand and having high salary as well is called a success?
I have seen people trying to make a point on this type of things that I have more responsibility then yours and you have no big responsibility and that fight use to get serious and there use to get a sense of hotting up the atmosphere.
Now what I think here is even one is having such a post and high salary and still he is not humble then the success has no meaning to me. Success makes man more humble and not arrogant. If success is making a person arrogant and starts thinking that what he does is correct even though what he does is wrong and he starts thinking that he is still correct ,whether it is with his job or other way then to me that has a no value......I would term that person as a ZERO...
I have seen many such people who are never repentive as they think that what they does and act is absolutely right even though it is not so.They never repent.....that is arrogance....and the bad thing is , they are very proud to be so. They proudly says that I don't care of what others thinks of me......
I am trying to bring one more aspect here.

I have seen people thinking this way about not worrying what others think of what they do.That is good but then others can also think the same way they thinks.
e.g. When a person think whatever he has done or thought is correct and he cares a damn what others think about what he has done as he has the right to think like that but the other person may not be thinking that he is right and he has also the same right to think about his way, which he thinks is right.One can't force him to do what he thinks to do.But I have seen that these type of people feels that they have done nothing wrong and expect other to accept that but that can never happen. Means that if one is doing wrong and still feels he is right and that others should accept it, it is not possible.I have seen such type of people in life.They do all wrong and still expect that other should accept that. Why? What he think is right may not be correct for other....simple.... Others have also the same right to care for him the damn.




Well, many people has the notion that what he has achieved is only be termed as success.If one is earning over $1,00,000 or $2,00,000 in a business they say the business can go down and one lose. But they don't understand that Job can also be lost. Someone told me that Motel is a risky business and hence it is not worth a look but what about those who made millions of money in Motel business? Aren't they successful?
I have a friend whose daughter is having a salary of $1,20,000 and she is just 24 years old.Now what can we say about that. The same salary others may have got of say working for over decade and a half and that girl is having a salary almost at the starting of her carrer but the arrogant people will say that is not worth. The success should come the way only mine way otherwise all are futile.
Talking about successful people I somewhere wrote that almost all successful people has admitted that they are lucky to be successful.
I am giving an example which I wrote there that I will not write the names. Here I give you a name. Bill Gates of Microsoft. He himself has written and spoken somewhere which I have read myself that after making Microsoft and listing it on stock Exchange , one day when I got up and saw that MS price has gone up by 50% in one day ,that was sheer luck. There was nothing that changed in 24 hrs that MS price can go up by 50%.
There are score of such exmaples. If Abhisek Bacchan would have not been the son of Amitabh Bacchan then he would not have been able to last this long in film industry. Whatever success he got and chances he got for so many pictures to prove that he is a good actor is only because he is AB's sons. Why that do not happened in the life of other actors who failed and never a film producer gave him another chance?Why Abhisek Bacchan is getting more chances then others?Can Abhisek Bacchan claim to be successful on his own?Never....Success is inter related.One is always standing on someone's shoulder when the last results comes out.But people forgets that and become too selfcentered and boast of having success on his own.


One more thing I would like to write here. I have seen successful people has charited lots of money for good cause. Like Bills Gates, Warren Buffet....This says that they know that this type of wealth they have accumalated is sheer luck and that is why they know that it should go to society for less fortunate. FORTUNE IS LUCK. When we say” fortunately” we accept the term LUCK. We have been passed through many circumstances where we have said fortunately this happened.
What is that?Like say one is trying to call someone , which is very urgent and he is not on cell.The info is very very important.Now that person meets you as soon as you go out of your house.When ask he says my cell battery was down but he was coming to your house and you will think fortunately he came to my house and I was able to convey this message.This happens with everyone .
What is that.If he would have not come either you or he would have been at great loss.Why this happens?How one will explain this?These are small things which we do not note when happens in our life.Never thought why that happened?
If one boast to be successful then why they are not able to gather the wealth Warren Buffet or Bills Gates or some other rich person is able to achieve?Why he is confined to just that much of income and not able to go above that?Way beyond that?
When your birth is not your choice what to say about other things?Why I was not born in Dhirubhai Amabani's house and why Anil Ambani. Why Anil Ambani born with a golden spoon in the mouth and not me?Why he has not to scramble for money and good living and a common man has to ?Why he got eberything on Silver or gold platter not others?What SIN other did that they even do not get foods enough for 2 times while foods is thrown away outside in rich houses?
Why a person has to take birth in a Slum and why others take birth in riches?What is the SIN of the person that he took birth in a Slum ?Can anyone answer me?Why some one is born in a big house and why one is there in slum?Why children of rich people can go abroad and take degrees in USA which has very less stress for passing the college and still said to have the US degree , even though they are below average in study and why other children has no chance to avail that even thoguh they are more good in study then the rich children?Because his father is not rich , cannot afford?But what SIN that child made that his father is not rich?
And that comes to my point .Success is related to many things many surrounding. Many things and many person has helped you in the way of success. I remember once Bill Gates said that don't avoid person while going up as you never know while coming down whom you will need. These says everything.
And what is Succes? Succes is what Dhirubhai Ambani achieved, what Bills Gates achieved. One is just a matriculate and one is college drop out. Warren Buffet was no great scohlar either. I have seen people saying that good and great academic carrier is a path for success but just try to look at all successful person they are just average people with no great academic carrer.
I define success as what Dhirubhai Ambani or Bills Gates achieved. They charited because they know that whatever they have done is too small then what they have achieved in regards of money,fame etc etc.......and that is why they give back to society.
While writing I believe in LUCK I never said one needs to sit down and the money will drop in your lap. Everyone try to be succesful and many fails and many gets success very soon and many gets success very late. Why one gets so soon and why one gets it so late?Depends upon what one mean by success.Money earning is success?Fame is succes?
One thing I have observed is that those who donot believe in luck they never accept their mistake and always try to find fault with others. Like they think that it is due to others wrong decision and misinformation they have to pass through this turmoils. They never accept that it was their decision which has making all these troube. That is the mindset of people who do not believe in luck as they believe that they planned everything and the life is exactly moving round according how they planned. And hence anything going wrong when they try to put it proper and if not done they will accuse some other person...
This is a general view and one should not put the hat on their head. I have written what I have observed and nothing more but it is a fact that those who do not believe in LUCK they find faults with others and will accuse others for their failure.
Well, if one have observed then one should have seen that someone use to drink alcohol heavily and still he lives a very long life.I have seen that type of numeruous example.Drunkard , drinking a 3rd grade alcohol, lives for many years and another person gets sick and dies in early 40's and 50's.Why that happens?Because the body didn't resist the alcohol in one person while in other person the body was able to resist the intake of over alcohol. Now does that mean that the alcohlic person who lived long developed such great body and hence he lived longer?NO, it is not?He inherited that body from his fore fathers and that is why he is living long. What is good for one can be bad for others. Our body is not ours. We didn't get it by our choice. Our birth is not by our choice.
I know one can argue that our birth and body is not our choice but we can plan it how it will be in future?How one can change the life who is living in a slum?What opportunity one is going to get?With father a drunkard, mother trying to meet both ends .These are talks.Take birth in a Slum area like Dharavi and then one need to think.One needs to go there and see how people live there and what one can do there and become successful.Go there and see how people live in a Slum.Find out how life is there in Dharavi.What type of problem one encounters which starts from early morning for Toilet.....so on and so forth....Arguements always looks good.Can anyone EXPLAIN me how he would have acted or planned HIS LIFE if he has taken birth in a SLUM?When there is problem for having food for each day how will one think of going abroad if one is not able to get good marks like Rich Peoples children use to have that type of luxury?
It is easy to say then done........

Bottomline is "Anything which one gets more then the effort made ,is LUCK..."






Friday, March 6, 2009

Am I too scared then I need to be for Global economy?

Friends,
I am writing too much negative which I do not do in normal circumstances.
But as I go on reading internet, Business papers,watch TV's business channel of India and USA I am becoming more concerned.
Just read couple of days back that in

1) USA Bankruptcy filing is up from earlier year by 29% in USA.
2)134 publicly traded cos filed bankruptcy and the figure is up by whopping 74% in USA .That is huge.
3)Scores of Banks are unable to show the proof of the Mortagages.It means that there are no papers with the bank for the Mortagages and when Bank will claim of that perticular mortagage ,it will not be able to have attachement on that Mortagage as it has no papers viz: Proof that this mortgage belongs to such and such bank.
This is horrible when we think of USA as Warren Buffet and likes always says that USA system is the most transperant and most reliable.
USA system talks of accountability and very strong rules for the corporate to follow and they need to adhere in any circumstances.
I would like to ask all those people and speakers who were damn sure about the system and reliabilty that what happened to all these.
4)AIG , a US Insurance co where US government has 80% stake has gone to bankruptcy.
Ben Bernanke says he was aggrivated when the news of AIG quater loss of $61 bn came out.
US governmnent ahs already pumped in $150 bn in AIG and that is already finished and now AIG wants more with its latest $61 bn loss.US gove alreadt immidiately sanction $3o bn after the last qr result of $61 bn came out.
So we can derive that $150 bn + $30bn = $180bn goes to AIG then I think $700 bn pacakage is nothing but just a peanut. Obama will need muc much more then this...
5) People are taking out money from 401K and IRS and that will again lead to bigger liquidity crunch.The withdrawing of money rate is going to get increased and will lead in much worser situation.
Frank Cappiello,CM of Montogomery Bros, Cappiello , in Baltimore says
" This is frightful.I haven't seen a bear market without a rally.No oine wants to stepup to the plate.WEe are going to have a whole generation wothout enough to retire on".
I think his words speaks for everything and if one can understand the finer prints of his saying there is nothing more for me to write for the US Indian residents who are following my blog and read it regularly.
I will be very very happy if someone can take a clue and save his money.

Now here are some facts which I have read somewhere and am pasting for my readers.Am sure after reading this any person can understand what needs to be done with their money lying in 401k and IRS.




Fact #1: Earnings declines are now worse than in America’s First Great Depression. Average earnings have plunged 61% year-over-year, much more than during the 1930s. In fact, the last time earnings declined more than 61% was 141 long years ago!

Fact #2: Consumer losses are worse as well. Last time around, the losses that triggered the depression were largely limited to stock market investors.

This time, the fact that the average NYSE stock has already wiped out HALF investors’ money is only the tip of the iceberg: The equity most folks count on as their #1 source of retirement savings has also been wiped out as our homes have lost a staggering $2.4 trillion of their value in a single year.

Fact #3: Debts are far larger. Like this crisis, the Great Depression was essentially a debt implosion. But in 1929, total debts represented no more than 170% of GDP. This time around, U.S. consumers are buried under a far larger mountain of mortgage debt, auto loan debt, credit card debt and other consumer debts. Result: Total debts are now close to 350% of GDP — TWO TIMES MORE!

Fact #4: Derivatives! The Office of the Comptroller of the Currency (OCC) reports that U.S. banks now hold a $176-trillion mountain of derivatives, many of which are extremely high risk. In 1929, these derivatives were virtually non-existent.

Fact #5: Giant failures. In the first 18 months of the 1929-32 bear market, there were many small and medium-sized bank failures. However, none were as massive or as dangerous as the giant failures we’ve experienced in the first 18 months of this giant bear market.

This time around, the failures (or bailouts) of giants like Bear Stearns, Lehman Brothers, Fannie and Freddie, Washington Mutual, and Wachovia dwarf anything seen in 1929. And even these large failures will be trumped several times over by the impending demise of Citigroup and AIG.

Fact #6: U.S. is a debtor nation! In 1929, the United States was a creditor nation, with substantial foreign reserves. Today, the U.S. is the world’s largest debtor nation, dependent on foreign lenders to keep it afloat. That means that there’s a definite limit to how much longer the U.S. government can continue to borrow to bail out failing institutions.

Fact #7: The economic collapse and debt crisis are far from over! Just this morning, for example, we learned that


Home prices have plunged 18.5%.


Sales of existing homes have fallen to the lowest level in twelve years.


Sales of new homes cratered to an all-time record low.


697,000 American families lost a paycheck in February — a 25% increase from January’s abysmal figures.


All these figures that are coming are no fictitious figures. It is time to think and act....

Rajeev

Wednesday, March 4, 2009

Warren Buffet says that US economy is in Shambles.....

Friends,
I am posting here what WB wote in annual letter.
But this time seems WB has also gone horribly wrong.WB is going to come on air on CNBC and I have asked him a question on CNBC.Let us see whether CNBC put my question to WB or not.
But here I am pasting here some views by Jim Cramer and Jeff Mathew as well which one can read one after other.
What I have written in my last post on US Economy and Financial Crisis.......is just a small trailer.I am seeing the US ecconomy deteriorating more then this and hence the global economy is now and would be in a very bad state.
AIG showing a $61 bn loss for a qr is a very big amt and I personally feel that the loss will keep on mounting.
I have asked the same question to the Oracle of Ohama , what I have written in my post that the Chinese trade deficit with USA is as big as $3 trillion and the Fiscal deficit of USA is over $1.5 trillion.How USA is going to balance it ?
Whenever I have met an Indian person living in USA and tried to talk and discuss about the US economy , they only says ,see what US has done to Chinese trade.They have broken the back of Chinese economy but I asked them , agreed that Chinese economy back is broken as China use to export majorly to USA.But what about USA's own economy?How USA is going to deal with its own problem?How the housing problem and Banks crisis and drying up of money is going to be solved?They says that people has to change the life style now and they need to start saving now onwards.That is what I was upto....means while disabling China economically USA people are going to pay a great price for that .
People will keep losing job and the unemplyement figures will keep on increasing.


For this read my last article which I have pasted under the heading " BUBBLE ECONOMICS - GLOBAL CRISIS: LURCHING FROM GLUT TO BUSTPAUL KRUGMAN "

It shows how the easy money were diverted in some fake funds and how Fund managers showed investor a big return which were never there.Bernie Madoff and likes type of episode will keep on coming .
Looking at the situation seems there is no end .Europe is going down with billions/trillions of dollar loss.There is a big big financial crisis globally and this is not going to end early.This recession which will get converted to deflation can long more then 4-5 yrs for USA and it can be even more then that.
THIS IS A FINANCIAL MESS......AND NO ONE IS SPARED and no one is going to be get spared......NO ONE SHOULD FEELTHAT HE IS SAFE ESPECIALLY THOSE LIVING IN USA.I am not writing just to sacre .I am seeing a very bad situation coming for USA unless US needs to think totally the different way. Even after that , how much the situation will get solved remained to be seen.
I am writing on US more this time because people here believes that the economy will make a comeback within a year.But that is not going to happen and no one should live in fools paradise that everything in US is going to be well soon.

When I came here in USA and started following Wall Sreet Journel and CNBC I was wondering what can happen if US stock market goes down.As I saw that all the money in 401K and IRS get used to be invested in US stock market and if the return is not there of 10%, which is the normal and minimum return people use to count, then what can be the fate of those money?
Fisrt around Feb 08 , I saw Bear Stren going broke.At that time it was said that this is just once in a life time.....but then a major jolt camein from Lehman Br , a 156 year old company and the CEO's have no guilt for taking such a company to bankruptcy.
USA system is said to be the most vibrant and trasparent and the investors world over use to invest in US stocks.But the trasperancy was never there.It was all fishy. Later after Bear Stern episode the financial Insti kept on taking money from Suadi Arabai, Dubai and other countries rich people and giving stakes to them which varies from 2 to 5% and all those money were drowned.
I am suspecting much deeper crisis and seeing Dow at much much lower level then this......AIG ,an insurance co, biggest in the world, when reports a $61 bn loss in only one quater is big big enough.If we consider $70 bn for 1 qr what can be the loss for the whole year?Can it be $240 bn?and that too for just one company!



Hence Read on:


Warren Buffet says that US economy is in Shambles.

Saturday, 28 Feb 2009 Warren Buffett Tells Shareholders He Did "Some Dumb Things" In 2008 Posted By: Alex Crippen Topics:Warren Buffett Companies:Procter & Gamble Co Johnson and Johnson Goldman Sachs Group Inc General Electric Conocophillips Berkshire Hathaway Inc.
In his annual letter to Berkshire Hathaway shareholders, Warren Buffett says he did some "dumb things in investments" last year.
The company's controversial "equity put" options are not included on that list. There has been some criticism of Buffett as the declining mark-to-market value of those contracts puts pressure on reported earnings. Fourth quarter net fell 96 percent to $117 million, largely due to 'paper' losses on those derivative positions. For the year, net fell to $4.99 billion from $13.21 billion the year before.
Buffett also predicts the economy will "be in shambles throughout 2009 - and for that matter, probably well beyond - but that conclusion does not tell us whether the stock market will rise or fall."
He's still optimistic for the long-term, however, again pointing out that "our country has faced far worse travails in the past" but always "we've overcome them." He says confidently, "America's best days lie ahead."
The letter was posted this morning (Saturday)
on the company's websitealong with Berkshire's 2008 annual report.
BUFFETT'S MISTAKES
Buffett admits that "I made at least one major mistake of commission and several lesser ones that also hurt... Furthermore, I made some errors of omission, sucking my thumb when new facts came in that should have caused me to re-examine my thinking and promptly take action."
The mistake of commission: buying a large amount of ConocoPhillips
[COP 36.42 -0.93 (-2.49%) ] stock just as energy prices were near their peak. Buffett writes, "I in no way anticipated the dramatic fall in energy prices that occurred in the last half of the year." He still thinks oil will eventually go well above its current $40-$50 range, "but so far I have been dead wrong."
Even if energy prices do rise, "The terrible timing of my purchase has cost Berkshire several billion dollars."
Buffett also reveals that he spent $244 million for shares of two Irish banks that "appeared cheap" to him. At the end of the year, they were written down to their market price of $27 million, for a loss of 89 percent, and they've continued to drop.

"The tennis crowd would call my mistakes 'unforced errors.'"
But he says he's not bothered by the overall "significant decline" in Berkshire's portfolio. "We enjoy such price declines if we have funds available to increase our positions."
Buffett confirms that he sold some stocks he would have preferred to keep to fund Berkshire's purchases of $14.5 billion in fixed-income securities from Wrigley, Goldman Sachs
[GS 86.79 -4.29 (-4.71%) ] , and General Electric [ Loading... () ] . He calls the holdings "more than satisfactory" based just on the high current yields they are delivering. Equity participation is a "bonus."
Those sales primarily involved Johnson & Johnson
[JNJ 49.35 -0.65 (-1.3%) ] , Procter & Gamble [PG 47.50 -0.67 (-1.39%) ] , and Conoco. (See last week's WBW post Why Warren Buffett Isn't a Hypocrite.)
"I have pledged - to you, the rating agencies and myself - to always run Berkshire with more than ample cash. We never want to count on the kindness of strangers in order to meet tomorrow's obligations. When forced to choose, I will not trade even a night's sleep for the chance of extra profits."
BERKSHIRE'S WORST YEAR
The letter also reveals a 9.6 percent decline in Berkshire's book value per-share last year, making 2008 the company's worst year since Buffett took over in 1965. Book value fell by $11.5 billion during the year.
There has been only one annual decline before this one. In 2001, book value fell 6.2 percent.
Compared to the S&P, however, Berkshire's drop is relatively small. With dividends included, the S&P's book value fell 27.4 percent, giving Berkshire its biggest "win" since 2002.
In the letter, Buffett notes that it was also the S&P's biggest decline during the past 44 years.
"By yearend, investors of all stripes were bloodied and confused, much as if they were small birds that had strayed into a badminton game."
DEFENDING THE DERIVATIVES
In a lengthy section on derivatives, Buffett calls them "dangerous" but defends Berkshire's 251 contracts. "I believe each contract we own was mispriced at inception, sometimes dramatically so."
He says the derivatives "float" (payments made to Berkshire by the contracts' buyers minus losses paid by the company) totaled $8.1 billion at the end of the year, money that can be invested.
And "only a small percentage of our contracts call for any posting of collateral when the market moves against us."
He specifically addresses the "equity put" contracts that have caused some concern among investors, revealing that Berkshire has "added modestly" to them.
The contracts, which insure against stock market declines over a period of many years, total $37.1 billion. They're written against the S&P 500, the U.K.'s FTSE 100, the Euro Stoxx 50 in Europe, and Japan's Nikkei 225.
Berkshire is only required to make any payments when the contracts expire. The first comes due in 2019 and the last in 2028. The mark-to-market, or 'paper', loss on the equity put contracts totals $5.1 billion.
Buffett emphasizes a point that he says is often misunderstood. "For us to lose the full $37.1 billion we have at risk, all stocks in all four indices would have to go to zero on their various termination dates." If the indices are down 25 percent, Berkshire would owe about $9 billion between 2019 and 2028, and would have had use of the $4.9 billion premium all along.
Buffett's conclusion: "We have told you before that our derivative contracts, subject as they are to mark-to-market accounting, will produce wild swings in the earnings we report. The ups and downs neither cheer nor bother Charlie (Munger) and me. Indeed, the 'downs' can be helpful in that they give us an opportunity to expand a position on favorable terms. I hope this explanation of our dealers will lead you to think similarly."
EXCERPT: BUFFETT ON THE BAILOUT AND ITS AFTEREFFECTS

This debilitating spiral has spurred our government to take massive action. In poker terms, the Treasury and the Fed have gone all in. Economic medicine that was previously meted out by the cupful has recently been dispensed by the barrel.
Charles Dharapak / AP Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke appear before the House Financial Services Committee on September 24, 2008.
These once-unthinkable dosages will almost certainly bring on unwelcome aftereffects. Their precise nature is anyones guess, though one likely consequence is an onslaught of inflation. Moreover, major industries have become dependent on Federal assistance, and they will be followed by cities and states bearing mind-boggling requests. Weaning these entities from the public teat will be a political challenge. They wont leave willingly.
Whatever the downsides may be, strong and immediate action by government was essential last year if the financial system was to avoid a total breakdown. Had that occurred, the consequences for every area of our economy would have been cataclysmic. Like it or not, the inhabitants of Wall Street, Main Street and the various Side Streets of America were all in the same boat.
"PESSIMISM IS YOUR FRIEND"
Berkshire is always a buyer of both businesses and securities, and the disarray in markets gave us a tailwind in our purchases. When investing, pessimism is your friend, euphoria the enemy. In our insurance portfolios, we made three large investments on terms that would be unavailable in normal markets.
BERKSHIRE'S TWO "YARDSTICKS"
Berkshire has two major areas of value. The first is our investments: stocks, bonds and cash equivalents... Berkshires second component of value is earnings that come from sources other than investments and insurance...
In 2008, our investments fell from $90,343 per share of Berkshire (after minority interest) to $77,793, a decrease that was caused by a decline in market prices, not by net sales of stocks or bonds. Our second segment of value fell from pre-tax earnings of $4,093 per Berkshire share to $3,921 (again after minority interest).
Both of these performances are unsatisfactory. Over time, we need to make decent gains in each area if we are to increase Berkshires intrinsic value at an acceptable rate. Going forward, however, our focus will be on the earnings segment, just as it has been for several decades. We like buying underpriced securities, but we like buying fairly-priced operating businesses even more.
EXCERPT: BUFFETT'S LESSONS FROM THE HOUSING MESS

Home ownership is a wonderful thing. My family and I have enjoyed my present home for 50 years, with more to come. But enjoyment and utility should be the primary motives for purchase, not profit or refi possibilities. And the home purchased ought to fit the income of the purchaser.
The present housing debacle should teach home buyers, lenders, brokers and government some simple lessons that will ensure stability in the future. Home purchases should involve an honest-to-God down payment of at least 10% and monthly payments that can be comfortably handled by the borrowers income. That income should be carefully verified.
Putting people into homes, though a desirable goal, shouldnt be our countrys primary objective. Keeping them in their homes should be the ambition.
WHY PREMIUMS FOR TAX-EXEMPT BOND INSURANCE HAVE BEEN TOO LOW
Early in 2008, we activated Berkshire Hathaway Assurance Company (BHAC) as an insurer of the tax-exempt bonds issued by states, cities and other local entities...
We remain very cautious about the business we write and regard it as far from a sure thing that this insurance will ultimately be profitable for us. The reason is simple, though I have never seen even a passing reference to it by any financial analyst, rating agency or monoline CEO.

The rationale behind very low premium rates for insuring tax-exempts has been that defaults have historically been few. But that record largely reflects the experience of entities that issued uninsured bonds. Insurance of tax-exempt bonds didnt exist before 1971, and even after that most bonds remained uninsured.
Mark Lennihan / AP Warren Buffett's municipal bond insurer write its first policy in January, 2008, backing a $10 million bond issued by New York City.
A universe of tax-exempts fully covered by insurance would be certain to have a somewhat different loss experience from a group of uninsured, but otherwise similar bonds, the only question being how different. To understand why, lets go back to 1975 when New York City was on the edge of bankruptcy. At the time its bonds virtually all uninsured were heavily held by the citys wealthier residents as well as by New York banks and other institutions. These local bondholders deeply desired to solve the citys fiscal problems. So before long, concessions and cooperation from a host of involved constituencies produced a solution. Without one, it was apparent to all that New Yorks citizens and businesses would have experienced widespread and severe financial losses from their bond holdings.
Now, imagine that all of the citys bonds had instead been insured by Berkshire. Would similar belttightening, tax increases, labor concessions, etc. have been forthcoming? Of course not. At a minimum, Berkshire would have been asked to share in the required sacrifices. And, considering our deep pockets, the required contribution would most certainly have been .
EXCERPT: THE "TREASURY BOND BUBBLE" AND WHY CASH ISN'T KING
The investment world has gone from underpricing risk to overpricing it. This change has not been minor; the pendulum has covered an extraordinary arc. A few years ago, it would have seemed unthinkable that yields like todays could have been obtained on good-grade municipal or corporate bonds even while risk-free governments offered near-zero returns on short-term bonds and no better than a pittance on long-terms. When the financial history of this decade is written, it will surely speak of the Internet bubble of the late 1990s and the housing bubble of the early 2000s. But the U.S. Treasury bond bubble of late 2008 may be regarded as almost equally extraordinary.
Clinging to cash equivalents or long-term government bonds at present yields is almost certainly a terrible policy if continued for long. Holders of these instruments, of course, have felt increasingly comfortable in fact, almost smug in following this policy as financial turmoil has mounted. They regard their judgment confirmed when they hear commentators proclaim cash is king, even though that wonderful cash is earning close to nothing and will surely find its purchasing power eroded over time.
Approval, though, is not the goal of investing. In fact, approval is often counter-productive because it sedates the brain and makes it less receptive to new facts or a re-examination of conclusions formed earlier. Beware the investment activity that produces applause; the great moves are usually greeted by yawns.
EXCERPT: CHANGES TO QUESTION TIME AT THE ANNUAL MEETING

This year we will be making important changes in how we handle the meetings question periods. In recent years, we have received only a handful of questions directly related to Berkshire and its operations. Last year there were practically none. So we need to steer the discussion back to Berkshires businesses.
CNBC.com Omaha's Qwest Center, site of Berkshire Hathaway's annual shareholders meeting
In a related problem, there has been a mad rush when the doors open at 7 a.m., led by people who wish to be first in line at the 12 microphones available for questioners. This is not desirable from a safety standpoint, nor do we believe that sprinting ability should be the determinant of who gets to pose questions. (At age 78, Ive concluded that speed afoot is a ridiculously overrated talent.) Again, a new procedure is desirable.

In our first change, several financial journalists from organizations representing newspapers, magazines and television will participate in the question-and-answer period, asking Charlie and me questions that shareholders have submitted by e-mail. The journalists and their e-mail addresses are: Carol Loomis, of Fortune, who may be emailed at cloomis@fortunemail.com"> cloomis@fortunemail.com ; Becky Quick, of CNBC, at BerkshireQuestions@cnbc.com"> BerkshireQuestions@cnbc.com , and Andrew Ross Sorkin, of The New York Times, at arsorkin@nytimes.com"> arsorkin@nytimes.com . From the questions submitted, each journalist will choose the dozen or so he or she decides are the most interesting and important. (In your e-mail, let the journalist know if you would like your name mentioned if your question is selected.)
Neither Charlie nor I will get so much as a clue about the questions to be asked. We know the journalists will pick some tough ones and thats the way we like it.
In our second change, we will have a drawing at 8:15 at each microphone for those shareholders hoping to ask questions themselves. At the meeting, I will alternate the questions asked by the journalists with those from the winning shareholders. At least half the questions those selected by the panel from your submissions are therefore certain to be Berkshire-related. We will meanwhile continue to get some good and perhaps entertaining questions from the audience as well.
Current Berkshire stock prices:
Class A:
[US;BRK.A 74320.0 -4280.00 (-5.45%) ]
Class B:
[US;BRK.B 2421.0 -143.00 (-5.58%) ]


Jim Cramer who use to come everyday on CNBC US channel.I use to hear him CNBC.

Tuesday, 17 Feb 2009Jim Cramer Warns Investors: Don't Follow Warren Buffett This TimePosted By: Alex Crippen
CNBC
Mad Money host Jim Cramer doesn't like what he sees in Warren Buffett's latest stock moves for Berkshire Hathaway, and doesn't think ordinary investors should follow the Omaha billionaire's lead this time around.
UPDATE: Cramer
writes in greater detail on BloggingStocks.com about how he's "struggling" with Buffett's recent stock moves, which amount to "selling America."
Buffett's holding company released its
fourth quarter portfolio snapshot earlier tonight (Tuesday). It revealed a big reduction in Berkshire's holdings of Johnson & Johnson [JNJ 49.22 -0.78 (-1.56%) ] .
Here's Cramer's reaction after Rebecca Jarvis reported tonight on the Berkshire filing during a CNBC Special Report:
http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=9,0,0,0 height=285 width=320 classid=clsid:D27CDB6E-AE6D-11cf-96B8-44455354000062
JIM: Rebecca, I've got to tell you. I listen and I know that he's a great man. And there's no doubt about it. He's a great man. And I know people love to see what he's doing. But I have to tell you, when I listen to what he sold, and what he bought, he's continuing to make a gigantic bet. And the bet is that everything is alive and well and good. And ever since he wrote that
New York Times piece, which I don't want to talk --
REBECCA: Four months ago to the day --
JIM: Yeah, and what, about 25 percent ago? Look, no one is ever going to say the man has lost his touch. I don't have that kind of arrogance in the show. I will tell you that people who are now going to sit there and buy in the after-market tomorrow morning the things that he bought, and sell the things that he sold, are not people that are going to profit, perhaps, within the time frame that they care about. The time frame that Buffett cares about --
REBECCA: He said that he'll hold onto it forever, Jim, if he could. That's --
JIM: That forever thing is so bad. I was at Chase the other day and they wanted to know when I wanted to pay my mortgage, and I was going to give them some forever rap. America ain't used to the forever game. America is about trying to put food on the table and pay the mortgage and we just don't have the luxury of being wrong. And that's what I think Warren's doing. He's got the luxury of being wrong. The rest of us do not.




Wednesday, 18 Feb 2009

Jim Cramer "Struggles" With Warren Buffett's Stock Moves Because He's "Selling America"

Posted By: Alex Crippen
CNBC's Mad Money host Jim Cramer is laying out his case against Warren Buffett's recent stock moves.
Last night (Tuesday), after
Berkshire Hathaway's fourth quarter portfolio snapshot, Cramer warned on CNBC that investors should not follow Buffett's lead because they will not profit "within the time frame they care about." (Transcript and video clip are in the WBW post Jim Cramer Warns Investors: Don't Follow Warren Buffett This Time.)
This morning,
on his TheStreet.com site, Cramer goes into greater detail, explaining why he's "struggling with some of the things that Warren Buffett is doing with his cash these days."
Cramer's prime complaint: Warren Buffett was "selling America" last fall when Berkshire reduced its stakes in Johnson & Johnson, Procter & Gamble, ConocoPhillips, and U.S. Bancorp. "What's more American than these stocks?" he asks. (The post notes that Cramer is currently long Johnson & Johnson and ConocoPhillips.)
Cramer draws a contrast with Buffett's "now-fated"
October 16 New York Times op-ed piece that argued it was time to buy American stocks. Since then, the major market indexes have continued to plunge, so "those who bought America that day are feeling ... well, downright un-American. Or at least they're feeling poorer."
Cramer says that he is "sensitive" to that Times piece because at the same time he was advising an exit from stocks if investors needed to keep their money safe for a major purchase in the next year.
And he argues that while rich people can afford to buy for the long term as Buffett advises, everyone else can't.
"As long as Buffett was buying and not selling, or as long as he was at least holding, you couldn't knock him. But now it turns out he's putting a terminal value on something we thought we were to hold forever."
While Buffett is "obviously a tremendous investor" and "doesn't have to answer for anything," Cramer continues, "It is fair to say that many, many people relied on his judgment to buy stocks just like the quintessential American names of Procter & Gamble and Johnson & Johnson. To them, what can I say? 'Don't worry about it.'"
Cramer concludes that Buffett's "actions should be scrutinized just like anyone else's," so TheStreet.com is starting its own Buffett Watch. (He cites his friend Doug Kass, "who has been on this case for months now" and who has
his own questions today about Berkshire's portfolio.)
"We need to know what's happening. Buffett's firm is too big, and he is too important to ignore. We need to know daily and some institution has to have the guts to do it. Glad it's us."


Jim Mathew's post:

Saturday, February 28, 2009

This Just In: Berkshire Equity Portfolio Back to its Cost Basis

The 2008 Chairmans Letter from Warren Buffett is in, and while it contains much of what youd expecta self-confession or two, that old Mae West Snow White joke, one humorous new aphorism (beware of geeks bearing formulas) and a metaphor that associates derivatives with social diseases, not to mention a sober assessment of the world economy, one no-punches-pulled prediction on inflation, as well as plenty of cheerleading for Berkshires managers and businessesthe biggest shocker in the letter is not actually highlighted, or even mentioned, by Buffett.The shocker is this: Berkshire Hathaways portfolio of equitiesthe stocks such as Coke and P&G and Washington Post that Warren Buffett himself, the Oracle of Omaha, famously purchased over the years at bargain pricesappears, as of yesterdays market close, to be worth not much more than Buffett's cost.Thats right.Based on the year-end portfolio presented in the letter (and it has changed only modestly over time, but now excludes two stocks, Burlington Northern and Moodys, in which Berkshire owns 20% and must report its holdings under the equity method,) Berkshires entire equity portfolio, which had a $37 billion cost basis and a $49 billion market value at year-end 2008, was, as of yesterdays market close, worth only about $37 billion.Now, we know what youre thinking: youre thinking, Warren doesnt mind, so why should we?Indeed, Buffett doesnt mindhe says so in this years letter, on page 5:Additionally, the market value of the bonds and stocks that we continue to hold suffered a significant decline along with the general market. This does not bother Charlie and me.Indeed, we enjoy such price declines if we have funds available to increase our positions. Long ago, Ben Graham taught me that Price is what you pay; value is what you get. Whether were talking about socks or stocks, I like buying quality merchandise when it is marked down.Yet Buffett also disclosed what might go down as the second most surprising disclosure in todays letter: he had to sell some of Berkshire's stocks to make those headline-grabbing investments in GE, Goldman Sachs and Wrigley:To fund these large purchases [GE, Goldman and Wrigley], I had to sell portions of some holdings that I would have preferred to keep (primarily Johnson & Johnson, Procter & Gamble and ConocoPhillips).No, to answer the obvious question, were not suggesting Buffetts portfolio is any worse off than anybody elses.Yet the fact is, the value of Berkshires equity portfolio is not only of enormous economic importance to Berkshire Hathaway and its shareholders, but to investors around the world who watch what Warren does and frequently imitate his moves.And the fact that it appears to be right back to its cost basisafter decades of notis startling.Now, the calculation itself is fairly straightforward. Since year-end Berkshires equity portfolio has suffered losses of close to $1 billion or more in American Express, Conoco-Phillips, P&G, and USB, if the computers here at NotMakingThisUp are correct.And while some of those losses are certainly temporary, the hits to his financial holdings look more permanentas does the whopping $5 billion decline in Berkshire's 7% stake in Wells Fargo thus far in 2009.Virtually every other named holding in Berkshires portfolioincluding Coke, Tesco, Swiss Re, and even poor old Washington Postis also down year-to-date.Consequently, if our math is correct, Berkshires equity portfolio stands at roughly $37 billion as of yesterday's market close, dead even with its $37.1 billion reported cost basis at year-end 2008.(For comparisons sake, at the end of 2007, Berkshires equity portfolio had a $35 billion unrealized gain.)As a modest shareholder in Berkshire Hathaway, were rooting for the current, jaw-dropping state of affairs in Berkshires equity portfolio to revert to the meani.e. back to fat profits.Nevertheless, if anyone had doubts how bad it is out there (Buffett himself writes in todays letter, Were certain, for example, that the economy will be in shambles throughout 2009 and, for that matter, probably well beyond) look no further than the Berkshire portfolio.As for what may be the least surprising aspect of Warren Buffetts letter to shareholderswe think it is that Buffett himself acknowledged what we wrote in Pilgrimage to Warren Buffetts Omaha, page 208, in a chapter called What Would Warren Do?Far from being a forum for business discussion, as Buffett wrote [when describing the virtue of attending Berkshires shareholder meetings], not a single shareholder has even asked about the business.So Buffett, according to the final page in this year's letter, is changing the rules on asking questions at the upcoming meeting.More on those changes Monday, when we introduce the Pilgrimage to Omaha Top Ten List of Questions Wed Like to Hear Somebody Ask The Oracle of Omaha.Jeff MatthewsI Am Not Making This Up© 2008 NotMakingThisUp, LLCPilgrimage to OmahaThe content contained in this blog represents the opinions of Mr. Matthews.Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews recommendations. This commentary in no way constitutes investment advice. It should never be relied on in making an investment decision, ever. Nor are these comments meant to be a solicitation of business in any way: such inquiries will not be responded to. This content is intended solely for the entertainment of the reader, and the author.

Comments: Here Jim Mathew has nicely explained how WB's investment has come to square one....




BUBBLE ECONOMICS - GLOBAL CRISIS: LURCHING FROM GLUT TO BUST
PAUL KRUGMAN


Remember the good old days, when we used to talk about the subprime crisisand some even thought that this crisis could be contained? Oh, the nostalgia! Today, we know that subprime lending was only a small fraction of the problem. Even bad home loans in general were only part of what went wrong. Were living in a world of troubled borrowers, ranging from shopping mall developers to European miracle economies. And new kinds of debt trouble just keep emerging.
How did this global debt crisis happen? Why is it so widespread? The answer, Id suggest, can be found in a speech Federal Reserve chairman Ben Bernanke gave four years ago. At the time, Bernanke was trying to be reassuring.
But what he said then nonetheless foreshadowed the bust to come.
The speech, titled The Global Saving Glut and the US Current Account Deficit, offered a novel explanation for the rapid rise of the US trade deficit in the early 21st century.
The causes, argued Bernanke, lay not in the US but in Asia.
In the mid-1990s, he pointed out, the emerging economies of Asia had been major importers of capital, borrowing abroad to finance their development. But after the Asian financial crisis of 1997-98 (which seemed like a big deal at the time but looks trivial compared with whats happening now), these countries began protecting themselves by amassing huge war chests of foreign assets, in effect, exporting capital to the rest of the world. The result was a world awash in cheap money, looking for somewhere to go.
Most of that money went to the UShence our giant trade deficit, because a trade deficit is the flip side of capital inflows. But as Bernanke correctly pointed out, money surged into other nations as well.
In particular, a number of smaller European economies experienced capital inflows that, while much smaller in dollar terms than the flows into the US, were much larger compared with the size of their economies.
Still, much of the global saving glut did end up in America. Why?
Bernanke cited the depth and sophistication of the countrys financial markets (which, among other things, have allowed households easy access to housing wealth). Depth, yes.

But sophistication? Well, you could say that US bankers, empowered by a quarter-century of deregulatory zeal, led the world in finding sophisticated ways to enrich themselves by hiding risk and fooling investors.
And wide-open, loosely regulated financial systems characterized many of the other recipients of large capital inflows. This may explain the almost eerie correlation between conservative praise two or three years ago and economic disaster today.
Reforms have made Iceland a Nordic tiger, declared a paper from the Cato Institute. How Ireland Became the Celtic Tiger was the title of one Heritage Foundation article; The Estonian Economic Miracle was the title of another. All three nations are in deep crisis now.
For a while, the inrush of capital created the illusion of wealth in these countries, just as it did for American homeowners: asset prices were rising, currencies were strong, and everything looked fine.
But bubbles always burst sooner or later, and yesterdays miracle economies have become todays basket cases, nations whose assets have evaporated but whose debts remain all too real. And these debts are an especially heavy burden because most of the loans were denominated in other countries currencies.
Nor is the damage confined to the original borrowers. In the US, the housing bubble mainly took place along the coasts, but when the bubble burst, demand for manufactured goods, especially cars, collapsedand that has taken a terrible toll on the industrial heartland.
Similarly, Europes bubbles were mainly around the continents periphery, yet industrial production in Germanywhich never had a financial bubble but is Europes manufacturing coreis falling rapidly, thanks to a plunge in exports.
If you want to know where the global crisis came from, then, think of it this way: Were looking at the revenge of the glut. And the saving glut is still out there. In fact, its bigger than ever, now that suddenly impoverished consumers have rediscovered the virtues of thrift and the worldwide property boom, which provided an outlet for all those excess savings, has turned into a worldwide bust.
One way to look at the international situation right now is that were suffering from a global paradox of thrift: Around the world, desired saving exceeds the amount businesses are willing to invest. And the result is a global slump that leaves everyone worse off. So thats how we got into this mess. And were still looking for the way out.