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International Market: Where World Economy Going On ?

Last updated: May 23 2012
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  • #21

    #21

    Re : International Market: Where World Economy Going On ?

    Stocks slump as consumer confidence plunges and Citi, Bank of America report lower revenues - Wall Street

    On Friday July 16, 2010.

    NEW YORK (AP) — Stocks slumped Friday after earnings reports from two big banks disappointed investors and a survey showed that consumers are becoming more pessimistic.


    The Dow Jones industrial average fell more than 190 points, and other major market indexes were also down more than 1 percent. Interest rates fell in the Treasury market as investors once again sought out the safety of government securities.


    The market fell at the opening after Citigroup Inc. and Bank of America Corp. released earnings. The two banks, like JPMorgan Chase & Co. a day earlier, reported higher earnings as losses from failed loans fell. But they are also seeing lower trading revenues because of the stock market’s plunge this spring.


    Stocks fell further after a twice-monthly survey from the University of Michigan and Reuters found that consumers’ gloom is increasing. An index of consumer sentiment compiled from the survey fell to 66.5 in early July from 76. That was a bigger drop than expected.


    “It’s mostly about the poor consumer confidence numbers,” said Anthony Conroy, managing director and head trader for BNY ConvergEx Group. “The possibility of a double dip also starts to come to mind” for investors, he said, referring to a phrase that describes the economy falling back into recession.


    Typically low summer volume Friday intensified the market’s losses, he said.
    “We’re going to see more volatility, days when there are 2 percent swings,” Conroy said. “The economy is OK. But the one concerning part of it is jobs — that’s the reason why you have poor consumer confidence.”


    Citigroup’s shares were off nearly 4 percent while Bank of America was off more than 8 percent. General Electric Co. fell 3.7 percent despite delivering stronger earnings and a healthy outlook before the market opened.


    Stocks had struggled to a mixed finish Thursday after being down for much of the day on disappointing regional manufacturing reports for the Northeast. Much of the deficit was erased late in the day as news began to circulate that man Sachs Group Inc. had settled civil fraud charges with the government over its dealings with subprime mortgage securities.
    However, while investors were relieved that man was putting the case behind it, they were again confronted Friday by larger ongoing worries: the economy and the future of the banking industry now that Congress has approved the banking industry overhaul bill.


    In midday trading, the Dow Jones industrial average was down 194.21, or 1.9 percent, at 10,165.33. The Standard & Poor’s 500 index fell 22.84, or 2.1 percent, to 1,073.64. The Nasdaq composite index fell 48.40, or 2.2 percent, to 2,200.68


    About fie stocks fell for every one that rose on the New York Stock Exchange, where volume came to 620 million shares.


    Bond prices rose in what’s known as a flight to safety. That sent their yields lower. The yield on the benchmark 10-year Treasury note, which helps set interest rates on mortgages and other kinds of loans, fell to 2.93 percent from 3.00 percent late Thursday.


    The formal announcement of man’s $550 million settlement came after the stock market closed on Thursday. man was the only major financial company to show a gain Friday. It was up $3.75, or 2.6 percent, at $148.97.


    Bank of America’s stock fell $1.26, or 8.2 percent, to $14.13. Citigroup was off 16 cents, or 3.9 percent, at $4. Both companies beat analysts’ expectations. However, the drop in their revenue as a result of the stock market’s slide had investors worried about how banks would make money in the future under new government regulations.
    Google Inc. fell $26.02, or 5.3 percent, to $468 after its earnings fell short of analysts’ expectations.


    GE lost 56 cents or 3.7 percent to $14.69.


    The Dow ended a seven-day winning streak on Thursday. The Dow was down as much as 126 points early in the day, but closed down just 7 as word spread about the man Sachs settlement.


    A government report on consumer prices for June was mainly in line with analysts’ expectations. The Consumer Price Index dipped 0.1 percent last month, largely due to lower energy bills.

    Comment

    • #22

      #22

      Re : International Market: Where World Economy Going On ?

      Don't be too quick on your trigger finger!

      Originally posted by sri_idea View Post
      Wiseman has posted a few jokes before but this one tops it all.

      Deflation !! ...does he not read the papers or watch the news ?

      In India people are taking to the streets on the oil price rice, food price rise...the PM has made a statement conceding that the prices will rise for a while
      In the UK the VAT rise coming up beginning of next year will push the inflation up from its present 3.5% (which, based on historical data is already high) ...

      Interest rates are set to increase n most countries.

      I agree with the general uncertainty in the market...but however eloquently someone say 'deflation' can't buy it...

      Sri and Sridhar,

      Krugman is a Keynesian and an inflationist. Only very recently he went deflationist (that too as a threat to the Obama to spend more).

      Secondly, Sri, looking out of your Window at the pouring rain might make you believe that India's rainfall is in excess this year. But, unfortunately for you, India is a bit bigger and its real rainfall is 14% deficit.

      Sri. India's GDP is around 2.5% of Global GDP. Focusing on India's inflation (and that too mainly Food Inflation, fuel inflation is a temporary aberation based on pricing coming closer to reality), i.e, price inflation in parts of 2.5% of world GDP and then extrapolating it to say that the world is threatened by inflation makes you the joker (I only use the word you used against me). Thats like saying the tail is wagging the dog.

      Go back and read the world of economic news a little more carefully. The remaining 95%+ of this world is in a deflationary spiral!!! Repeat. Money is being destroyed faster than its being created (even with all this stimulus) - and thats the true definition of deflation!!! When this stimulus ends, money will be destroyed at an even faster rate. And so will be the fate of asset prices and value all over the world. They too will decline hugely. And that is called deflation!!!

      When the world is trying to get rid of excess debt, it must destroy money net-net. This is deflation.

      Once there is substantial destruction of the value of money like the Dollar losing 60% of its value), there should be some kind of hyper-inflation. But that is NOT inflation the way you understand it.

      We will see a reasonable-to-long period of deflation, after which we may see a short period of hyperinflation and drastic revaluation of currencies.

      And you guys are saying fundamentally the same thing I am.

      When RE prices are going nowhere and stagnating, it is deflationary with respect to time value of money. And that seems to be the general opinion in this thread.

      So, Sri, get the fundas straight before calling others jokers on the basis of unsound fundas!!!

      cheers
      Last edited July 17 2010, 08:31 PM.

      Comment

      • #23

        #23

        Re : International Market: Where World Economy Going On ?

        wiseman

        i never claimed i knew my fundas and world economics. - u were the one who claims it ..I just claim i have some common sense

        great rainfall logic- but what is really happening is when its pouring outside ....and a great expert comes in with a beautiful explanation about how the worlds weather pattern is going to stop the rains tomorrow and will not see any rain for 3 years

        - call me a joker or anything u want ....dosent bother me ...its an anonymous forum afterall

        Comment

        • #24

          #24

          Re : International Market: Where World Economy Going On ?

          Originally posted by sridharchennai View Post
          Hi abk,

          When a person is excess of cash then no price is too costly for him. As you said home is not always about investment but, when mistimed it can eat all your life of savings. That is where I'm concerned about.

          Well, the market has not definitely crashed but, even the bus has not yet started moving. It's still there stagnated.

          I have my flat in perungudi and I can tell you the prices are down from 2008 peak. I don't buy your argument of price rise based on my experience

          Thanks,
          Sridhar
          Check out other areas in chennai like kilpauk,adyar,velachery,adambakkam,chromepet,east tambaram,virugambakkam,valsarvakkam,porur etc.
          when comparing rates check for projects in the main areas not peripheral locations.
          OMR is fraught with oversupply and basically it is a newly developed location wherein the majority of the buyers are from the IT sector and salaried.
          The ground rates in the above mentioned areas have appreciated by 10-20% in the past year which are above the rates in 2008.

          this is not my argument this is info.

          Comment

          • #25

            #25

            Re : International Market: Where World Economy Going On ?

            Originally posted by wiseman View Post

            When the world is trying to get rid of excess debt, it must destroy money net-net. This is deflation.

            Once there is substantial destruction of the value of money like the Dollar losing 60% of its value), there should be some kind of hyper-inflation. But that is NOT inflation the way you understand it.

            We will see a reasonable-to-long period of deflation, after which we may see a short period of hyperinflation and drastic revaluation of currencies.

            And you guys are saying fundamentally the same thing I am.

            When RE prices are going nowhere and stagnating, it is deflationary with respect to time value of money. And that seems to be the general opinion in this thread.



            cheers
            Dear wiseman,

            Can you please guide us on how to manage cash better during these times?

            Though my liquid/debt investments have been giving better returns than I would have got in any other assets, I have some very basic concerns during this period of uncertainity.Looks many here share the same concern too.

            Let me try and explain.Deflation I feel doesnt always result in price coming down and better affordabality.Especially when it also results in shortage in supply/volume.It could result in people who have more wealth and money fight with each other for the limited resources pushing the price even higher.

            In India, Business dont generally cater to the masses - i.e. low profit mass volume but its increasingly becoming high profit low volume.The corporates are not obliged to provide value for money and concentrate only where they can profit more.It has become only the responsibility of the government to announce freebies, provide subsidy, take care of have-nots.It works for the government/political parties as such announcement are populist and they also recieve kick-backs from corporates.

            Ths issue now is, whether to choose the devil or the deep blue sea.I choose to believe the government as they are the known devil and think, thanks to their policy and past history we will become increasingly poor and keep expecting them to provide for us and we inturn vote for them.

            Unless rupee appreciates considerably or governments policy shifts towards domestic production/consumption, I feel with global deflationary effect destroying value of money, It will not only ensure pressure on jobs and salary but also deprive the middle class from what they are able to afford currently.I am not talking about borrowed money, but what we can buy now using cash from hard-earned savings.

            I have started to believe and prepare myself to face stagflation for India.I feel it is more or less the same preparing for deflation now and hyperinflation later, only difference I now carry my umbrella in case my house leaks eroding value of my cash and threaten to drench me and flood my livelihood.

            Request you to kindly put things in perspective for me and advise.Thanks very much in advance.
            Last edited July 18 2010, 02:10 PM.

            Comment

            • #26

              #26

              Re : International Market: Where World Economy Going On ?

              Originally posted by nabishek View Post
              Dear nabhishek,

              Can you please guide us on how to manage cash better during these times?

              Though my liquid/debt investments have been giving better returns than I would have got in any other assets, I have started to believe and prepare myself to face stagflation for India.I feel it is more or less the same preparing for deflation now and hyperinflation later, only difference I now carry my umbrella in case my house leaks eroding value of my cash and threaten to drench me and flood my livelihood.

              Request you to kindly put things in perspective for me and advise.Thanks very much in advance.
              can you tell us how? liquid funds?

              Comment

              • #27

                #27

                Re : International Market: Where World Economy Going On ?

                Originally posted by yeskrish View Post
                can you tell us how? liquid funds?

                No, Not liquid funds.

                For my cash savings, I have chosen long-term fixed schemes with moderate returns, periodic cash outflow and less exit load.Cash that cannot be invested in such schemes, goes into purchase of Bullion.

                I believe money gets multiplied only when it keeps rotating.My strategy is to keep rotating the money from periodic returns of debt instruments into better equity-linked schemes to get more compounded returns meanwhile ensuring capital guarantee of my principal in long term.

                There are so many good schemes that give better returns than Bank FD.Such as from Post office, Co-operative banks and societies, Bond issues/NCD.Most of them are close-ended so you have to constantly look out to know when they are announced.

                Instead of Fixed deposits, you can select fixed maturity plans MF where you can choose growth or dividend(tax free) option and also if invested more than a year avail indexation benefit to adjust for inflation and save tax.

                Also, check the following scheme.Capital is guaranteed by the government.

                http://www.indiapost.gov.in/Netscape/6yearsMIS.html

                One can open a joint account and invest 9 lakhs and get a monthly income of Rs 6000/-. Invest it back as SIP in a good ETF or mutual/index fund that provides more returns.

                You can also choose to do the same on the amount you tend to pay every month for EMI from salary through SIP.It would give better returns than trying to leverage on appreciation of mortgage.

                I hope to hear better strategies and advise from experienced members.Thanks in advance.
                Last edited July 19 2010, 05:52 PM.

                Comment

                • #28

                  #28

                  Re : International Market: Where World Economy Going On ?

                  I do not call people names ...

                  Originally posted by sri_idea View Post
                  wiseman

                  i never claimed i knew my fundas and world economics. - u were the one who claims it ..I just claim i have some common sense

                  great rainfall logic- but what is really happening is when its pouring outside ....and a great expert comes in with a beautiful explanation about how the worlds weather pattern is going to stop the rains tomorrow and will not see any rain for 3 years

                  - call me a joker or anything u want ....dosent bother me ...its an anonymous forum afterall

                  Sri,

                  As I mentioned in the post, my calling you joker was only in response to your calling me joker. Find any post of mine that calls someone names without provocation and I will change my title to foolman.

                  I don't call people names without provocation and even then only use the same words.

                  But a lot of people get panicky about what I say and react badly. No need. Under any circumstance, if one maintains their equilibrium and seeks proper advice and follows a systematic approach, most issues become non-issues.

                  cheers

                  Comment

                  • #29

                    #29

                    Re : International Market: Where World Economy Going On ?

                    Very important question ...

                    Originally posted by nabishek View Post
                    Dear wiseman,

                    Can you please guide us on how to manage cash better during these times?

                    Though my liquid/debt investments have been giving better returns than I would have got in any other assets, I have some very basic concerns during this period of uncertainity.Looks many here share the same concern too.

                    Let me try and explain.Deflation I feel doesnt always result in price coming down and better affordabality.Especially when it also results in shortage in supply/volume.It could result in people who have more wealth and money fight with each other for the limited resources pushing the price even higher.

                    In India, Business dont generally cater to the masses - i.e. low profit mass volume but its increasingly becoming high profit low volume.The corporates are not obliged to provide value for money and concentrate only where they can profit more.It has become only the responsibility of the government to announce freebies, provide subsidy, take care of have-nots.It works for the government/political parties as such announcement are populist and they also recieve kick-backs from corporates.

                    Ths issue now is, whether to choose the devil or the deep blue sea.I choose to believe the government as they are the known devil and think, thanks to their policy and past history we will become increasingly poor and keep expecting them to provide for us and we inturn vote for them.

                    Unless rupee appreciates considerably or governments policy shifts towards domestic production/consumption, I feel with global deflationary effect destroying value of money, It will not only ensure pressure on jobs and salary but also deprive the middle class from what they are able to afford currently.I am not talking about borrowed money, but what we can buy now using cash from hard-earned savings.

                    I have started to believe and prepare myself to face stagflation for India.I feel it is more or less the same preparing for deflation now and hyperinflation later, only difference I now carry my umbrella in case my house leaks eroding value of my cash and threaten to drench me and flood my livelihood.

                    Request you to kindly put things in perspective for me and advise.Thanks very much in advance.

                    Hi Abishek,

                    I am prone to believing that progressively the world is getting from bad to worse in the economic sense. Please note that I said "world" and not "India". But what affects the world will also affect us since we are getting increasingly coupled into the world economy.

                    The core belief is that we will see a global depression of zero or low growth overall and negative GDP growth in many parts of the world for a few years from today. There will also be a massive destruction of "credit" which happens to actually be "debt" and is the root cause of the whole mess.

                    A recent statistical study shows that the worst case scenario will see around half the world's economies go into Sovereign Default (where the Govt itself defaults on repaying debt) and a ultimate loss estimated between $10 - 15 Trillion. But this is the worst case and maybe we will see something far less.

                    The takeaway is this. The World will not end! Thats a relief!

                    But how you handle your job (income), your spending and your investment as well as the debt you take on can make a HUGE difference to your financials for decades to come.

                    This is how I'm approaching the next few years..

                    - Reduce all debts to ZERO! I started this in 2006 and went Zero in 2008.

                    - Do not leverage to buy any asset since most favored assets (land, stocks) will see significant declines in value (obviously this will be only for short periods of time in India, but in the US they could take several years to come back to where they were in 2007 or for that matter even today. Buy only for cash

                    - Reduce discretionary spending (postpone buying those fancy cars, high cost stereos, etc unless you are spending cash and that too after putting aside at least 1 years living expenses for emergency. This will be the toughest thing to do for our youngsters who started their careers running revolving credit on their cards by middle of the month

                    - Do not go into long-term debt. 1 year debt instruments (FDs, etc) are probably optimal as Interest rates will be very dynamic

                    - Put at least 15-20% of your longterm assets into investment (even at today's price). Foreign Coins (Krugerand, Sovereigns, etc are best). Also buy some silver

                    - When markets crash, load up on high dividend yielding stocks with good performance. In the last crash, one could easily pick up good companies with 8% - 12% dividend yield, which is phenmenal as a starting position. Remember that, today, these dividends are tax-free in your hands (which will change with the new tax code) and over the next 5-5 years these dividends will grow to give you a yield of 15% - 25% on your original investment.

                    Thats about it. On my part, I also put around 2-3% of my portfolio into highly leveraged speculation in Options which could yield (if you are lucky) returns in the 100s of percent. But this is not an easily available option (pun intended ) and I would not ask anyone to get into F&O as it is a most dangerous field.

                    Any other ideas rom others will be welcome as I can add to my tools for financial growth!

                    And most importantly, answering your question on stagflation. As money supply crashes (deflationary), credit will become very scarce and very costly (I believe it would easily surpass 90s interest rates of 15%-20% and we will see 20%+ interest rates). Couple this with even stagnating prices of assets along with stagnating incomes as salaries remain flat and real purchasing power of rupee declining and you are heading for some very hard times if you take on debt, especially very large debt (loans) in relation to your income and savings (assets). Remember that, until you pay off your last EMI the house belongs to the bank and in a stagnating price environment and low liquidity, distress sales will see you losing even your down payment if you are forced to sell within the first 5 years as interest takes up most of your EMIs.

                    Also relating to investing large parts of our savings in fixed income securities is (in my opinion) a losing proposition when you are simultaneously hit with dropping PP of Rupee, rising interest rates and a lagging return on investment on these securities (the interest you receive is always lower than the interest you pay on debt, that why I call it lagging). If you take a more dynamic interest in the stock market and look for crashing markets to throw up high dividend yields and get into sound stocks purely for dividend with price appreciation as an extra bonus, you will get returns north of 20% and even as high as 50% per annum in a flat market going nowhere. You might want to experiment with this as it has served me very well over the last 25 years!

                    But I suppose you know that already Abishek!

                    cheers
                    Last edited July 19 2010, 06:43 PM.

                    Comment

                    • #30

                      #30

                      Re : International Market: Where World Economy Going On ?

                      Thanks for sharing yours.

                      I also have invested in POMIS and PPF. But only a portion of my wealth. < 10%. rest i have invested in equity MF 30%; debt MF 30%; liquid MF+BankFD 30%.

                      I hope that with this styrategy atleast i can conserve wealth net of inflation, though i would much rather prefer wealth to grow!
                      with food inflation at 15%; education inflation at > 15%; Healthcare inflation at > 15%; all form of investments in india are useless.

                      i have a vague feeling that once this phase of india's growth tapers say in 5 years time, inflation in india will settle down to 2nd world levels. at say 3-5%.


                      Originally posted by nabishek View Post
                      No, Not liquid funds.

                      For my cash savings, I have chosen long-term fixed schemes with moderate returns, periodic cash outflow and less exit load.Cash that cannot be invested in such schemes, goes into purchase of Bullion.

                      I believe money gets multiplied only when it keeps rotating.My strategy is to keep rotating the money from periodic returns of debt instruments into better equity-linked schemes to get more compounded returns meanwhile ensuring capital guarantee of my principal in long term.

                      There are so many good schemes that give better returns than Bank FD.Such as from Post office, Co-operative banks and societies, Bond issues/NCD.Most of them are close-ended so you have to constantly look out to know when they are announced.

                      Instead of Fixed deposits, you can select fixed maturity plans MF where you can choose growth or dividend(tax free) option and also if invested more than a year avail indexation benefit to adjust for inflation and save tax.

                      Also, check the following scheme.Capital is guaranteed by the government.

                      http://www.indiapost.gov.in/Netscape/6yearsMIS.html

                      One can open a joint account and invest 9 lakhs and get a monthly income of Rs 6000/-. Invest it back as SIP in a good ETF or mutual/index fund that provides more returns.

                      You can also choose to do the same on the amount you tend to pay every month for EMI from salary through SIP.It would give better returns than trying to leverage on appreciation of mortgage.

                      I hope to hear better strategies and advise from experienced members.Thanks in advance.

                      Comment

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