RBI: Global Rally Not Sign of Economic Revival

The surge in global stock prices, including Indian shares, in recent months doesn't signal an economic recovery is around the corner, Reserve Bank of India Deputy Governor Rakesh Mohan said, indicating the central bank will take into account a broad range of signals before moving to rein in its easy monetary policy.

The RBI's government bond buyback program - part of its money market operations aimed at helping the market absorb the heavy debt issuance by the fiscally-strapped government - doesn't pose an inflationary threat, Mr. Mohan also said in a recent interview with Dow Jones Newswires.

"We (RBI) look at multiple indicators and act with multiple instruments - we look at financial markets, industrial production, GDP growth, agricultural production, monsoon, bond markets," Mr. Mohan said.

"On one hand, our open market operation program is being done to help the government borrowing and on other hand, it is totally consistent with our monetary program in terms of expectation of GDP growth. It is non-inflation generating. We are not doing (balance sheet) expansion beyond that."

Since mid-September when the global financial crisis deepened, the RBI has flooded money markets with liquidity by cutting interest rates, lowering reserve ratios and, in late March, announcing a program to repurchase government bonds, an effort to support fiscal stimulus aimed at curbing a slowdown in economic growth. A drop in global crude oil prices late last year has helped pull down inflation to near zero levels, giving the RBI more room to ease monetary policy.

From : wsj.com

Krugman says Too Early to call off Depression

From Krugman's Blog :

Ben Bernanke, the Federal Reserve chairman, sees “green shoots.” President Obama sees “glimmers of hope.” And the stock market has been on a tear.

So is it time to sound the all clear? Here are four reasons to be cautious about the economic outlook.

1. Things are still getting worse. Industrial production just hit a 10-year low. Housing starts remain incredibly weak. Foreclosures, which dipped as mortgage companies waited for details of the Obama administration’s housing plans, are surging again.

The most you can say is that there are scattered signs that things are getting worse more slowly — that the economy isn’t plunging quite as fast as it was. And I do mean scattered: the latest edition of the Beige Book, the Fed’s periodic survey of business conditions, reports that “five of the twelve Districts noted a moderation in the pace of decline.” Whoopee.

2. Some of the good news isn’t convincing. The biggest positive news in recent days has come from banks, which have been announcing surprisingly good earnings. But some of those earnings reports look a little ... funny.

Wells Fargo, for example, announced its best quarterly earnings ever. But a bank’s reported earnings aren’t a hard number, like sales; for example, they depend a lot on the amount the bank sets aside to cover expected future losses on its loans. And some analysts expressed considerable doubt about Wells Fargo’s assumptions, as well as other accounting issues.

Meanwhile, Goldman Sachs announced a huge jump in profits from fourth-quarter 2008 to first-quarter 2009. But as analysts quickly noticed, Goldman changed its definition of “quarter” (in response to a change in its legal status), so that — I kid you not — the month of December, which happened to be a bad one for the bank, disappeared from this comparison.

I don’t want to go overboard here. Maybe the banks really have swung from deep losses to hefty profits in record time. But skepticism comes naturally in this age of Madoff.

Oh, and for those expecting the Treasury Department’s “stress tests” to make everything clear: the White House spokesman, Robert Gibbs, says that “you will see in a systematic and coordinated way the transparency of determining and showing to all involved some of the results of these stress tests.” No, I don’t know what that means, either.

3. There may be other shoes yet to drop. Even in the Great Depression, things didn’t head straight down. There was, in particular, a pause in the plunge about a year and a half in — roughly where we are now. But then came a series of bank failures on both sides of the Atlantic, combined with some disastrous policy moves as countries tried to defend the dying gold standard, and the world economy fell off another cliff.

Can this happen again? Well, commercial real estate is coming apart at the seams, credit card losses are surging and nobody knows yet just how bad things will get in Japan or Eastern Europe. We probably won’t repeat the disaster of 1931, but it’s far from certain that the worst is over.

4. Even when it’s over, it won’t be over. The 2001 recession officially lasted only eight months, ending in November of that year. But unemployment kept rising for another year and a half. The same thing happened after the 1990-91 recession. And there’s every reason to believe that it will happen this time too. Don’t be surprised if unemployment keeps rising right through 2010.

Calling Market bottoms - How Pros went wrong

• 2008 kicks off with legendary prognosticator Abby Joseph Cohen of Goldman Sachs calling for a 14,750 Dow.
• As stocks struggle through the early part of the year, many analysts think the March 17 demise of Bear signals the turning point in the bear market. The Dow closes at 11,972 and a subsequent CNBC.com poll finds more than one-third of respondents embracing the "Bear Stearns bottom."
• On June 20, Merrill Lynch analyst Ed Najarian says bank stocks are in "capitulation mode" suggesting that a full-scale selloff was in the works, well before the worst of the carnage in financials. The Dow closes at 11,842.
• July 8 sees market strategist Byron Wien say the market is in the process of bottoming and will be stronger by year's end. The Dow is at 11,225, a number that looks staggering now. A week previous, CNBC.com asks readers in a poll whether the Dow will finish the year at 10,000, 12,000 or 14,000.
• On Sept. 23, eight days after Lehman's fall, BlackRock's Bob Doll says the worst may be over for the market and signs of capitulation are appearing. The Dow is at 11,015.
• On Oct. 10, Art Hogan of Jefferies calls the renowned "Hogan Bottom" on CNBC. The Dow closes at 8,451 following a stunningly volatile day of trading.
• On Nov. 11 Doll says the "market is going to take time to make a bottom. It's going to be over a period of months." The Dow teeters at 8,854 and is just four days away from making a temporary bottom that lasts until Feb. 19.

From : http://www.cnbc.com//id/29550282

Roubini forecasts "Severe Global Economic Contraction"

The Great Depression 1928 or 2008 ??

Why Federal Reserve is a Failure !

1. The Fed ignored the early signs of the crisis, it tried to cover up a small bubble in early 2000 which later blew of up into a mega bubble that burst into the current financial crisis.

2. Fed was retroactive it did too little too late, was behind the curve most of the time in the crisis times.

3. Fed view on inflation is flawed, history shows that printing too much money will lead to highly inflationary scenarios. With the amount of money being printed this time it could only lead to Hyper Inflation.

4. Fed kept Interest rates too low for too long time, this created unhealthy lending procedures.

5. Fed gives life line to failed institutions rather than letting them to demise. Institutions fail because of bad business practices, and they deserve to dis appear.

6. Fed had too much faith on big banks believing they will be self regulate themselves.

Alan Greenspan was the chairman of the Federal Reserve for 18½ years, he said the current financial crisis has uncovered a flaw in how the free market system works and that had shocked him

Meredith Whitney Discusses Bad Banks

Peter Schiff : Stimulus = Disaster

The fiscal stimulus bill being debated in Congress not only won't help the economy, it will make the recession much worse, says Peter Schiff, president of Euro Pacific Capital.

Schiff scoffs at the notion the economic decline is starting to level off and concedes no government action means a "terrible" recession. But the path of increased government intervention will lead to "unmitigated disaster," says Schiff, who gained notoriety in 2007-08 for his prescient calls on the housing bubble and U.S. stocks.

The problem, he says, is the government is trying to perpetuate a "phony economy" based on borrowing and spending. With the U.S. consumer tapped out, the government is "now taking on the mantle" of consumer of last resort, he continues, predicting the bond bubble will soon burst - if it hasn't already - ultimately leading to a collapse of the dollar and an "inflationary depression worse than anything any of us have ever seen."

Peter Schiff, president of Euro Pacific Capital is one of the few minds that predicted the crisis much before any body. Interstingly Commodities Guru Jim Rogers voices same conerns as peter that all the money poured in is of little use and will cause only Hyper Inflation.

Baltic Dry Index Recovers

The Baltic Dry Index which plunged from a high of 11700 to 600 levels in Nov - Dec 2008 during the height of credit crunch has shown some recovery indicating a bit of easing in shipping activity, Currently its at 1600 levels.

What Does Baltic Dry Index Mean?

A shipping and trade index created by the London-based Baltic Exchange that measures changes in the cost to transport raw materials such as metals, grains and fossil fuels by sea.

Changes in the Baltic Dry Index can give investors insight into global supply and demand trends. This change is often considered a leading indicator of future economic growth (if the index is rising) or contraction (index is falling) because the goods shipped are raw, pre-production material, which is typically an area with very low levels of speculation.

The recovery is good for shipping stocks like GE Shipping , as it indicates increasing shipping activity around the world.

DOW Theory tells you to sell

Dow Theory is a heterodox theory on stock price movements that is used as the basis for technical analysis. The theory was derived from 255 Wall Street Journal editorials written by Charles H. Dow (1851–1902), journalist, founder and first editor of the Wall Street Journal and co-founder of Dow Jones and Company.

Six basic tenets of Dow Theory :

1. The market has three movements

The "main movement", may last from less than a year to several years. It can be bullish or bearish. (2) The "medium swing", secondary reaction or intermediate reaction may last from 10 days to three months (3) The "short swing" or minor movement varies with opinion from hours to a month or more.

2. Market Trends have three phases :

Accumulation (when insiders are buying a into a good deal), public participation (when every Tom, Dick and Harry gets involved), and distribution (when the wise guys sell off their shares for profit)


3. The stock market discounts all news

Stock prices quickly incorporate new information as soon as it becomes available. Once news is released, stock prices will change to reflect this new information. On this point, Dow Theory agrees with one of the premises of the efficient market hypothesis.

4. Stock market averages must confirm each other

In Dow's time, the US was a growing industrial power. The US had population centers but factories were scattered throughout the country. Factories had to ship their goods to market, usually by rail. Dow's first stock averages were an index of industrial (manufacturing) companies and rail companies. To Dow, a bull market in industrials could not occur unless the railway average rallied as well, usually first. According to this logic, if manufacturers' profits are rising, it follows that they are producing more. If they produce more, then they have to ship more goods to consumers. Hence, if an investor is looking for signs of health in manufacturers, he or she should look at the performance of the companies that ship the output of them to market, the railroads. The two averages should be moving in the same direction. When the performance of the averages diverge, it is a warning that change is in the air.

5. Trends are confirmed by volume

Dow believed that volume confirmed price trends. When prices move on low volume, there could be many different explanations why. An overly aggressive seller could be present for example. But when price movements are accompanied by high volume, Dow believed this represented the "true" market view. If many participants are active in a particular security, and the price moves significantly in one direction, Dow maintained that this was the direction in which the market anticipated continued movement. To him, it was a signal that a trend is developing.

6. Trends exist until definitive signals prove that they have ended

Dow believed that trends existed despite "market noise". Markets might temporarily move in the direction opposite to the trend, but they will soon resume the prior move. The trend should be given the benefit of the doubt during these reversals. Determining whether a reversal is the start of a new trend or a temporary movement in the current trend is not easy. Dow Theorists often disagree in this determination. Technical analysis tools attempt to clarify this but they can be interpreted differently by different investors.

If the current context of market is seen , as per DOW theory it tells to sell the markets.

The confirmations we see now are

• The DOW Jones transportation index has made lower bottoms.

• The Market is beginning to digest bad news for instance GDP nos of last qtr, Multi decade high Unemployment data.

• The Market is on low Volumes.

IS ANOTHER BIG SELL OF ON CARDS ????????

Five Predictions for 2009

1 . The BRICs (Brazil, Russia, India and China) will have a terrible year. China will compete with the U.S on who has the bigger government-led infrastructure program.

2. Oil will rise again, after hitting rock bottom levels oil will begin to surge again to higher levels.

3. One of the big three auto makers will disappear, most likely GM.

4. The fourth quarter will cough up earnings reports that manage to disappoint rock-bottom expectations. The Dow will plunge and flirt with the 5,000 mark.

5. Gold shoots to $1200 levels on the back of safety haven buying.

Emerging Markets in 2009 - What to expect ??

The Year 2008 will go down in history as one of the most difficult years in the history of Financial Markets. It started with the Sub prime bubble that swallowed huge amount of money from the Banks treasury , in turn causing a wide spread credit crunch that triggered the Demise of Lehman bros , Bear sterns & AIG. The Problem that started from the Developed world has been contagious and caused huge problems to the emerging markets as well. The theory of decoupling proved to be wrong. Emerging markets have taken a bigger hit than the developed ones.

Russia and India -- two of the four once-mighty BRIC countries -- are among the five worst-performing major global emerging markets this year. Brazil and China are also deeply in the red, down 56% and 52% respectively.The MSCI Emerging Markets index shed 56%, as investors pulled billions of dollars out of developing economies.


Worst hit by the turmoil was Eastern Europe, where equities have tumbled 68% this year. Several countries, including Hungary and Ukraine, have sought financial aid from the International Monetary Fund.

Some of the worst-performing emerging markets

Russia: Equities in resource-dependent Russia have plummeted as much as 72% this year, as the country was battered by the worst financial crisis since 1998. Falling oil prices and Geo political tensions with Georgia added more concerns on russian markets.

India: Indian equities have fallen 65% this year as last year's rally has unraveled. In 2007, India was one of three best-performing emerging markets, but asset prices had surged to unsustainable levels. GDP is expected to slow down significantly , the recent IIP numbers confirm that possibility.

Outlook for 2009 :

* The scorching pace at which economies like china and India were growing will definitely not be seen in 2009. The ripple effect of the crisis begins to show up on these economies. China would slip to Single digit growth.

* China's export and import have slowed down significantly. China is highly dependent on export oriented growth. In India which in driven by domestic consumption also feels the slow down in demand. Companies are beginning to cut down on production and announce lay off's.

* Brazil and Russia are commodity driven markets, with commodity prices tumbling these markets are at a higher risk.

* The concerns on deflation is begging to show up, US and UK central banks have sounded their concerns over deflationary scenarios. Deflation will lead to a depression, as it happened in the 1930's.

* Oil prices have fallen to a 5 year low of $33 inspite of record production cuts by OPEC. This provides a breather for India where subsidy burden for Oil products is very high.

* Not much of recovery in expected in 2009 in terms of economic growth. As US is expected to fall into a severe recession. Job losses could peak at 9-10% and US GDP could Slip significantly.


We would Like to hear your comments. Pls leave your comments and thoughts.

Worst is yet to come - Says Dr.Doom

Nouriel Roubini the Man who predicted the crisis says worst is yet to come. He predicts global recession and Deflationary scenarios in 2009

Biggest financial frauds in the world

Madoff - An alleged $50 billion Ponzi scheme fraud which is easily the biggest fraud in the history of capital markets.

Jerome Kerviel - Parisian trader of Societe Generale created damages of 7.1 billion dollars with term operations on european stock indicators.

Brian Hunter - Lost of 6.4 billion dollars from operations with derived instruments with natural gases lead to the extinction of Amaranth Advisory investment fund.

Giancarlo Paretti - The italian business man buyed using credits from banks Hollywood studios, merging into fraudulent operations that caused 5 billion dollars lost.

John Meriwether - Derived placements with active supports made by the financial director of Salomon Brothers caused lost of 4.6 billion dollars.
Yashuo Hamanaka - Copper trader of Sumitomo Corporation caused 2.6 billion lost with wrong term transactions placement.

Harshad Mehta - obtained funds from the bank market, which he operated at Bombay Stock Exchange. In 1992 the Indian stock exchange collapsed, the total lost being around 1.3 billion dollars.

Madoff's Ponzi Scheme Clients

Client	Client Type	Exposure
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Access International Advisors	Financial firm	$1.4 billion
Ascot Partners	Financial firm	About $1.8 billion in assets
Banco Santander, Optimal Investment Services	Financial firm	$3.1 billion of client exposure
Bank Medici	Financial firm	$2.1 billion
Banque Bénédict Hentsch	Financial firm	$48 million
BBVA	Financial firm	$404 million
Benbassat	Financial firm	$935 million
BNP Paribas	Financial firm	up to $478 million
Bramdean Alternatives	Financial firm	About 9.5 percent of assets
Caisse des Dépôts et Consignations	Financial Firm	$1.4 million
Carl and Ruth Shapiro Family Foundation	Charitable foundation	$145 million
Chais Family Foundation	Charitable foundation	Unknown
Clal Insurance	Insurer	$778,000
CNP Assurances	Insurer	$4.1 million
Congregation Kehilath Jeshurun	Religious Organization	$3.5 million
Credit Mutuel	Financial firm	$124 million
Dexia	Financial firm	$107 million
EIM Group	Financial firm	$230 million
Elie Wiesel Foundation for Humanity	Charitable foundation	$37 million
Fairfield Greenwich Group	Financial firm	$7.5 billion
Fix Asset Management	Financial firm	$400 million
Fortis Bank Netherlands	Financial firm	$1.4 billion
Gift of Life Bone Marrow Foundation	Charitable foundation	$1.8 million
Groupama	Insurer	$13.6 million
Harel Insurance	Insurer	$14.2 million
HSBC Holdings	Financial firm	$1 billion
JEHT Foundation	Charitable foundation	Unknown
Jewish Federation of Greater Washington	Charitable foundation	$10 million
Jewish Foundation of Greater Los Angeles	Charitable foundation	$6.4 million
Julian J. Levitt Foundation	Charitable foundation	$6 million
Kingate Management	Financial firm	$3.5 billion
Madoff Family Foundation	Charitable foundation	$19 million
Man Group	Financial firm	$360 million
Maxam Capital Management	Financial firm	$280 million
Mediobanca	Financial firm	$671,000
Mirabaud	Financial firm	Several million dollars
Mortimer B. Zuckerman Charitable Remainder Trust	Charitable foundation	$30 million
Neue Privat Bank	Financial firm	$5 million
Nomura Holdings	Financial firm	$302 million
Norman Braman	Individual	Unknown
North Shore-Long Island Jewish Health System	Hospital	$5.7 million
Notz Stucki	Financial firm	Unknown
Pioneer Alternative Investments	Financial firm	About $280 million in assets
Ramaz School	School	$6 million
Reichmuth, the Reichmuth Matterhorn fund	Financial firm	$330 million
Robert I. Lappin Charitable Foundation	Charitable foundation	$7 million
Royal Bank of Scotland	Financial firm	$625 million
SAR Academy	School	About $1.2 million
Senator Frank R. Lautenberg’s charitable foundation	Charitable foundation	Unknown
Société Générale	Financial firm	$13.8 million
Sterling Equities	Financial firm	Unknown
Tremont Group Holdings	Investment firm	$3.3 billion
Union Bancaire Privee	Financial firm	$1.08 billion
Wunderkinder Foundation	Charitable foundation	Unknown
Yeshiva University	University	$100 to $125 million

Source : nytimes.com

Two men who fore saw the US crisis

Peter Shciff and Senator Ron Paul , Two men who fore saw the US crisis before any one else, watch the video

Major Economic Developments Of 2009 that Never should happen !!

*** Dollar hits parity against euro by June 2009.

*** Oil bottoms at $12 per barrel by April 2009.

*** Gold falls to $500 as Indian economy crashes and Dubai abandons spending spree.

*** US inflation dips to zero; interest rates too.

*** US unemployment hits 10% by January, 15% by April

*** Despite $25 billion in loans, GM files for bankruptcy

*** Junior mining companies, green energy tech, and marginal oil exploration (shale, sands, deep sea) go bankrupt by the hundreds

*** France jockeys for superpower position within EU

*** Major terrorist attack on US soil; Obama declares national emergency, establishes National Security Force

*** Tata Motors aready bought Jaguar & Range Rover: Maybe now it will buy Ford or GM?

***US Economy turns European: Unemployment extends towards double-digit territory.

Where Is Crude Oil heading ??

• Oil prices may crash as low as $10 a barrel, says Devina Mehra, chief strategist at First Global.

• Iran wants 100 dollar Oil

Iran's oil minister said he considered the "real price" for a barrel of crude should be more than $100 and a senior Iranian official said OPEC needed to cut oversupply from the market

• By the end of Q3 '09, analysts expect oil to be at $71.5. Expectations are for $83 by the end of 2010, $100 by the end of 2011, and $95 by the end of 2012. Based on these estimates, analysts aren't expecting the speculative high of $145 to be reached at any time over the next four years

• Goldman Sachs lowers Oil Outlook

Goldman Sachs, one of the largest energy traders in the markets, loewred its 2009 price forecast for crude oil to 45 dollars a barrel. Goldman Sachs last estimate for 09 was 40% higher.

• Global oil consumption will drop this year for the first time since 1983

Global oil consumption will be less than last year`s for the first time since 1983. The economic slowdown in the US and in Europe and slower growth in China cuts gasoline and oil demand, according to IEA.

THE OPEC MEETS ON DEC 17 TO DECIDE ON MAGNITUDE OF PRODUCTION CUTS. A view is that OPEC meet should be a non-event. Nobody real believes OPEC might really cut production even if they announce a big cut. They need to sell all the oil they can to balance their budgets.


Click here to download the OPEC's monthly oil report .

Scary Predictions From the People who saw the Crisis coming

• Nouriel Roubini

Known as Dr. Doom, the NYU economics professor was one of the first persons to predict the Global recession and Mortgage market meltdown.


What He says now " We are in the middle of a very severe recession that's going to continue through all of 2009 - the worst U.S. recession in the past 50 years. It's the bursting of a huge leveraged-up credit bubble. There's no going back, and there is no bottom to it. It was excessive in everything from subprime to prime, from credit cards to student loans, from corporate bonds to muni bonds. You name it. And it's all reversing right now in a very, very massive way. At this point it's not just a U.S. recession. All of the advanced economies are at the beginning of a hard landing. And emerging markets, beginning with China, are in a severe slowdown. So we're having a global recession and it's becoming worse. "

• Jim Rogers

The commodities guru predicted two years ago that the credit bubble would devastate Wall Street.

He says " A bubble is building up in the US treasury Bonds, Current US markets valuations are not attractive says fair value at 4000 for DOW "

• Meredith Whitney

The Oppenheimer & Co. analyst was among the first to warn that the big banks had big problems.

She says " So far we've had TARP 1.0, TARP 2.0, and TARP 3.0, and I'm certain there will be a 4.0, a 5.0, and a 6.0. There has to be, because the companies cannot raise the capital they need, which means that the default provider of capital has to be the federal government.

What happens in 2009? Frankly, it's hard for me to predict what's going to happen next week, never mind next year. What I will say is that I expect all these banks to be back in the market looking for more capital

If 2008 was characterized by the market impacting the economy, then 2009 will be about the economy impacting the market. It's already started. "



Source : Forbes.com

World Central Banks to the rescue - will it make any difference ??

The central bankers around the world were siting on hot seat watching the world markets tumble in the last fortnight. All of them have taken measures to relieve the liquidity crunch in the financial system.

* Joint Interest rate cut by FED,BOE,ECB, BOC, China and swiss central banks.

* 100 bps interest rate cut by Australian central bank.

* 50 bps CRR cut by RBI.

* UK announced a bail out plan of $85 billion. BOJ pumps 600 billion yen into the system.

* $700 billion dollar bail out package by US.

The price tag of has crossed $2 Trillion and still there is no respite to the financial crisis. It seems like there will be more efforts from the central banks. With G7 countries financial chiefs meeting around the corner expect some more unprecedented moves in history of financial markets.