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Durudarshan - Investment Analysis

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How is the economic Recovery likely to continue?

Posted on October 28, 2013 at 8:34 AM Comments comments ()
It has taken all of five years for the world economies to be restored to semblance of normality from the dark days of 2008.
 
Remember those days when the interest rates were quite high in the advanced economies, anything from 4 to 7 percent - and that for the benchmark European Central Bank, Federal Reserve and Bank of England rate. 
 
The crisis created by the collapse of Lehmann Bros sent shockwaves throughout the financial system worldwide, with stockmarkets tumbling, loss of confidence in trade, fall in house prices, and a mood of pessimism gripped the world. 
 
At the vortex of the crisis, when Oil price reached $147 per barrel, according to OPEC AND European Union figures, about $250 billion additional bills were imposed on the European Union's oil expenditure, and what a terrible crisis it created, making transportation and manufacturing unviable in many countries, e.g. Portugal, Spain, Greece, the extra drain sucking the life-force out of the system. 
At the peak of the crisis, people who were earlier working in the textile industry were suddenly without work, and wondering how they would find their cod-and-chips.  Enterprising young people and old were trying their hand at the e-commerce economy, and finding lot of work but little revenue.  The Prime Minister of a sovereign nation which was so prosperous not so long ago was visiting the heads of state of various nations, asking for help.  The social security systems were severally stretched, the tax revenues not corresponding to the new outflows.  The interest on the bonds became quite high, to attract investors.  Talented people from universities were not able to find opportunities to make a living. 
Demand on housing was as high as ever, but people didn't have money to rent, nor were banks willing to extend mortgages.  Indeed, banks and loan corporations were suddenly unviable, after the property price plunge and bankruptcies of many individuals. 
 
Today, comparatively, there has been a return of confidence.  Things are getting better.  Spain, Portugal and Greece have seen their bonds become more attractive to international investors.
But the worst is hardly behind us, yet the oil price remains so high.  The pending closure of the Grangemouth Refinery is an indicator of the havoc the oil price plays with the balance sheet of such businesses.  A business that was viable up until recently today stands in need of £300 million, with that it would support 800 jobs until trade is more favourable.  This may be a microcosmic illustration of what could be in store for the OPEC nations, unless they decide to reduce the oil price to a level that is affordable to the rest of the world, and would give the OPEC nations an on-going stable income on a long-term basis into the future, and allow the world to breathe, and help sustain Recovery. 
 
It took two-and-a-half years after the high oil price knocked the economies for six for a return to some kind of normal business activity.  Common sense tells me that the high price today will probably hamper growth for about a year-and-a-half, and it is already restricting growth and causing hardships in many places, e.g. Yemn, Kenya, India, and almost all the nations outside the G20. 
I WOULD RESPECTFULLY SUGGEST THAT THE OIL PRICE NEEDS TO BE BELOW $85  A BARREL.
 
That would help the hard-pressed developing nations meet their bills from their depleted reserves or devalued currencies, and enabling continuation of trade with the U.S., China, European Union, Israel and indeed OPEC, which would create a dynamic of mutual co-operation and support that may help all nations thrive and develop all their potential.  That is the missing piece of the jigsaw in the picture of a continuation of the worldwide economic Recovery. 
 
All the listening hearts of the world know what I am saying, and those who sit in positions of influence will do what is necessary, for that I pray.
 
Kind regards,
Duru-darshan.
 

Debt Ceiling, grounds for optimism

Posted on October 15, 2013 at 2:35 PM Comments comments ()
Sound bites coming out of Washington this morning suggested that progress had been made on the debt ceiling raise negotiations, but there was still some work to be done. 
 
Indeed, NDTV was stating that a deal had been agreed in principle, to the effect that there would be 'full funding' of the government till 15th January, and thereafter a debt ceiling renegotiation date of 15th February.  If that is in fact so, that would be great news for everybody, at least they won't have to worry about the cold winds of November and can have a holiday and relax over Christmas before having to face the cold corridors of Washington in the New Year.
 
People are counting on the House Fathers Harry Reid and Mitch McConnell to bring everybody to the fold and get some agreement in principle, so that it can be presented to the world latest by Thursday.
Optimistically, everybody is waiting for such news.
 
In the meantime the U.S. Budget Office is issuing advisories in the event that an agreement is not reached.  Namely that in the event of a debt ceiling limit not being raised, the government will have run out of authority to issue any more money into the system.  In the most unlikely event of that happening, the ramifications would multiply twelve times what has happened under the Sequestration.
(The sequestration cuts totalled $85 billion over twelve months from a Q.E. budget running at $85 billion per month; hence one twelfth, so the effects of a halt would be magnified twelve times.  This is just to put in context some meat for the doomsters.  I cannot see the wise elected leaders of the U.S. ever leading America down that path, which would of course spell pessimistic scenarios for the world, as all nations trade with the U.S. and lot of people are engaged in producing something for export or working in calls centres and so forth which serves the major economies.)
 
Ideally, everybody would like to believe that such an agreement will be reached and released to the world, that full funding of the government continues until January, and then once again they can face the cold winds of February to negotiate another debt ceiling raise.  In the meantime, the funding will ensure U.S. continues to trade at full strength with the world, and create more jobs at home and abroad, creating a continuation of the Recovery that has gladly blessed this great nation. 
 
Japan is most definitely looking for an endorsement of the QE policies which they have implemented with a huge success, pulling Japan out from a phase of stagnation that lasted 20 years to what are glad welcomes of a Recovery.  China likewise is re-focusing on domestic growth; how much better it will be if things continue in a positive way across the globe, so that there is work for the workshops, freight for the transport and the oceans, everyone doing something purposeful, busy, happy, earning their livelihoods, buying houses, cars, sending their children to schools and colleges and universities, a whole world procession in progress, the army of humanity. 
 
How wonderful it will be for those wise leaders in Washington to agree upon and then issue to the world the words that signal the continuation of the economic Recovery at home, and by extension to the world.  I pray for this. 
 
Looking for inspiration yesterday, some words occurred to me, which I tweeted, as follows :
  "Have faith, just believe.  Everything will be all right, by the grace of God."
 
I sincerely believe that shall be so.
 
Kind regards,
Duru-darshan.
 
 
 
 
 
 
 

What would happen if there were no Debt Ceiling raise?

Posted on October 8, 2013 at 3:41 PM Comments comments ()
Each one can imagine some kind of bleak scenario, in the event that the Debt Ceiling was breached and there was no agreement in Washington between the Republicans and Democrats. 
 
At the moment, the world watches in exasperation as the two sides debate and give a very mixed impression.  As they gleefully remain entrenched as to what they will concede or not, the time is ticking away to 17th October. 
 
Japan and China have wondered at the shutdown, and why it is not being lifted swiftly.  In those nations, such a situation, were it ever to arise, would be reversed as a matter of honour and in the interests of not impeding the economic engine.  It would be done swiftly with a command from the leadership. 
 
In the U.S., by contrast, as is the nature of democracy, every fine detail has to be debated.  That is fair enough, but time is running out nevertheless.
 
In the event that there is no Debt Ceiling raise by 17th October, one can envisage a bleak picture where government will not be able to pay its employees, which of course also includes the Representatives and Senators who have defended very narrow corners and brought about the current shutdown and the furloughs, disrupting peoples' daily routines and reducing their paypackets.  Of course this would have an impact on the economy overall were it to continue for any length of time.  Just over a week has gone, and the mood on the stockmarket has been subdued.  If it were to continue for consecutive 21 days, probably it would cause a disheartening mood, which would dampen the feelings and start a down-turn.
 
Secretary of State for the Treasury Mr Jacob Lew has said there would be about $30 billion for cash-flow, in a 'four trillion dollar enterprise'.  That may be sufficient for 12 days, which would take everyone to 29th October.  If there was no agreement by then, can you imagine anything but the stock markets falling, a fear factor and a lack of confidence, people being laid off by private enterprises as well.  I would bet the Oil price would plummet, demand would be so drastically reduced.  The domino effect would be worldwide, nothing short of alarming.  It would be like looking at Greece in its recent dark days, only the U.S. is a much bigger economy, with over 16 times the population of Greece.  Not only that, what is the sovereign currency of a well-functioning economy and the Reserve Currency of the world would have its standing compromised. 
 
I trust they have some arrangement in place, whether by bi-partisan co-operation, putting aside for the moment the other issues which are dividing them at the moment, and agreeing to a Debit Ceiling raise by 17th October; or, arrangements in place to allow the President to exercise his prerogative under the 14th Amendment and sign in an amount that would be prudent and necessary. 
 
Mr Obama has mentioned that the debt burden has been reduced by Two and a Half Trillion in the last few years, so his Administration's policies have been productive and praiseworthy, pulling the whole economy out of a severe recession and creating a nation with huge heatmaps of happiness, which have  provided growing confidence worldwide.  The sooner the uncertainity regarding the Debt Ceiling raise is removed, the better will it be for the whole world.  America's well-wishers and creditors alike would feel good, a positive mood of certainity and predictability for future growth would continue worldwide.
 
The last Debt Ceiling raise in August 2011 has proved efficacious, and so there would be universal approval and applause for such a measure this once also.  Those who believe in doing right by their fellow humanbeings, let them also do right by the currency that says 'In God We Trust'. 
 
Kind regards,
Duru-darshan.
 

My blogs in the last 7 days, and Referring Traffic

Posted on October 5, 2013 at 2:31 PM Comments comments ()
Hi everyone, how are you?
I wrote and published several blog posts over the last seven days, as follows :-
  -  Germany a good model of employment
  -  Forward guidance and the UK Housing market
  -  Light a candle....
  -  Stimulus? Taper?  Where we headed?
  -  Mr Bernanke's penultimate testimony before he leaves the Fed.
  -  The paradox in inflation
  -  My blog posts this month
  -  Thanks for visiting my website.
  -  Bi-partisan Agreement or 14th Amendment, either way Debt Ceiling will be raised.
  -  Netherlands, Kansas City, Kharkov....welcome, welcome!
 
Over the 7 days, I note Referring Traffic to my website and blog (www.durudarshan.co.uk)
from the following.  I express my thanks to the staff at these organisations, for listing my website and blog....without you, all these readers wouldn't have found me so easily.  Thanks!
     -  Google.co.uk
     -  woman.seopower.su
     -  Google.co.in
     -  Stumbleupon.com
     -  t.co
     -  webconfs.com
     -  Google.com
     -  durudarshan.co.uk
     -  api.twitter.com
     -  News.Google.com
 
I am pleased to note that the value of my website is going up, and I am getting more visitors each month.  I am particularly pleased to note that I rank tops with Google.  That is thanks to my parents for having given me this unique name.  (Duru is the North Star, and darshan means obeisance). 
 
I hope you find something interesting to read on my website or blog.  I like to tune in to receive any interesting information, most of which I share with my readers.   
 
This morning, I went and helped clean the LDS Chapel here in Ilford.  I opened the windows, then squirted some bleach into the toilet pans on all three floors.  Whilst this was doing its job, I moved the chairs in the Sacrament Hall and hovered the carpet.  Just nice and easy, and the exercise did me good.  In the peace and quiet of physical labour, the mind becomes quiet and receives the Eurekas!
 
Until next time,
 
Wish you a great weekend.
 
Duru-darshan.
 
 
 

Bi-partisan Agreement or 14th Amendment, either way Debt Ceiling will be raised.

Posted on October 4, 2013 at 2:59 PM Comments comments ()
It is a concensus worldwide, and not only in Washingdon D.C., that the Debt Ceiling which needs to be raised to avoid a default, which the U.S. certainly does not wish to entertain, will be raised, be it (preferably) by bi-partisan co-operation and agreement in Congress, or by Presidential Prerogative. 
 
Secretary for the Treasury Jack Lew has suggested 17th October as the date when the current debt ceiling arrangements hit top.  It will be both prudent and necessary to raise it further, and in the current shutdown scenario in Washington the options are plain : Either the partial shutdown of the departments is swiftly lifted and government can function once again as normal, giving enough time for a bi-partisan consultation and agreement on a Debt Ceiling raise; alternatively, give the President the opportunity to exercise the Presidential Prerogative under the 14th Amendment and sign into law a figure he believes justified to safeguard the normal functioning of the government and the U.S. economy. 
 
The new jobs created figure today of 155,000 for September seems pretty healthy, although to see a fully fledged Recovery would need about 400,000 to 500,000 new jobs per month for about 6 months.  Until then, the environment demands continuation of a Stimulus, which may be tapered later when conditions improve further.  In the meantime, the record low interest rate gives hope that the housing market can continue to improve and strengthen, together with auto sales and hand-in-hand creation of many jobs and heatmaps of happiness.  Strength of the U.S. economy for now seems a barometer of the world economy, as confidence in the world's largest economy always impacts everywhere else.
 
In Japan, Premier Abe's government continues with their Stimulus, which was running at $85 billion a month (equal to the U.S. stimulus at its current height).  This has enabled the Japanese economy to pull out of the stagnation that has marred it for over 20 years; the investment and build-up after the Fukushima disaster has enabled Japan lay the foundation for continued improvement and growth, the fruits of which Japan shares with investment overseas in neighbouring countries and abroad.  Their GNP
figures will be nothing less than impressive, with substantial investments in the U.S. also.
 
It will be a great blessing for the U.S. to raise the debt ceiling in a timely fashion, and renew the confidence worldwide that things can continue as normal everywhere, which can add impetus to further growth worldwide from a strengthening Recovery to Prosperity.  For that I pray.
 
Kind regards,
Duru-darshan.
 
 

Netherlands, Kansas City, Kharkov.....Welcome, welcome!

Posted on October 2, 2013 at 8:11 AM Comments comments ()
It is that moment in time when the world knows the answers, yet some do not seem to.  For their narrow vested interests, they may be taking decisions which will adversely affect so many people.
 
Yes, point in question about the shutdown in the United States, affecting some 700,000 government employees who have been told not to turn up for work, because the two caucuses of the centrist Republican Party which is the U.S. Congress cannot agree the left with the right.  They would like concessions on many issues, which are not of prime importance today and bear some relevance to the great impending issue of the raising of the Debt Ceiling.  According to Mr Jack Lew, Secretary of State for the Treasury, the clock is expected to hit a top on 17th October, giving just about 15 days for the Congress to concentrate on this priority. 
 
The aggregate debt stands at a whopping $16.5 Trillion, but certainly that is not huge in comparison to the essence and integrity of the United States of America.  At last count, when the debt ceiling needed to be raised in August 2011, the Chinese Premier Hu Jintao as well as the Japanese leaders offered their continued support. 
 
The cash-flow in the system has enabled an ongoing Recovery, translating into much consumer confidence, demands on goods and services, and heatmaps of happiness across the world, in China, India, Malaysia, Hong Kong, Japan, Australia, Europe, Brazil, Venezuela, and every nation who trades, which includes all nations of the globe. 
 
Indeed it was a great gesture when the Federal Reserve opened the Open Window in Europe, enabling the Eurozone to borrow dollars and pump into their economies, creating much growth and momentum
in production and consumer confidence. 
 
There must be few people who do not see the benefits of a globalised economic powerhouse that is the world, where co-operation and trade between nations helps each nation produce its unique resources and exchange with the rest of the world.
 
I believe the world can confidently assume that the U.S. banks collectively have the wherewithal to underwrite the raising of the Debt Ceiling.  As Jamie Dimon of JP Morgan and other leading bankers meet with Mr Obama today, certainly that will be on the agenda of discussion. 
 
In August 2011 the U.S. banks collectively had over $1.45 Trillion, and enabled that raise.  It will be good news to hear what they may be willing to underwrite this time.  Certainly the money has swirled around the system, enabling people buy the houses and cars and television sets and sofa sets and iPads which they love, and swelled the coffers of companies such as Apple and Oracle and billionaire Carl Icahn.  All that is really needed is for such companies and people to continue to create more employment in the private sector, and for government to continue to serve the people effectively.
 
The lifting of the shutdown would be great, and would be welcome for people who are visiting America, so that their trips are joyful in seeing the monuments they have come to see. 
 
A rethink on what has led to the shutdown can only help the goodwill of America, and the prosperity of her own people.
 
Kind regards,
Duru-darshan.
 
 
 
 
 
 

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