Obama Speech Effect has been shrugged off by world market. It lasted a total of 4-5 hours in the world. Then stocks plunged worldwide.
Since Speculative Securities trade is the most cherished and weighed profession, January results will be a dampener for growth of global economy (if any such thing exists). As the hawks of Davos are contemplating, whether there will be a double dip in the recession, the economies all across the globe are heading towards the second dip of the great recession ( We will wait till 2011 for the Depression coinage). This July at least 7 out of G-20s will be back in recession (based on Q2 GDP) and another 8 will plunge by Q3 results.
Bad news, indeed; But if we continue to re-select Dr. Dangerous Bernanke over and over again, what else would you expect. One who never stopped the easy credit for stupid housing, bailed out his super buddy banks and insurance companies and yes; Gave us the “Too big to fail” connotation to big business.
There would be a barrage of JVs launched by Davos-returnee crooks, beware and stay out of it. There would be a spate of Merger & acquisitions by Davos-returnees as well, mostly across distant geographies. It is the task of the governments to ensure that both local consumer interest and local workforce interests are given primary importance. Governments must discourage further job-losses and place punitive strictures in place to prevent such efforts by big business.
Never the less, every company /organization had faith in the hedge funds and overseas investments and took the downturn as a momentary loss of inertia. In the field of Macro-economics inertia is most dangerous and can be attributed to 90% of economic downturn.
The malicious practice of hedging in large scale takes the eye of innovation and reality check on the real market. The manufacturers of real goods must produce new products which outperforms the best brand in the market. If any manufacturing organization condemns itself by looking for new and emerging market at the time, then they should not be in manufacturing space in the first (Try retail if yours is one such).
Every downturn in major labour intensive sectors such as Housing (Lets call it Construction please), Automobiles, Steel undoubtedly results in severe downturn in service sectors. Service giants of our times is the Financial sector (Banking, Stocks & Insurance). During the growth of 2004-2006 the financial sectors promoted hedging instruments, clubbed them with Security-based products and promoted credit beyond their means.
The noted economists of our times failed to anticipate the pitfalls of agressive retailing of financial products promoted by the banks. This products do not have any guaranteed asset value but were considered (and be carefull, are still being considered) as real assets of high value. This resulted high profits and great PE values for stocks. Things could go at this level as long as credit was available.
Now in india, which has the best performing fiscal market among BRIC countries. The RBI and state owned banks and LIC have been injecting funds in the stock market thoughout 2008. The Govt was in complete denial of economic reality, they kept saying the fundamentals are good and our internal demand is strong enough engine. They ignored the fact the blue-eyed segment of indian economy stays in the city and serves mostly the outside world. They ignored the fact that inflation in double digits hurts the rural and semi-urban population the most, and takes away their possible capital investment powers.
Now as we had more than 8% fall in manufacturing,we are looking are recession at our cards. Fixing the GDP number by ignoring major economic data like inflation will not be of any help.
Huge job losses are on the way, the service sectors are to be affected as well. So stay wise in these difficult times.
