U S A…..United States of Abattoirs ! ….Strategy going forward
USA…What a slaughterhouse !…Bears & Sterns….Now Lehman,Merill Lynch,American International Group…all inside two days….with more to come !….Comical really…those who lived in Glass Houses were throwing stones at others…..Their Reports were always revising or even reversing estimates and projections and strategies advised earlier to justify every share price rise and fall !….how could you then sensibly move with them !…now you know why Warren Buffett prefers to be in Omaha……away from Wall Street!
Till they threw their hands up this week they were all preaching Indian Equity Strategies in lengthy reports…messed up their own backyard and then moved on to mess up those around the world…sadly we let them…. succumbing to their pressures to open out our economy on a fast track for them to enter and play havoc…we were brainwashed to see the rose and not the thorns…we ignored the wilting,hoping that our markets would remain affected only to a limited extent by the US Contagion…we boasted of decoupling…and now as FIIs reverse flows of billions of dollars from our markets we in turn are wilting !
Imagine if Freddie Mac and Fannie Mae,the USA Pillars of mortgage lending, were allowed to collapse,instead of the Fed taking them over last week !…The 1929 Depression would have paled to what would have unleashed around the world
So what Now ?….Oh ! the Virus is deeply set in and only Disk cleansing and reformatting may salvage something…this would mean letting old Financial Powerhouses die out instead of baling them out…a sad and tough call but one which the Fed has taken now for Lehman
The reality is that the mortgage and other lending woes are yet to play out their strikes in full….any bale out…US $ 85 billion for an 80% stake was just announced by the Fed for the AIG Group…..will not create new jobs and new income and new business…will not be productively spend…it goes only to part fill the hole created by lending and investment loss…it will takes years to recoup and come back on healthy profit track…whether it is Citigroup or AIG
The business and sentiment shrinkage is visible in all developed economies…USA,UK,Germany,Japan and even China
Oil is now rapidly falling and is close to US $ 90/barrel…Inflation too is seen to be in a falling mode….and the rupee has dramatically depreciated 20% from Rs 39/US $ to Rs 47/US $ in no time