Thursday, January 14, 2016

THE FALL HAS BEGAN AND WE ARE NOT BOTHERED

Well I am not happy to write my 400th Research Article on this topic but I can’t help being an economist and Journalist. Over the last 6 years I have covered a vast range of topics and subjects but its seems I have many more to write.  Its not china alone, there are many things in between. Chinese corporate profits and loan books of banks in terms of disbursement are significantly dropping. According to the latest data released before the markets opened revealed that Chinese banks gave 597.8 billion yuan ($90.76 billion) in new loans for December, notably lower than the 708.9 billion loaned out in November, sparking renewed concerns over the economy's health. Further significant drop in commodity prices leads stupendous losses on the Chinese company’s books of accounts. On the other hand the high dividend which corporate across the globe used to pay are travelling on the path of drying up. The steep price declines in everything from iron ore to gold to agricultural products  where prices have come down to the level of decade back will create significant threat for the global economy. It’s not china alone. Many things are acting detrimental to the world GDP growth in 2016. Flight of capital will increase more in coming days as China have asked its overseas china bank subsidiaries to invest and buy Chinese stocks. This will create major sell of in other asset class in different countries. It’s the same strategy adopted for buying QE bonds designed by different economies.

Yes my statement might scare you but the hard core fact is that employment and new investments are drying up and we are not noticing that rather we are all busy about China. Iran will start its production of crude and this will take prices to hell. Now around $350 billion of investments from OIL Players have been withdrawn as crude is no longer a profitable business. These further results to kill of Jobs and unemployment. Consumption is getting a step back taking cues from the global economy. Currency devaluation of one economy will cost trillion to the global economy in 2016 and this will create a panic and loss of investments. Already around 3.2 trillion worth of value proposition of assets have been wiped in 15 days of 2016 and I can bet investors are running away taking cues from Greece matter where banks were locked in for withdrawal. Equity investors should wait before taking investment decision of going for long positions.  Exporting countries are in deep problems and their budget cut downs are going to reduce consumption which related to inter trade of business. This is what is happening and this is what will go on unless crude prices accelerate. Importing countries might be celebrating Christmas for a long time once crude fell below $50. Now these countries might have been able to improve their CAD and Fiscal position but they will not be contributing much to the global GDP. Yes the hard fact is that these importing or developing countries contribution to the global GDP is less compared to the exporting countries or consumption countries. US rate hike was designed to stop the redemption of sovereign wealth funds but I hope that will not be protected any more. QE will come up very soon and also it will be in the form of Joint Banks created by different economies based with global trade impacts which means give and take.

Europe is having problem of refugees and this is going to create real problem for its societies and income inequality based problem in the society. Global economic condition don’t even give the cushion of taking long bets and financial gimmicks of healthy ROI and free cash-flows and other jargons are not supportive currently. Invest in opportunities and be prepared to go for long in unavoidable circumstances. The current problem is that we are having a generation of young fellows who are more scared and more in pains of financial collapse. We have destroyed the myth of healthy living and dreaming new heights of life. Safety of living is of more important. Dont forget those who are suffering losses they are hardly going to come back.

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