Sunday, January 25, 2009

Difficult Times - Continued

The good news.
Jeremy Grantham suggests:
Slowly and carefully invest your cash reserves into global equities, preferring high quality U.S. blue chips and emerging market equities. Imputed 7-year returns are moderately above normal and much above the average of the last 15 years. But be prepared for a decline to new lowsthis year or next, for that would be the most likely historical pattern, as markets love to overcorrect on the downside after major bubbles.

The Ugly:
Societe Generale strategiest Albert Edwards said on Janaury 15:

"Investors should now cut equity exposure ... and prepare for a rout.
He predicted that the S&P 500 index of U.S. stocks could be set for a fall of around 40 percent from recent levels."
Edwards also raised the danger of a global trade war with China.
"It is becoming clear that the Chinese economy is imploding and this raises the possibility of regime change. To prevent this, the authorities would likely devalue the yuan. A subsequent trade war could see a re-run of the Great Depression."

The Excesses
In 2007 (the great bull market was continuing), Wall Street baron, Steven Schwarzman of the Blackstone Group, a private equity and hedge fund, celebrated his 60th birthday with 350 guests. To appreciate the degree of ostentation and taste, Rod Stewart was called to entertain, at a cost of 1 million US dollars.
Four months after the party, Blackstone went public.
Two years later, in 2009 January, Blackstone shares are trading 85% lower.

John Thain was treated as a wise man when he saved his company, Merryl Lynch by arranging a merger with Bank of America. During the process he took some hard decisions, including the retrenchment of thousands of employees. It now appears that he tried to give himself a bonus of $30 million during the same period, gave millions in bonus to his top ranking officers, refurnished his office by spending 1.2 million dollars, including a trash can costing $ 1405 (About Rs seventy thousand for a waste paper basket). Mr Thain, resigned last week, when these details emerged.

My Notes: What is the message ? A group of people have taken control of financial services in most countries of the world. This group has no morals, is pushed only by the desire to make money, by hook or by crook.


rakesh said...

on 25th blog my note give most valubale advice every one once read before trade.

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