One of the simplest ways of explaining to people why they and their successive generations have been saddled by the biggest credit card debt in human history is to just shake one’s head preacher style and say “Human greed”—-greedy black suits on Wall Street and dumb-ass investors hoping to make thousands on the back of the housing boom essentially gambled away your grandson’s college fund while everyone from Manhattan to Washington DC, being in on the take, looked the other way.
This explanation is comforting mainly because it is simple and understandable while at the same time by and large true.
Continue reading ‘The Question of Compensation’
The corporate malfeasance confessed to at Satyam has shocked the nation with words like “financial 26/11″ and “India’s Enron” being used to describe this catastrophe for India Inc. Satyam has been subject to ritual humiliations like having their corporate ethics award withdrawn and being taken off stock indices. The economic pundits are baying for blood. On the board floor.
Continue reading ‘Satyam-eva Jayate’
[For context, please read Part 1 and Part 2 first]
The Dow Jones Industrial Average (DJIA) gains 936 points on a spectacular Monday. And then, like the proverbial monkey on the oily pole, drops 733 points on Wednesday, making it the second worst single day drop in Wall Street history.
The stock market has now entered a most dangerous period—-a time of high price volatility. As an investor, you say to yourself—”The market has gone the lowest it can go, equities are as cheap than they have ever been for a long time and I can start buying stocks now.” And the moment you think its safe to go into the water, the market goes into a free fall once again. Naturally, you panic even more and keep holding onto whatever investments you have. Unsure as to which direction the market will go and fearing for the worst, you start having a fire-sale of your holdings. Other people do the same thing. The market drops further. Then perhaps some little gains are made, market sentiment perks up and you again wade in. The shark however sneaks up once again and before you know it, you are holding a bloody stump where once your investment portfolio was.
Continue reading ‘The Wall Street Meltdown Part 3′
[Continued from Part 1. Again this is a long post.]
With investment banks and financial institutes sitting on stockpiles of toxic mortgage-backed securities and credit default swaps, the same instruments that Warren Buffet had dubbed “weapons of mass financial destruction” (with the only point to note is that unlike the “weapons of mass distraction” and Santa Claus, these really existed), lenders were as eager to loan these people money as anyone would be to leave their kid alone with Michael Jackson.
Continue reading ‘The Great Wall Street Meltdown Part 2′
Warning number 1: This is a long post, part of a multi-post series on the crisis in the financial markets.
Warning number 2: I never took an Economics or Finance course in my life. I will not quote economists or provide citations and statistics. Not because I want to be simple and lucid. It’s because my knowledge of finance is extremely limited. All that follows is based on my understanding of the present financial situation, an understanding formed by reading the popular press.
Warning number 3: Which means that everything I say below may be wrong. But what’s wrong in that? At least, I didn’t get half a million dollars bonus and an apartment in Manhattan as reward for being “wrong”. Right?
Continue reading ‘The Great Wall Street Meltdown Part 1′
In stores first week of March 2010.
R