Friday, March 6, 2009

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

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....



  1. Hi Rajeev:

    Scene is pretty bad with amount of job losses ,this is spiralling into big black hole , noone know what bad news coming next , including me and myfriend who work in IT industry are so stressed out ,lot of family have start moving back to India. what is your take on US economy and Indian economy when should we see the bottom .


  2. Hi Hiren,
    I am seeing the scenario mor bad then this.More and more people will lose the job.
    Seeing Dow much much lower then this , maybe 40% down from here and maybe even more.
    Same with Sensex.We can see 6000 and even lower levels.
    It is scary.