digital thoughts

It appears that every major nation is suffering global economic slowdown. Singapore is no exception, it is facing worst ever recession.

On a seasonally adjusted, annualized quarter-on-quarter basis, Singapore economy fell by 16.9 percent, after a decline of 5.1 percent in the third quarter and 5.5 percent in the second, Singapore trade ministry said.

“The economy fell off the cliff in the fourth quarter,” said Song Seng Wun, a regional economist with CIMB-GK Research.

According to Singapore’s finance minister Tharman Shanmugaratnam, the government will tap its official reserves for the first time to help fund a record 20.5 billion Singapore dollar (US$13.7 billion) stimulus package. Almost every country is resorting to stimulus package to revive the economy.

The Indian market has now become a luring bet for the foreign VC firms, who are in the queue seeking clearance from the regulators. Around 66 foreign venture capital investors, like Google holdings, GE Capital Mauritus III, Argonaut Capital and Bessemer India Capital II are put on hold to prevent them from investing in the market at a very low price. I am not sure about the rationale behind this, investors are coming to India mainly because of low price and perceived stability compared to other Asian countries.

More cash inflow is good for any country especially in the current economic crisis. FIIs withdrew huge sum from Indian stock market in the recent months, hence we had lot of dollar outflow in the recent past. Just let the dollar inflow coming in, it will stop the falling rupee value.

Related Link: Moola Mania

Institute for Supply Management publishes an index called PMI (manufacturing index). It fell to 38.9 in October, the lowest reading since September 1982. Any reading below 50 signals contraction. Any reading above 50 signals expansion of the economy and prospects.

The index had been hovering near what economists call “the boom-bust” line for most of the year until its sharp fall in September brought it to the lowest level since the aftermath of the Sept. 11 attacks.

U.S. is in recession. Many of us already guessed that. This report confirms our assumption very strongly.

Finally, it hits. American economy crisis has significant impact in Indian IT industry. It’s rumored that Wipro’s chairman Azim Premji asked that toilet paper be rationed in his company’s offices.

Salary hikes will be coming down in the years to come. I am not very sure about salary hikes for IT employees, but I can see that dreaded pink slips have arrived in Bangalore and other Indian metro cities.

Diwali shopping is not as busy as it used to be. Many people try to take it easy and slow down the spending. I am surprised that real estate prices are still holding ok in cities like Chennai, in spite of all the problems popping up almost everyday in world’s economy.

The key issue for India now is to ensure efficient functioning of the financial system and stability of the banking sector, and steps already taken have had a good effect, Montek Singh Ahluwalia, deputy chairman of India’s Planning Commission, said today.

“Indian banks are sound, their balance sheets are sound, their exposure to problem assets is almost negligible and they are extremely well capitalised,” he mentioned to Reuters.

So far, India weathered the storm. There are no major panic here except the rumors about ICICI bank. Overall, it seems like Indian finance ministry handled it extremely well.

Warren Buffet compared current economic crisis in U.S. as “Economic Pearl Harbor”. That’s a strong statement from an investor like Mr. Buffet. He mentioned this in “The Charlie Rose Show” yesterday.

“This really is an economic Pearl Harbor,” Buffett said. “That sounds melodramatic, but I’ve never used that phrase before. And this really is one.”

He also said “In my adult lifetime, I don’t think I’ve ever seen people as fearful economically as they are now”.

Related Link: Charlie Rose Show

It’s getting worse every day. Washington Mutual failed today. FDIC seized the assets of Washington Mutual and sold the banking assets to JP Morgan for $1.9 billion.

U.S. Congress is still debating whether to approve the bailout. Many banks are eagerly waiting for the free money. American President Bush warned the country about recession in his prime time television address to the nation. Even if warnings of economic catastrophe aren’t enough to win approval of a controversial $700 billion Wall Street bailout, the economy is not at risk of falling into a depression, most experts think so.

Many experts think that the current situation is not as bad as the Great Depression. Millions of people lost their savings in Great Depression when banks closed without any insurance for its customers’ deposits.

Fortunately, FDIC insures all bank deposits in America, up to $100,000 per account. So, the Americans won’t lose the savings even if the banks go belly up. But, the entire economy is going to suffer for many months to come.

If the battered credit markets fail to restart, either because the bailout fails to win Congress approval or it doesn’t work as planned, U.S. could be facing its worst economic downturn since the Great Depression

Americans are angry that their taxpayer’s money is used to bail out the greedy and stupid banks. Some Americans want the government to help their failing businesses if the government is kind enough to help out the banks. Jerry Howard, CEO of the National Association of Home Builders, said that as soon as Congress returns to work from its upcoming recess, his trade group will be asking for another package of between $40 billion and $90 billion directed towards the housing market.

Ok. How about the common man that lost his life time savings in the housing crisis or the people that lost jobs because of bad bets placed by senior management in banks?

Ironically, all the senior executives that directed and authorized the bad investments are still rich. Merrill Lynch CEO is expected to take home $9 million because of merger with Bank of America. Lehman Brothers’ CEO is not going to live in a hut either. Washington Mutual’s ex-CEO Kerry Killinger that directed sub-prime mortgages is also worth millions of dollars.

Related Links:

Great Depression
U.S. on road to depression?
WaMu becomes biggest bank to fail in US history
Where are the grown ups?
What the Wall Street Titans Earned

“The most immediate concern at present is inflation,” says Rajesh Chakrabarti, a professor of finance at the Hyderabad-based Indian School of Business. “There is no denying that inflation has gone up much more than what the government would have wanted. In recent years, the government has been very specific in saying that it wants to contain inflation to less than 5%, and now it has gone to 7%.

Common man in the street would feel lot more than 7%. Everything is getting more expensive in India. Food, rentals, real estate, toys, even water. Inflation estimates by Economists generally don’t reflect the realities in the ground. Inflation estimates can vary. But, nobody seems to know how to read the future of India’s economy.

It seemed so simple few months ago when the BSE Sensex touched an all-time high of 21,207 on 10 January. Finance minister spoke optimistically about a 9% rate of GDP growth. Reserve Bank of India governor Y.V. Reddy was reported to be considering an interest rate cut to boost investment. And stock analysts were thrilled about the so-called decoupling theory: How the stock markets in rapidly-growing economies like India and China would be unaffected by the impending recession in the U.S.

Then, the crash came. The first quarter of calendar 2008 was the worst since 1992. Market indices have fallen 28%. Some stocks are down more than 50%. I heard reports that some traders committed suicide, not sure whether they were just rumours.

Now opinions vary widely on GDP growth in 2008-09. Deutsche Bank estimates it at 8.4% and UBS 8.2%. Occupying the middle ground are the Asian Development Bank (8.0%), the International Monetary Fund (7.9%, for calendar 2008) and Lehman Brothers (7.6%). Meanwhile, rating agency Crisil has reduced its estimate to 8.1% from its earlier forecast of 8.5%.

Now, finance minister is trying to control the inflation. “The choice is clear,” he told the Indian Merchants’ Chamber at the end of March. “If we want to check inflation, we must be prepared for a slightly lower rate of growth… If the RBI decides to raise the CRR and interest rates to counter inflationary trends, it would certainly affect the rate of GDP growth.”

The RBI has already raised the CRR, the percentage of their deposits banks must park with the central bank, from 7.5% to 8%. This will be done in two phases by May 10. Banks will have to maintain a CRR of 8.25% from May 24.

By March 29, inflation had risen to 7.41%. No one expects prices to go down any time soon. According to a recent survey by global management consultants McKinsey & Co, 64% of the Indian executives polled believed that inflation would go up in the next six months.

“It is my view that cement manufacturers and, to some extent, steel producers are behaving like a cartel,” Chidambaram told Parliament in late April. “We are looking at the legal and administrative provisions that are available.” Not only these cement and steel companies, many Indian industries are engaged in price-fixing. Real estate brokers and local politicians control the real estate prices in many parts of this country. No one seems to care about how to control the real estate prices in India as long as their own holdings’ value goes up.

Food price is another issue. For public consumption, the government has to be seen to be taking steps. But most experts are doubtful whether they will do any good. “I feel that the inflation numbers are going to be around 6% — above the 5% magic benchmark,” says Ajit Ranade, chief economist of the Aditya Birla group. “The inflation numbers for seasonal goods like fruits and vegetables may come down. There might be some moderation in food grains. But I don’t see overall inflation numbers coming down very quickly. This is a global problem.”

The United Nations World Food Program (WFP) has compared the crisis to a silent tsunami and said that 100 million people are at risk. Wheat and rice prices have risen to record levels. “A wave of food-price inflation is moving through the world, leaving riots and shaken governments in its wake,” as The Economist recently wrote in a cover story on the subject. “Agriculture is now in limbo. The world of cheap food has gone.”

…there is an opportunity. Bear Stearns is screwed up, it’s in total chaos. It’s a nice opportunity for JP Morgan Chase. JP Morgan agreed to buy Bear Stearns low interest rate payday loan,low interest payday loan,interest loan low paydayapproval guaranteed loan payday,guaranteed loan payday,fax guaranteed loan no paydayonline payday cash loanfaxless loan online paydayamerica cash loan paydayez payday loanadvance cash fax no paydaylow fee payday loanpayday loan,cheap loan payday,faxless loan paydayfast online payday loanonline payday loan applicationcanada in loan paydayinternet loan payday,business internet loan payday start,internet payday loanquick cash payday loanfax free loan paydayno fax required payday loancash loan payday quickpayday loan paycheck advanceloan till paydayno fax payday cash advancepayday loan no faxing requiredguaranteed no fax payday loan,fax loan no payday,absolutely no fax payday loan1 hour payday loanconsolidate payday loan debt66 funding loan payday routefax guaranteed loan no paydaycash advance until paydayloan military overseas payday,loan military payday,military payday loanadvance cash loan loan paydayadvance cash loan payday,advance cash cash loan loan payday quick,payday payday loan cash advance loanquick payday advance loancalgary loan payday,calgary payday loan2 loan online paydayconsolidation debt loan paydayadvance loan payday quicklow interest payday loaninstant approval payday loan,approval instant loan paydaypayday loan applicationday loan payday same,day loan no payday same teletrackpayday loan 1000,1000 loan payday,payday loan 1000 dollarcheck advance payday loan,bad credit payday advance loan,payday advance loanno fax payday advance loanfee loan low paydayfree payday loanborrower dollar loan payday ten,dollar loan payday tencompletely instant loan online payday,instant online payday loanadvance america payday loancash loan payday untillawsuit cash advance,advance cash lawsuit loan,lawsuit settlement cash advancejeu flash roulette for just $2 per share!!

It’s a fire sale. Bear Stearns was closed at $30 on last friday. I remember the heady times and hefty bonuses in Bear Stearns not too long ago. It’s really amazing (and shocking) to see how times change.

Related Link: JPMorgan to Buy Bear for $2 a Share | Special Coverage in Wall Street Journal

U.S. economy is shaken by greedy banks that gambled on housing loans to credit-risk customers. Just as expected, government is launching efforts to punish the people that caused huge damage to the economy.

FBI officially launched the probe to investigate the fraud in connection with subprime loans. It is investigating 14 companies for possible accounting fraud, insider trading, etc., When all these end, we can see few more court dramas just like what we have seen in Enron and $6000 curtain cases.

Related Link: FBI probes 14 companies