Buffett Says He Sees ‘No Signs’ of Recovery in Housing, Retail

Bloomberg: Billionaire investor Warren Buffett, the chairman and chief executive officer of Berkshire Hathaway Inc., said hes seen no indication of recovery from the real estate slump that helped cause the U.S. recession.

"Theres no signs of any real bounce at all in anything to do with housing, retailing, all that sort of thing," said Buffett, 78, in a Bloomberg Television interview before the Omaha, Nebraska-based companys annual shareholder meeting today. "You never know for sure, even if theres a leveling off, which way the next move will be."

Paul Volcker, one of President Barack Obamas economic advisers, said this week that the economy was "leveling off at a low level" and doesnt need a second fiscal stimulus package after the $787 billion plan signed by Obama in February.

The U.S. economy contracted at a 6.1 percent annual rate in the first quarter, weaker than forecast, making this recession the worst since 1957-1958

Continue reading : Bloomberg.com

Nifty Charts

Nifty Vs DOW - YTD

The De coupling theory busted - Nifty Fell almost 60% from its highs Vs Dow's fall of 40% from its highs.


Nifty - YTD chart



A break out above 3080 on closing basis can take nifty up to 3460 levels, if Global Markets support in coming days. Fall below 2820 will confirm down Trend

Global Economy Review - Nov 13 , 2008

World Economy:

The world's entry into a period of recession is certain now, with the 3 biggest economies of the world already slipped into recession and with 2 of those economies the US and Germany already announced recession officially.

The Emerging economies including the BRIC countries are facing severe slow down. IMF has forecast that chinas growth will slow down to 8% and india to 6.1% in 2009. Russia is facing tough challenge ahead of it with its stocks markets falling heavily and shows investors losing confidence over the economy

The period of inflation is a history and we are staring at a possible deflation phase where prices are falling below production cost. Retail sales across the developed economies are at a multi year lows. Oil has slipped to $55 dollars, even with the production cuts announced by the OPEC. Gold prices have also fallen to an year low.

The landscape of the US financial sector has changed forever. There are 3 super banks now in the US namely Bank of America, JP Morgan & Wells Fargo with a cumulative net worth of nearly $2 Trillion in terms of assets. Some Investment banks have changed their business model into banking model. Some like Lehman bros have filed for bankruptcy. Some like Meryl lynch. have merged with other institutions.

The Auto sector in the US is the next domino to fall in the crisis. GM is staring at a possible bankruptcy. What was once thought to be an impossible event has happened now. GM is the largest Auto maker in the world in terms of global sales. Too big to fail ? is it ??

The slow down is slowly spreading to the global economies and companies. Arcelor Mittal the largest steel maker has announced a 30% cut in production. In India tata corus has slashed production, Ashok leyland has announced a 12 day work cut in a month. Global corporate giants like Intel, Cisco, GE all have slashed their growth forecast and has cited caution in their future outlook.

In terms of Jobs US unemployment has hit 6.5%, normally in recession times unemployment rate rises to 9-10%. UK has lost 1000's of jobs. In India signs of job cuts are setting in as the effects of slow down are being felt slowly across all sectors.

Stock Markets:

US Markets are nearing the lows made on OCT 27th, Nasdaq made a new closing low. Its important that the recent lows hold or else we may see another down fall in world equities.

Chinese stocks market made a new multi year low with the markets losing almost 60% of its value from its highs.

The Japanese Yen is trading near the lows of 94 that it made on OCT 27th. Its important that these levels should hold. Else we may witness another round of carry trade unwinding. Weaker yen will affect Japanese exporters.

In India Nifty might retest it lows of 2252 , there is a chance of it to take supports at 2500 levels. But then again a lot depends on world market cues.

Money Markets :

The Money Markets have thawed considerably. It was literally frozen a few weeks back with the LIBOR rates peaking at above 4%. Banks were not lending to one another. The situation has improved and LIBOR has fallen substantially to near 2% levels.

Global Central Bankers are cutting interest rates across the board in an effort to improve the credit flow in the system. More rate cuts can be expected in coming weeks.

The G20 leaders meet in Washington on Nov 15th, The outcome will send important signals to the markets. A lot depends on what measures are undertaken after the meet.

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What to expect from US Markets this week - Oct 25

1 . FED's 2 day meet which ends on wednesday, A 50 basis Point rate cut is expected.

2. US reports its 3rd qtr GDP growth which is expected to be weak.

3. As Many as 100 of the S&P 500 announce their results.

4. Last week of campaigning before US presidential election on Nov 4th.

Some Indicators.

US VIX ( Volatilty Index) Has hit an all time high of 80.

Weekly jobless claims shoots to 478,000.

OPEC cuts oil prodution by 1.5 million barrels.

Hunt for Bottom

The situation in the financial markets is much worse than what most people think. This is one in a century crisis and I doubt whether the levels like 3200,3000 would work in times like these. Yet another time market would prove that its bigger than any individual being.

This time i think its better to leave the market decide its bottom rather than judging the bottom. For all the froth and leverage that existed in markets this crisis had to come and it was just a matter of time of when it was going to happen, and its happens today.

The leverage used by financial giants like lehman and morgan are too big, in some cases 40 times of their net capital. To give an idea of how big the mess is, The amount of CDS( Credit derivative spreads )that is out there in the system is above $1100 trillion. The combined GDP of world itself is less than $60 Trillion. So no doubt the mess is too big and it will take some unprecedented measures to clear it.

All world markets are highly over sold and there is a high possibility of a bear market rally anytime. But most people who are stuck at higher levels would use this rally to sell of their holdings.

P.S : Before the current crisis even ends there is another big threat waiting to hit markets, its credit-card defaults in US and soured debt that could further undermine the financial system. Be prepared to for the worse.