I don't know, how many of you would really recall my posting 'Spanish flu - The Great Depression of 1929 - Bird flu - Financial turmoil of 2008' of Oct 16, 2008. I have stated in that article that the world will be out of financial turmoil within 6-9 months. There were people who were skeptical about the thought, but today when we see the world (economic situation world-wide, stock market, commodities etc.) then it appears to be much better in terms of stability than what it was that time. Today people are most optimistic about the turnaround and in fact many 'so called' specialists are stating that the downturn is over.
Now, will this euphoria, created by the shock waves of UPA victory, last for long and what should be the strategy to deal in this time?
If you find that the stocks that you are holding have appreciated by 60% or more in last 3 days then please exit and book profit as you may find them at lower levels one the rationality prevails.
In the coming 6 months time, market may see a level of around 15000-16000. I wound not like to repeat what has already been stated on many business channels, widely published in pink papers or logical about the comfortable situation of the present government. This is very much expected and known. If the government does not take right & quick decisions then it is a problem. The government has already announced the distribution of several soaps earlier and this will haunt them if they do not control the fiscal deficit. So the government will have no option but to go for disinvestment and sale-off all the nonstrategic/loss making entities. Faster and righteous are better, is the mantra.
My next pick will be the stocks from the agriculture sector (including companies in horticulture, floriculture, irrigation, fertilizers, dairy, farming, manufacturers of products used in agriculture etc.). When Mr. Manmohan Singh became the Finance Minister in 1991-92 and had an open hand, he went ahead and opened the world of manufacturing and services sector to globalize our economy. It made our manufacturing and services sector amongst the best in the world. Now he is in the similar situation where he has got an open hand with an amazing numbers, he will make it sure that outdated, loss making, uncompetitive agriculture system takes a complete face lift. Keep a close eye on the agriculture sector; this is the next big thing in India in next 5 years.
Cheers,
Niteen S Dharmawat
http://dharmawat.blogspot.com/
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.
From: Niteen S Dharmawat
Date: Thu, Oct 16, 2008
Subject: Spanish flu - The Great Depression of 1929 - Bird flu - Financial turmoil of 2008
I would like to quote here one very unusual example which does not have any direct relation with economy/stock market. But still gives a convincing reply to why and how the world will come out of the financial trouble it is facing today.
The example is of Spanish flu which hit the world sometime in 1918. This influenza pandemic spread to nearly every part of the world. It was caused by an unusually severe and deadly Influenza A virus strain of subtype H1N1. Historical and epidemiological data are inadequate to identify the geographic origin of the virus. Many of its victims were healthy young adults, in contrast to most influenza outbreaks which predominantly affect juvenile, elderly, or otherwise weakened patients. The Spanish flu lasted from March 1918 to June 1920, spreading even to the Arctic and remote Pacific islands. It is estimated that anywhere from 20 to 100 million people were killed worldwide, or the approximate equivalent of one third of the population of Europe, more than double the number killed in World War I. So in short it was a very grave situation which took life of 20-100 million people between 1918-20.
We had another unprecedented turmoil that hit the world in 1929. It's better known as The Great Depression. It was a worldwide economic downturn starting in most places in 1929 and ending at different times in the 1930s or early 1940s for different countries. It was the largest and most important economic depression in modern history, and is used in the 21st century as a benchmark in how far the world's economy can fall. The Great Depression originated in the United States; historians most often use as a starting date the stock market crash on October 29, 1929, known as Black Tuesday. The depression had devastating effects both in the developed and developing world. International trade was deeply affected, as were personal incomes, tax revenues, prices, and profits. Cities all around the world were hit hard, especially those dependent on heavy industry. Construction was virtually halted in many countries. Farming and rural areas suffered as crop prices fell by 40 to 60 percent. Facing plummeting demand with few alternate sources of jobs, areas dependent on primary sector industries such as farming, mining and logging suffered the most.
Now, I have a parallel to Spanish flu. Avian influenza, sometimes Avian flu, and commonly Bird flu refers to "influenza caused by viruses adapted to birds." Recent influenza research into the genes of the Spanish Flu virus shows it to have genes adapted to both birds and humans; with more of its genes from birds than less deadly later pandemic strains. Between year 2003 to 2008, 385 cases of Bird flu were reported in the world which took 243 human lives. It is not even 0.001215% of the total human lives lost by Spanish Flu (here I took total 20 Mn casualties and not higher number of 10 Mn by Spanish Flu). This is even more important considering the fact that genetic analysis of the H5N1 virus (bird flu) shows that influenza pandemic from its genetic offspring can easily be far more lethal than the Spanish Flu pandemic.
So why the number of casualties were far less than Spanish flu? The reason is only one. The world is much better connected than it was in 1918. Today the globally connected economy responds and communicates much faster, better and effectively. The coordinated efforts of various governments, health groups, NGOs, WHO etc have helped to successfully face this challenge posed by Bird flu.
In the similar way, the world is in a much better position to face the unprecedented financial situation today than it was in 1929. I believe that the world market is going to come out of this situation within 6-9 months period with the coordinated efforts of all the governments world over. The media is going to blow things out of proportion and a panic like situation is going to get created which will benefit only those who control their nerves.
These were my two pence worth. You may share your thoughts/opinion directly on the blog or write to me at niteen.dharmawat@gmail.com
Cheers,
Niteen S Dharmawat
http://dharmawat.blogspot.com/
IMPORTANT DISCLAIMER: Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective. The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it & take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations above.