We need peace in investments and not high alpha created income inequality.
Last year I covered some hard
facts about income inequality where prostitution have been taken up by many
families who are struggling to have a half day meal in well developed
economies. Surprised but the fact is that earlier we used to find these stories
in poor economic countries like Africa etc. But the current economic times after the recession of 2008 to till date completing
8 years and about to become decade in next 2 years. Post recession it’s evident that we did not
get growth in the world largest GDP and even in European countries despite of
spending billions of QE and Bond purchase and now the Helicopter Money. Among all these the developing economies have
also got under the influenza of slow GDP growth like china. Historic recovery of economic crisis have been
easier since after a collapse there have not been tail of bombs for financial
crisis erupting form different economies. This is one of the key reasons why
historic global financial economic collapse revival has been faster compared to
the current journey of 2008 recession. Income inequality is a legacy of
financial fortune which have been passed for the next 100 years as the current
generation at various stages of life will remember and will teach the collapse
of the financial fate of their individual families and life.
Within the BRIC only the (I –India)
am left and rest is broken. Wealth Managers and Wealth Houses in the financial
market have closed their shops and are in search of new jobs or new
opportunities of exploitation. Stock buy
backs and shareholders wealth increase have been played very judiciously by the
capital markets across the globe. But we did not bother about the legacy of the
knowledge and fear we have injected each day over the last 8 years within the
generation of each age in every country across the globe.
Income inequality have widened up
as financial crisis of 2008 has began with series of financial turbulence with Euro
zone and with china and last but not the least with crude oil prices and its
economic slowdown and financial crisis arising from the same. From 2008
we have created huge hole of income inequality across the globe through the
financial collapse of the various economies. Hence the recovery and the aftershocks
of jobless and bankruptcy have been chasing the people across the globe over
the last 8years. In these 8 years we have changed the mind set and behaviors of
the societies across the globe in terms of its reliance on the government policies
and financial policies. Governments are busy to post healthy employment growth
but the fact is that instability and lack of skill due to income inequality have
eroded the fate of the people. Middle class society is just getting eradicated and
getting under the poverty line. Poverty line people are getting below the
poverty line where survival becomes at stake. For a middle class people having
good job and providing a better education to his next generation are the most
important requirements. Trail of Financial crisis has created huge gap of
income inequality. Just imagine and figure out how many people reduced and
created wealth among the middle class and poverty line in terms of the down
Jones scaling new heights. Rich share holders multiplied their wealth whereas other
lost since the theory of derivative reveals one wins at the cost of others
loosing.
From 2008 the Journey begins:
·
Financial crisis lead many families to become
bankrupt and also jobless. The historic number done not require to give a poof
of the pudding.
·
Many mothers opted prostitution to feed their
families. The majority had come into the sex trade from so-called respectable
careers – including one woman who had been a senior manager in a private sector
business. Growth of tourism gave an opportunity to these struggling families to
opt for prostitution in replace of stable job.
·
Many children’s between the age bracket of 5 to
12 have to change over schools as their families could not bear the cost due to
recession and lack of job opportunities.
·
The recent Greece problem gave a good lesson
that if you park you money in banks you might not get back your funds.
·
Buying bonds to avoid the volatility of the
global equity market is no longer a safe zone to invest.
·
A Student newly qualified 21 years student choose
to do low quality and much degraded jobs to feed themselves.
·
Education loan have become nightmare which have
forced the students to opt for poor quality in higher education which has lead
poor jobs due to lack of skills.
·
A 30 years fellow had to file for divorce as his
family went for a toss as he became bankrupt.
Now from an 5 years age kid to an
21 years age graduate fellow to an 30
years person all have got an lesson over the last 8 years as they grew up to the age of 13, 29
and 38 respectively about income crisis
and wealth crisis. They have got one of the strongest lessons of the financial crisis
where destruction the life and pattern of living has taken a toll. They have
got the lesson of investing and getting bankrupt in complicated high alpha
generating toxic products. They have also burnt their fingers towards investing
in bonds as they blindly believed the banks and governments without reading the
indenture of the bonds being issued.
In between the global climate has
changed dramatically which has also pushed down the growth of the family’s
wealth even after trying hard to earn and get out of the falling life style. Few of the natural calamities which have severely
increased the income inequalities across the globe
·
Japan Earthquake
·
Haiti Earthquake
·
Nepal Earthquake
·
Houston Floods – President Declares Major
Disaster
·
Ecuador earth quake
·
Texas Floods
·
Uruguay
I might have skipped few countries
and some more major events but on a overall basis the natural calamities have increased
income inequalities and have widened the savings and bankruptcy risk. Small
savings are getting wiped off at the same time. A person who has done some
savings and has accumulated wealth from some investments also gets into repairing
these natural calamities. We have
created situation where the behaviors of the generation will take toll on their
economic growth. This generation will be skeptical towards financial products and
hence wealth managers have no option but to look out for jobs. Now the demand
of the time is being unheard and also we are busy in exploring the world of new
financial products which will create more alpha. The financial product designers
have destroyed the investor’s savings and their mind set towards investors into
a nightmare. Alpha no longer suits any investor particularly the ones who have
burnt severely over the last 8 years.
Savings rates across the globe
have come down significantly as they are struggling for their daily activities.
Financial products investments have come
down as they have no savings or they are reluctant to go for savings due to
trail of ongoing financial collapse. Job security and social security benefits
are at the highest risk point and both cant taken for granted for the next 20
years. Global investors don’t need any alpha generating product neither
inflation beating products as inflation itself is as at such historic lows. Governments have broken the faith of investing
in bonds and also parking money in banks. Your money and you will not be able
to withdraw from banks. We have given hard lesson to the society for the next
100 years through this financial crisis and foolish activities of the government.
Every year either banks or an economy or a government comes under collapse. Stability
of an economy is a matter of distant dream for the global economy. Natural calamities
have also increased the income inequality. The conclusion is that we have created
mess and the financial product designers and managers needs to come up with plain
vanilla products and not super alpha product. Risk of investments and the nightmare
related to the same is at high level.