Financial Wisdom – By Kalidas

Radical Solution for Credit Crisis from Kalidas

American Common Sense prevails over Wall Street Intelligence

with 22 comments

God Saved Americans’ $700 Billions with Dow’s fall of 778 Points

There is a saying that there could be a delay in God’s regime, never Injustice. Wise man also said that never regret what happened, – it did only for better. My father also taught me when you need to use the common sense, never waste your intelligence. (Use it where it is required)

 

American citizens excelled and finally came on to their own. They said – we can afford to lose 778 points of Dow or 10% of S&P, because they will always retrace, but we can not afford to waste $700 Billions for crazy guy Paulson, that will take generations to get back, if at all. The rejection of Paulson Plan was the victory of American democracy. There could not have been better display, when the Americans saved almost irrecoverable $700 Billions and lost just retraceable 778 points of Dow.

 

Here is the brief virtual conversation between the American Citizens and Paulson, with FED Chief Bernanke and President Bush intervening at times.

President Bush

Fellow Americans, you made terrible mistakes…

American Citizen

Really, who is saying that? You? You never made right decision in last 8 years of Presidency. Yes, we made terrible mistakes, but that was 8 years ago, when we sent you to the White House. What we did today was the right thing to do – to show you the door and never see you again. We would prefer to see the face of “Ugly Betty” to you – at least she will make us laugh. You always made us shed the tears of sorrow, blood and sweat. Please don’t bother me.

Paulson

There will be job losses, unemployment, no credit for cars, homes, banks will not offer you loans…when you asked your Representative to vote against. Look at Dow – down 778 points, S&P down 9% NASDAQ down 10% – you see, we have worst economic situation since 1930 depression era.

American Citizen

Really? Who will lose jobs – the people working at Wall Street? We can afford to lose jobs for a while, because it is limited to my own generation. But giving you a blank checkbook of $700 billions to buy the rotten eggs will make my grand, grand grand, grand grand grand children to pay through the noses.

 

And who will benefit? You and your Goldman Sach? You mentioned that the portfolio of $700 billions will be managed by your Goldman Sach employee. Your GS will charge the exchequer 1% to 2% for next 5, 10 or 30 years to hold these rotten assets till maturity. So your GS will make about $ 7 billions to $ 14 billions per year for next 30 years, and you will go on making money in the GS stocks.

 

And are you saying that this is the worst time since 1930 depression? Are you kidding? The Dow is down to 10,370 today whereas it was just around  3000 in 1987. It has not gone down to even 1987 level, and are you saying that this is the worst economic time since 1930? Better get your figures straight.

 

And dear, these derivatives were all invented in the factory of Goldman Sach and likes, so called “financial engineering”, in off shore centers. Now that they are busting, you bring them on the American soil and ask us to pay for your sins?

Fed’s Bernanke

Brother, you do not know the real problem. All these banks are busting, there is a credit squeeze, the interbank market is dead, GDP will go down, job losses will increase, the economy will contract, there will be problems everywhere.. You should have authorized the passage of bill for $700 billions of which only $250 billions were to be disbursed now, and $100 billions before December under the supervision…You see…

American Citizen

Stop right there. Let me ask you one question. How much money did you pump today into the United States and abroad to ease so called “Liquidity crunch”?

Fed’s Bernanke

Well, about $673 billions were pumped into the system today

American Citizen

Hey wise guy. You pumped $673 billions into the system without any form of authorization from Congress or otherwise, and you wanted my Authorization for just $ 250 billions? Are you out of your mind? How come we get “dumb persons “like you and Greenspan to head the FED empire?”

President Bush

You see, this is fairly complicated. Even I don’t understand. These guys are professionals and experts. You got to believe them…

American Citizen

You were elected as President of United States and you could not understand this basic economics? Why did we give you this beautiful and most powerful nation for management when you did not have even common sense?

 

And you are telling me that these guys are professionals and experts? These are the guys who messed up the whole system, who created CDO, CDS, and CLN etc that finally busted. We are harvesting their sins now and you are saying that we should believe this bald headed Paulson and Bearded Bernanke who have no brains of even 5th class student?

President Bush

Well, I do not know CDO but know WTO and WOT only…

American Citizen

I can understand WTO, but never heard of WOT – have you mis-spelt it?

President Bush

No, No, No. There is no spelling error. WOT = War On Terror. You know these terrorists who scare the hell out of me…

American Citizen

Oh, War on Terror. What are you doing now? Are you not terrorizing me by telling me GDP will go down, jobs will be lost, no money for the cars, homes, health care, Medicare, social security, and no money at the banks too?

President Bush

Well, these are my final 35 days – you may better ask these complicated questions to next President who may be better placed to answer them.

American Citizen

Well, Mr., President, Mr. Bernanke, Mr. Paulson, I got to go…otherwise I will lose job and only you will have to pay me the Unemployment Allowance. I am a good citizen unlike all of you, and do not want to be a burden on the state.

President Bush

Don’t be angry. Did not I send you rebate checks worth $106 billions some time ago?

American Citizen

Yes, I received it, and now you want $700 billions from me? Do you think that your fellow American citizens are stupid?  Are you a President or a Con Man? Get the hell out of here – all of you…Now.

Why did the Dow fall so steeply?

These Wall Street guys spread all rumors, including PIMCO chief – Bill Gross. I was watching the market and Congressional proceedings all night long. The market fell in last 5 minutes when the sellers deluge. They marked down the prices steeply when they saw no bids, It was more like a scene of Bombay Stock Exchange in January, when the brokers marked down the prices steeply for all blue chips, seeing no bids.

 

It should be noted that if there were sellers all around, there were buyers too for whole day except for last 5 minutes. Even on closing bell, Maria of CNBC announced the fall of about 600+ points whereas the last minute update sent the Dow reeling by another 180 points. They were not indicative of meltdown. Who did that? Goldman at the instance of Paulson, to force the Congress to pass the bill a day after?

 

What will happen on Tuesday?

People will have time to think. Wall Street has been manipulating the whole market like a bunch of thugs. They brought down Dow in last few minutes to force the Congress to pass the bill on Thursday, October 2, 2008. They wanted $ 700 billions before September to manipulate the market prices of derivatives, by buying them at very high prices. They will even now lift the short selling ban on 799 financial shares, so that the market could go down further, and these “three Musketeers” could say – We told you so…

 

Asian markets will fall again in the opening trades, but then, might recover. Whatever happens in Asia or Europe, there is a strong possibility that Dow after sliding further by 200 points (10,170), may rebound strongly. The rejection of Paulson Plan is now discounted in the market price. Nothing worse is going to happen. If some bank goes under, let it go. How many banks will they go on resurrecting? These CDO/CDS have spread like Aids virus.”

 

The sudden outbreak of bankruptcy virus is due to the “off shore” liabilities coming “on shore”. They were never seen on the balance sheets of the banks in the past. When they lost money overseas, they jettisoned them to “on shore” parents, like an ocean that always throws the trash on to the shore.

 

The investors have short memory. How many times the investors remembered 1930, 1987 and 2001 in last 5 years? You can count it on finger tips.

 

Frozen Liquidity?  How to counter it?

Let the market rates rise. There are always lenders who want to lend the money if they get higher return for higher risk. Did not Warren Buffet give $ 5 Billions to Goldman Sach by extracting 10% interest on preferred shares? With warrants attached?

 

It was stupid move on the part of Bernanke to pump over $673 billions in the market without any authorization while he was seeking Congress approval for just $250 billions. What the hell is he doing? He is just printing billions of dollars every day with almost no coma, semi colon and full stop? Has he gone mad?  Why does not he recognize that the lenders are just on side line? They do not want to lend in high risk environment by receiving just 2%. If they want higher interest rate for short term, let them have it. Nothing stops. Everything has a price. Let the market determine the interest rates for the time being. Pumping hundreds of billions of dollars will only make the people shun even treasury and go for Gold – which can not be printed.

 

God has finally saved the America. The Americans should be proud of themselves for putting their foot firmly down on the gang of President Bush, Ben Bernanke and Hank Paulson.

 

Kalidas, Hong Kong

September 30, 2008

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Written by anilselarka

September 30, 2008 at 6:51 am

22 Responses

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  1. Very entertaining!

    Regards,
    Sukaina

    Sukaina

    September 30, 2008 at 7:18 am

  2. Dear Sir,
    There is no provision for giving 5 Star Mark .Please provide that:-))
    Sir By the way your photo is very small. Not visible properly. Please post your passport size photo in page (About Author)
    More or less I was awake whole night watching TV.
    Yes Most of the time Market was down around 600 points. Last 5 minutes manipulation is as you said should be from GS. I was watching gold future it was steadily going up through out. I slept and got up and now I see it has come down bit from its peak. In such a event full day it should just jump. I think Goldman manipulates Gold too like DOw.
    Any how I have to wait till your book is released.

    Shiva

    shiva

    September 30, 2008 at 7:41 am

  3. Dear Kalidas sir, God saved america and you saved us. (MMB Boarders who followed you).Continue your good work.
    Now what is the safe sector. Pharma,Omc or IT. would be happy if you can give guidence. Among pharma is Ranbaxy better bet.
    Thanks and regards
    Ravi, Chennai

    Raviprakasham

    September 30, 2008 at 8:32 am

  4. Hello Sir,

    As u said mkt may go somewhat lower and then bounce back.Some analysts on TV are also talking about sensex @ 10000 levels and nifty @ 3000… So shud I sell everything on my portfolio today? And if I sell everything, and the 700 billion dollar bill is passed today and on tuesday dow rallies 10% then we will rally too.

    In that case I will be a loser…If I wait today then I will be losing too…Plz guide shall I hold my holdings or sell everything???

    Thanks,
    Ojal Suthar

    Ojal Suthar

    September 30, 2008 at 10:20 am

  5. Kalidas,
    Do you think it is a good time to buy into Indian Stocks for a 3-4 year perspective.

    Deekay

    September 30, 2008 at 12:04 pm

  6. Dear Kalidas

    Hats off to you. Pl. keep up the good work.

    Shall be greatful if you could post on MMB & here your next suggested action for stocks bought for short term trade ( 7 days ) in anticipation for market upmove after the 700 Bn $ package will be passed.

    Regards

    Mohan

    Mohan Khandwe

    September 30, 2008 at 12:26 pm

  7. Dear Mr.Kalidas,

    I got opportunity to see few dedicated people in my life and I am really fortunate to know you through MMB. The US market closed around 4 am HK time and after few hours I am reading your analysis of bailout plan and its aftermath. Unbelievable speed.
    Great work for the benefit of your followers in a simple language.

    God Bless you and your family.

    Best regards
    Saravanakanth, Oman

    Saravanakanth

    September 30, 2008 at 2:40 pm

  8. Very well written & simple to understand. It will be very interesting to see how the DOW performs tomorrow morning. Keep up the Great Work.

    Ashish

    aselarka

    September 30, 2008 at 3:03 pm

  9. Dear kalidasji,

    In such times of uncertainty, i look forward reading your posts on MMB and your BLOG.

    I just request you to please keep provision for us to procure your published book via online shopping.

    Im eagerly awaiting for it. Words are not enough to let you know how much worth of information we have acquired through your posts.

    Best Regards
    Girish

    Girish

    September 30, 2008 at 7:09 pm

  10. Hello Sir

    You are saying 700B is saved from common people but how to you justify billions or trillions spent on research and space explorations ? Expenses done on security etc. What do you think that totally amounts to? This 700B would have saved all the families dependent on Finacial sector. Then why would universities manufacturing so many MBAs? to become unemployed ? Kindly consider my queries for your perusal.

    Manjunath

    October 1, 2008 at 3:10 am

  11. Kalidas,
    Was reading on Money Control that Indian markets with an additional 10 -15% shaved off would be the cheapest they have been in 15-16 years . Dont you think we should look forward to a long lasting bull market in India.

    Reply to Deekay,
    You have wrong information. Even in Oct 2002, SENSEX was at 2949. Go to Yahoo Finance and check the historical prices. The bulls are dead in western market. In India, they might be relatively stronger, However, don’t forget the terrorists have already infiltrated into Pakistan and are increasingly crossing over to India. This kind of geo-political factor play important role in the market indices. Yes, India is least leveraged market, with heavy savings and almost 30,000 tons of accunulated gold. If the Gold price rise to 2400 in 12 months, then the gold holding alone will be over $2.4 trilions – right now may be around $800 billions to$1 trillions. The trouble is that Indians are very obstinate in character – once they stick to something, they never detach. If Gold is sold steadily in rally, those money could be pumped into the capital market. In that case, who cares about FII? – Kalidas, 2-Oct-2008

    Deekay

    October 1, 2008 at 6:54 pm

  12. Dear Sir,

    I dont know how much the fellow broaders missed you including myself during your absence on moneycontrol. But probably your writings are the first thing during when i am online.

    Keep up the great work!!!

    Regards,
    Vivek

    Vivek

    October 1, 2008 at 7:46 pm

  13. Your views on UK residential property would be highly appreciated.

    Goel

    October 1, 2008 at 11:26 pm

  14. Dear Sir,

    Its amazing and wonderful narrative skill; Kalidasji using exact and concise expressions with great fullness to tell the financial essays. Thats why basic reader also can understand the essays very easy.
    Have one request. If time allows please write one more book about value investing to guide the various investment options like equity, bonds and commodities. I am sure it will be a guiding light for next generations also.
    Sir please throw some light about bond investing.
    Thank you
    Best regards,
    Rajmohan babu

    Rajmohan babu

    October 2, 2008 at 1:44 am

  15. Dear Sir,

    Wish you a Happy Navarathri

    Best regards,
    Rajmohan babu

    Rajmohan babu

    October 2, 2008 at 1:51 am

  16. Reply to Manjunath 1 Oct 08 at 3:10 am Edit

    The expenditure on scientific exploration is not unproductive. They pay up over long period. Apart from military use, they also benefit in predicting weather and help agriculture. The 700B expenditure we are dicussing here are total waste – throwing good money after bad. They are absolutely uncomparable. while MBA are being used in high profile jobs in financial sector, most of them are used in real manufacturing industries of every kind. Finance is only a branch of MBA

    anilselarka

    October 3, 2008 at 8:34 pm

  17. Reply to shiva: Ref: 30 Sep 08 at 7:41 am Edit

    from a regular reader of my posts, I would expect more critical evaluation of my work – I have already accepted your compliments number of times. They are becoming too heavy to bear. thanks for your support and often valuable feedback with some real information.

    anilselarka

    October 3, 2008 at 8:37 pm

  18. Reply to Girish : 30 Sep 08 at 7:09 pm

    It will not be long before my book is published. First, eBook may be published followed by Print edition. I will certainly make a provision for a good reader friend like you.

    anilselarka

    October 3, 2008 at 8:39 pm

  19. Dear Kalidas,
    I presume the statement on Equity Market being cheapest in 10-15 yrs was made considering valuation in terms of forward earning .Another important thing to keep in mind that such valuation is available at a time when the growth rate of the Economy is 7-8% compared to the ‘HINDU’ growth rate of 3 % prevalent in the Nineties.
    Please correct me if Iam wrong here.

    Deekay

    October 6, 2008 at 6:19 pm

  20. Dear Sir,

    If possible, Please share your book with me. I am willing to purchase if it is available in India. But i dont know whether the book will be available in India at the same time it is available in US.

    Regards,
    Vivek

    Vivek

    October 7, 2008 at 12:16 am

  21. Forgot to mention, we are all waiting for your next blog and also an article on how to restructure the portfolio in these time for maximum gain in future.

    Regards,
    Vivek

    Vivek

    October 7, 2008 at 12:18 am

  22. Dear Sir,

    At Last Pulson & Gang realised that bad assets they were thinking of buying were really valued zero. Realisation has come late but It is better late then never. So they are not going to buy any derivative backed assets . Did they get link of this site ?? :-))
    So it is good for American citizens and bad for the banks and financial institutions. Now with this change do you think Dow hitting 5000 is possibility?

    Shiva
    Bangalore Inida

    Shiva

    November 13, 2008 at 7:29 am


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