The New Great Depression is a Different Animal, Stupid

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Oct 26 2008
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Just because some so-called smart analysts who may not know how it felt during the 1998-1998 Asia Economic Recession screamed that “our shares are oversold”, “they no longer reflect their values” and “plenty of cheap quality undervalued stocks”, you should refrain yourself from being influenced by them as the fruits are not ripe yet for the picking. And please stop believing those buy “calls” from irresponsible analysts or fund managers whose main intention was to unload their sour stocks, unless you wish to become the suckers.

Kuala Lumpur Composite Index finally closed below 900 points (Yippee!) after it shed 32 points to 859.11 on Friday. I bet many beginners were mouth watering and may have entered as the stocks were relatively cheap (than yesterday). But if you’re a season player the past memory of the KLCI’s plunged from 1,300 to 262 points 10-year ago should serve as guidance for this round of the game. If you think 800 points is attractive then 700-level is very cheap, 600-level is absurd and 500-level is unbelievable. That’s right! don’t blink with your jaw dropped to the floor when that happen. Prepare yourself mentally and you would reap a bountiful harvest soon. Forget about the parasites’ plan to rob peoples saving (EPF) to boast their cronies’ stocks because the RM5 billion is practically useless against the onslaught of the stocks-tsunami.

Mahathir create artificial demandsIn fact if you wish to know the truth of what’s going on locally just read the reverse of what those politicians said and about to say in future. They’ll still sing the same old song that the stocks are fundamentally strong even when the KLCI were to drop to 500 points. Boy! Those shorting the futures would have made tons of money by now. The only thing that could stop the bleeding is probably when the former premier Mahathir played behind the scene and used many more billions of peoples money (who cares about what the people think?) to support the local (or rather cronies) stocks – artificially. He may succeed this time compared to 10 years ago simply because most of the foreign funds have exit or rather have never return in the first place since the 1997-1998 Crisis. But Badawi has been so successfully in doing “nothing” that it would take more than a rescue on the stock market alone. And if you’re still holding Bursa Malaysia Berhad (KLSE: BURSA, stock-code 1818) stocks today, chances are high that you didn’t read FinanceTwitter’s article written on Dec 2007 (read here).

More than 110,000 have lost their jobs so far this year and some industry experts forecast Americans could see close to 200,000 will face the same fate before the year is over. Already branded companies such as Yahoo Inc. (Nasdaq: YHOO, stock), Goldman Sachs Group Inc. (NYSE: GS, stock), Coca Cola Co. (NYSE: KO, stock) and Electric Company (NYSE: GE, stock) has announced the job-cut plan. In September alone, 2,269 employers each laid off 50 people or more and most likely the current job losses are only the tip of an ugly iceberg. It is pity that there’re still people who are in the denial state and think recession is centuries away. Interestingly there’re people who chose to argue that the current recession will not reach the level of 1929’s Great Depression. So, we should applause and pretend things are all right?

1929 Great Depression2008 2009 Great DepressionOf course we would not see thousands of skeletal jobless people queuing begging for food just like 80 years ago stupid. In 1928, the Fed drove up interest rates so high that construction slowed and subsequently the stock market crash. Consumers’ spending nose-dived and then you saw more than 9,000 banks went bust from 1930 to 1933 – the losses estimated at $2.5 billion or $340 billion of today’s money. People got panic and almost everyone withdrew their money from their bank’s account. Money supply collapsed and brought down many small businesses. Unemployment of 3% in 1929 jumped to 25% in 1933. It was a crisis of confidence and shortage of liquidity while what we faced today is shortage of solvency. Unless you can clone the problem back, chances are you won’t be able to experience the 25% unemployment anymore (hopefully). At today’s rate even half of that is bad enough and would bring you back to the 1982’s Great Recession.

Great Depression of today’s standard is a different animal altogether. Unlike 80 years ago, U.S. has become smarter with the ability to print almost unlimited monies if required. Furthermore U.S. problem is not confined to U.S. alone but rather shared amongst the entire richest nations. You have watched how European and Japanese were more anxious than Bush’s administration in preparing trillions of dollars whenever the superpower needs it. It is no-brainer that everyone cannot afford to have U.S. stop playing this musical chair game. American’s purchasing engine cannot stop else it’s Armageddon.

USA 2008 Great DepressionIt appears that the U.S. economic epidemic which has spread to Europe is now slowly setting its foot onto the Gulf countries. Kuwait’s Gulf Bank’s (KUW: GBK) stock was stopped from the trading board due to rumors that it incurred losses of over $750 million in derivatives deals. Other Gulf coun
tries stock exchanges were not spared from the current global economic crisis. Oman, Qatar and Saudi Arabia’s stock exchanges were all down despite their black gold. And to think that the de-facto PM Najib has the nerve to declare Malaysia will never enter recession and the country’s willingness to pay more than double the price for Eurocopter’s EC 725 Cougar helicopters than Brazil were enough to send a very scary message to the public. Amazingly we’re still paying the salary to the good-for-nothing Kuala Lumpur Mayor who thought it would bring in more tourism by changing the 35-year-old famous Jalan Alor to Jalan Kejora. What a waste of public fund!

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You are right bro… the bottom is still far away.

This is what the Hongkie people are saying: The Hong Kong market will not find its bottom until next year, Prudential Brokerage associate director Kingston Lin King-ham warned. "The market will continue to drop, maybe for another six months," Lin said.

"It's hard to predict what's the bottom – maybe 6,000, maybe 8,000."


hello muhammad,

thanx for the link … hopefully the selling will continue till next year then *grin*

cheers …

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