Monday, January 12, 2009

Currency devaluations !

This post would just be a short one offering some insights about coming booms !
  1. Our sources tell us that some kind of devaluation of Yen is in the offing in near time in the future.
  2. Also this week is going to be extremely dreadful for gold may be going down by 10%, already it has fallen about that extent.
  3. J.P. Morgan is in increasing trouble with the stock price being bamboozeled in last couple of days. Watch out there is someting serious brewing there, we already know their derivatives book may be the reason for their impending troubles. (JPM $24.91, down $1.6)
  4. Today morning in Closing bell CNBC US, news was Morgan Stanley entering into JV business with investing into the Smith Barney of Citigroup. Mind you this is another of the ways Morgan through the US government is pumping money into the already failed Citigroup by our reckoning.
  5. US could lose 2mn jobs in 2009 - a news report by a research group

Keep up the spirits


US Debt:New Sources

As of today, US is not having bit of problem generating debt for its expenses at extremly trivial costs compared to what the emerging markets might be giving. Just go and check the returns on 1yr, 3yr, 10yr and 30yr UST bills.
Considering the balance sheet of US, pundits have started the raga of announcing that the UST is a grand bubble so start shorting it. In a way they are right, but what is the right moment to short the Treasury bubble?
What happens, when countries like China and Japan stop financing the US debt? It may be of importance if we just look at the strong winds of change in the baby boomers generation in US. There are enough indicators by the investment gurus well versed with the situation, that now baby boomers might turn to a savings oriented community rather than consumption oriented. So the savings rate are going to provide US government a sizeable proportion of the reserves making their life bit not much easier, but still it would help.

Wednesday, January 7, 2009

Another Madoff?

Did India and this world needed another of the PONZI scheme, well no one could have thought that IT sector in India and that too a top tiered company Like Satyam would be put under the cirumstances that Mr. Raju has put it in.
More so it is seemingly a combination of Enron and Madoff combined with books cooked and assets being shown when none were there.
It is certainly a big blow for Indian industry reputation but to the experts it would not be a surprise considering, such events are more likely to happen when the things are tough and thus it becomes all the more difficult to keep all the skelotons in your cupboard.
What is clear, that increasingly examples are coming to light in this era of greed where promoters even after having taken their companies public, have treated them as personal fiefdom not caring about the other stakeholder interests.
May be Mr. Raju you can go and apply at the Federal Reserve since you have excellent credentials now or team up with Bernie Madoff after he is released from house arrest.

Here comes another Madoff...

Tuesday, January 6, 2009

Inflation or Deflation going forward

Hi there
Welcome to the new year. Going back and looking at 2008, it was a tough year for most of the investors. Well, I what our think tank says: 2009 might turn out to be equally if not more volatile because of the interventions by the Central banks and governments around the world. After all Interventions dont let the market funtion the natural way.
Alot my reads these days have the mention of the debate going on about if Inflation or Deflation will have taken hold going forward and thus what are the implications for investments for the year 2009 and beyond.
Well, I like to bring to light a definition of inflation in terms of two major theories, given by two major school of thoughts.
According to the Austrian school of thought: Inflation is a monetary event and not an economic one, thus the relative increase in the money supply compared to the economic activity will lead to more money compared to assets, thus would lead to an increase in the asset prices.
Thus increase in money supply relatively, leads you to inflation.
Whereas, Keynesian school of thought says that inflation is an economic event, wherein the event itself leads to a general increase in the prices of assets. That means economic advancement leads to increase in the prices of goods over a period of time.
Going into the details of the definition is not the aim of this post, but let me state that Keynesian school has always used by the ruling elite to obfuscate and mislead the masses to retain their grip over the scheme of things and as usual general public content being safe with status quo does not dwell and study history has no inkling of what is right way.
So, going by the Austrian school of thought, second half of 2008 has been a pure deflation because of the evaporating money and money supply in critical markets: be they debt or credit or commodity markets.
But would it remain so going forward?
Make your own conclusions: Considering the capital infusions Central banks all over the world have made into the system and the lower interest rate regimes they all are embarking upon thus making the availability of the money cheaper + punishing the savings of people, money supply and velocity will have to increase over time.
Thus one factor that one would have to watch out for would be the money velocity which right now in US is below 1, meaning that the capital infused into the system has not trickled down into the veins of the economy. If the people all over the world, decide not spending whatever money has been infused, thus keeping the money velocity down, then Central banks would have to create an 'expectation of inflation', so that in anticipation of prices increasing in the near term, people start spending and thus the cycle tends to feed itself leading to what is generally being termed by the experts right now as INFLATION HOLOCAUST.