Wild Swing to continue as long as the Worse is Not in Sight





Nov 15 2008
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By now you should know why stimulus package or rescue plan is not the magic bullet that could solve any economic problems created by greedy top management. I’ve wrote four basic “for dummy” initiatives that a country could take in the event of or about to enter a recession. Announcing or launching stimulus or rather rescue plan involving billions or trillions of dollars is easy. You can even ask your grandma to announce it instead of Treasury Secretary Henry Paulson or Fed Chairman Ben Bernanke or President Bush for that matter. The best part was you don’t have to justify the figures and nobody asks how the U.S. economic experts arrived at the $700 billion bailout figure. Probably it was just a figure plucked from the sky, who knows.

If you’re a certified project manager in your own field you would understand that the success of a project depends very much on planning, project management and execution. That was why experienced project managers are in great demand. Well, this stimulus package announced by U.S. and later spread like wildfire to the rest of the world from European Union to Malaysia can be equate to a secured project. Now what you need to do is to have an experienced project manager to ensure the $700 billion taxpayer monies are spent wisely to achieve the objectives. You’re bound to face obstacles and probably discover new problems or challenges along the way. Just like a project over-run, stimulus package may need extra injections if the problem(s) was more serious (or locked inside closet on purpose) than first thought.

U.S. Treasury has pumped in more than $300 billion last month into 40 financial institutions including the risky American International Group Inc. (NYSE: AIG, stock) but it appears nothing has improves. Sadly ordinary people (inclusive of investors) are still pessimistic and wonder if the plan was working. At the moment only the banks were given the privilege to maul the meat while others were made to queue (and it’s getting longer). Even with Treasury latest plan not to buy toxic assets of banks the stock markets were not impressed as the writing is already on the wall that U.S. problems could only be solved with trillion(s) of dollars of rescue. Now the giant, Citigroup Inc. is speculated to be the next company to drop a bombshell. Citigroup’s stock has lost more than 60 percent of its value this year alone and the staffs’ morale is spectacularly low with 40,000 jobs confirmed to be cut with another 9,000 jobs to be axed at the next batch. If things do not improve, Citigroup planned to cut additional 88,000 jobs by end of 2009 to reduce the employee force to 264,000 from 352,000.

We’re now seeing wild swing on the Wall Street’s DJIA almost on daily basis with three-digit gains or losses. Ready or not such wild party is expected to continue. Besides futures traders another group of people who are simply delighted with this newly found jewel is swing traders. Unlike the dot-com bubble’s burst that only affected mostly technology stocks, the current situation is worse simply because it involves the heartbeat of all economies – the financial sectors. So a fast recovery is out of the question, not to mention the slow pace of “actions” from U.S. and how clueless some countries are in tackling the issue. The effect of current crisis is taking its toll on technology stocks now. Sun Microsystems Inc. couldn’t take the heat anymore and is set to axe 5,000 to 6,000 which represent 15 to 18 percent of its workforce in order to save $700 to $800 million annually. Instead of struggling maybe Sun should just put the “For Sale” sign and let either Hewlett-Packard Co., IBM Corp., Fujitsu Ltd., or even EMC Corp to take it over. But it was Intel that slashed its fourth quarter outlook by a whopping $1 billion that set the ball-rolling, flagging its technology stocks turn to be slaughtered. Things need to get worse before it gets better.

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