No one is too big not to fall

1)
Last few months' and a few years' events show that "No one is too big not to fail"

See the following list:
1. Baring Securities (Failed after almost 100 years of history due to rogue traders)
2. Bear Stearns
3. Lehman Brothers
4. Merril Lynch
5. Fannie Mae
6. Freddie Mac

Nearly Saved list:
6. Morgan Stanley
7. Goldman Sachs

Others in Parade:
8. UBS
9. Washington Mutual
10 Wachovia
11. Citibank
12. JP Morgan Chase
13. General Electric (GE)
14. General Motors, (GM)
15. Ford Motors
16 Chrysler
17. American Airlines
18. United Airlines
19. Delta Airlines

In UK
20 Northern rock
21 Royal Bank of Scotland
22. Barclays (on the way)
23. HSBC (on the way)

And last one in the parade:
24 United States of America

Those who say in India that Ambani, Tata or Birla are solid businessmen and are infallible, read above and judge yourself. Do not elevate them to the status of God.

There was a James Bond movie called " Never Say Never Again". does it apply to America?

Kalidas, Hong Kong
23/9/2008

2)
for nmel

Both(RBS and ABN Amro) are very very weak bank. You scratch my back, I scratch yours - they function like that.

In terms of quality, RBS was 10 times better bank. It was unfortunate they were caught up in mortgage mess.

Kalidas, Hong Kong
25/9/2008

3)
for C V H Murthy

There is another James Bond movie - Never say Never again. if some big institution fails, it is not end but the begining of end

I always learn from movies. This is why many of my posts do have reference to movie names and some peculiar content.

Kalidas, Hong Kong
26/9/2008

4)
for rvk41

It is not a question of ethics but 'impulsive Investment'. The problem is limited to financial sector in USA that may have effect on other companies if right actions are not taken - right now there are no indications - All plans are going to fail,because even today they fail to recognize the basic underlying problems.

L&T did not have ethical problem, but they did lose 1400 crores in exotic investments sold to them presumably by ICICI. They do not have made provisions therefore using 'Held till Maturity' principle, but in reality the valuation is ZERO

That was the case of 'Impulsive Investment'. I also believe that number of cash rich software companies would have exposures to such exotic investments as they usually deal with top 5 firms that went bally up or in serious difficulties. Indians are, as I know them, feel proud if some American/British broker approach them and take them to sumptuous lunch. They consider themselves very important and then make disastrous investments.

You will know after in last week of October, where the Indian firms stand.

Kalidas, Hong Kong
27/5/2008

5)
for Guest,

Only American Citizens, Corporations, Firms, Banks, Brokers, Investment Bankers, Insurance Companies, Cats, Dogs, Chickens, Pigs, Cows, and buffaloes and other vegetarian animals were allowed to line up.

Indians were not invited. Sorry, ICICI - HCL better luck next time.

Kalidas, Hong Kong
27/5/2008

6)
for Guest

ABN was swollowed by Fortis Bank outside which the people were lining up in Belgium to withdraw the money. The Belgium authorities assured depositors everything was fine, it is just hurricane was blowing outside. Everyone was asked to remain inside their homes to avoid damange. former name of Fortis Bank was Belgian Bank

Standard Chartered Bank appear very clean. It is more active in Asia. But today, you never know. When HSBC start reporting massive losses from this quarter onwards, eybrows will be raised for StanChart too - but right now it is a safe shelter.

Kalidas, Hong Kong
27/9/2008


7)
I can understand your sarcasm. However, you are new to the practice followed everywhere internationally.

Wheneven one posts a comment in the forum like MMB or for that matter in BBC, they mention the nickname (with full identity disclosed to the website owner) and the place from where the post has originated. This makes other readers know the geographical reach of the post commented on. This is a international practice, that I follow at all time.

It is not that I have to show my importance like Ph.D or otherwise or that we are from Hong Kong and therefore superior to others. It is only for identification purpose as required by international protocol.

The readers here read what I write in the middle, not at the tail that I am from Hong Kong. Just because I am from Hong Kong does not lend weight to my credibility.

At least you know that I am from Hong Kong. I do not know your identity nor the location by just reading - investr. Can I?

I clarified this position long time ago, and regular readers know why do I write Hong Kong as suffix to my nickname. On MMB too, they should make it obligatory to disclose the place from where the post has originated, so that the readers know the popularity of the post geographically and also know the wide reach of MMB

Kalidas, Hong Kong
28/5/2008

8)
When Govt guaranteed LIC is available why do you go for exotic foreign names and their alliances? What do the Bajaj knows about Allianz or insurance business? they may not spell the name properly.

for very long, I have stopped trusting Insurance companies. I have some policies in Hong Kong for my son and daughter. The company has changed hands 6 times in last 16 years. I was told that I many not have to pay premium after 7th year, and I am still required to pay after 16 years.

I rely on Deep Discount Bonds. currently I have DDB of Dev Bank of South Africa and ESKOM denominated in South African Rand. Due to political troubles, Rand has weakened. But I bought Rand at 12.5 or about to US$, today it is 8.33, making 50% from current value or 35% from old value. My bonds have risen from 2.80 to 16.00 (went upto 21.5) in 10 years. Dev bank of South Africa rated A+ and ESKOM also BBB+ or investment grade. I am making 700% in 10 years or 70% per year. Why do I care LIC policies? I have told my family that if I contract terminal illness, do not spend life savings after me. If my game is over, I will retire to pavilion. What I made in my life is not to be thrown away in medicine

Kalidas, Hong Kong
30/5/2008

9)
I missed your point. I agree with the failure of large companies, but Allianz from Germany will not be allowed to fail by German government. So there is nothing to worry. Indian division appear independent. If I have choice of LIC and some foreign insurer, I prefer LIC. They have clean record. Why to bother big private names like Tata, Birla, Bajaj etc who every day form some or the other company.

Kalidas, Hong Kong
30/5/2008

11)
for shia,

When the patient is admitted to the hospital, he is screened, x-rayed, cardiogrammed. CT Scanned, and all tests. The doctor then try to determine what could have been wrong, by which time the disease has deteriorated.

Last week, I entered the Indian market, considering myself smart, that I was buying back same stocks 15% to 70% cheaper - only to find next two days that ... I was a bit early to enter. I did not control my inner urge after months of discipline.

If I say anything about Warren Buffet, people will bounce on me. It is a tremendous risk for me to go against. I took the risk for the first time a few years ago, when Mr. Buffer bought General Re - the re insurer. One of my best client told me, Anilbhai, you should have been careful. The people will begin to put you off. I said that I have loyalty to my client, and tell them what I feel, what the world feel is already known to you through various media - Print, TV, Radio etc. I earn commission from my client giving me business, so I owe to them what should I tell them.

The situation is repeated again today. You are asking me to take extra ordinary risk in telling you what I feel. There are many boarders who named themselves after Warren Buffet ( they have disappeared now, that I am proved correct again after a few months)

Here is what I feel about legendary Mr. Warren Buffet:

1. He is 78 and does not wait too long for seizing Investment.
2. He has abandoned his eternal virtue - Patience and Avoiding sycophancy or adulation (what you call, maska baji).
3. Too much adulation in the press from every quarter has go to his head and therefore began to falter.
4. He has stopped being an investor. He has become a money lender. Wants 10% interest on all his investment, and invests into Preferred shares, which are riskier than Convertible debt. The debt always have preference over equity, common stock or preferred stock. He has therefore become a 'Multani Hundi holder' like many Marwari, Chettyar, Jew, Agarwals or Katchhi Gujaratis. He looks for any yield and not the associated risks.
5. He is too early to enter. His patience are wearing thin. He is entering at beginning of the end. He is entering at a time when Dow has corrected by just 18% from the top (not bottom).
6. He says that he is investing into best managed companies, blue chips etc. In that case, why so called best companies are willing to give him 10% interest for next 5 years, not collateral securities (Warrants are paper and will be worthless if the company goes under). Just position yourself in Indian market with over 1000 crores with you. If you find that potential buyer has lost thousands of crores in recent past, will you give him real hard cash against his paper and promises to pay in future - 5 years later, when the industry?
7. I said against GE almost 11 years ago for the first time, 11 months ago in this column and only perhaps 11 days ago that GE may be next to follow in ... SEC imposed short selling ban, because GE stock is held by almost all pension funds and 401K plan holders. GE has been selling all major assets, has extremely large exposure to derivatives, higher than the people imagine, and huge debt compared to revenue. its Debt level is nearly 3 times the revenue, whereas the healthy company is having revenue 6 times the debt level.

I heard on the street comments only yesterday that GE has capital of just $18 billions compared to over $250 billions (or even more) of the debt. GE has lots of interest rate swaps where it will lose most. The market rates today is over 20% (when GE pays 10% how much ordinary corporation will pay?)

I hope the time does not come when Warren Buffet has to depend on his own charity money during his last prime days, which are nearly over if we go by his attitude, and investment pattern.

Kalidas, Hong Kong
2-10-2008

12)
for jonas (Sub: Gold)
Gold prices are directly related to Oil, Indian Rupee and inversely to dollar. You have to consider all 3 factors together when you are in India

Gold is a measure of Inflation, and also non-interest bearing asset. It is real universal currency, exchangeable anywhere, anytime.

Influences on Gold Prices:
1. OIL: If oil goes higher, gold tned to go higher. It did not happen recently when Oil rose to $145/brl. There were multiple reasons - Manipulation in future markets vs. dollar index for oil, belief that higher oil prices were not sustainable, so the gold did not accompany the rise

2. Inflation: Although there is huge inflation in United States, but they are manipulating inflationary numbers. For instance, they divide inflation in two parts - Core inflation and non-Core inflation (incl volatile food and energy components). By eliminating food and energy prices, which constitute over 50% of household budget, they showed less inflation that weighed on gold prices.

3. Exchange Rate: Government of India has deliberately and disastrously followed the policy of weaker rupee, that tends to raise the price of gold in India. If gold rises 10% in dollar terms and rupee depreciates 10%, then rise in price of gold is 20% in rupee terms. When Indian rupee was appreciating, the gold prices in India were not rising as much as overseas, because the effect was muted by the rise in rupee value - that brings down the cost of imported gold (almost all are imported gold)

4. Gold Sale by central banks: Gold prices were deliberately suppressed by Central Banks by selling huge quantity in the market by prior announcement. Britain was notorious. Now, that the central banks have little gold left, they have decided not to sell further.

FED is the main manipulator of gold prices. It shows that it has 8100 tons of gold, but in reality, it does not have even 15% of that quantity. Yes, physically the gold is lying there, but it belongs to some one else. This is not known to the public at large. I have all proof.

Leveraging and De-leveraging: The current reversal of gold prices in spite of serious problems in USA is due to acute credit crisis that have prompted Hedge Funds who live on borrowed funds, have to liquidate their long position to meet the redemption calls from investors. When the people seek redemption, they need money, and if they need money, they have to sell the underlying assets such as commodity and gold, if alternative finance was not available, which is the case at the moment. So they sell heavily to raise the cash, so the dollar goes up and gold/oil goes down.

There is nothing in dollar. It is just unwillingness of banks to lend to each other that has created artificial shortage of dollars, that have pushed the price. Otherwise, who will invest in USA? Look at Dow - it is slumping, so no foreigner is buying.

Am I bullish on Gold: Yes, I am, but for time being due to faster pace of De leveraging by hedge funds, the prices have come down fast. As soon as the situation in credit market becomes normal, they would bid up the prices with as much as speed that you have seen before and now.

Gold is a Gold under present times. It is meant mainly for long term investors, that Indian women are capable of doing, not their Men who are opportunist short term speculator. It is beyond the means of even professionals to judge the games of large country like USA who has been actively manipulating the price of gold and oil.

Investment in gold is not the cup of the tea of ordinary male investors. Women love gold on long term basis as always, and they are the best investors of Gold.

When Paulson/Bernanke printed 1 trillion dollars of notes without assets, it goes without saying that the gold will rise many fold. However. they got a blank cheque to do whatever they like in currency, commodity and gold prices. This will fail big time very soon and all dollars will be dumped.

Kalidas, Hong Kong

13)