I started by asking the Calcutta-born Australian whether the credit crisis was in what Americans would call the "third inning." This was pretty amusing, it seemed, judging from the laughter. So I tried again. "Second inning?" More laughter. "First?" Still too optimistic.If Das is right - and I think he knows more than I do - the bear market that will follow will stick around for years. I think we would be kidding ourselves if we think this won't hurt us - but to be honest the first on the line to fall are exports. The fall out will be the financial market, and as a result of that, real estate, cement, auto, etc. will be hit. Some stories like Power, Infrastructure, Oil etc. may not be affected quite as much though.Das, who knows as much about global money flows as anyone in the world, stopped chuckling long enough to suggest that we're actually still in the middle of the national anthem before a game destined to go into extra innings. And it won't end well for the global economy.
Das is pretty droll for a math whiz, but his message is dead serious. He thinks we're on the verge of a bear market of epic proportions.
The subprime crisis is fairly big, but we have to lose interest in it fairly soon so that it can hurt us when we are not looking. If history is a teacher, the lesson has been that markets hurt the most number of players when they are most vulnerable. What the US market is facing now is probably just a small tiny part of the eventual downturn - which could take years to unravel - and eventually we will also need to take some of that damage in our markets.
But does it mean the end of equities? To most of us reading this blog, it might seem like it. And when you come to the conclusion that "equities are dead", my suggestion to you is: think immediately about buying some.
Disclosure: Short Nifty, long RIL and some stocks not mentioned here.
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>That is one scary story – $1 of assets results in $30 of loans – What planet are we living in ??
I guess there was no interview – just titbits ??
Hari
11.21.07 at 2:53 AM
>Hi Deepak,
In CNBC TV 18 I heard one of the top guys from USA say that Subprime Crisis in USA will have the least impact on other economies. Just the subprime crisis will not cause a lot of problem to the Emerging Markets,isnt it?
Regards
hari
11.21.07 at 5:30 AM
>This is a slow train wreck and will take time to pan out.
I don’t think this will be the end of the world. As a matter of fact a recession world wide will have several beneficial effects.
-Will kill short term investors and encourage Rational long term investing.
- Bring more energy efficency and help global warming.
- Hopefully all the $ 500 billion losses on CDO presently hidden in various accounts world wide will get exposed. Wiping the slate clean.
- Stop China to manipulate their currency and hit the exports of Industries in other Asian Countries like India.
11.21.07 at 11:36 AM
>hi deepak, great link to the interview. And what an eye opener it was!
But closer home, what really scares me is seeing the increasing number of shrill voices showing up all over the internet, expecially on sites where some expert gives his views.
Voice like: “I bought RPL at XXX it has fallen to XXX what do i do??” Or “I i bought RNRL at XXX and it’s fallen too….
It’s pretty clear to me that there’s a growing number of johnnies coming off the street and buying equity with no idea what so ever about the company or what it does. Probably buying it on a hot tip from Jignesh, the neighbourhood colleague/broker.
The moment i see more and more of these guys coming into the market, I know it’s time to take money off the table. And i’m seeing an ever growing number of them these days!
As i write this the sensex is down 700 points or so! I can just hear the screams on the experts sites grow louder! :-)
rgds
mark
11.21.07 at 12:48 PM
>I completely agree with the fact that Johnies are floding the market (me too was one of them, but trying to graduate). I find many of my friends talking about it, few have got their trading acounts opened, few are day trading. But the thing that proved that madness in the croud was when my uncle said he has got a trading account opened and he didn’t correctly new the name of the broker. When i said, its risky game, I got a expert reply back, “I’m going to buy stocks released by companies at Rs 10 only.” Now, how do I explain what premium in IPO is. Anyway, I got woke up that madness is spreading and soo there will be a time when we will hear the spreams.
JOhnies will always scream, thats not the problem. The problem is one does not know when party is over. Knowing about the happenings around the world is a good idea, but predicting when the world is going to end (read the big crash) is really a foolish business. I guess our actions should be based on the present situation rather than future predictions and in most cases, its like a flash flood, you are swept unaware of it. So, the prediction are of no use.
In such a scenario, I was wonder whether there is any strategy which would help you exit unhurt especially for many people (including me) who have come late (havent gained much and protection of capital is important) since corrections mean both a buying opportunity as well as a signal to exit.
I would really appreciate your comments on this.
11.23.07 at 11:29 AM