Monday, March 10, 2008

What goes down ain't Depression always...

One of my friends asked me my views on the current state of the markets...

Any advice for someone like who's baffled by the downturn in markets and spooked by recession fears? Is it gonna be recession at all or is it all fear mongering? Or as some people say, could this be a depression?

Let me say that I am no market expert or an economist e.g. one of the JPM lead economist who said we are in period of slow growth and growth will pick after second quarter. And one month later he says we are in deep recession. I can't see what changed in month that wasn't apparent in previous months. Anyway ...

So here are my views...
This is the best time to buy stocks (not any stocks though :-) ) Both the market environment and interest rate environment is helpful for stock buyers. Mostly the last 4-5 years were years of rapid growth and were periods of unsustainable growth for the very reasons revealed today like subprime, CDO, lot of use of leverage. So this is period of so called "correction" or self-healing. Basically people have realized the "true" value of assets they own. And this correction will cause the fall of a few more hedge funds and banks.

As for fear mongering, Nathan Rothschild made a fortune by "fear mongering" by calling the Battle of Waterloo. He made a fortune. So when people tell you that all hell is going break loose, think of Nathan Rothschild. These are the best times to make a fortune. You take calculated risk. You are right if your numbers are right. Don't speculate in stock market. Bet on your right numbers.

"Depression" ha ha... Look at the numbers coming out of most companies. They are still making profit... well most of them... Financial markets have made similar messes in the past (think LTCM, asian bank crisis) and this too will pass (w/o depression). Its going to be slow growth. Thats all for some time. Some hedge funds and banks will fail but that shouldn't drag the entire economy into a recession. It sure will create some panic and fire selling. When you are drowning (in this case hedge funds/banks) you want to create so much fear that the entire world is going to drown. So the entire world (reserve banks, governments etc.) rescue you instead of calling your bluff :-)


No comments: