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Monday, August 17, 2009

One should not ARTIFICALLY BOOST markets

It just doesn't work in the long run. That's what I learnt from the GURUS of Market Economy - be it Warren Buffet , Alan Greenspan, George Soros or Benjamin Franklin.

As a matter of fact, artificial boosting of the market by injecting funds/capital inflows might HURT THE MARKET IN THE LONG RUN. Because, after all, you're borrowing it from somewhere.

So, as the following report goes, one needs to be cautious till about 2010 - middle, GLOBALLY.

Read this stuff. from Associated Press


NEW YORK – Investors are finding out what everybody else already knew: The consumer isn't going to spend the economy into recovery.

Major U.S. stocks indexes tumbled by the biggest amount in six weeks Monday as investors grew worried that they have been too quick to bet on an economic rebound during the market's five-month rally. Overseas markets plunged and investors' demand for safe-haven investments sent the dollar and Treasury prices shooting higher.

The Dow Jones industrial average skidded 186 points and the major indexes fell at least 2 percent. The Nasdaq composite index was hardest hit, falling 2.8 percent, but it also had the biggest advance as Wall Street rallied this year.

A shudder in China's main stock market touched off a wave of selling that spread to Europe and then the U.S. A drop in quarterly profits at home improvement retailer Lowe's Cos. added to worries that an improvement in the economy is far off.

Joe Saluzzi, co-head of equity trading at Themis Trading LLC, said the selling was warranted.

"The economics obviously don't support where we've been," he said.

The slide on Wall Street was steep but felt more controlled than the plunges of the past year because stocks ended just off of their worst levels and because analysts have been calling for a retreat after the Dow and Standard & Poor's 500 index raced up 15 percent in only five weeks.

The Shanghai stock market tumbled 5.8 percent Monday as investors worried that stocks had risen too quickly and that the Chinese government would tighten bank lending policies. Investors outside China have been hoping that strengthening there would spill over to other economies.

Worries grew when Lowe's said consumers are putting off big purchases. That's troubling because consumer spending accounts for more than two-thirds of U.S. economic activity.

Some investors used to seeing a quick bounce-back in stocks have underestimated how difficult the recovery could be, even though many analysts have warned that it could take well into 2010 for the economy to regain strength. And some traders seem to be in the same mind-set as three years ago, willing to take big chances even when there was little economic or corporate evidence to justify a huge advance.

Now, with consumers facing high unemployment, weak home prices and mounds of debt, investors are worrying that they had grown too optimistic even though the stock market tends to improve before the economy after a recession."

Meanwhile, I've decided to totally cutoff Election Outcome Predictions and concentrate on the following AREAS for Predictive Analyses. I'd feel real good with a small 2-3 team of statisticians/sociologists/economists :

  • Disaster Early Warning System ( I'll tell you about how I knew it was a Tsunami on Dec 26, 2004 within 30 minutes. And how I could figure out Hurricane Katrina was going to be a Major Disaster. I'm following the latest Hurricane Bill, BTW - given the fact it has a lot of water to cover from which it can suck in its "life blood" though I don't have access to data like surface water temperature (averaged) plus macro atmospheric dynamics. or say forecasting how dangerous a "bhora kotal" adding on a cyclone can be. )
  • Disaster Management (say, how to rectify the "bunds" in the Sunderbans or the dykes in the Netherlands)
  • Global Warming After-Effects (say glacier retreat and effects on the ecology/human aspect)
  • H1N1, H5N1 and other Pandemic Predictions with respect to Magnitude. (For example, what are the risk factors for escalation of a pandemic)
  • Alternative Medicines. For example, for the above Pandemics.
  • I.T. and other technology trend analysis.
  • Macro-Economic Projections.
And some other non-controversial stuff. But one has to do these things in a relaxed manner.

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