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4 Months since we talked last

April 2, 2009

Around the beginning of the new year, I posted an article in Seeking Alpha, titled “2009:What to Expect–and what not to Expect“. I believe had we been more accountable in our claims we would have had a slightly better claim to future today.

So this is my, ‘sorta’ aim at being more accountable after I got my word out about 2009.

Bailouts, Handouts and Obama: Barack Obama will undoubtedly take out all stops and all pins to bring the US back on track. Obama knows that this is a war and he is prepared for it. But, unfortunately, he is no God and has very few resources at hand. If 700 billion dollar TARP was anything of a rip-off for the taxpayers, then, undoubtedly, we should get prepared for the grand daddy of thefts. Bailouts, TARP, handouts might be the words to watch out for in the first half of the year. Obama will hand out a lot of money. And it will be a lot of money.

Incidentally, this had been my first ‘predictionary’ marker for 2009. We are continuing to see similar ideas being flouted every other day for a bailout to GM, a possible bailout to CITI group etc. As per another estimates around a trillion to trillion and a half is required. But given the way the wind is blowing, it will be nice to know that Obama will not underuse the only power he has, printing notes. Unfortunately market does not care, you bring in a billion dollars here or a trillion dollars here, market is moved by sentiments and not raw monetary power. End of the story.I continue to see things going some more downhill on Fed borrowing.And yes, this market might show some new highs [$SPX, ES surging to 825 or so, but beyond that, I am sceptical]

The Spreading of Crisis on the American Life: 2008 had been a year to thank for in this part of the scenario. Given the magnitude of the crisis, it’s a surprise that very few job losses have happened; general economic spending may have slowed, but in effect bucked the trend [refer to holiday shopping statistics]. This will change in ‘09H1. The first big wave of auto loan defaults, then secondly credit card defaults [~40b] and then student loan defaults will enter the national consciousness.

Check, Check,Check! GM and other auto makers are grappling under the falling demand. And 2008 saw a ‘mere’ 2.6million job losses on its way. I am sorry to sound so trivial for 2.6million job losses. But numbers alone will prove that it is indeed trivial. Retailers will shut shop, so will a number of Silicon Valley blueneck  startups. Present unemployment rate is 7.6%. I am looking at 10%+. Bad news. 2.6million job loss in one was the highest since WW. Present unemployment is around 11million. I am looking for at least another 5-6million. Yes they are devilish intentions. I have the freedom because I am not on the receiving end, but thats the way it is.

Eco-Political Circumstances Will Worsen: Crises like this one give an unprecedented rise to tension and conflicts. News to watch out for Indian-subcontinent, Middle East, Russian-Chechnya and also Africa. This might prove to be a bad thing for oil.

Check! Pakistan terrorism,Taliban,Afghanistam,Israel-Palestenian conflicts, sigh!Check!

The China Saga: China’s race to keep its yuan undervalued during the good times is commendable, but it has come back to bite it during these times. With the dollar strengthening, the yuan has become uncontrollably undervalued. And this will affect [if it is not already affecting] the economy in an adverse way. And the general political developments. If the intensity increases, then riots will break out and people will undoubtedly get shot. Quite dramatic, but a distinct possibility due to the tense political situations. But by 09Q2, China should start making a good recovery.

Riots have not yet broken out, or who knows might have broken out by now.But China is increasingly making noises. Noises right in many ways, asking world to move to Gold and stop printing dollars etc etc etc. But China all this time has been a silent participant. Its increasingly becoming vocal and thats a marker of the level of desperation(perhaps) inside China.

The India Chapter: India had not been untouched by the global mayhem. Its bourses have tumbled like nine pins and stimulus package has entered the public lexicon. 9% GDP growth rate now is being considered too high and 7-8% is the downgraded expectation. The crime in India might see an increase and terrorism might take a turn for worse. But at the risk of sounding biased, I am bullish on Asian stocks.

Well it was a mixed bag. Further down the article I mentioned we should see a recovery in 09Q2. Well, officially we have seen a “recovery”, but very technically it is a fake recovery. Only that todays rally (across the board surge) has breached an important marker at 3150 levels. It definitely has given the bulls a breathing space and some profits. Small and short term bears [of the horizon 2-3 months] will pull it higher with their short covering, but positional bears hardly will move until unless NIFTY shows some extraordinary breathe in the coming days. But a few stocks have bucked the larger trend and are chugging away quite well.

Web 2.0 Stocks Will Tumble: With credit cards and the online ad revenue as the mainstay of the Web 2.0 companies, Google (GOOG), eBay (EBAY) and Amazon (AMZN) might see their balance sheet suffering. An exception is Amazon with its low cost web infrastructure offering which will find its takers with the remaining startups.

Not yet, not yet. A big red cross near this. AMZN is quickly emerging as one of the strongest in technology sector. GOOG has also shown a massive recovery. The only blacksheep in this is EBAY. But NASDAQ still continues to fall.

Credit Cards, India, China and Consumption: Credit cards will penetrate even deeper in the traditional savings based Asian societies. This will form the bulwark of the next consumption based global economic cycle.

A big cross. I failed to see the wealth at the bottom of the pyramid consuming through plain old hard cash and instead cashed in on urban credit consuming India. Wrong statement.

I made 10 statements, in that article, out of which  5 points emerged pretty close and two foresights emerged as a “not-quite-right-not-quite-wrong”. Hence awarding 1/2 points to each.


What do you think?

Update: March unemployment rate surges to 8.5pc at 663K. Even my pessimistic estimates of 12% will be breached sooner than later.

2 Comments leave one →
  1. matt permalink
    April 2, 2009 9:27 pm

    This blog’s great!! Thanks :).

  2. April 3, 2009 2:09 pm

    awesome post 🙂

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