There isn't much possibility of this happening, but I think everyone should keep one thing in mind.
If this $700 billion bailout package doesn't go through in next few days, the world economy would face very serious consequences.
Firstly, the entire US banking system will collapse.
Banks in other countries will also get dragged along.
I am not talking about a simple recession in which the GDP of a country shrinks by 1%-2%.
I am talking about an economic disaster.
Something that occurs once in a century.
US had witnessed one such "depression" in 1930's and once again US faces such a possibility.
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The possibility that the bailout won't go through is very small.
Most politicians in the US accept that some sort of bailout is needed to prevent the banking system from collapsing.
Thus, there isn't much to worry right now.
However, as nothing is 100% certain, I thought it would be better if investors are prepared for all possibilities.
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If US banking sector collapses, all Indian banks too will have huge losses.
A few banks may even be brought to the brink of bankruptcy.
Public sector banks have a lot of overseas exposure too, so no one should think that PSU banks will remain unaffected.
However, the good thing about Indian banking system is that there are only a few banks in India (compared to US).
There are only 85 or so commercial banks in India. US has more than 100 times that number (8500+).
It is very unlikely that RBI will ever let any bank fail.
The failure of one bank has domino-effect on other banks and RBI would never want that to happen.
(It is this "domino-effect" that caused 1000's of US banks to fail in 1930's).
Global Trust Bank was a tiny bank and still RBI made sure that its depositors didn't lose a single rupee.
I am sure this will be case if any of 85+ Indian banks ever collapses.
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If the US goes into a depression, most of the stocks that investors own today will be worth a fraction of their current prices.
Everyone using leverage to buy stocks/futures would be butchered.
I have stated this in my other posts too:
Please don't underestimate the risks that global equities are facing right now.
-Don't invest any money in the markets if you can't carry the position for at least 2-3 years.
-Don't take any leveraged position in the markets unless you have enough spare funds to provide 100% margin.
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Once again, there is no reason to panic right now.
There isn't much possibility of this bailout plan being rejected by the US politicians.
(If you would like a number for it, let me give you one......the chances of this $700 billion package not going through, are less than 3%).
I made this post so that if one morning you wake up and find that the bailout plan has been dropped, you know what is coming....).
Lets see .. But advisable is keep as less money as you can in market for time being..
Once picture is clear then we should start looking it ..
Rgds,
From what I've seen, the picture can get clear but that's the time we go overboard and later get into trouble .
Just think of the optimism that all bulls display during a bull market.
At such times, they see the picture so clearly as to convince us to break the FDs and put them into stocks.
That's why I feel, waiting for clarity may not be the right thing to do. You have to buy a little all the time if you are convinced of a stock and keep your portfolio and asset allocation balanced at the same time.
From what I've seen, the picture can get clear but that's the time we go overboard and later get into trouble .
Just think of the optimism that all bulls display during a bull market.
At such times, they see the picture so clearly as to convince us to break the FDs and put them into stocks.
That's why I feel, waiting for clarity may not be the right thing to do. You have to buy a little all the time if you are convinced of a stock and keep your portfolio and asset allocation balanced at the same time.
you Know Vasa. I think another way round at this movement.. I might be wrong.
I am thinking slowly to get my cash back from stock market slowly and will think after few months later. My portfolio is at loss right now.
I am only afraid of the collapse of whole economy of the world because of USA..
Read today's DNA Money for "Knowing a stock's "right" value". There's also a Latin quote:
Res tantum valet quantum vendi potest meaning a thing is worth only what someone else will pay for it.
Vasa can we have the link also what you want us to read. .
basically bottom line is. Nobody can catch bottom. It is best to buy in staggered manner!
Money which you employ for buying, you should not need it for next 8 years!(Year 2016)
Why 8 years?
- We are sitting on a 8 year economy cycle as per ICICI analysis form 1950 till today for sensex!
- If we have entered that phase of correction of 3 years, we will not see a new high at least for 8 years!
If you also read Jhunjhunwala interview from last Sunday he is also saying "mother of Bull run" is still to arrive!
Thus, point is to buy small, staggered quantity and forget it for 8 years!
Note: Alchemist talked about Last recession which lasted from 1925 till 1935, before world war 2!....10 long years!
Last edited by man4urheart : 25th September 2008 at 02:30 PM.
the way the banks are getting bankrupt reminds me of about 5 years ago in Bangalore when a lot of these .com companies had been set up and there was it boom,all of a sudden they collapsed.
the way the banks are getting bankrupt reminds me of about 5 years ago in Bangalore when a lot of these .com companies had been set up and there was it boom,all of a sudden they collapsed.
Compared to the IT bubble burst, this problem is much more serious.
IT sector is only a part an economy.
Banking sector is the economy.
Banking sector is the heart of economy and today US is facing the risk of heart failure.
Without banking sector there will be no credit, no businesses and no profits.
If the US banking sector collapses,we will all lose a big part of our stock investments.
Many will lose their jobs too.
Just to give an example.
Around 40% of revenues of the bigger Indian IT companies come from US/EU BFSI verticals.
BFSI = Banking, Financial Services, Insurance.
A collapse of the financial sector in US/EU would mean around 40% of IT jobs in India will be at risk.
Think of it....40% of Indian IT workers losing their jobs.
The actual number may be even bigger than 40%. Banking sector will bring down all sectors.
With every passing day, I am getting more worried.
If the US banking sector collapses,we will all lose a big part of our stock investments.
I'm sure you mean "a big part of the little that's left of our stock investments. (This applies to recent entrants only)
Quote:
With every passing day, I am getting more worried.
I've decided to cheer myself up by thinking that the US is "too big to fail" and the world is too interdependent (despite some of the joys expressed by some hoping for the imminent failure / collapse of the US).
The financial sector was getting a bit too smart and needed to be brought down to earth somehow. It is unfortunate that this is happening so severely but the sooner the better and the more severe the more thorough the clean-up.
Yesterday's Swaminomics (ToI) described some of the causes of the bank meltdown.
All-inclusive loans: politicians in the US pushed for loans to be given to all so that each American could own a house. This push resulted in NINJA loans. NINJA = no income, no job, no assets. Consequently, the lenders could not proceed against many defaulters.
He further talked about securitisation, in which the loan was not shown in the books of the lender because the lender chopped up the loan amount and sold bits of the loan on the market.
Don't buy stocks if you can't hold them for 2-3 years. You may not see your buying price for a long time - may be a few quarters or even years.
Don't use leverage unless you can pay 100% margin if required.
Alchemist thanks for that..I really was really thinking when i would be able to sell the stocks i had bought...That really gave me an answer...I am 23 now and i entered markets 5 months back...I am just a newbie I don't day trade i only take delivery..My portfolio losses kept increasing day by day i was worried ..Now at least i know that it is natural think that happens to all investors that during certain phase you need to wait for even a year for the price to shoot up... I had posted my portfolio in the another link..Quite a number of them are big stocks but got them at very high prices...Hope i need not wait for more than a year...
Fortis has been rescued by the governments of Belgium, the Netherlands and Luxembourg.
Quote:
The governments of Belgium, the Netherlands and Luxembourg launched an 11.2 billion euro ($16.4 billion) rescue for Fortis late Sunday, acting after confidence in the banking and insurance group evaporated and potential bidders reportedly walked away from a deal.
Bradford & Bingley was rescued by the UK government.
Quote:
The British government is nationalizing troubled mortgage lender Bradford & Bingley, the Treasury confirmed Monday, taking over the bank's 50 billion pound ($91 billion) mortgage and loan book
Do you think there will be any structural changes in banking. I refer to the post I made earlier about Ninja loans and securitisation. Then there's also the whole derivative business.
Don't you think this is a good time for all concerned to go back to more conservative and prudent banking?
Do you think there will be any structural changes in banking. I refer to the post I made earlier about Ninja loans and securitisation. Then there's also the whole derivative business.
Don't you think this is a good time for all concerned to go back to more conservative and prudent banking?
Of course there will be structural changes.
There is no doubt that US banking industry will never be the same again.... at least not in next 20 years.
No one is lending to sub-prime borrowers now. No one wants to take any risk now.
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However, the question is not about what banks will do in the future.
The question is about what banks have done in the past.
There are huge outstanding positions in the credit markets and no one really knows how these positions are going to unwind.
e.g.
The CDS market has positions as big as the world's GDP.
Quote:
The volume of trades in the worldwide market fell to $54.6 trillion from $62 trillion in the first half, the International Swaps and Derivatives Association said in a statement yesterday.
All indian ADRs are down by >10% in the US markets today. Will it be idiotic to buy stocks tomorrow...i think we might hit a lower circuit, NASDAQ is down over 6%
I like the following stocks:
L&T
Infy
ICICI
HDFC Bk
HDFC
All indian ADRs are down by >10% in the US markets today. Will it be idiotic to buy stocks tomorrow...i think we might hit a lower circuit, NASDAQ is down over 6%
I like the following stocks:
L&T
Infy
ICICI
HDFC Bk
HDFC
Looking forward to your guidance.
Best,
Hiren
Quote:
Originally Posted by rishig
Bailout fails!!! what next??
Don't buy anything.
The oil price collapse will help the oil marketing companies - IOC, BPCL and HPCL.
Other than that, I can't think of any stock that will be positively impacted.
The bailout package may again be brought to vote by around Friday.
Till then it is better to avoid any position - long or short.
Paulson said that it was important to get approval of a measure as soon as possible and the administration was committed to working with congressional leaders to get that done.
Many analysts believe that the administration will again try to get the bill passed.
but lets say Bush Admin makes it on Friday.
Today we may break 12000 easily.. So Assuming that Bailout package is successful somehow on Friday or next week.
In that case, is there any support line for our market then?
If not then what you think about the Sensex lowest?
Hope we would not break 9500 level?
Happy investing!
Last edited by San Yad : 30th September 2008 at 08:38 AM.
Hi,
Today's market behaved different than the expectations. Is it due to short covering or is it due to strong support around 12,500?
everything combined.
- short covering.
- 12000-12500 is strong support.
- markets slowly realized that the bill will get passed sooner or later and thus there isn't any reason to panic.
Quote:
Originally Posted by rishig
exactly...somewhat confused here...all the traders know that the bill would pass in the next few days and we have couple of holidays coming as well...
but the most interesting point that everybody missed was that today's was end of Q3.....maybe something to do with that?
I changed my shorts to longs..any suggestions??
At present, most market participants agree that the bill has to be and will be passed.
IMO, that makes it a fully discounted event.
When the bill is passed, we may see a small rally, but I don't see any significant upside.
My advice would be to follow the "sell on news" strategy and fully (or partially) close your short-term long positions when the bill is passed.
In case the bill is rejected again, we may see a strong sell-off, so it is essential to be alert....
A Note of caution: Everyone agrees that the short-term solution to avoid a meltdown is to pass the bailout package. However, don't count on it.
In India, we all know that the reservation system in jobs and education is counter-productive, but are we doing anything to cure it? No, on the other hand the situation is becoming worse. Why? Lack of political will. (ie votes rule)
The situation in the US is similar. Ordinary Americans are OUTRAGED that they will pay for the greed of the guys on wall street. the senators have been bombarded with calls from their constituents to vote against the bill. (I can vouch for this personally, the guy who sits next to me in office did it!).
So voting for the bill is like political suicide.
Another aspect is that once a representative has voted against the bill, it becomes difficult to vote for the same bill after 5 days without becoming the object of ridicule (or facing charges of bribery from their constituents)
Last week, everyone thought that the bickering over minor details in the bill was a case of political posturing and that the bill WILL get passed. The reality is other wise. NOW I wont be surprised if the bill is rejected again (unless it is changed drastically).
The anger amongst Americans against bailing out greedy people with taxpayer money is very real and politicians have to take heed of the anger unless they plan to retire.
When the bill is passed, we may see a small rally, but I don't see any significant upside.
My advice would be to follow the "sell on news" strategy and fully (or partially) close your short-term long positions when the bill is passed.
You mean on big/small rally we should sell off and book our profit if bill will be passed?
Why can't we hold...?? is there any more bad news after this bill success?
Last edited by San Yad : 30th September 2008 at 07:53 PM.
A Note of caution: Everyone agrees that the short-term solution to avoid a meltdown is to pass the bailout package. However, don't count on it......
The anger amonst americans against bailing out greedy people with taxpayer money is very real and politicians have to take heed of the anger unless they plan to retire.
I don't have any argument with what you've written, but even the man in the street will suffer if the bill isn't passed and the stock market suffers. In the US, exposure of evereybody to the stock markets is much higher compared to India. There, pension / retirement funds also have an exposure.
US Financial Crisis - Cautionary Note
...the chances of this $700 billion package not going through, are less than 3%).
. 
!
..Now at least i know that it is natural think that happens to all investors that during certain phase you need to wait for even a year for the price to shoot up... I had posted my portfolio in the another link..Quite a number of them are big stocks but got them at very high prices...Hope i need not wait for more than a year... 
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Is tomorrow the butchers day?
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