History may rhyme, it doesn’t repeat itself’ (Twain). Or that, “the only thing that is constant is change” (Heraclitus). These two famous quotes apply to the financial markets as much as anything.
The way the mid and small caps in the Indian markets are trading gets to sense the equity markets are either at the start of a bull run breaking out higher or are on the verge of a break down lower.
Just correlate with layers 2007 and early 2008
- Sub Prime issue was lingering in the mouths of traders for three years before the pain struck. Now, Greece is lingering for five years. Markets did not price in the Sub Prime issue. Now markets have under-priced Greece exit.
- When the major markets peaked and languishing in ranges we have seen for about three months a surge in Indian equities (along with mid and small peaking to astronomical levels) then eventually Indian equities crashed.
Ok, So the Greece just voted in a landslide to reject further austerity (Good for them). So nobody knows what’s going to happen next. There nothing like a financial crisis to get adrenaline pumping, Might be the chances of Grexit be higher now, but I would not dig in to detail. Would rather move away to the maverick author Nassim Nicolas Taleb who made the points for Bailouts and Prevailing culture in the financial domain
- The main difference between government bailouts and smoking is that in some rare cases the statement “This is my last cigarette “holds true
- The difference between banks and Mafia: banks have better legal regulatory expertise, but Mafia understands the public opinion. Or you can say”Give a man a gun and he can rob a bank. Give a man a bank and he can rob the world”
Continue reading “Greece Bailout Yes or No”
The endeavour below is to – explain a very complicated circular trading (round tripping algorithm) nonsense that became a crisis – in a simple way.
MARY is the proprietor of a bar in Dublin. She realises that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronise her bar – she will go broke.
To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later.
She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).
Word gets around about Mary’s ‘drink now, pay later’ marketing strategy and, as a result, increasing numbers of customers flood into Mary’s bar. Continue reading “Greece Crisis in simplified terms”
So it appears the Eurozone crisis has finally crossed the Rubicon. Greece is going to default on Monday and this likely will put in motion its departure from the currency union. The Eurozone as we know it may soon cease to exist.
Was this breakup inevitable? Many observers would say yes. The Eurozone, after all, is not an optimal currency area and therefore likely to create problems. Martin Feldstein, for example, in 1997 wrote this in Foreign Affairs:
Monnet was mistaken…
If EMU does come into existence, as now seems increasingly likely, it will change the political character of Europe in ways that could lead to conflicts in Europe…What are the reasons for such conflicts? In the beginning there would be important disagreements among the EMU member countries about the goals and methods of monetary policy. Continue reading “The Inevitable Grexit”
The problems of Greece is not new, long before the financial crisis hits the global economy in 2008-09, Greece was in trouble. The combination of structural economic weakness and high structural deficits were compounded by a culture where tax evasion and corruption are both widespread and, to a large extent, acceptable and Euro became the scapegoat. The Euro is a scapegoat. Hard currency is not inherently bad. The real problems are: Continue reading “Is Greece a failed state now”