>Naked American Financial System

Amazing write up must read:)





The United States is supposed
to have not just great markets
and great enterprises, but also
great regulators. The Federal
Reserve and the Securities and Exchange
Commission are respected
and feared the world over. Those great
markets also rely on institutional
mechanisms, like the rating agencies
— all of which are now Americanowned.
The amazing thing about this
entire pack is that the financial crisis
has shown all of them to be as naked
as the emperor who strutted out in
what he thought were his new clothes.
What, for instance, was the SEC
doing when the great investment
banks (Bear Stearns, Lehman Brothers,
et al) were leveraging their equity
30 and even 40 times? If a company
runs $600 billion worth of assets
on an equity base of just $26 billion,
then if those assets drop in value
by just 5 per cent, the company
goes bankrupt — which is what has
happened. If the SEC wasn’t looking
at the problem, what were the rating
agencies doing when they gave these
firms the best ratings in the book?
If the risks are blindingly obvious today,
why could the Fed not see them
and ask for corrective action from the
lawmakers or by the SEC?
It seems obvious now that the
whole investment banking model is
simply not viable. They made fat
profits because they ran risky, overleveraged
businesses; and they were
not regulated in the way that traditional
banks are, so they did not
have any defences in place for when
things go wrong. That explains why
it is banks like Bank of America
which are now gobbling up the investment
banks, and why Morgan
Stanley is running for cover to Wachovia
and others.
When Enron went bust, it was run
by a bunch of Harvard MBAs, advised
by McKinsey, and its accounts audited
by one of the big accounting
firms (which imploded). It turned out that the
accounting firms were busy
getting money from their clients
for doing consulting work — which
created a conflict of interest when
it came to proper auditing. That same
problem now affects the rating agencies,
which were getting a lot of work
and therefore revenue from the investment
banks. So did they go soft
in their ratings of the investment banks
— and mislead the markets? In any
case, did the people in the rating agencies
actually read and digest the thousands
of pages of legalese associated
with every complex financial instrument
before they gave a rating,
for which the fee was relatively modest?
You can guess.
In other words, it is not just the
investment banking model that is
broken, it is the entire system of complex
financial instruments that no
one fully understood, so that risk
was not properly measured — and
that is lethal when things start unraveling.
The trading practice that
makes things unravel even faster in
such a situation is called ‘going short’
— a practice long frowned on by Indian
regulators for being destructive
of value, but advocated by market
fundamentalists as being an
inalienable part of an efficient market.
Now, surprise, the SEC is talking
of banning ‘shorting’ because
that is causing the selling stampede
behind the bankruptcies!
Someone said the other day that
the worst is over. Don’t bet on it.
All the assets owned by the firms that
have gone bust (trillions of dollars
worth) have to be sold, and it will
be a fire sale at knocked down prices.
That means enormous destruction of
asset value, and someone has to feel
the pain. AIG, for instance, has been
given two years to sell down, so it
is going to last a while.
Closing thought: It isn’t funny any
more to say that the Indian financial
regulatory system shines because
of its innate caution.
T N Ninan

World financial crisis and its impact-A.K.Prabhakar

Are bad times here to stay in 2008?

3more months to end the year and Global financial crisis seeing no end we have September 30, Tuesday, which is the deadline for hedge fund investors to put in requests to get their money back by year’s end 90day notice period. The redemption requests have been pouring into hedge funds well ahead of the Sept. 30 deadline. More pressure can be seen in the last few days, hedge funds, control nearly $2 trillion in assets and indication are that 10% of withdrawal can be seen.

Read more here.... Look Out for Bloody Tuesday

Will the $700billion package save the crisis?

This can be a temporary relief and never a permanent solution many times I get a feeling if U.S has turned into socialist and using good money to buy bad asset to save mismanaged corporate, instead of allowing them to die natural death. I have attached a file which says 1,479 FDIC member banks are at risk of failure with total assets of $2.4 trillion. So we are no way near to solution. , the sixth-largest U.S. bank by assets, hunts for a merger partner – reports. The bank suffered a record $9.11 billion loss in the second quarter.Read more here...Final bailout

Will India face the same problem?

India has a better system of banking and with majority of banks being PSU where Govt hold more than 50% stake we don’t have a problem. India is a better regulated market in terms of Banking and NBFC as RBI norms are strict and regular monitoring and stricter NPA norms are followed, recently also RBI warned KOTAKBANK to reduce equity market exposure as it exceeded the limits prescribed.

Special mention:

Ex-RBI Governor Y.V.Reddy was very smart enough to check asset bubble by hiking interest rate and reducing liquidity into the system and it did effect growth but he was strong to say I would compromise growth to control inflation. And warned Govt that real crude prices were not reflected in inflation so first correct that in response to FM statement to cut interest rate. When Fed was cutting rates he stood his way with higher rate and tighter liquidity.

Recap: Market summary for April 7th 2008-A.K.Prabhakar (for use of ANANDRATHI)

Market always discounts bad & good news at faster pace maybe a layman can be laggard, Inflation worry was there for almost 1years and RBI governor refused to bow down to political pressure to cut interest rate when FM wanted to reduce interest rate to improve growth, the same man (FM) now says we compromise growth for inflation. And the mess which has been created by political bosses for there whims and fancy has impacted us now. Good thing about political stupidity is they can’t face midterm election now and hard fight over inflation will happen. The art of living lies not in eliminating but in growing with troubles, growth doesn’t come without inflation but we need some visionary moves to control inflation and stimulate growth at the same time. If someone were to watch the moves of China they are accumulating oil wealth for long time and the reforms are faster and timely compared with any countries in the world. As Sitaram Yechury pointed out after visiting china, China is putting there hand on left and turning (doing everything) Right’.

Remember: The bigger the boom generated by manipulation of money and credit, the bigger the ultimate bust.

Read more here....Economy in Trouble, No Matter Bailout Outcome

Opinion: Bad times never last, but time is the best cure for any problem maybe by February or March 2009 market can show a bottom and enter a consolidated phase before an up move and I doubt a new high for next 3years but come 2009 good time for stock market starts and wise investment would give best returns.

A.K.Prabhakar

Lehman Brothers Holdings Inc

The 158-year-old firm was founded by brothers Henry, Emanuel and Mayer Lehman, Jewish immigrants to the US from Germany, in 1850. Henry set up a general store in Alabama in 1844 and was later joined by his brothers. In 1850 they set up the merchant bank in New York after having made money in railway bonds. Lehman Bros, which till June 2008 had not reported a quarterly loss even once, had earlier survived many an economic crises, like railroad bankruptcies of the 1900s, the Great Depression in the 1930s, and the collapse of Long-Term Capital Management in the 1990s.

Regards,

A.K. Prabhakar

>Did that 7.3% two-day jump impress you(DOWJONES)

A nice commentary about the 2 days humongous rise in dowjones .

Did you breathe a sigh of relief when the Dow Jones jumped by 779 points last Thursday and Friday? Did that 7.3% two-day jump impress you?

I Wasn't. Let Me Give You Three Reasons Why.

First of all, I don't trust any rally that is based upon a government rescue. The price tag for bailing out Fannie Mae, Freddie Mac, and AIG is already in the $700 billion range and almost certain to rise if Washington Mutual and Morgan Stanley (and others yet to be revealed) join the list.

By the time the rest of the anything-for-a-commission crowd comes clean with their financial sins, I would be surprised if the government's bailout tab DOESN'T EXCEED 1 TRILLION DOLLARS!

We're not talking about play money either.

We're talking about real dollars that you, I, and our children will be paying for decades. Instead of celebrating, I believe that the bailouts are a reason to be even more worried about the state of our economy and the U.S. stock market.

Second, I believe that the end-of-week rally you saw last week was not because of the government bailouts but because of the temporary ban on short selling. Last week, the SEC banned short selling on 799 financial companies. And they just happened to announce this dramatic change right before a 'triple witching' Friday.

Triple witching is when stock index futures, stock index options and individual stock options all expire on the same day. A triple witching day only happens four times a year. It is also called "freaky Friday" because of the exaggerated moves it often creates.

Last Friday would have been volatile enough because of triple witching. But the SEC only threw fuel on the fire by banning short selling. Once the ban on short selling expires on October 2, the selling pressure could return in droves.

Third and most important, if you're going to remain invested in the stock market, you're making a huge mistake by ignoring the Super Ball bounce going on over in Asia.

I don't see the Chinese, Japanese, Indian, Taiwanese, South Korean, or Singaporean governments spending billions of taxpayer dollars to bail out a bunch of greedy and irresponsible corporations.

I don't see any of the Asian economies in danger of rolling into a recession either.

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>CNXIT H&S?

IT stocks if you think they have hit the bottom

Read this with a pinch of salt
Daily chart shows a big Head & Shoulder so before you think of buying then wait for
more dips ,Also a big trigger for IT sector would be INFOSYS results.
If we go by HS target would be a fall of about 500 points more in the IT index.
Recent financial turmoil in USA too had hit IT badly as they lost many big clients.
This is my personal view you may or may not follow this :)

Of course some rise may come before fall.

Regards
Rish

DOWJONES CHANNEL

Dowjones can show some good upmove once it cuts that channel up
elese it will continue to drift down in lack of ant trigger.
Regards
Rish

LIVE NEWS

>Shorting ban???? not likely

Friends ,
We saw orchestral rises in stock markets world over in last few days.

Let me give my 2 gray bytes to this SHORTING saga.World over we saw massive onslaught by bears since a month or so with in between deep cuts ,We saw all major world indexes making new 2008 lows kind of cascading effect of American financial turmoil.
Did we see its effect on INDIA?

In my words to a lesser extent as compared to world markets.There every financial index was making newer lows every other day(They deserved it their banks were on weak foundation) ,But here back home in INDIA Banks were the one which were holding on and are near to there 2008 highs(Tried alot to figure out why they held strong one valid reason i think is they selling dollar what they bought near 39and presently near 46+).

So under such scenario asking for shorting ban is INDIA looks bit a wishful thinking. Overall with out BEARS Markets wont be good for trading :)Also the kind of fall BRICS countries faced recently INDIA is the only one which is least affected .Why UK ,Russia banned naked shorting there because it was going out of control.Also if any of you read an .pdf File from HSBC they tittled that article as
"INDIANS ARE THE LONE BULLS IN WORLD"
so asking about ban on shorting is not justified.

Regards
Rish

Do give your comments.

>Is India poor, who says? Ask Swiss banks

DISHONEST INDUSTRIALISTS, scandalous politicians and corrupt IAS, IRS, IPS officers have deposited in foreign banks in their illegal personal accounts a sum of about $ 1500 billion, which have been misappropriated by them. This amount is about 13 times larger than the country’s foreign debt. With this amount 45 crore poor people can get Rs 1,00,000 each. This huge amount has been appropriated from the people of India by exploiting and betraying them.

Once this huge amount of black money and property comes back to India, the entire foreign debt can be repaid in 24 hours. After paying the entire foreign debt, we will have surplus amount, almost 12 times larger than the foreign debt. If this surplus amount is invested in earning interest, the amount of interest will be more than the annual budget of the Central government. So even if all the taxes are abolished, then also the Central government will be able to maintain the country very comfortably.

Some 80,000 people travel to Switzerland every year, of whom 25,000 travel very frequently. “Obviously, these people won’t be tourists. They must be travelling there for some other reason,” believes an official involved in tracking illegal money. And, clearly, he isn’t referring to the commerce ministry bureaucrats who’ve been flitting in and out of Geneva ever since the World Trade Organisation (WTO) negotiations went into a tailspin!

Just read the following details and note how these dishonest industrialists, scandalous politicians, corrupt officers, cricketers, film actors, illegal sex trade and protected wildlife operators, to name just a few, sucked this country’s wealth and prosperity. This may be the picture of deposits in Swiss banks only. What about other international banks?

Black money in Swiss banks -- Swiss Banking Association report, 2006 details bank deposits in the territory of Switzerland by nationals of following countries:

Top five
India---- $1456 billion
Russia---$ 470 billion
UK-------$390 billion
Ukraine- $100 billion
China-----$ 96 billion

Now do the maths - India with $1456 billion or $1.4 trillion has more money in Swiss banks than rest of the world combined. Public loot since 1947: Can we bring back our money? It is one of the biggest loots witnessed by mankind -- the loot of the Aam Aadmi (common man) since 1947, by his brethren occupying public office. It has been orchestrated by politicians, bureaucrats and some businessmen. The list is almost all-encompassing. No wonder, everyone in India loots with impunity and without any fear.

What is even more depressing in that this ill-gotten wealth of ours has been stashed away abroad into secret bank accounts located in some of the world’s best known tax havens. And to that extent the Indian economy has been stripped of its wealth. Ordinary Indians may not be exactly aware of how such secret accounts operate and what are the rules and regulations that go on to govern such tax havens. However, one may well be aware of ’Swiss bank accounts,’ the shorthand for murky dealings, secrecy and of course pilferage from developing countries into rich developed ones.

In fact, some finance experts and economists believe tax havens to be a conspiracy of the western world against the poor countries. By allowing the proliferation of tax havens in the twentieth century, the western world explicitly encourages the movement of scarce capital from the developing countries to the rich.

In March 2005, the Tax Justice Network (TJN) published a research finding demonstrating that $11.5 trillion of personal wealth was held offshore by rich individuals across the globe. The findings estimated that a large proportion of this wealth was managed from some 70 tax havens.

Further, augmenting these studies of TJN, Raymond Baker -- in his widely celebrated book titled ’Capitalism’s Achilles Heel: Dirty Money and How to Renew the Free Market System’ -- estimates that at least $5 trillion have been shifted out of poorer countries to the West since the mid-1970.
It is further estimated by experts that one per cent of the world’s population holds more than 57 per cent of total global wealth, routing it invariably through these tax havens. How much of this is from India is anybody’s guess.

What is to be noted here is that most of the wealth of Indians parked in these tax havens is illegitimate money acquired through corrupt means. Naturally, the secrecy associated with the bank accounts in such places is central to the issue, not their low tax rates as the term ’tax havens’ suggests. Remember Bofors and how India could not trace the ultimate beneficiary of those transactions because of the secrecy associated with these bank accounts? IS THERE ANY ONE WHO WOULD SAVE INDIA ?God... No No No, even he can’t..........!!

Source:-www.merinews.com

>High volumes not bullish always!!

Volumes say diffrent things at diffrent times:)

An important concept that many traders miss is that heavy volume is not always bullish.

Heavy volume is valuable during a breakout or at an important low. However, heavy volume with no substantial movement signals that one party is "distributing" the stock to another.

When there is heavy volume AFTER a strong uptrend, it's usually institutions distributing stock to retail investors. When you see heavy volume AFTER a long trend low, then it's usually institutions accumulating from retail investors.

Notice the common theme?

Institutions are rarely transparent with their intentions, however, they can't hide the volume they trade:D.

This is time tested thing may not be true always:)

Regards
Rish

>SBI Autopsy:)

SBI chart structure shows 5 up done in hourly time frame also waves followed Elliot principles
W3=1.6W1 ,If this count is correct SBI is heading for a good fall.





Lets talk more about wave counts
Near 1600 5 wave up done
A 1600-1300(Clear 5 down)
B 1300-1548(3 wave)
here in B >>> c=1.6a( looks steep) so lil confusion thrustfull B?
If this wave counts are true SBI is heading for atleast couple of 100's fall.

Lets discuss another wave count

1000-1600 3 wave up

1600-1300 4th wave

now 5 th wave in progress

well if this case is true SBI can touch recent highs again.

lets get little more closer :)

lets take this 5th up

As of now looks like 3 waves done and 3=1.6(1 ) followed clearly so 4th can start anytime,
Before 5th up.

One important conclusion after this wave talk

SBI is headed for some fall. How much?

We will see in coming days this second count fails if we go below 1400.

Regards
Rish