Geopolitical Crises that can trigger Economic Booms and Declines

It's an accepted notion, an accepted fact that Economical Growth and Decline are to a large degree governed by Geopolitical Crises and Maneuvering.

Let's look at the coming year of 2008. What have we here, folks ?

The Crisis in the Middle East is not waning. In fact, certain events are leading to greater instability - events like the global tension in Iran, the Benazir Bhutto assassination, the desperation of the Bush Administration since 2008 is election year.

Add to that a growing understanding amongst the OPEC countries.

Add the factor of high ESCALATION OF GASOLINE DEMAND IN DEVELOPING COUNTRIES.

END -RESULT : Oil Prices will skyrocket.

So, this will trigger inflation.......this inflation will hit most countries DEPENDENT on oil the most.

What about the leading economy ? The U.S. economy ? It is heavily into debt....and add to that the burden of War.

IMHO, we will see a further DECLINE in the U.S. $ against the Euro and all the developing countries' currencies. Furthermore, this decline is also due to an "artificial mass psychology" effect. If Gurus like George Soros , Gates and Warren Buffet openly state that they are dumping the U.S. $....won't it's value go down ?

The European Union is a HUGE ECONOMIC ENTITY......it's GDP is 1.5 to 2 times that of the U.S.
......It's a not much known fact. This will start to call the shots slowly in the global trading strategies. However, IMHO, it's still unclear HOW WELL THE European markets will perform.

Focus now the Asian economies like China, India & the Pacific Rim Countries. These, in the abscence of conflict, and taking advantage of the selling of their products at a cheaper price...However, I think China will start to face a GROWING CRISIS because it's economy is TOO CONTROLLED.....
.....However the rest of the Asian Economies WILL CONTINUE THEIR ECONOMIC BOOM.....though a bit chaotic.

So, best picks for the GLOBAL TRADER are certain MARKET SEGMENTS that will PROFIT within the DEVELOPING COUNTRIES' ECONOMY.

The best segments are obviously INFRASTRUCTURE -ORIENTED ......like Steel, Cement, etcetera. Almost all companies in this sector should outperform the basic market indices.
Outsourcing will lead to boom in the I.T. sector....however one has to do thorough research. Not all companies will fare well.
Export at cheaper prices will benefit the consumer goods and pharmaceutical sector also.

Global Economy Indicators....is it a war economy ??

It might be a bit early to say that it's a total war economy, where gold, silver prices are rising.

But then there are other indicators too:

The developed countries' stock markets are not giving good returns.....investors there are turning more and more to investing in emerging markets.

Now, check out the following graph:



Study the graph above......graph source: stockcharts.com

Note, the steady fall of the U.S. $ (red line)...it begins to fall post 9/11 .....of course, there's a buffer time period, the fall starts from 2002 end of first quarter.

Check out the rise of silver prices (blue) , it starts rising from about start of 2002....

It's exactly inverse proportional !

And that trend is continuing till as of today.

Now, wouldn't you say it's a global war economy ?...........

God knows

My prediction regarding gasoline prices have come true

Folks, please check my blog post dated August 15th , 2007.........3 months back.

Gasoline prices then were $ 73 / barrel , and I had predicted a very, very steep hike in prices $ / barrel.

The price today is $ 97 / barrel....it touched $ 99, but failed to break the psychological barrier of $ 100....

Anyway, if I sell today, how much profit do I make ?

32 % in 3 months.

As for sky rocketting prices within the recent period, check this graph from wtrg.com , portraying NYMEX Crude Oil:




The basic factors pumping up the price are the same as pointed out on August 15....

The "mass psychology" factor is starting in factor in slowly and steadily, as more and more people start to become aware of the Hubbert Peak of Oil Production.

This peak, which is , of course , IMPOSSIBLE TO PREDICT, is to come by around 2010 ......

After this, the RISING DEMAND FOR OIL CANNOT BE MET BY THE EXISTING SUPPLY.

My prediction is by year - end of 2008 it should touch a minimum of $ 150 / barrel.

There are going to be temporary slumps, but the macro -trend is up, up & up.

AL GORE - PACHOURI WIN NOBEL PEACE PRIZE.....

The Nobel Peace Prize has gone to the worthy, for a change....

It's a victory for environmentalists the world over......


Al Gore for president ?

Right Time to Invest in Gold

This just might be the right time to invest in gold. Market gurus are saying its the weakening dollar & a nervous global market. But it could be a culmination of many factors :

1. One is of course the weakening dollar, against the euro & other strong currencies. That always historically pushes up the gold.
   
2. It's basically a wartime economy, folks. Some analysts are of the opinion VHNWI 's are hoarding up on gold in billions. Besides these some corporations are also stuffing up gold.
3. This leads to a temporary shortage, pushing up gold prices even more in the future.
4. Further terrorist attacks or even the threat of further attacks will boost up gold further.
5. There's a credit crunch, leading to gold price increase.

It's Gold Rush 2 ...... INVEST before it's TOO LATE

GASOLINE PRICES……..LONG TERM PERSPECTIVE

We are seeing a slight hike in oil prices, about to $73 a barrel….this due to fears of a major storm strike in the Gulf of Mexico petrochemical & oil facilities.

But these are probably short-term rises….what prediction can we make on a long term…say 2-3 years ?

I’d say a very, very steep hike.

The reasons are:

The crisis in the Middle East show no signs of declining. In fact, they are escalating. The relation of quite a few oil consuming countries with Iran is deteriorating.

Then, there’s a nexus between some OPEC countries like Venezuela, Iran with China & other consumers…..this would cause a lot of jitters in Western & Far East capitalist countries.

Gasoline consumption of developing countries like China & India are increasing exponentially.

Russia has overtaken the U.S. to be the second largest oil producer….and Gazprom is . Russia is flexing its muscles, and seems to be on a trade agreement with anti-capitalist allies.

And lastly, the MOST IMPORTANT FACT :

THE GLOBE IS RUNNING OUT OF OIL………some predict we have oil only till 2050….and by 2015 there would be a shortfall of 25%

It is a corollary of the Hubbert Peak of Oil Production.

So, my prediction is…..fear will drive the oil prices sky high.

SO THIS MIGHT BE JUST THE RIGHT TIME TO BUY THOSE OIL STOCKS…

THE COMING PANDEMIC & THE THREAT OF HUMAN EXTINCTION

As we are relying more and more on antibiotics, modern medical marvels, IMHO…we humans, the hairless apes who are now dominating this Blue Planet….are living on an “artificial life support system”.

This might sound shocking to you, but many experts agree this is the TRUTH.

Look around us……observe closely those “inferior” creatures who are around us – starting from the domesticated animals to the creatures of the wild.

Let’s say, bird flu or a dangerous strain of the ebola virus hits us.

WHO DO YOU THINK HAS A BETTER CHANCE OF SURVIVING?

The so-called “inferior” animals, through millions of years, developed a robust immune system…..they have been through hundreds of such bacterial & viral outbreaks…..the weakest have died in the beginning….much the stronger ones have survived.

Now, they are much equipped to fight off a pandemic like the Bird Flu. Sure, millions would die. But the majority will survive.

But, I don’t think humans have much chance.

Man of today, though much advanced in his “cranial capacity” is, from a biological point of view, a much poorer specimen than the Man of, say, 10,000 years back.

I think, the viruses & bacteria, under attack from our antibiotics & modern medical armament, are constantly mutating….more & more DEADLIER versions are coming up…and they will win……EVENTUALLY.

Let me turn around that famous quote “Life will find a way” from Jurassic Park, and reframe it in this way…..

“ The Microbes will find a Way”

Here’s a few facts:

Man has been around for some 2 million years.

Scorpions are thriving for 425–450 million years…

Spiders have been around for 400 million years…

Turning to more aesthetic creatures, the true cats were there 30 million years ago…

Long Term Market Prospectives

Though quite a few are pessimistic about the long-term prospects......I think you can buy quite a few blue chips...Google included

GROWTH OF GOOGLE…..

Google is set to be the greatest software giant mainly because of its vision.

We are witnessing a paradigm shift in computing, I.T. , ITES & the media. In the future, most of our computing / I.T activities will be on the Net. The success of Google has been due to its ability to understand this trend.

We bloggers are one example of the media shifting towards the Net. So, obviously, the advertisers are also shifting towards this new medium, from TV’s, movies & other channels of entertainment. We already have online videos, courtesy Youtube. There will be more CONVERGENCE.

Then, of course, there is the legendary Search Engine, which is now dominated by Google. In the future, more complex SQL facilities/parameters should be added to refine searches. Maybe, we might be able to query information FROM MULTIPLE WEBSITES into a COMPOSITE RESULT.

We already have some of these…like Google News, Google Groups, University, Scholar Search, Book Search.

We are also hoping for acceleration of the process of ONLINE PUBLISHING……Google already has a headstart…blogging is just the start of a REVOLUTION.

There are also useful applications like Docs & Spreadsheets which can be incorporated.

Then, take GOOGLE EARTH. IMHO, this is probably one of the greatest achievements on the Net. We have the entire globe at our disposal. I hope more & more LAYERS OF INFORMATION are added. After all, “a picture tells a thousand words”. With more R & D, this layman’s GIS will GROW…..

We hope Google adds querying facilities to Google Earth. It can, potentially, be the growth of the greatest software of this century. THEORETICALLY, you can put ALL THE DATA OF THIS GLOBE INTO THIS SOFTWARE. It could also be glimpses of real-time, with updates.

We should also have TOTAL DEMOCRACY FOR PROGRAMMERS....

Let’s say some software giant wants to fix it’s Operating System bug….It’ll post the problem it’s having, with some PRIZE MONEY OFFERED FOR SUCCESSFULLY FIXING THE BUG…..Programmers can dump their codes into an EVALUATION STORAGE of the SOFTWARE GIANT FACING AN O/S BUG…..the guy(or team) whose code(s) fixes the bug gets the PRIZE MONEY OFFERED. This’ll also save the company a huge amount of money.

FALL OF THE SENSEX & OTHER GLOBAL MARKETS

We have been witnessing the fall of global stock market indices, besides sharp falls in the Sensex.

This can be attributed to GLOBAL FACTORS + LOCAL FACTORS + MASS PSYCHOLOGY (call it “domino effect”).

Global factors……The Dow witnessed sharp falls a few days back…this was due to “bad lending” by sub-prime lenders….causing panic globally. Of course, if they fail, the lenders’ / banks / financial institutions might be in a mess…… So the Dow fell….)

Second factor was markets were overheated.

This led to Dow witnessing falls of around 2% & falls in the Pacific Rim Countries’ markets…fall on 14 March was Nikkei 225 (2.92%), Shanghai Composite, Sensex(3%), Sydney's S&P/ASX 200 (2.1%), Singapore's Straits Times(3.17%), S.Korean Kospi,(2%), Hong Kong's Hang Seng (2.8%)…..

Now let’s turn to the SENSEX.

It had touched a high of 14,500 in January 2007 & was expected to reach 15,000 + within March.

But then it started having mini crashes. It was going down to 12,500 ‘s, bounced back…people were optimistic….

But today it is down again at 12,900…..& the pundits were saying it should have been 16,000 + by this time (they were making this prediction in January)….

???Why this crash....

First of all, we're overly spooked by the GLOBAL FACTORS.....

But mainly.....

The SENSEX is witnessing a general MELTDOWN because of inherent weaknesses…..this had been previously warned by major market analysts…Merill Lynch, S&P, etc.

…….will be exploring LOCAL FACTORS & weaknesses of the Indian market next blog

;-) It’s not that weak…I should say 11,000 is the best “support level”.

Future Political Destabilization in India?

Recent assembly elections were held in Uttarakhand, Punjab & Manipur. The result? The Congress lost power in Uttarakhand & Punjab, but held on to Manipur. Now what does that mean?

Anti-incumbency was not the only cause. The underlying reason was the failure of the state governments on the economic front.

Price hikes of 9% (real value)…not talking of Consumer Price Index or Wholesale Price Index, only. WPI & CPI do not reflect real inflation. This over a sustained period of time caused angst among the voters.

The UPA government came to power in May 2004 highlighting failure of the NDA on the rural front. So obviously, there was great expectation amongst rural voters. But Congress failed miserably managing this front. So, in the Assembly elections rural voters went the BJP way.

In the urban areas, the UPA lost due to rising unemployment & rampant administrative corruption.

So, what does this project?

The coming U.P. elections are going to be a bad for the Congress also.

Remember, Congress has only 145 out of 543 Lok Sabha seats. It is artificially “supported” by the Communists, Samajwadis & most importantly other regional parties.

The Communists would come in a collision course with Congress due to differences in economic policy.
The Samajwadis are already in conflict with Congress after withdrawal of support in U.P.
The major blow would be the non-support of regional parties of South India, especially Tamil Nadu. (where also Congress is becoming unpopular).

The magic figure is 273…halfway of 543.

Communists are “blackmailing” the Congress.
SP has withdrawn power. After U.P., it will definitely never give support.
The key lies with the regional parties. DMK+ has a huge number of seats. If they decide they can get better governance with the BJP in centre, it can withdraw power. Or at least threaten to.

Which means…..UPA can fall short of 273

The key lies with DMK+……if they withdraw, the Left Front do not have the numbers to prop up the government.

The present government falls. Another mid-term elections…..

But this scenario is based on many “if-what” scenarios……it’s difficult to predict a total fall.

But I’m 100% sure, Congress would be in severe pressure for the next 2 years it is in power in India. (till May 2009 Lok Sabha elections, that is)

Fall and Rise of the Communist Blocs

1990’s saw the fall of the much touted Soviet Union.

The free-market driven countries heaved a sigh of relief. But they made a mistake of not aiding the fallen satellite communist countries of the Soviet Bloc.

Then came 9/11 & the rise of the Islamic fundamentalists.

Right now, the democracies of the world are making another great mistake. They are concentrating almost 90% of their energy & resources in the “War on Terror”.

THE RESULT : Totalitarian China has risen exponentially. Russia is also much stronger. Human rights in such totalitarian regimes are abysmal.

Not to speak that China is responsible of wiping out an ENTIRE SPECIES - Panthera Tigris …( the tiger ).

All we can do is just sit & watch….switch the channel, maybe ?

And maybe just watch with concern when Kim of North Korea when he fires one of those Taepodong II missiles ?

??? Why are the democracies of this world afraid to tackle the main problem, the main threat ?

Time to remember that old proverb …….“A stitch in time saves nine “

Middle East Oil …..”closed circuit phenomenon” ?

Thanks to the IMMATURITY of the Bush Administration, it seems the Midlde East is headed towards further destabilization. Such things would have been unthinkable during the Clinton-Gore administration.

What can be real threatening is what I call the “closed circuit phenomenon". It is a frightening scenario. The OPEC countries can shut out a significant part of the democracies, & trade oil to dictatorial countries.

Put in together Saudi Arabia, Iraq, Gulf States, Iran, Indonesia, Venezuela. They hold 80%+ of the oil. What they do is start trading with Russia, China & other dictatorships.

Democracies like India, Taiwan, Japan (the list goes on) are totally helpless in such a scenario, as they do not have sufficient reserves.

YOU HAVE A TRUE NIGHTMARE SCENARIO.