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Economy
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US lawmakers in the House of Representatives on Monday voted against the biggest proposed government intervention in the U.S. economy since the Great Depression of 1929.
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US house rejected bailout plan of USD 700 bn that means pain has to be experienced. Although India\\\'s internal domestic growth is robust & could even outperform next year, there are large doubts & heavy risks in some sectors which have US Inc. as their customers.
Offcorse all fingers go to IT, Tech sector which has tremendous strength & support due to US Inc. there could be heavy pessimism & panic related to these sectors as US domestic issues could reduce the further orders to these sectors. Also, If US democratic govt. comes then it would favor democracy\\\'s demand of reduction in IT outsourcing & spending to asian economies like India.
So, from my point of view even realty & banks are much better sectors in this financial crisisn than IT & Tech....
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Mutual Funds have a greater responsibility to their investors. Most funds have a limit of cash they can hold. this may range from 10 to 25% of the total funds available on hand. So even if they continue to hold cash upto this limit, they still take a large hit when the market goes down on the invested amount.
In the interest of the investors, they prefer to stay in cash for this period till the market reaches a stability point.
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In reply to:
why our economy faces free fall
Posted by :
sachindua
large no mutal fund cos holding a cash why there not use ing it & making losses to small investor as i am reading ether messages there using a word of freefall of 700 below nifty reaches 3700 as us is in troublence not our econmy 
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IIP numbers are good & Q2 results are also not disappointing. i think Fy2009\' GDP will be set between 7.5 to 7.8%. & if things get much better like interest rate unchanged & then cut by say 25 BPS 50 BPS then I think 8% target would be achieveed....
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large no mutal fund cos holding a cash why there not use ing it & making losses to small investor as i am reading ether messages there using a word of freefall of 700 below nifty reaches 3700 as us is in troublence not our econmy...
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As the Indian economy grows over the next decade or so and a predominantly young population enters the workforce, a big problem that is likely to emerge is a certain loss of meaning. The early symptoms are already visible in the form of high attrition and low employee morale and loyalty across all levels in most industries. It appears that human fulfilment would ironically face its biggest challenge from rapid economic growth and its numerous harmful side-effects. One such side-effect is the commoditisation of time.
Unsustainable bubbles
In a recent article, MIT professor Peter Senge proposes that the very notion of the Industrial Revolution is a bubble much like the dotcom bubble of a few years ago. The current climate change crisis we are facing is a fall out of this bubble, which is now in its last stages. Over a long period of time, rapid industrialisation has occurred in a manner that has been completely out of sync with nature and the costs of those actions are beginning to be borne now.
In much the same way, rapid economic growth leads to another bubble — an unhealthy relationship between people and the time they have on their hands. The people inside the bubble are led to believe that time can be spent on only two kinds of activities — either in the production of goods and services as part of the workforce or in the consumption of the very same goods and services. Needless to say, this view is completely out of sync with the way human beings are designed, as creative agents who seek fulfilment through multiple dimensions (depending on their orientation) including economic activities, community, family, art, service to society, spirituality and so on.
The leisure economy
The Leisure Economy is a book by Linda Nazareth that explores how “changing demographics, economics and generational attitudes will reshape our lives and our industries,” and how the ‘time bubble’ discussed in the previous section is headed towards its end. In the book, she proposes that as Gen X and Gen Y individuals dominate the workforce over the next few years, they will discard many old notions about work and leisure time. It is not hard to see that the cultures of companies founded by Gen X/Y entrepreneurs (like Google) is radically different from the cultures of older organisations with regard to how the workforce spends its time, as well as the manner in which a closer integration between work and other aspects of life is encouraged.
Timothy Ferriss, author of the best selling The Four Hour Work Week also makes a strong case for looking at work and leisure in a new way. Amongst other things, he advocates the idea of taking a number of ‘mini-retirements’ over the course of one’s working life as opposed to the traditional notion of retirement as one long stretch of time (of delayed gratification as it were).
Towards a more balanced world
While the leisure economy may be an emerging reality in highly developed economies of the West, it may well be some time before it comes true in developing nations. However, considering the globalised world we live in today, one could guess that the learning curve would be far more compressed. Either way, the trend clearly points to a future where people will look for fulfilment through multiple dimensions with the underlying currency being time and its balanced allocation across dimensions. Secondly, there would be a growing realisation that human fulfilment is an ongoing parallel activity across all these dimensions and suppressing one in the interest of the other will inevitably fail in the long run. Finally, the notion of time as a commodity would be replaced by the notion of time as a currency, as a form of income that is as important as financial income
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Dear boarders,
I don\\`t understand what\\`s wrong with market.
N-Deal is cleared. US 700 Bln resuce plans seems to be reality now.
Then why markets are reacting negative ?
Please let me know the outlook.
Thanks in advance.
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The success of the Indo-US nuclear deal in Capitol Hill depends on four key players in the US Congress. Three out of four have publicly announced their support. However, a short Congressional calendar and critics could still derail this process.
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No government bail-out of the banking system was ever going to be pretty. This one deserves support
SAVING the world is a thankless task. The only thing beyond dispute in the $700 billion plan of Hank Paulson, the treasury secretary, and Ben Bernanke, chairman of the Federal Reserve, to stem the financial crisis is that everyone can find something in it to dislike. The left accuses it of ripping off taxpayers to save Wall Street, the right damns it as socialism; economists disparage its technicalities, political scientists its sweeping powers. The administration gave ground to Congress, George Bush delivered a televised appeal and Barack Obama and John McCain suspended the presidential campaign. Even so, as The Economist went to press, the differences remained. There was a chance that Congress would say no.
Spending a sum of money that could buy you a war in Iraq should not come easily; and the notion of any bail-out is deeply troubling to any self-respecting capitalist. Against that stand two overriding arguments. First this is a plan that could work (see article). And, second, the potential costs of producing nothing, or too little too slowly, include a financial collapse and a deep recession spilling across the world: those far outweigh any plausible estimate of the bail-out’s cost.
Mr Market goes to Congress
America’s financial system has two ailments: it owns a huge amount of toxic securities linked to falling house prices. And it is burdened by losses that leave it short of capital (although the world has capital, not enough has been available to the banks). For over a year, since August 2007, central bankers, principally Mr Bernanke, have been trying to make this toxic debt liquid. But by September 17th, following the bankruptcy of Lehman Brothers and the nationalisation of American International Group earlier that week, the problem started to become one of the system’s solvency too. The market lost faith in a strategy that saved finance one institution at a time. The economy is not healing itself. If credit markets stay blocked, consumers and firms will enter a vicious spiral.
Mr Paulson’s plan relies on buying vast amounts of toxic securities. The theory is that in any auction a huge buyer like the federal government would end up paying more than today’s prices, temporarily depressed by the scarcity of buyers, and still buy the loans cheaply enough to reflect the high chance of a default. That would help recapitalise some banks—which could also set less capital aside against a cleaner balance sheet. And by creating credible, transparent prices, it would at last encourage investors to come in and repair the financial system: this week Warren Buffett and Japan’s Mitsubishi-UFJ agreed to buy stakes in Goldman Sachs and Morgan Stanley. Some banks would still not have enough capital, but under Mr Paulson’s original plan, the state could put equity in them, or, if they become insolvent, take them over and run them down.
The economics behind this is sound. Government support to the banking system can break the cycle of panic and pessimism that threatens to suck the economy into deep recession. Intervention may help taxpayers, because they are also employees and consumers. Although $700 billion is a lot—about 6% of GDP—some of it will be earned back and it is small compared with the 16% of GDP that banking crises typically swallow and trivial compared with the Depression, when unemployment surged above 20% (compared with 6% now). Messrs Bernanke and Paulson also have done well by acting quickly: it took seven years for Japan’s regulators to set up a mechanism to take over large broke banks in the 1990s.
Could the plan be better structured? Some economists want the state to focus on putting equity into the banks—arguing that it is the best way to address their lack of solvency. In theory you would need to spend less, because a dollar of new equity would support $10 in assets. Yet the banks might not take part until they were on the ropes and, if house prices later fell dramatically more, the value of the banks’ shares would collapse. The threat of the government taking stakes would scare off some private investors. And in the charged atmosphere after this bail-out meddling politicians, as part-owners, would have a tempting lever over the banks.
Mr Paulson’s plan also has its shortcomings. He will find it hard to stop sellers from rigging auctions, if only because no two lots of dodgy securities are exactly the same. Taxpayers may thus pay over the odds and banks may be rewarded for their stupidity. Yet these costs seem small against the benefit of putting a floor under the markets. And fine calculations about moral hazard are less pressing when investors are fleeing risk.
If the economics of Mr Paulson’s plan are broadly correct, the politics are fiendish. You are lavishing money on the people who got you into this mess. Sensible intervention cannot even buy long-term relief: the plan cannot stop house prices falling and the bloated financial sector shrinking. Although the economic risk is that the plan fails, the political risk is that the plan succeeds. Voters will scarcely notice a depression that never happened. But even as they lose their houses and their jobs, they will see Wall Street once again making millions.
Buckle a little, but do it briefly
In retrospect, Mr Paulson made his job harder by misreading the politics. His original plan contained no help for homeowners. And he assumed sweeping powers to spend the cash quickly. He was right to want flexibility to buy a range of assets. But flexibility does not exclude accountability. As complaints mounted, Mr Paulson and Mr Bernanke buckled—agreeing, for instance, to more oversight. Now that Messrs McCain and Obama have returned to Congress to forge a deal, more buckling may be necessary. Ideally, concessions should not outlast the crisis: temporary help for people able to stay in their houses, a brief ban on dividends in financial firms, even another fiscal package. They should not be permanent or so onerous that the programme fails for want of participants—which is why proposed limits on pay are a mistake.
Mr Paulson’s plan is not perfect. But it is good enough and it is the plan on offer. The prospect of its failure sent credit markets once again veering towards the abyss. Congress should pass it—and soon.
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Business confidence in India has registered a sharp decline in July 2008, dipping to the lowest level in five years, according to a survey conducted by New Delhi-based National Council of Applied Economic Research (NCAER).
The business confidence index (BCI) fell to 125.8 points in July 2008, fluctuating widely from 148.7 points recorded a month earlier.
But, despite the fall in confidence, businesses expect positive growth in sales and profit, mainly driven by domestic demand. “The indicators point to slower growth in exports and imports than sales and production. In other words, the domestic markets are expected to be stronger than the global demand conditions,” NCAER said in the report.
The survey is based on four indicators — overall economic conditions, financial position of the firms, capacity utilisations and investment climate, with equal weight to all indicators.
Sector-wise, business confidence in the services sector declined the most with a loss of 26.2 points, followed by the consumer goods sector (loss of 19.5 points). “All the sectors are faced with a weaker business environment now. It is not only consumer expenditure but also investment spending that appears to be experiencing a slower growth. No sector has been able to insulate itself from the slowdown,” the survey report said.
The firms seem to have anticipated slowdown in growth this time, as there were no indications of inventory or stock build-up by the 487 respondents.
The political confidence index (PCI) too fell to the lowest level in four years, as firms were not confident that the political system would be able to address the economic policy challenges. However, public sector firms, which constituted nearly a third of the respondents, were confident of political system’s ability....
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Bailout does not help US economy in long run.It might help markets from further slide temporarily and make investors bleed more with long term pain.
It is better to provide financial support to troubled companies with strings attached rather than taking them over or taking bad debts off their books....
In reply to:
Wall Street bailout hits snag; Marc Faber sees it failing
Posted by :
MMB Messenger
The fate of the USD 700 billion Wall Street bailout remained unclear as a White House meeting of both parties ended without an agreement and some participants said talks had hit a major snag, reports CNBC-TV18.
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Washington mutual, the giant lender that came to symbolize the excesses of the mortgage boom, was seized by federal regulators on Thursday night, in what is by far the largest bank failure in American history.
Regulators simultaneously brokered an emergency sale of virtually all of Washington Mutual, the nation’s largest savings and loan, to JPMorgan Chase for $1.9 billion, averting another potentially huge taxpayer bill for the rescue of a failing institution.
The move came as lawmakers reached a stalemate over the passage of a $700 billion bailout fund designed to help ailing banks, and removed one of America’s most troubled banks from the financial landscape.
Washington Mutual, with $307 billion in assets, is by far the biggest bank failure in history, eclipsing the 1984 failure of Continental Illinois National Bank and Trust in Chicago, an event that presaged the savings and loan crisis....
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who is the owner of exchange.?...
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Wall Street bailout hits snag; Marc Faber sees it failing
Posted by : Guest
Satta & Casino guru speak louder!!!! Market falls by 500 points. Really nobody makes money in casino but only casino owner makes it. HOW?????
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well stated speedy.. a very comprehensive reply..
many people criticize marc faber as a pessimist but i think he says it as it is.. what people really DO need is a reality check and to try and understand the core problems rather than just speculate..
the speculative moods are gone for now and unless they wake up they will be buying when others are quitely dumping.....
In reply to:
Wall Street bailout hits snag; Marc Faber sees it failing
Posted by : speedy
I think he is correct. He has been correct all the while. When he said it was a bubble, optimist thought it was not. When he said the dollar will be extinct one day many people thought he was kidding the market. When he said Gold will be rising people were investing in equities. What we need to do is get a sanity check on ourselves. We know that stock prices are driven by sentiment and not by value. So when a DLF was 1200 it was sentiment and when it is Rs 350 it is still sentiment. Value of anything is driven by how optimistically or how pessimistically you think. If you bought a Levi\\`s for 1300 or a Arvind mills jeans for 300 at the end of the day you have a jeans. At the height of optimistism 1300 looks good and height of pessimism 300 looks good. Having said that I agree it is not the end of the world. People need to buy things on a day to day basis and live their lives. So go out and buy those sectors Gilletes and Colgates of the world because whatever the inflation I don\\`t think a normal person wont shave or brush or take a bath. Don\\`t buy exotic stories like a upcoming hotel project because time is not going to favor them for another 3 years. Long time back there were stories about selling trees that they would plant then. I think the only people who made money were people who sold these stories or people who planted a tree in their backyard. Put your hard money in hard things and you will might make millions slowly but surely.
Take care
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Satta & Casino guru speak louder!!!! Market falls by 500 points. Really nobody makes money in casino but only casino owner makes it. HOW?????...
In reply to:
Wall Street bailout hits snag; Marc Faber sees it failing
Posted by : MMB Messenger
The fate of the USD 700 billion Wall Street bailout remained unclear as a White House meeting of both parties ended without an agreement and some participants said talks had hit a major snag, reports CNBC-TV18.
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