Asian Stocks Slump.....are the fears justified ?

Today, we saw a meltdown of all the Asian Stock Markets......I was especially surprised at the Nikkei registering its sharpest fall since 9/11.

Are things really that bad ? I don't think so....

The U.S. economy might tend towards a recession, based on which assumption there was a reduction in the funds rate from 4.25 to 3.5 percent, that is 75 basis points. This, BTW, marked the greatest funds rate since 1990.

But then, such a move was aimed two-fold :

1. To prevent a recession
2. To prevent a panic global stock sell-off.

It might cause the opposite !

Because, the greatest rate cut in 18 years , AMIDST ALL THIS TALK OF RECESSION IN 3-4 COUNTRIES, would unnerve all.
Result: More and more people would sell off.
Leading to, of course.....more stocks slumping.

If outsourcing is ended, U.S. Economy might hit deep recession

It is the Era of Globalization.

One has to accept that developing countries would be exporting at much lesser prices, much lesser than the Euro or the U.S. $. price tag, be it on textiles or be it cars.

But then, at the same time, to stay afloat / make more profit, developed countries' companies have resorted to "outsourcing"......this is NECESSARY.......as it doesn't take much for a rival company to beat you....it can steal the thunder in 2 quarters.....

It is the "outsourcing" which has kept the U.S. economy afloat.

Let's take a look at the stock charts for the last 5 years
Image source: finance.yahoo.com
If we look at the Dow Jones Industrial Average for the last 5 years,

the profit percentage is much lesser than the Indian stock market.......it is apparent from the "COMPARATIVE STEEPNESS" of the 2 curves. The Indian stock markets had a far greater higher RETURN.

Even if you look at the 5 year chart (Image source : finance.yahoo.com ) of Singapore Straits, it shows a steady rise.......




Which is why, U.S. global investors are pouring in funds into Emerging Markets.

Again, one has to keep in mind, that the U.S. economy is doing this well primarily due to outsourcing.

If the Democrats come to power, and put an end to outsourcing.....rival European companies would start "outsourcing" to developing countries........and even some U.S. companies would find a way around to beat the others.