What difference does a year make? Plenty, the distressed would cry out in unison if they have any tears left to shed.
2007 will be remembered as a great year for Asian stock markets where share prices soared, some manifold. Most of the global stock markets reached their peaks last October and many investors have made money.
Ignoring the expanding credit crunch and various signs of distress in the US housing market, rich Asian investors also loaded up on US bonds and derivatives that they hardly knew. After all, the US officials, who were supposed to be in the know, repeatedly calmed the financial markets with soothing rhetoric.
'It is okay, the damage is minimal and manageable', they seem to indicate with confidence from time to time over the months until the bail out of Bear Stearns, in March 2008. Then the real panic and urgency set in.
But during the calmer months, investment gurus and stock analysts started to predict the turning of bear markets. Sure the markets will, since what comes down must go back up again, one day.
When, has become the trillion US dollars question. Timing is related to the sincere study of Changes. Not to analyses of markets or the reading of technical charts.
The investment gurus and hedge funds have since lost much money in the ensuing meltdown of markets. Three trillion US dollars have been lost during the mid September carnage in the global stock markets immediately after the failure and bail out of US investment banks, according to Bloomberg reports. Going by that reported figure, tens of trillions would have been wiped out over the year since last October.
That is the difference, a year makes.
Just like the Asian financial crisis ten years ago, no one actually knows how to contain the collateral damage and the dire consequences that can ensue. The current financial crisis and meltdown of markets looks beyond any help or rescue.
It appears too enormous to handle, notwithstanding the prevailing collective actions of central banks and governments, daily throwing tens of billions of dollars into the financial markets to quench the insatiable thirst of banks and financial institutions, similar to filling up an abyss or a black hole.
Governments also tried to shore confidence by buying up index linked stocks and local currencies beaten down by the exodus of foreign investors. Some changed rules in the markets or moved goalposts. They eventually stopped, realizing the folly of burning up foreign reserves and using hard cash to buy ever softening stocks.
Mr. Market has been and will always be bigger than any institution or country, unless it is a closed market. Partly reminisce of the previous crisis, a decade ago.
The American people were the first to suffer in the crisis. The housing meltdown caused million(s) to be forced out of their homes.
If you happen to hear of hundreds of thousands of the middle class and the poor living in cars and a similar number recently started to live in tents, you would not have been wrong to think that such phenomena only happens in a poverty stricken third world country. The charity food kitchens in the US have been inundated with ever growing queues of the poor, jobless and hungry. Retirees fear their nest eggs of stable income from stock dividends would dwindle or curtail.
If once considered the best, the safest and biggest corporations in the US and in the world can collapse like ten pins and dominoes, where can investors hide? And the scenario looks bleaker, each passing day.
Over in Asia, natural disasters and calamity seems to be order of the day in 2008. Earthquakes and floods had killed tens of thousands. Coupled with the meltdown of their stock markets, human suffering there can also be horrendous.
Suicides caused by huge losses in the battered stock markets have been reported in various parts of Asia, and may become more common, since many investors are currently numbed, distressed and in denial. What with the huge decimation of capital where prices of once good fundamental stocks can plummet 90% or more from their record highs in 2007.
Highly geared finance and property companies are also failing in numbers in various developed Asian countries because of the credit crunch. Hedge funds with big losses are beginning to close shop.
If well established reputable banks and financial institutions in the US can fail or have to be bailed out like Bear Stearns, Lehman Brothers, Indy Mac, Fannie Mae, Freddie Mac, American International Group and the latest casualty on September 25, 2008, Washington Mutual Bank, with most of their ordinary and preferred shares completely worthless, what investments can be considered really safe?
When an era of investment banking, where the most talented and world highest paid financial advisers worked, has been totally erased, does anyone seriously think that the impending mother of all bail outs, the US$ 700 billion, can really resolve the massive mess, created by those once gigantic fees churning titans that had failed, and condoned by regulators and central bankers alike who slept on the job?
Does anyone really has the handle on how many tens of trillions of US dollars worth of derivatives and credit default swaps that are out there in the markets? Who insures these insurers of credit defaults, when they are asked to pay up? How does the US$ 700 billion, miniscule by comparison, begin to resolve the insurmountable problems?
However, if left entirely on its own, the financial crisis may get full blown, and its aftermath could severely affect the lives of billions, all under heaven.
Therein lies the dilemma of continued government bail outs of banks and financial institutions considered too big to fail. The contagion has already spread to Europe with the bail outs of another mortgage lender bank in England and of a well known bank in Belgium announced today. US and European bankers like to lay massive gambles, don't they?
The only ones who probably stand to gain from this mother of all bail outs would be those affected bankers who can finally offload their ‘marked to make believe’ assets and toxic debts that no fool wants anymore, in exchange for good solid cash from the US government. That would also put a stop to auditors panting down their necks, like what the ‘watchdogs’ had done over the past few reporting quarters. (In case, these bankers want to pin blame on them for their own mistakes, the auditors were just doing their professional job.) If the banks have to write down these soured assets, more of them including the big Main Street ones could fail.
With this fresh lifeline, banks would start to lend to selective customers, probably those who do not really need the loans. Then again, perhaps you have not read recent news; hoarding cash is the current favorite pastime of bankers in US and in Europe.
Only with strict regulation and constant oversight, can the mother of all bail outs likely work.
Warren Buffett had exclaimed, ‘If Congress does not help, Heaven help us', after hearing about the wrangling over the intended massive bail out. It must have been a ‘do or die’ situation. Few seemed to understand the severity of this financial crisis of gigantic proportions; since it is a once in a lifetime thingy.
However the dice falls, eventually, her taxpayers have to bail the United States of America out of the massive mess created. Call it fate, destiny, or whatever!
Chaos and Unemployment, the Yi had warned last September. In a subsequent entry last October, I had also warned about the mountain imploding and advised on how to escape forthcoming disasters.
In such times of despair, the Chinese would exclaim, ‘Tian Zai, Ren Huo’ which translates as, ‘disasters from heaven bring ruin to the people'.
Earlier this year, the Yi warned that heaven and earth will close in September 2008 and the able goes into hiding. I had cleared all my stocks in May 2008, waiting patiently for the heaven secrets or omen to unfold.
In line with the guidance of the Yi, I am now watching heaven fall. So would those one to two million adversely affected and unfortunate US citizens who have no choice but to sleep out in the open, and living in misery. There would be much more suffering before the catastrophes and great panic finally ends.
If heaven does fall, what can be done by man on earth? Since Tao has already gone into recess all under heaven, even the ShenXian (Daoist deities and immortals) can do nothing much.
And how can heaven actually help, when it is about to fall?