So we have massive wealth disparity, income inequality, corruption, rural poverty, poor infrastructure and then we have on the other hand an ecomnomy that's doing fantastically well, while the world economy is still reeling under the strain of slowing consumer consumption and record debt levels.
While its going to be a never ending discussion about the politicians, industrialists and other individuals involved in these scams, there are some facts and lessons that an investor in Indian markets can take away from this mess.
The richest 1 percent of Americans now take home almost 24 percent of income, up from almost 9 percent in 1976. As Timothy Noah of Slate noted in an excellent series on inequality, the United States now arguably has a more unequal distribution of wealth than traditional banana republics like Nicaragua, Venezuela and Guyana.
C.E.O.’s of the largest American companies earned an average of 42 times as much as the average worker in 1980, but 531 times as much in 2001. Perhaps the most astounding statistic is this: From 1980 to 2005, more than four-fifths of the total increase in American incomes went to the richest 1 percent.
That’s the backdrop for one of the first big postelection fights in Washington — how far to extend the Bush tax cuts to the most affluent 2 percent of Americans. Both parties agree on extending tax cuts on the first $250,000 of incomes, even for billionaires. Republicans would also cut taxes above that.
The richest 0.1 percent of taxpayers would get a tax cut of $61,000 from President Obama. They would get $370,000 from Republicans, according to the nonpartisan Tax Policy Center. And that provides only a modest economic stimulus, because the rich are less likely to spend their tax savings.
At a time of 9.6 percent unemployment, wouldn’t it make more sense to finance a jobs program? For example, the money could be used to avoid laying off teachers and undermining American schools.
Likewise, an obvious priority in the worst economic downturn in 70 years should be to extend unemployment insurance benefits, some of which will be curtailed soon unless Congress renews them. Or there’s the Trade Adjustment Assistance program, which helps train and support workers who have lost their jobs because of foreign trade. It will no longer apply to service workers after Jan. 1, unless Congress intervenes.
So we face a choice. Is our economic priority the jobless, or is it zillionaires?
USD CHF : The CHF broke down below parity in its recent rally vs the USD
USD CAD : It came ever so close to testing parity vs the USD
USD JPY : Despite the efforts of the Bank of Japan to weaken the JPY, the JPY continues its relentless upward march.
EUR USD : A weak EUR helped boost Germany's GDP numbers last quarter. the recent rebound in the EUR will surely make life difficult for the Club Med nations
Conclusion:
The USD appears to be oversold in the near term and a counter trend rally is underway. The market is betting on some mega fire power solution from the US Fed at its meeting in November. If QE2 disappoints and the equity markets sell off, the USD could stage a much stronger rally!
The Equity markets have been getting far too complacent about the weak and worrying news data and unemployment numbers in the US.
Fund flows to emerging markets have boosted stock prices across the board and a correction is well overdue. These markets are ''not decoupled from the actions of the US Fed'' and when the tide starts to turn we can expect large fund outflows to have a drastically negative impact on stock prices in emerging economies
Lastly, the rally in Gold prices also appears ripe for correction and consolidation. Silver prices too, are clearly overstretched in the near term. expect lower prices if the USD stages a comback rally. It's not time to be buying the precious metals sector just yet!
Watch this space!
I recently came across some gold charts while reading a link I found at kitco.com
Could gold and silver have a repeat performance of those parabolic moves?
Well all I can say is who knows! Gold has been the top performing asset class of the last decade. The Every bull market has corrections along the way and the precious metals sector is no exception. So expect corrections and panic selling as part of the ongoing gold bullion bull market. The fundamentals are rock solid and long term buy and hold strategy is advised.
Once again I would like to warn investors not to try to time the precious metals market or indulge in leveraged trades when gold prices are rising. Instead look to buy in only after sell offs and corrections rather than chasing rising prices.
Overall, I continue to be wary of the ongoing rally in equity markets that seem to refuse to acknowledge poor economic data as well as the total lack of confidence on main street (especially in the developed world).
Are equity markets adequately factoring in a possible slow down in the second half of 2010? - I think not
Remember, it's better to be realistic that hopelessly optimistic.
I am still bullish on precious metals. We are also entering a 'seasonally strong' period for precious metals. Caveat Emptor - A sell off in equity markets will trigger a sell off in precious metals.
Expect upcoming posts on Gold, Silver and Indian Equities in coming weeks.
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Just remember, it's not just the U.S.A!!!!!
For the forseeable future, Crude Oil will remain the main fuel source driving the world's ''oil hungry'' economies.
As car sales zoom in China & India, consumption of refined petrochemical products will rise.
This means that the world's oil companies will have to continue to drill for crude oil in deep offshore blocks. Increasing fuel efficiency and enforcing ''clean fuel '' norms can only take us so far. It's time to prepare disaster managment plans for deep off shore drilling.
Accidents may occur, but it will be a whole lot better if the drillers and regulators have disaster management plans and solutions in place before such unfortunate accidents occur again, instead of continuing a never ending blame game!
Lastly, here is a link from Main Street that the guys on Wall Street should take a look at.
Food-stamp tally nears 40 million, sets record Reuters
""""""""Food stamps are the primary federal anti-hunger program, helping poor people buy food. Enrollment is highest during times of economic distress. The jobless rate was 9.9 percent, the government said on Friday.
The Agriculture Department said 39.68 million people, or 1 in 8 Americans, were enrolled for food stamps during February, an increase of 260,000 from January. USDA updated its figures on Wednesday.""""""""""""
In the meantime, the India Meteorological Department (IMD) has forecast a normal monsoon across the country this year.
'''Lending a quantitative perspective to the available indications, IMD said the total rainfall during the June-September monsoon season would be 98 per cent of the long period average. This assessment is subject to a model error of ± 5 per cent.'''
Lastly, just a warning for those who may blindly follow the forecasts of the IMD!!
''''Last year too IMD had predicted a near-normal rainfall of 96 per cent. Two months later, in June, it issued an update scaling down its assessment to 93 per cent of normal. Both these predictions went awry. IMD then revised its forecast for a third time in August, this time predicting 87 per cent of normal rains. These predictions, however, turned out wrong and the country received only 77 per cent of normal rainfall. This led to a drought in large parts of the country.'''''
