US Collapse - Letter to the President

1) Dear Boarders,

Thanks for your messages. It is impossible for me to reply individually. However, I will write later this week wherever necessary.

I had just finished my book called "SUBPRIME RESOLVED" which is a "Bible for complete Economic Recovery of United States of America" . This is where I have analyzed entire range of events, how the present mess came to being, and how to resolve it.

I sent out a 4 page letter to the President Bush offering my services. This was picked up by White House on 25/8/2009. I also sent a copy of the same letter with covering letter to the Consul general of Hong Kong with my full identification details. I did not receive any reply from either of them.

EXTRACTS OF MY LETTER TO THE PRESIDENT OF UNITED STATES OF AMERICA.
QUOTE
Mr. President. I have total solution for not only the sub-prime related mortgage crisis, but the complete and most comprehensive economic solution for other troubles like falling dollar, rising crude and commodity prices, gold and geo-political crisis in the middle east. So far as I know from the public knowledge, I am at this point of time, the only person in the world to have complete and speediest solution to the current range of crisis engulfing the United States.

I can make your last 90 days of Presidency the most memorable event of your political career. What you could not achieve in the past 2700 days of Presidency, would be achievable in just 90 days. Your approval rating less than 30 now, could rise to 90 or more by the time you would give up your Presidency.

If you follow the solution diligently, almost entire cabinet -Vice President Mr. Cheney, FED, Treasury Secretary, Secretary of State, Secretary for Defense, and Generals of the Pentagon - will agree to my claim after reading the solution, The success will be over 70% minimum .

..Do not write off the remaining 90 days as a social exercise bidding farewell to old buddies or resign to the fate of helplessness that nothing else can be done anymore. Unlike Katrina, this is a man made crisis and can be resolved by human efforts alone. Your time for action starts Now. These will be the best days of your Presidency - I can guarantee that..Contd.

..Ask FED Chairman Bernanke, Mr. Greenspan, Henry Paulson or great investors like Warren Buffet or PIMCO's Bill Gross, no one, I repeat, no one will come even 1000 yards close to the solution that I have outlined after almost 6 months of day and night efforts..

(I then gave brief details of 18 chapters what the solution contains)

Contd..
As you can see, the entire plan is very comprehensive. Full facts, figures, data are given in simple yet effective manner. It offers the solution and tells the administration "what to do" rather what others criticize "what should not have been done" . It is more directional.

contd..I will disclose my terms of engagement, once I see the interest. If no proposal is received, I will publish my work in the form of a book in a few months. However, In that case, the US will lose the first strike advantage, some erring nations will go scot free. The trillions of dollars of inflow and income will be lost...US will never be able to recover from the present economic mess. The worst days will come if no actions are taken now to address the challenge...

Contd..Since this is an unsolicited offer, I do not expect any reply in case there is no interest. However, those who are handling this letter are requested to inform the President of the contents.....

UNQUOTE

And lo, they ignored this letter from 25/8/2009 and what is happening now, like failures of Lehman, Merrill, Fannie Mae, Freddie mac, AIG proves what I warned them...Worst days are yet to come...

You will see the separate post for the current collapse of the market. This will continue, because almost all actions taken by the FED and Treasury Secretary are wrong. They simply do not know what to do nor do they want to listen.

Kalidas, Hong Kong
18/9/2008

2) I sold everything today at the market near the close except the Quantum Gold Funds. My position was relatively small compared to my regular investment. However, I believe that things are turning nstier day by day.

When such blue chips suffered massive fall, there is every possibility that there will be tons of margin calls in next 3 to 7 days that will cause more downward pressure.

Markets usually go up on Thusday. Friday is generally a critical day for the market all the time. this is why we always have Black Friday or Black Monday. There is a logical reason for this - will discuss some other time.

Make your own decision. I was also holding some of your stocks but sold them today without any loss (my cost was around 60 to 66 for Air Deccan). I will buy back later with same money at cheaper price.

Kalidas, Hong Kong
18/9/2008...

3)
for radhika nandlal,

Make me a Finance Minister - I can transform India into thriving economy and make it a leader in the world in less than 5 years.

Everything is possible. Right actions, right time with full commitment is what it takes to transform Indian into the best country to live in.

India has all talents, resources, money, creativity, imagination, drive etc. What it lacks is the killing spirit, enthusiasm, commitment and implementation.

Look at our own behaviour with our children. How many times do we tell them - don't do this, don't do that. AND how many times we tell them do this, do that by way of direction? None. We have more negative list for our own kids than positive one. that is what it builds their character when they grow up.

Unfortunately, there is no school in India that should teach Parents how should they conduct themselves with their own children to ensure that future generation is of always better quality than the previous one.

Kalidas, Hong Kong
19/9/2008

4)
for jonas,

disagreed. A leader is one who takes the actions against all odds and let the actions alone determine the future course of actions. Almost all PM, FM and Planning Commission in the past wee also highly educated with thumping majority. They did not act but only reacted.

We need proactive leaders who can act, rather than react, and who shuns all odds. Education in politics is not that important as made out to be by many. What is the education of Laloo Prasad Yadav compared to PM or FM? Nothing, yet he was more effective leader than his venerable superiors.

Kalidas, Hong Kong
19/9/2008

5)
for shia

you are damn right. Flaoting of separate agency on the line of RTC was rumored long time ago. However, from the interivew of Paulson and Bernanke to the Senate, it was clear that the Administration was not clear as to its structure and goals. While they go on trumpeting that Tax Payers' money will not be used, how this agency is going to fund itself while buying the bad debts from the defunct banks? FEd will fund them and it has no money, so the money will be printed. So Tax Payyers' money will be used anyway, under different name.

Wall Street Journal's President was interviewed on CNBC or Bloomberg. (I did not remember the name and channel)He said that this is not going to address the challenge. Where is the solution to the systemic risk? Another interviewer on BBC said - Okay, they will buy Bad Toxic Debt from the banks with a view to sell - who will buy them after all that is known today?

There are more than 100 senators who are opposing the use of public funds by FED. Another senator went on record saying that how the 'unelected member like Bernanke of FED be given a check for over $800 billion to spend the Tax Payer's money the way he likes'

The markets will rally no doubt today, may be 800 points. The US future is also quoted at 11,200 (+200 pts). The efforts are made by US authorities for over last 2 months to ensure that DOW does not fall below 11,200 which is a recession indicator point. The ban on short selling only one day before option/future settlement for September today may add more points to Dow.

One may trade today and get out by Monday, unless very positive news emerge after the meeting of FED, Paulson and Congress through weekend.

Do you believe that $8 trillion of losses could be resolved by these bunch of idiots at FED and Treasury Department? If they could have done that when the crisis was unfolding, last 18 months of turmoil could have been avoided altogether.

My strategy for today will be:
Lighten up by 50% today
Sell balance on Monday during hyped up rally.

I sold my entire holding only yesterday - may be I sold a bit early by one day - but then - who knows what happens tomorrow.

Kalidas, Hong Kong
19/9/2008

6)
Agreed but it depends on the extent of help required. The problems with AIG is not related its basic insurance business, but the leveraged investments made by it in exotic derivatives like CDO, CDS, CLN and other structured products. That was not its core business.

It is estimated that AIG has total bad assets in the region of over US$ 1.47 trillions or 1470 Billions or Rs 5,888,000 crores. It is totally bankrupt. It is like throwing good money after bad money.

Do you believe that the US should use its taxpayers' money of USD 1.47 trillions to save the AIG? US believes in capitalism - if the enteroprise is not efficient, it has to disappear. Otherwise, all corporations would be delighted to do whatever they like with the assurance that in the event of default, the big brother SAM is alreay there. This breeds inefficieny.

The major risk in funding the AIG is that they have global presence, and they will steadily pass on the bad assets to vulnerable global investors like other insurance companies, policy holders etc. and then get away with it. If they die now, there is no rebirth even under reincarnation theory of Hindus. This will help save other genuincve investors from the clutches of bad asset holders like AIG

However, you are right. It may have positive effect on the market because at this time almost everyone wants to hear good news so that their investment is saved.b Better trade for a while in liquid stocks of blue chips. It is still not time to play second or third liners.

Kalidas, Hong Kong
19/9/2008

7)
for Guest (kalpesh S)

You better learn simple English so that you can understand what I really mean when I said something. I write very simple English which is beyond your intelligence. for your information, I never said I was bullish on India - I merely said that India was relatively safe place. Right now, there is no question of bullishness anywhere in the world - the money has simply disappeared. Don't you know why the biggest brokers and investment bankers like Bear Stearns, Lehman Brothers, Merrill Lynch have failed and AIG too who lost trillions of dollars in derivatives when its business was simply in Insurance?

And if you believe that you are the Robinhood of the Innocent investors, why don't you write your Original Post and guide them? why do you have to come to my post and go on venting out your anger? Don't you have listeners that you have to come to my desk?

Kalidas, Hong Kong
19/9/2008

8)
Off Balance sheet items are never reflected in the main balance sheets. One will find them in the small notes attached to the balance sheets. Further, any exposure through their off shore subsidiaries are not reflected either.

The figures I mentioned was from the reports and discussions on CNBC, Bloomberg and other finance channels.

Kalidas, Hong Kong
19/9/2008


9)
for impatient,

The US markets jumped because of ban on short selling of 799 financial stocks until 2nd October, 2008. The SEC actions were illegal and came only a day before the September futures and options settlement.

However, Interest rates jumped, so did the Gold. A realization downed upon core investors that this is the end of the bull market and future days will be only have to brace double digit interest rates. The credit rating of US government may also be questioned. What do you say of a government who announces to purchase Mortgage Bonds from the banks at 35% discount @ US$ 65 per $100 when the market value is ZERO? Nearly 1.3 trillion dollars will go down the drain within a flash.

Many manufacturing companies whose bonds are maturing within next 60 days find interest rates galloping beyond imagination. The Americans have never seen interest rates in double digits since 1980. Those days have arrived again with still higher interest rates. The interest rates may rise to over 24% in next 12 months.

There is no money in the market. This is why the central banks around the world are pouring billions of dollars into the system. However, they are fighting losing game in exconomy flattened by $ 8 trillions of derivative collapse. What you have seen is just 6%.

Indian market may follow the world markets. On Sunday evening in USA or Monday morning in Asia, the US will announce the details of Rescue Plan. Indian market will take the cue from Asia. In all probability, the market may rise in subdued manner, because other markets may see some profit taking.

I mentioned before in this column that next company to watch is GE - the doyen of American Corporate. On Friday, the SEC included in the list of banning of short selling the name of venerable General Electric or GE. This company is probably seeing the last days of its existence. It has been so much hyped, I do not have word to describe it. It is heavily indebted with huge portion of derivatives outstanding. No one knows the real exposure. Judging from the market reaction and sudden ban on short selling of this counter, it seems that the company will be in ICU soon.

The markets that rely solely on domestic economy will not feel as much heat as that of Western world. India is domestic demand based economy, and now developing fast. Its pace will slow down, but it being least leveraged economy, it may advance on world scene in real terms.

If the US does not take right actions now, there could be a civil war in United States, and it will go the Soviet Union way - will break apart into 50 tiny states. The future text books will have a chapter - ONCE UPON A TIME THERE WAS A NATION CALLED UNITED STATES OF AMERICA'

All the actions taken by Paulson and Bernanke lack total imagination. They are followed by other Congressional leaders because they simply do not know what is really going on. They look upon Paulson and Bernanke for professional advice - and they smile at each other murmurring - Hell, even we do not have any idea what is hitting us invisibly. So let us do one thing we know best - Run the Printing Press 3 shifts a day and print as many dollars as we can.

Kalidas, Hong Kong
20/9/2008


10)
for Tunga

Can you specify when(specific date) I said about the NOCIL, what was the stock price then, when (specific date) you bought it and to what level of price the stock went to after my write up? Did you also listen to my call to sell everything and stay 100% cash and the date thereof?

Always talk specific. Vague assertion is not enough to distract the other boarders. There are many who write on this forum, call me or even email me for the huge savings they made, and there are also some who criticized me to the extent of abusing me for listening to my call, used different timings, and when they lost, started blaming me.

Please note that this column is meant for discussion, to share the views and to take individual decision based on their own profile.

Also, I am not your broker nor your advisor to make money out of commission or fees for advisory advice. I do not make money even if you make money following my views nor do I lose money if you do lose money in same fashion. You are the person in control of your actions.

One more thing - I am not god. My words are not gospel of God that you have to follow at all the time,.

Kalidas, Hong Kong
20/9/2008


11)
for Gangaram,

1929 and 1980 no longer apply in the Internet Age where the money travels at the speed of light. There were no toxic derivatives during those times. The product scenario has changed over the years.

Basic tenet remain same however. Irresponsible creation of money ultimately bursts. What the Amrican Banks and Ivestment banks created was the trillion dollars of parallel economy that was eventually busted.

Agreed that Stock indices are strictly not comparable due to constant changes in Index components. In India, for example, there were no software industry a few years back due to which present day indices do not offer adequate comparison with the 20 years old Sensex index

kalidas, Hong Kong
20/9/2008

12)


for greedy one,

A very thoughtful analysis and I agree on most points. You are very correct that India's domestic resources are rising steadily like savings, PF, PPF, and investment in Gold. Today, only those nations will progress who are strong in their domestic economies and less reliant on exports.

India is largest private holder of Gold. India has been buying gold @ 800 MT per year over last few years. It used to buy minimum 500 MT for over last 70 years. If you really accumulate the figure and discount by 30% for any error, Indians will be having at least 30,000 tons of gold which at today's price works out to US$ 840 billions at current price of $ 850/Oz. If the gold prices shoot up to $2400/oz which is now very real possibility, the privately held gold by Indians will rise to over US$ 2.5 trillions.

However, Indians will have to sell the gold steadily during those rally, and cash so released if placed into capital market or banks, there could be unprecedented growth. However, Government has to take active role to educate the Indians when to buy and sell the gold. Most holders of gold in India live in villages - not in big cities like Mumbai.

But do not compare India with China. Nationalistic flavour should not blind you to talk only of India and degrade China. We are in Hong Kong and we deal with China on continuous basis. Except for Software and diamond industry, other manufacturing companies do not come close even 50% from China. China is developing diamond industry very fast, and you will see that in less than 3 years, China will be competing with India on head to head basis. Chinese have much defter hands than Indians -you have to see them while they are working, have more capital, more government supports, very discipline, very sober than Indian workers, and latest machineries. They hold Conventions and Exhibitions 3 times a year, in grand style. The buyers from world over come here in hordes to buy their wares because they are displaying them.

When I was in a nationalized bank, I told my Regional Manager to let the bank become a centerpiece for marketing of customers' goods. I told him that we should let customer of one branch to come closer to other branch by providing him the information like bank report and displaying the goods in bank's special show room at various centers and also host annual convention show at some place to get together Banks all customers to meet at central place for development of their trade. When the customer of one branch knows that customer of other branch of same bank could be his buyer or seller, the resultant sale helps the buyer, seller and the bank itself who may earn extra commission for its services for any successful deal.

In Internet and Database age, this process is efficient by nearly 50 times - we had to keep the record manually at that time.

But most of state owned banks and even private banks like HDFC, ICICI or AXIX bank do not have creative officials who think about 5 years ahead. I thought ahead by 20 years at that time because we grew using our logical abilities. Most people do have that ability but ignore it saying 'no one will listen to us - why waste our time'

Today, the knowledge is no longer one genre or nations' monopoly. Anyone can come up using their inner abilities. The government has to play pivotal role to bring awareness of ability of each individual so that they reinvent themselves. Often we know many things, but not aware of them. Knowledge alone is not important, but its awareness is. China is miles ahead of India in this respect.

Kalidas, Hong Kong
21/9/2008