Thursday, April 28, 2016

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. 

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