Long-term economic outlook of USA and beyond
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Quote:
Originally posted by pratickm
Now that the "bail-out" package has been signed into law in the US, what do you all think about the following -
- Is the bail out package going to help or actually do more damage in the long-run?
In other words, creating $700B out of thin air - would that further devalue the USD?
Who is going to ultimately buy the debt securities - China, Saudi, or mostly private investors?
- What is this going to do to oil and gold prices?
- Does the US economy has any hopes at all of gaining any fundamental strength any time in the next 5 years?
By fundamental I mean in terms of manufacturing, industrial or agricultural production - not overinflated stock market values based on bubbles (tech or housing or oil).
- Are any of you planning to change your investment strategy based on recent happenings?
If so, how?
Selling stocks and moving into fixed interest investments?
Or buying up more stocks and looking for value stocks?
The Internet and chat boards are abuzz with all kinds of opinions and predictions, ranging from the end of the civilized world to business as usual.
What do our fellow Canadian Desi's think?
Here's the motto I heard for all those jobless in the financial industry in the US these days: ITS DUBAI, SHAGHAI, MUMBAI OR GOODBYE
But jokes aside, from an investment perspective, it is a time to buy. But not because some stocks are low but to pick those that are low because of market speculation and not because of any direct relation to the crisis.
The US will bounce back but it will never be the same...my opinion is that this is the beginning of the end. The world has been witness to too many gaffes and blunders by the so called superpower. The land of the free is now a purveyor of human rights violation. Wars haven't given anyone anything but taken American lives...along with it has dragged down other nations. It has just been a steady decline.
Its all up in the air for now...
http://www.charlierose.com/shows/2008/10/1/1/an-exclusive-conversation-with-warren-buffett
listen to this and make your decision
Quote:I know, all the pundits are saying it's time to buy.
Originally posted by naradavijaya
But jokes aside, from an investment perspective, it is a time to buy. But not because some stocks are low but to pick those that are low because of market speculation and not because of any direct relation to the crisis.
My instinct is the same, but but but (there's always a but) - the market may take a /very/ long time to recover.
And as you said, it will never be the same again.
Remember that folks who bought during the peak tech bubble (early 2000) and did not bail out on time were in the red for many years to come - some are probably still in the red.
So many joint stock companies simply disappeared between 2001 - 2002.
The big names like Micro$oft and Yahoo fell like a rock and their shares haven't recovered to 2000 levels even now.
Also, no one is willing to predict exactly how deep this crisis really is, and what impact it is going to have on the other economies of the world - both established economies like Japan and Europe as well as "emerging" like SE Asia and India.
Keep in mind that a lot of countries hold significant amount of US debt, therefore, a significant devaluation of the USD will diminish the value of their assets.
Quote:I'm not sure if/when they will bounce back.
The US will bounce back but it will never be the same...my opinion is that this is the beginning of the end. The world has been witness to too many gaffes and blunders by the so called superpower. The land of the free is now a purveyor of human rights violation. Wars haven't given anyone anything but taken American lives...along with it has dragged down other nations. It has just been a steady decline.
They have a huge national debt.
It is simply not possible to carry that much debt without long term consequences.
And they have been carrying this debt for many years now.
The last 8 years of Bush have by far been the worst for national debt, with the war and whatnot.
Also, the fact is the US does not produce anything anymore.
They are no longer the argicultural or industrial giant.
Their economy has over the last 20 years become a service oriented economy.
And now it is being discovered that a lot of that service sector is essentially useless, paper shuffling and creating value out of nothing.
It has been all smoke without any fire, only gravy and no meat, only sizzle and no steak.
They are stumbling from one artificial bubble to another in less than a decade (tech to housing), neither of which had any value or content.
Reminds me of Marx who said (I'm summarizing) that capitalism is advanced by the value added by labour.
At each subsequent stage of production, labour adds value to production and thereby the cycle continues.
US doesn't produce anything anymore.
Where is the recovery going to come from?
Or maybe we'll see some other bubble in 2 - 3 years time?
Its all up in the air for now...
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"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."
-- Rhett Butler in "Gone with the Wind"
Location: God's own country
Posted on: 05-10-08 00:41:34
Quote:
Originally posted by pratickm
I belive that people who have invested in high / medium risk mutual funds should pull out and reinvest in GIC's (low risk) until a direction is found.
Quote:
Once a bottom is reached (again this is subjective and is not today), Stocks are a very good buy. Almost all the stocks are beaten to the bottom even now.
Aren't you contracting yourself with the above?
Great Thread.
No. I am not.
What I meant to say is that we are almost at the bottom and not at the bottom. This would be reinforced by the fact that the $700 billion failed to convince the markets.
Let us take the following example.
Stocks which were worth $100 is around $20 now. They may fall to $10 in a few months or may not. But for sure they will be $50 in a year. So it is safe to buy now.
Again stocks like Wachovia, AIG, Freddice Mac, Fanny May, JP Morgan have all reached the bottom last week and are all bouncing back. This is a great time to invest in these stocks. the $700 Billion would greatly help them.
Not all Banks / financial institution stocks are at the bottom. Some may suddenly fall as news of their exposure to credit crisis comes into the market.
I have seen that many brokerage companies are selling penny stocks (to get rid of them in their portfolio as it is worthless). So stocks which are 5 or 6 cents suddenly b'cos of dumping fall to 1 or 2 cents. If you have a good eye and buy then you can get 100% profit in 2 or 3 hours.... (Like in the Torotno Stock exchange - MAM, TOO, KLA, CCH etc) This is only possible in these kind of markets....
Again for anyone not willing to take these kinds of risks, better to take out you mutual funds and put then in low risk GIC's b'cos we may not know in what companies your mutual fund is invested in. For example, if your mutual fund invests heavily in say some banks / institutions which are in good position now, it will go down once it is found that those institutions are exposed to the sub prime / credit crisis risk. So it is better to take the money out and reinvest when everything is over.
Hope this helps
Peace
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I am a Gents and not a Ladies.
Stock market volatility likely to continue amid global economic deterioration
It was a gut-wrenching week for investors as the Toronto stock market wiped out $150 billion of value and bounced around like a pinball, and it's likely there'll be more of the same ahead as the global economy deteriorates and drags commodity prices down with it.
"The situation is still very fluid, very much in flux," said Patricia Croft, chief economist of investment firm Phillips, Hager and North.
"I think markets are rallying from a deeply over-sold position, but nonetheless the reality is the economic backdrop continues to deteriorate."
All eyes will be on Alcoa as the Dow component kicks off the third-quarter earnings season with its report on Tuesday. The average analyst estimate is for earnings of 53 cents per share.
Canadian unemployment numbers will be released Friday and Croft said they likely won't be pretty.
"I suspect we'll see a softening of Canada's labour market," she said. "This is truly a global credit crisis, and now it's being overlaid by growing concerns about a slowdown in the global economy."
Croft added that she expects markets to react to the passage of the bailout bill with some "sober second thought" this week.
"This is a very complex process that's going to have to be undertaken to determine the price of those distressed assets. It's not going to happen overnight," she said.
"There could be this sober second thought: 'What does this really mean, how does it work, and how long is it going to take?"
Stock markets closed in the red Friday after a bailout plan for U.S. banks passed Congress, ending a dismal week that saw two separate 800-plus point declines on the Toronto Stock Exchange.
The Toronto market ended down 1,322.64 points or 11 per cent last week - an equity loss of $150 billion - after tumbling oil prices and revised earnings estimates for fertilizer makers sent commodity stocks plunging.
A seemingly endless parade of bleak U.S. economic data also served to push New York markets lower. The Dow Jones lost 817.75 points over the week, while the Nasdaq declined 235.95 points.
Gareth Watson, Canadian equity adviser at ScotiaMcLeod, said investors have had their trust shaken and markets won't turn around until that trust is restored.
"Just ask yourself, would you go and buy something from someone you don't trust? And if the answer is no, it applies to the stock market as well," Watson said.
But Croft said investors shouldn't despair just yet.
"I think a very important point to remember is that stocks will bottom long before the credit crisis is over and long before the economy troughs. That's the good news," she said.
"There are incredible opportunities amidst the doom and gloom, but I think the worst thing people can do right now is redeem and get out of the markets, because history has shown very, very consistently that significant downdrafts are followed by sharp bounce backs, and if you're out of the market you're going to miss that opportunity."
http://ca.news.finance.yahoo.com/s/05102008/2/biz-finance-stock-market-volatility-likely-continue-amid-global-economic.html
Cheers!
Quote:We will know what the bottom is/was only once the upturn begins.
Originally posted by tamilkuravan
What I meant to say is that we are almost at the bottom and not at the bottom. This would be reinforced by the fact that the $700 billion failed to convince the markets.
Let us take the following example.
Stocks which were worth $100 is around $20 now. They may fall to $10 in a few months or may not. But for sure they will be $50 in a year. So it is safe to buy now.
Else, how would we know whether we are already at the bottom or not.
TSX is already under 10,000 pts.
It was only a few months ago that it had gone above 15,000 and people were predicting a non stop climb.
Quote:I'm staying away from mutual funds, period.
Again for anyone not willing to take these kinds of risks, better to take out you mutual funds and put then in low risk GIC's b'cos we may not know in what companies your mutual fund is invested in. For example, if your mutual fund invests heavily in say some banks / institutions which are in good position now, it will go down once it is found that those institutions are exposed to the sub prime / credit crisis risk.
Esp. the high fee ratio funds.
Now is not a good time to be in mutual funds.
I have some MF holdings, including in the banking sectors (most Canadian equity funds cannot stay away from financial stocks anyway).
They have all gone down significantly but fortunately my exposure to such high-cost MF is very limited (they are less than 10% of my total holdings).
The problem with those is that even when the market is losing money significantly, the fat cat, grey suits are still getting their > 2% fees from everyone's holdings.
It is probably a good time to buy banking stocks, but only through direct common stock purchase or through low-cost ETFs, index funds or e-funds.
Mutual funds will keep losing money until the market recovers significantly (since they lag the market by the % of the fees).
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"Mah deah, there is much more money to be made in the destruction of civilization than in building it up."
-- Rhett Butler in "Gone with the Wind"
Location: God's own country
Posted on: 06-10-08 16:23:46
Pratick,
You are correct.
No one would know the bottom until we start the upward climb.
Even today no one expected such a drop but with the credit crisis in Europe, everyone got frightened.
I donot expect more significant drops to the TSX or the Dow Jones after this. I guess it is fair to say that we are almost at the bottom. If we see any more crazy days like this, everyone is predicting that we will be midway between a recession and a depression.
I belive ING mutual funds donot have user fees but it is good to stay away from Mutual funds all across the world (india incl.).
Again, even our CPP investments are significantly down and so will be the RRSP.
Canadian dollar is pathetic now.
Looks like the old way of hiding cash under the matress still is a good thing..
Peace
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I am a Gents and not a Ladies.
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