Jump to content
House Price Crash Forum
Realistbear

Global Meltdown From An Asian Perspective

Recommended Posts

http://www.asianage.com/main.asp?layout=2&...&RF=DefaultMain

The stock exchange carnage was no doubt part of the global meltdown of the stock markets brought on primarily by the meltdown in the global metal markets and the hike in US interest rates
. The US Fed has been hiking interest rates consistently and it is said they could even go up to
six per cent
. This is enough warning for markets round the world that funds will automatically gravitate to the United States.
When times are bad it is obvious that the markets which are least attractive will be the first victims, and at one level, the Indian stock markets are unattractive because of the high price to earnings ratio, or PEs, and the market is highly overvalued. Most foreign market analysts propagate the view that the Indian market is overvalued and overheated. The rise in the market from 6,000 to 12,000 happened in a few months, which is unheard of in any other stock market in the world. In fact, the climb from 11,000 to 12,000 was in a matter of a few trading days.
The markets ballooned despite there being no major change in the economy or in the business and industry sector. It just spiralled upwards and the reason given was liquidity. Stocks with no fundamentals except bare land — property stocks — started to get frisky, even though it will take two or three years for anything to come up on this land and yield revenue. Likewise, other sectoral stocks were pushed up and there was this big balloon waiting to burst. According to most market watchers, the carnage is not exactly over. Though the regulators do not agree, the fact is that the F&O sector is where most of the seeds of a catastrophe lie. The volatility is always highest as the last Thursday of the month approaches when it is settlement time in the derivatives segment. There is reckless playing in this segment. There are media reports which say that young boys working in the offices of brokers, earning Rs 8,000-10,000 a month lost Rs 3 lakhs and Rs 5 lakhs in just these two or three days. How did they even make this kind of money? Do the brokers know about this and is the KYC applicable to these people or not? There is a lot of hanky-panky going on and there is very little surveillance of all these activities. So when there is a global quake India gets more affected than others

Interesting. The Indian writer sees through the essential nature of a Miracle Economy--price rises without a commensurate shift in fundamentals. They also recognise the tendency for funds to gravitate to the US when the going gets rough because it is still the world's most powerful economy and GDP is second only to China and Japan with whom the US are increasing investment and joint ventures.

This article seems to be a sell signal for emerging market investment and a possible move to US Bonds after the next couple of hikes.

Share this post


Link to post
Share on other sites

Hi Realistbear.

Will this affect the UK, if so in what way and when ?

Thanks

It is a good insight into market sentiment. It helps to know how other countries are thinking. To me its a signal to sell off emerging market stocks and possibly consider dumping commodities.

It also gives us insight into how the Indian economist sees how an economy that bases itself on speculation in the absense of fundamentals in support will collapse. This sums up the UK house market. As Mervyn King said: house prices are a matter of opinion whereas debt is real. The article has a realistic view of the world economy and the dangers that are apparent. There is a realisation, absent in the UK, that speculative prices cannot continue in the absense of supporting fundamentals. The fundamantals include sufficiently high wages, healthy employment forecasts, absense of stress in debt levels, and continuation of the levels in interest rates that allowed house prices to rise to the value that are now evident.

All of which are now absent in the UK suggesting that a collapse is inevitable.

Globalisation means that what happens in India will affect other markets. If India is seeing a meltdown we have to ask why and if the same conditions apply here in the UK. Sell-offs can be contagious and the world markets all appear to be very pensive about the coming weeks and whether the markets have finished correcting. When I read artciles around the world that seem to be thinking the same thing I act accordingly. For me, its time to go to cash and wait for buying opportunities.

Share this post


Link to post
Share on other sites

There is a realisation, absent in the UK, that speculative prices cannot continue in the absense of supporting fundamentals.

Do you believe it is absent in the UK or more likely we have chosen to ignore it ? It does seem to me at least that most “normal” people understand that things are looking quite bad but the people in control do seem oblivious to it. Or perhaps they just don’t want to admit it.

Considering that Crash Gordy must know deep down what is really happening why do you think he is doing nothing about it ? Surly he has no hope of covering it all up for long ?

All of which are now absent in the UK suggesting that a collapse is inevitable.

Thanks for that, it’s a real confidence booster !! Inevitable ( lovely word and especially in this context ) and any suggestion as to how big the collapse may be ?

Thanks.

Share this post


Link to post
Share on other sites

Can't see how Gold is going to tank long term when the US dollar is being artificially propped up by 24/7 printing press skulduggery........ Don't you think the Asians know they own nothing in return for their export efforts?

Plenty of pressure on the dollar from Euro oil trading also to consider.

I predict a short bear run on Gold before the market realises that paper $ are in fact worthless. Silver, copper and other commodities are another thing entirely. I suspect a major and sustained bull run on other commodities.

A return to a GOld backed system is where its going.

Expect a hit on Iran and Venezuelan interests soon.

Share this post


Link to post
Share on other sites

Can't see how Gold is going to tank long term when the US dollar is being artificially propped up by 24/7 printing press skulduggery........ Don't you think the Asians know they own nothing in return for their export efforts?

Plenty of pressure on the dollar from Euro oil trading also to consider.

I predict a short bear run on Gold before the market realises that paper $ are in fact worthless. Silver, copper and other commodities are another thing entirely. I suspect a major and sustained bull run on other commodities.

A return to a GOld backed system is where its going.

Expect a hit on Iran and Venezuelan interests soon.

One of the dawning realities is that the world is addicted to the US economy. It follows from the position of the US in the world order. The $ is the world currency and the world cannot afford a collapse of its currency. Globalisation is pointing toward a global currency and the odds are still in favour of the $.

I am not so sure that the $ is being artificially propped up. Their GDP growth is more than double that of Europe and investment in the emerging Asian economies is huge. True, the debt is huge but it does not lie in the mouths of the nations who have benefited to complain. US productivity has made a lot of nations very rich--China in particular. US consumption has been lining Arab pockets for decades.

Gold has risen because of the fear of inflation and the belief that the US cannot afford to raise IR. Both assumptions are proving to be somewhat less true than originally thought. So far, 16 hikes in the US have had zero affect on the resilience of the US`Economy. True, house prices may be affected but as Al said--it will be localised crashes. Inflation is tame compared with the 80's and the employment situation does not point to wage growth inflation.

The US is nowhere close to the collapse the press has been suggesting. Its Oil reserves are enormous and a recent move to exploit high grade reserves off the West Coast have been shut down once again by environmentalists. EU on the other hand is in a different position. German is not doing so well with exports to the US under enormous threat due to the Euro. Germany is upping VAT and employment is stubbornly high. Spain and Italy? Not good.

What will happen to commodities/metals in the near term? I don't know but I am tending to follow Buffet and invest where he is investing and that does not include metals. I have gone with utilities, Asian stocks in limited quantities and over 80% is cash with 80% of those reserves in US $ and the rest in pounds for convenience sake. I do see a sterling sell off sometime this year due to weak fundamentals and the dawning reality that HPI is no longer going to power our economy.

Share this post


Link to post
Share on other sites

Can't see how Gold is going to tank long term when the US dollar is being artificially propped up by 24/7 printing press skulduggery........ Don't you think the Asians know they own nothing in return for their export efforts?

Plenty of pressure on the dollar from Euro oil trading also to consider.

I predict a short bear run on Gold before the market realises that paper $ are in fact worthless. Silver, copper and other commodities are another thing entirely. I suspect a major and sustained bull run on other commodities.

A return to a GOld backed system is where its going.

Expect a hit on Iran and Venezuelan interests soon.

GOLD backing includes silver backing.silver being the minor partner in the denomination.commodities are likely to continue to run up unless we get something really drastic like bird flu which will hit both supply and demand sides.

think about it,war with iran etc,people will still be working,eating,making machines,driving cars,heating their homes.....the peripheral stuff like getting your cat feng-shui'd will go out of the window as people are bled dry on essential items....you could argue that IPOD's and the like will suffer sales drops,which in turn will impact PCB's...which in turn impact copper/silver etc.

.....BUT all thet material IN IPOD's is now making tomahawk missiles and battlefield equipment.

back to basics is where it's at....unless bird flu strikes,then a quick trip into pharma's is calling.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.