Stephen Roach, earlier the chief economist with Morgan Stanley, now head of its Asia operations says:
No economy can live beyond its means in perpetuity. Yet....the US thought it was different.
..... [My Note: In India, we have heard "This time is different" many times during the last one year of bull market excesses. Careful when you hear it again]
With equity markets now in bear-market territory in most parts of the world, it is tempting to conclude that the worst is over. I am suspicious of that prognosis.....
..... [My Note: The bear market in India has more way to go. It could be a range or maybe a test of lows. We do not know that.]
I could envision the dollar actually stabilizing or possibly even rallying into year end 2008 before resuming its decline in 2009 due to America’s still outsized current account deficit.
.....[My Note: For Indian IT stocks there may be pain starting in 2009 if the Dollar starts weakening then. Markets will often discount such events before they occur.]
– a marked deceleration in global growth leading to a related improvement in the supply-demand imbalance in commodities.
.....[My Note: Good news since crude may come down, Bad news since world economies may be in recession. Not sure what the net effect will be.]
Indian GDP growth could fall below the 7% threshold in 2009
.....[My Notes: The RBI is correct in fighting inflation even at the cost of lower growth. While Growth in India has benefited mainly the super rich, Inflation hurts the poor and the middle class.]
Undisciplined risk taking has been a central element of this crisis.
.....[My Notes: At the risk of repeating again, proprietary trading by investment banks has been at the root of the financial crisis. For this simple reason, avoid brokers which have such activities. The best brokers do not do any proprietary F&O . Go with them. Why take unneccesary risk ?]
Financial and economic crises often define some of history’s greatest turning points. They can be the ultimate in painful learning experiences.
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