We are approaching for year end. Year end closings are very vital to the technical analysis and in forecasting market movement of following year. Year 2011 closing would be of significant importance in analysing US and European markets. If year closes around these levels for most of the markets then it gives quite contrary signals. We have Asian markets India, China, Hongkong, Japan and Singapore mainly in firm downtrend and have corrected more than 25% this year. On other hand, you have US quite firmly holding upper levels and Europe mostly in middle, have given up tops but showing some resilience at current levels.

This makes it difficult to forecast. Even fundamentally, we have no clear signals weather Europe would be able to solve its problems, Would US cut more fiscal deficit or would resort to print more? In Asia, too, we are passing through difficult situation. Japan’s debt has kept rising and growth falling, China just passed through inflationary period and real estate bubble is still unanchored, at home-policy paralysis and governance deficit continues to widen. G-20, which constitutes 80% of GDP are in one or other(fiscal or monetary easing) problems.

These all nations has tried their best to contain the crisis but they have miserably failed. More to that, world has shot all the bullets they had to fight the crisis. The question looming large is, if crisis worsens as expected, would these nations just surrender and let markets fall in their natural course? Or would reuse old bullets(printing more) which hardly works.

Let me share thoughts of some prominent figures to come near to the conclusion

Last 10 economic advisors to president in US were interviewed on this subject and they said next crisis will “ Dwarf 2008 “. – Imagine the magnitude of crisis they are expecting. In 2008, everything had come to standstill. We were just hours away from wide spread Financial Collapse ( Banks go bankrupt, accounts are freezed, bank holidays are declared). These experts are seeing far severe crisis in coming years which will DWARF2008.

IMF chief recently warned “Beware of the clouds that are accumulating at the European skies and make sure that you have enough reserves, enough resistance, enough cushion to actually weather the storm ”. She also said “And what we see is stalled growth in advanced economies with potential recession in some of the European Union countries, including my own country of course ( France), and channels of contagions which can be different”.

In their coming Financial Stability report, IMF is expected to lower world GDP forecast to sub 4% from 4.5% earlier.

After having gone through such reports and analysing technical in similar context, I expect two outcomes next year.

1. World experiences severe depression.

If Europe fails to reach an amicable resolution-European banks default-Spain and Italy defaults as Greece did-Germany opts out from Euro zone,

US forced to put severe austerity measures-China, Japan stops buying US treasury bills, Derivatives bubble blasts( Which caused this crisis at first hand and from 2008 till last year it has increased 40%). According to BIS, size of derivatives market is $600+ tn. More than 10 times of world GDP. These derivatives are speculative bets largely among banks and financial institutions on interest rates, mortgages etc..

China’s growth slows down as expected and fears of real estate bubble and resultant inflationary period re emerges,

India’s reform process halts, rupee devalues further and inflation ghost keeps dancing — world is sure to get into depression.

These fears are real, indeed real!!. Keep close watch, these are probable events of next year.

2. World experience modest recession followed by massive printing by US, Europe or by G-20 as coordinated measure.

If Europe continues to fight with the problem but nothing moves and finally Europe decides to give free hands to European Central bank to print massive Euros to monetize the debt. During continuing fight, world markets will fall further and after massive printing markets will adjust with the infused liquidity.

US resorts to QE 3 – recently Q3 GDP was revised to 1.8% from 2% and you must be knowing that US revised last year GDP from 3% to just 1% in second quarter of this year. You may have ugly GDP numbers in next few quarter sending Dow to 9000 and then FED comes to an aid with massive QE3. Or situation in US and Europe continues to deteriorate and G-20 decides to take coordinated actions and they decide to print more.

Put all thoughts together, I can conclude …

We have very difficult 2012. In first half, we may go through severe fall in all markets specially commodities, energy and precious metals and US, Europe equity markets. In second half or late 2012, FED and ECB prints unprecedented massive money re inflating everything under the sun.

This time it is very likely that when US and European markets crashed, funds will to India and China because these markets are quite cheaper to their European counterparts and even passing through crisis India-China will keep growing around 6 and 7 percent respectively against 1% or minus GDP growth in US and Europe.

I would advise to remain away from markets for next few days. Let market settle out and decide its direction.

Subscription of Equity Trading Advisory Services for month of Jan, 2012 closes on 31st Dec, 2011. Subscription rates are increased to Rs. 3000/per month from current Rs. 2500/per month from 1st Jan, 2012. Take the benefit, subscribe early. Click on the link to know more about Equity Trading Advisory Services. Link: http://investmentacademy.wordpress.com/2011/09/22/new-product-launch-equity-trading-advisory-services/

Best Efforts

Dhaval

Blog: http://investmentacademy.wordpress.com/

E-mail: academyofinvestment

Please find the performance of Calls initiated on Equity, Commodity and Forex markets in last 3 days. Total absolute gain of last 3 days calls reached to Rs. 1,52,875 .

Keep in mind while analysing performance, Calls were generated during most volatile and direction less period of market.

Except LT, even stopped out calls have given enough opportunity to book profit on higher level. Like ABAN reached to 364.50 against target of 366 before it was stopped out. I think, traders are wise enough to book profit near before target.

Let me also convey the message, which I have conveyed to those, whom I have been sending calls through SMS that Subscription charges are going to increase from 1st Jan, 2012 to Rs. 3000/month from current Rs. 2500/month. Those subscribing before 1st Jan, 2012 will get the benefit of saving Rs. 500.

Similarly, Quarterly charges would also increase to Rs. 8000 from current Rs. 7000 per month.

Hurry to subscribe before 1st Jan, 2012.

Free Calls Performance:

Best Efforts

l

Dhaval

Blog: http://investmentacademy.wordpress.com/

BARODA | Mob No. 91 9825528815

Indian Rupee hit the target of 54, I had given in last letter titled “ Why Indian Rupee falling precipitously??” (Link: http://investmentacademy.wordpress.com/2011/09/24/why-indian-rupee-falling-precipitously/ ).

I had also mentioned reasons for rupee’s sharp fall like Fiscal Deficit, Trade Deficit and bearish sentiments among Foreign Investors caused by hyperinflation and mismanagement of governance.

Rupee has fallen close to 23% in value from around 44 to today’s high of 54.28 as I am penning this article.

Rupee has almost discounted major relevant factors. Some of the factors are still not publicly discussed in financial media but are of high relevance are our Debt to GDP ratio. Analyst may give you comfort that it is well within range and we need not to worry about it. Out debt is mostly internal and manageable. But, the other factor is not discussed about until last 2 days back, you had IIP data for the month of Oct. It came -5%, is GDP. You have now analysts talking of 7% GDP this year, which I forecasted last year only. Situation is far worse than estimated, we may grow at just 6% and even may be below 6% in years to come. You look at growth in GDP and compare it with Govt borrowing in all those years, you would realise last 3-4 years growth was sustained by Govt spending and there is no real, participative- inclusive growth, Govt is talking about.

My regular readers know that I had been raising concerns on this since long that real economy is slowing. Since 2008, Govt has been borrowing close to 4.5 lac crore from the market to finance different budget schemes. Govt earns close to 6-6.5 lac crore revenue( as of 2009-10 budget estimates). From that, It spends 2.6 lac crore towards interest payment of past borrowing. Govt is left with just 3.5 to 4 lac crore real revenue to spend in economy. Since, it is not enough, Govt borrows close to 4.5 lac crore to match up with expenditures bringing total receipts to close to 10 lac crore.

If YOU go to bank and say, hey, my total income is Rs.10. Rs.6 from salary, Rs, 4 from borrowing and I spend Rs. 2.5 towards interest payment alone, leaving me with real income of Rs.3.5 and I want to borrow another Rs. 4 from you every year. Would bank lend you?? You would be chucked off. But, when it comes to Govt, standard changes and Govt keeps on borrowing until bond investors refuse to buy or asks for higher interest rates. Greece, Portugal, Italy, Ireland, Iceland and Spain have passed through similar situation.

If in this budget, Mr. Finance Minister does not alter his borrowing course and keeps spending without generating massive revenue through conventional and non conventional sources, We are seriously doomed for years to come. We can be another Greece.

In every Quarterly meet, RBI points out at Insane fiscal management and explains that without fiscal deficit control, measures taken by RBI would not produce intended results.

If I put current statistics in picture, our GDP for year 2010-11 has come at 48.77 lac crore and combined liabilities of Centre and State stands at 51.12 lac crore. Our Debt/GDP comes at staggering 104%.

These are all reasons why rupee was falling and Why I expected it to fall to 54 level.

What I expect in short term?

In short term, rupee can stay around this level. Shortly, it should retrace some of its gain falling to 51.50. None of the above mentioned factors(Govt Fiscal deficit and trade deficit) can be reversed in short term, Hence, pressure would continue on rupee.

Next steps taken by Govt would be of prime importance including revenue part of budget and other non budget measures to generate revenue. Govt borrowing program would be watched closely.

I expect this budget to be real tough. Govt would take numerous measures to generate higher revenue.

Best Efforts

Dhaval

Blog; http://investmentacademy.wordpress.com/

I gave 2 calls today. First advised to buy ABAN and later ICICI Bank. Both calls were given when market was down to the lowest point and almost all analyst on Financial news channel were calling for more downside and had no hope for recovery.

Please look at the performance…

Calls given are positional unless stopped out on closing basis.

Today’s open gain is close to more than 2 times of monthly subscription of Rs. 2500/-. Hurry to subscribe…

Best efforts

Dhaval Shah

I have restarted free calls service for a brief period (for next 4 days). Those who are not receiving, can send their Mobile number to me( can also SMS on 98255 28815).

This service is limited to Investors residing in India only.

I will post update performance of calls given in a day, end of the day.

Out of the Box Letter

Some of the Investors did not receive yesterday’s out of the box letter. I am forwarding the same for their reference.

Date: 12-12-2011

Dear Investor

I have been writing since long on state of economic situation of USA. Please go through one of the eye opening article identifying key problems of USA economy and expected outcomes if course of action not redirected timely.

American privilege rots an empire from within

Well-paid professionals are contributing to U.S. economy’s demise

By Andy Xie

BEIJING ( Caixin Online ) — A rising empire rewards people who contribute to its growth and invest in its future. The empire’s decline begins when certain members of society are over-rewarded by means of privileges, and the empire’s money is wasted on outdated endeavors.

Today, America rewards the wrong people and spends disproportionately on projects of the past. Symptoms of the flawed incentive system in the U.S. economy include a massive fiscal budget deficit, high unemployment rate, crumbling infrastructure and a failing basic education system.

International competition isn’t threatening the United States, but internal problems are. And unless the United States tackles its wrong-way incentive system and spending spree soon, its gradual decline will continue until it eventually joins the likes of Latin America.

A serious effort to correct the U.S. course started in earnest a few months ago during a congressional fight over raising the national debt ceiling. Democrats and Republicans eventually agreed to mandate $1.2 trillion in budget cuts over 10 years through a “super” committee, which was assigned to work out details.

If the super committee failed to reach an agreement, the cuts would be proportionally slapped on future civilian and defense expenditures, with health care and social security programs exempted. Guess what happened? The committee failed to reach a compromise, and thus the consequences will be felt after mandated cuts begin in 2013.

Next year’s election may change the political landscape: One party may again dominate Congress and the White House, leading to a different outcome. Hence, the super committee’s failure isn’t consequential on its own, but it does provide ammunition for election campaigns, and offers another example of America’s dysfunctional political system.

Further, the cuts, even if successful, would not bring the U.S. government budget under control. The total amount on the chopping block is equal to less than one year’s deficit. That’s not very ambitious for a 10-year program.

Against this backdrop, the United States is experiencing a full-blown economic crisis. The nation’s real unemployment rate, which includes idled workers who’ve given up looking for jobs, is 18%. One-tenth of the nation’s properties have been foreclosed since 2007, and another tenth have negative equity. The poverty rate is more than 15%, and another 20% of the population is struggling on incomes near the poverty line. Looming over these grim statistics is the federal government’s budget deficit, which is equal to about 10% of the nation’s GDP.

Obama Calls on Republicans to Extend Tax Cuts

In his weekly address U.S. President Barack Obama is calling on Republicans to quote "stop the games" and extend the payroll tax cut. Video courtesy of Reuters.

The breakdown began with the 2008 global financial crisis, which was like a dam break. Problems had been accumulating for years, and a debt bubble had merely temporarily covered up problems. Now, the U.S. government borrows roughly 40 cents for each dollar spent.

Alan Greenspan, a former U.S. Federal Reserve chairman, was mainly responsible for creating the bubble. The fiscal balance was later wrecked by rising health care costs, social security payments and defense spending along with veteran’s benefits. Spending on these three items alone increased a combined 107% between 2000 and 2010, while nominal GDP rose only 45%, to $2.6 trillion — substantially more than total fiscal revenues. If spending on these three items had grown at the same pace as nominal GDP, the fiscal deficit would be less than half of what it is today.

How bad is it? Excessive health care spending tells part of the story, eclipsing the U.S. trade deficit in seriousness. Some 17% of the nation’s GDP is spent on health care — twice as much as in other developed economies — with about half paid by federal and local governments, and the other half covered by businesses and individuals. Unless these costs are brought under control, America will never resolve its fiscal crunch.

Ironically, excessive health care spending hasn’t produced a healthier population. The United States actually fares worse than other developed countries in areas such as life expectancy, diabetes and cardiovascular disease.

Unlike Europe and Japan, the United States has a growing population. So it could count on growth to solve problems. Its agriculture and mining industries are booming. And it has many competitive companies in industries in areas such as aerospace and pharmaceuticals. But it’s weighed down by excessive overhead costs such as health care, social security and defense.

The Occupy Wall Street movement drew attention to what organizers said was a huge gap between the 99% of the nation’s citizens whose lives are out of synch with the 1% wealthiest Americans.

The top 1% control about one-fifth of the nation’s income and two-fifths of the wealth. The top 10% take in about half of all income and have accumulated 80% of the wealth. Meanwhile, about 80% of Americans merely get by and have very little wealth available as a cushion for when personal finances turn down.

The gap between the rich and the rest, which has roughly doubled over the past two decades in the United States, is an inevitable result of competition. Of course, competition motivates people, and inequality is often a price worth paying if it motivates people to make the pie bigger. All could be better off with a bigger pie, even if inequality worsened. Limiting competition improves equality but decreases incentives for people to work. A society needs to make a trade-off between the two.

Inequality worsens in an environment of limited competition, as inefficiency and social friction rise. Examples of this phenomenon include the Philippines, where few families rule through monopolistic practices. The country has become poorer relative to others over the past two decades, while inefficiencies are supported by Filipinos who work abroad and send money home.

Many Latin American countries fall into this category, too, and the United States is heading that way.

Fat paychecks

Most of America’s well-to-do are corporate executives, doctors, lawyers, bankers and the like. Their rewards are tied to positions, not performance. Corporate managers are paid a lot more than average employees, even if they’re not worth it.

For example, one report said salaries for big U.S. company CEOs have jumped to 343 times the average pay for their own employees, up from 42 times in 1980. Of course, a CEO whose work generates a lot of value deserves a decent slice. But look at the stock market: Common shareholders have done terribly over the past decade. How can CEOs justify millions in take-home while shareholders — their bosses in theory — do so poorly. I’m sure the compensation consultants can come up with good excuses. But this has been going on for years.

Of course, when CEOs make tens of millions of dollars, their immediate subordinates can make millions. These steep compensation levels for executives are a major reason for rising inequality in the United States. And judging from stock performances, many executives don’t deserve fat paychecks.

When big companies started rising in the early 20th century and managers, not shareholders, took control, theorists tried to explain why it was efficient. But as managers essentially decide their own compensation, large companies eventually exist for the benefit of managers, not shareholders nor workers. A board of directors is supposed to look after shareholders’ interests, but in reality, most boards are stuffed with friends of the CEO.

Clash of the Frontrunners in Republican Debate

Surging frontrunner Newt Gingrich fought off heavy attacks in a presidential debate from Republican rivals who questioned his judgment. Deborah Lutterbeck reports.

One could argue that the economic failure of the United States is not the fault of but the sabotage of capitalism. Indeed, corporate governance is breaking down, and that’s one of the most important causes of America’s current economic troubles.

Likewise, reaping unmerited compensation are highly paid financial professionals. Salaries in the financial industry have risen despite the sector’s collapsing firms, shareholder wipe-outs and taxpayer bailouts. This industry certainly has worked neither for the economy nor shareholders.

Lawyers are another group of well-paid professionals who maintain the rule of law. But the United States suffers from an oversupply of lawyers, which forces some to look for ways to circumvent or take advantage of the system. The most extreme example is the professional niche of ambulance chasers who are busy seeking ways to sue hospitals, doctors and insurance companies. High-end lawyers working for corporations are busy helping corporate managers maximize benefits without breaking rules. How’s that for no added value?

Now, we come to health care. Doctors and hospitals in the United States charge more for their services than in other countries, yet the U.S. population’s health condition proves more spending doesn’t yield better results. Neither does competition work in the health care market, as the information asymmetry between patients and doctors seriously decreases the effectiveness of market competition in allocating resources.

Because patients are vulnerable and must accept what the doctors say, the health care market has a naturally inflationary tendency. Doctors are biased toward expensive treatment. Prices rise easily in a system in which patients are insured and, hence, not resistant to high prices. Of course, insurance premiums rise to reflect costs, too.

In other developed countries, the runaway tendency of health care costs is checked by government limits on doctor charges to ration services. While many argue the United States delivers better services in some areas, isolated examples can’t justify a system that costs twice as much and delivers a less healthy population.

Growing old

To understand the American government’s fiscal trouble, one must study the American Association of Retired Persons, which has more than 40 million members. They constitute a huge bloc of voters in national elections, and their biggest financial concerns are health care and social security.

U.S. Hands Over Iraqi Base

US forces leave a strategic base on the Euphrates River, part of plans to withdraw all but a handful of soldiers from Iraq by the year’s end. Andrew Raven reports.

Some 45% of federal expenditures go toward health and social security programs. This slice of the spending pie is expected to rise to 51% of total expenditures by 2016. Unless something happens that suddenly disrupts this upward spiral, these two parts of the fiscal budget will bankrupt the country.

Meanwhile, the federal government spends a mere 3% on education. Local governments fund most education services through property taxes, yet it’s shocking to see how little the federal government supports youths as opposed to retired people.

In addition to rewarding the right people, an empire rises by investing in the future. The United States went on a massive investment boom in late 19th and early 20th centuries, creating a superpower. An infrastructure program in the 1950s and information technology investment in the 1970s strengthened its superpower status after World War II.

But America has moved in the opposite direction over the past two decades. Its crumbling infrastructure is a sign that money has been diverted to support retirees. The number of wealthy Americans willing to support charity in the pattern set by the likes of Bill Gates and Warren Buffett are dwindling.

The financial crisis in 2008 and the current fiscal crisis are merely symptoms of deep structural problems in American society. Only a popular awakening and strong leadership can solve these problems and prevent the United States from following calling the International Monetary Fund and asking for a bailout.

Historians have all sorts of theories on why the Roman Empire fell, blaming everything from religion to barbarians. My take is that every empire in history eventually rots from within when privilege, not contribution, becomes the basis for compensation.

The children of the ones who contributed take advantage of their status as the offspring of the empire-builders. They can live comfortably, enjoying easy rewards, even as their neighbors lose jobs and homes. We’re seeing the consequences of this phenomenon today in America.

Read this commentary on Caixin Online.

The author is a Board Member of Rosetta Stone Advisors

Regards

Dhaval

I have been writing since long on state of economic situation of USA. Please go through one of the eye opening article identifying key problems of USA economy and expected outcomes if course of action not redirected timely.

American privilege rots an empire from within
Well-paid professionals are contributing to U.S. economy’s demise
By Andy Xie
BEIJING ( Caixin Online ) — A rising empire rewards people who contribute to its growth and invest in its future. The empire’s decline begins when certain members of society are over-rewarded by means of privileges, and the empire’s money is wasted on outdated endeavors.
Today, America rewards the wrong people and spends disproportionately on projects of the past. Symptoms of the flawed incentive system in the U.S. economy include a massive fiscal budget deficit, high unemployment rate, crumbling infrastructure and a failing basic education system.
International competition isn’t threatening the United States, but internal problems are. And unless the United States tackles its wrong-way incentive system and spending spree soon, its gradual decline will continue until it eventually joins the likes of Latin America.
A serious effort to correct the U.S. course started in earnest a few months ago during a congressional fight over raising the national debt ceiling. Democrats and Republicans eventually agreed to mandate $1.2 trillion in budget cuts over 10 years through a “super” committee, which was assigned to work out details.
If the super committee failed to reach an agreement, the cuts would be proportionally slapped on future civilian and defense expenditures, with health care and social security programs exempted. Guess what happened? The committee failed to reach a compromise, and thus the consequences will be felt after mandated cuts begin in 2013.
Next year’s election may change the political landscape: One party may again dominate Congress and the White House, leading to a different outcome. Hence, the super committee’s failure isn’t consequential on its own, but it does provide ammunition for election campaigns, and offers another example of America’s dysfunctional political system.
Further, the cuts, even if successful, would not bring the U.S. government budget under control. The total amount on the chopping block is equal to less than one year’s deficit. That’s not very ambitious for a 10-year program.
Against this backdrop, the United States is experiencing a full-blown economic crisis. The nation’s real unemployment rate, which includes idled workers who’ve given up looking for jobs, is 18%. One-tenth of the nation’s properties have been foreclosed since 2007, and another tenth have negative equity. The poverty rate is more than 15%, and another 20% of the population is struggling on incomes near the poverty line. Looming over these grim statistics is the federal government’s budget deficit, which is equal to about 10% of the nation’s GDP.
Obama Calls on Republicans to Extend Tax Cuts
In his weekly address U.S. President Barack Obama is calling on Republicans to quote “stop the games” and extend the payroll tax cut. Video courtesy of Reuters.
The breakdown began with the 2008 global financial crisis, which was like a dam break. Problems had been accumulating for years, and a debt bubble had merely temporarily covered up problems. Now, the U.S. government borrows roughly 40 cents for each dollar spent.
Alan Greenspan, a former U.S. Federal Reserve chairman, was mainly responsible for creating the bubble. The fiscal balance was later wrecked by rising health care costs, social security payments and defense spending along with veteran’s benefits. Spending on these three items alone increased a combined 107% between 2000 and 2010, while nominal GDP rose only 45%, to $2.6 trillion — substantially more than total fiscal revenues. If spending on these three items had grown at the same pace as nominal GDP, the fiscal deficit would be less than half of what it is today.
How bad is it? Excessive health care spending tells part of the story, eclipsing the U.S. trade deficit in seriousness. Some 17% of the nation’s GDP is spent on health care — twice as much as in other developed economies — with about half paid by federal and local governments, and the other half covered by businesses and individuals. Unless these costs are brought under control, America will never resolve its fiscal crunch.
Ironically, excessive health care spending hasn’t produced a healthier population. The United States actually fares worse than other developed countries in areas such as life expectancy, diabetes and cardiovascular disease.
Unlike Europe and Japan, the United States has a growing population. So it could count on growth to solve problems. Its agriculture and mining industries are booming. And it has many competitive companies in industries in areas such as aerospace and pharmaceuticals. But it’s weighed down by excessive overhead costs such as health care, social security and defense.
The Occupy Wall Street movement drew attention to what organizers said was a huge gap between the 99% of the nation’s citizens whose lives are out of synch with the 1% wealthiest Americans.
The top 1% control about one-fifth of the nation’s income and two-fifths of the wealth. The top 10% take in about half of all income and have accumulated 80% of the wealth. Meanwhile, about 80% of Americans merely get by and have very little wealth available as a cushion for when personal finances turn down.
The gap between the rich and the rest, which has roughly doubled over the past two decades in the United States, is an inevitable result of competition. Of course, competition motivates people, and inequality is often a price worth paying if it motivates people to make the pie bigger. All could be better off with a bigger pie, even if inequality worsened. Limiting competition improves equality but decreases incentives for people to work. A society needs to make a trade-off between the two.
Inequality worsens in an environment of limited competition, as inefficiency and social friction rise. Examples of this phenomenon include the Philippines, where few families rule through monopolistic practices. The country has become poorer relative to others over the past two decades, while inefficiencies are supported by Filipinos who work abroad and send money home.
Many Latin American countries fall into this category, too, and the United States is heading that way.
Fat paychecks
Most of America’s well-to-do are corporate executives, doctors, lawyers, bankers and the like. Their rewards are tied to positions, not performance. Corporate managers are paid a lot more than average employees, even if they’re not worth it.
For example, one report said salaries for big U.S. company CEOs have jumped to 343 times the average pay for their own employees, up from 42 times in 1980. Of course, a CEO whose work generates a lot of value deserves a decent slice. But look at the stock market: Common shareholders have done terribly over the past decade. How can CEOs justify millions in take-home while shareholders — their bosses in theory — do so poorly. I’m sure the compensation consultants can come up with good excuses. But this has been going on for years.
Of course, when CEOs make tens of millions of dollars, their immediate subordinates can make millions. These steep compensation levels for executives are a major reason for rising inequality in the United States. And judging from stock performances, many executives don’t deserve fat paychecks.
When big companies started rising in the early 20th century and managers, not shareholders, took control, theorists tried to explain why it was efficient. But as managers essentially decide their own compensation, large companies eventually exist for the benefit of managers, not shareholders nor workers. A board of directors is supposed to look after shareholders’ interests, but in reality, most boards are stuffed with friends of the CEO.
Clash of the Frontrunners in Republican Debate
Surging frontrunner Newt Gingrich fought off heavy attacks in a presidential debate from Republican rivals who questioned his judgment. Deborah Lutterbeck reports.
One could argue that the economic failure of the United States is not the fault of but the sabotage of capitalism. Indeed, corporate governance is breaking down, and that’s one of the most important causes of America’s current economic troubles.
Likewise, reaping unmerited compensation are highly paid financial professionals. Salaries in the financial industry have risen despite the sector’s collapsing firms, shareholder wipe-outs and taxpayer bailouts. This industry certainly has worked neither for the economy nor shareholders.
Lawyers are another group of well-paid professionals who maintain the rule of law. But the United States suffers from an oversupply of lawyers, which forces some to look for ways to circumvent or take advantage of the system. The most extreme example is the professional niche of ambulance chasers who are busy seeking ways to sue hospitals, doctors and insurance companies. High-end lawyers working for corporations are busy helping corporate managers maximize benefits without breaking rules. How’s that for no added value?
Now, we come to health care. Doctors and hospitals in the United States charge more for their services than in other countries, yet the U.S. population’s health condition proves more spending doesn’t yield better results. Neither does competition work in the health care market, as the information asymmetry between patients and doctors seriously decreases the effectiveness of market competition in allocating resources.
Because patients are vulnerable and must accept what the doctors say, the health care market has a naturally inflationary tendency. Doctors are biased toward expensive treatment. Prices rise easily in a system in which patients are insured and, hence, not resistant to high prices. Of course, insurance premiums rise to reflect costs, too.
In other developed countries, the runaway tendency of health care costs is checked by government limits on doctor charges to ration services. While many argue the United States delivers better services in some areas, isolated examples can’t justify a system that costs twice as much and delivers a less healthy population.
Growing old
To understand the American government’s fiscal trouble, one must study the American Association of Retired Persons, which has more than 40 million members. They constitute a huge bloc of voters in national elections, and their biggest financial concerns are health care and social security.
U.S. Hands Over Iraqi Base
US forces leave a strategic base on the Euphrates River, part of plans to withdraw all but a handful of soldiers from Iraq by the year’s end. Andrew Raven reports.
Some 45% of federal expenditures go toward health and social security programs. This slice of the spending pie is expected to rise to 51% of total expenditures by 2016. Unless something happens that suddenly disrupts this upward spiral, these two parts of the fiscal budget will bankrupt the country.
Meanwhile, the federal government spends a mere 3% on education. Local governments fund most education services through property taxes, yet it’s shocking to see how little the federal government supports youths as opposed to retired people.
In addition to rewarding the right people, an empire rises by investing in the future. The United States went on a massive investment boom in late 19th and early 20th centuries, creating a superpower. An infrastructure program in the 1950s and information technology investment in the 1970s strengthened its superpower status after World War II.
But America has moved in the opposite direction over the past two decades. Its crumbling infrastructure is a sign that money has been diverted to support retirees. The number of wealthy Americans willing to support charity in the pattern set by the likes of Bill Gates and Warren Buffett are dwindling.
The financial crisis in 2008 and the current fiscal crisis are merely symptoms of deep structural problems in American society. Only a popular awakening and strong leadership can solve these problems and prevent the United States from following calling the International Monetary Fund and asking for a bailout.
Historians have all sorts of theories on why the Roman Empire fell, blaming everything from religion to barbarians. My take is that every empire in history eventually rots from within when privilege, not contribution, becomes the basis for compensation.
The children of the ones who contributed take advantage of their status as the offspring of the empire-builders. They can live comfortably, enjoying easy rewards, even as their neighbors lose jobs and homes. We’re seeing the consequences of this phenomenon today in America.
Read this commentary on Caixin Online.
The author is a Board Member of Rosetta Stone Advisors

I WISH HAPPY DEEPAWALI TO ALL OF YOU.

MAY THIS AUSPICIOUS OCCASION BRINGS LOTS OF HAPPY WEALTH, HAPPY HEALTH AND HAPPY MOMENTS…

Dhaval, Jalpa, Khushi Shah
Baroda

WHY INDIAN RUPEE FALLING PRECIPITOUSLY…..

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Dear Investor

I have been writing since last 3 months consistently pressing on my view that Dollar will go up and rest everything( i.e. everything be it Equity, Commodity, Precious metal or other currencies) will collapse miserably.

Today, we are witnessing the same since last 1.5 months, every asset class is crashing against dollar.

Refer articles

A Crash in Progress – http://investmentacademy.wordpress.com/2011/02/04/a-crash-in-progress/

Quick Update on A Crash in Progress – http://investmentacademy.wordpress.com/2011/02/12/a-quick-update-on-a-crash-in-progress-2/

Gold, Silver to correct 20-30%, Real Estate 40%, Commodities and Metals to follow – http://investmentacademy.wordpress.com/2011/03/15/gold-silver-to-correct-20-30-real-estate-40-commodities-and-metals-to-follow/

And few more articles, where I gave my detailed views on reasons of market correction and with precise targets.

In very short period of 2 months, Indian rupee fell sharply from Rs. 44/$ to Rs. 49.93 / $. It has created havoc amongst Exporters, Importers, Traders and Investors.

There are various reasons for that let us go through one by one

Let me take Technical parameters first..

Rupee has been forming base since April, 2010 around 44 level. And, below chart would clear much of your doubts that Why it went up ballistic Rs. 6 from 44 level to the level of 50. This is single most important reason for rupee’s sudden fall in value.

RBI vs Chinese Central Bank

To cool inflation, RBI raised interest rates but did not manage the rupee well. ( Your analyst was among the first to predict interest rate rise ). India is net importer. We import 30% more than what we export.

It has been evident since long that Commodity prices are up and going up more, it was RBI’s duty to keep check on rupee to ensure sustained exports and moderate inflation.

China has kept its currency tight under control and that has helped China to weather inflationary wave smoonthly.

Fiscal Disaster

For most part of this, Indian Govt is responsible. I had been warning since last 2 years thatWe need to keep our house in order. You can refer my article (http://investmentacademy.wordpress.com/2010/01/28/fiscal-disaster/ ) . It is seer insane mismanagement of finances which has brought us to this stage. Since 2008, Govt has been borrowing close to 4 to 4.5 lac crore from market for different budget schemes, it is close to 50-60% of Govt’s annual revenue.

It kills economy 2 ways, it keeps economy up artificially where real demand is replaced by Govt’s artificial temporary demand and It negates the effect of rise in interest rate.

I shall update this issue in detail next month.

What I Expect in Near term?

I feel Rupee should retrace some of its rise from recent high of 49.93. Should consolidate around 47.5-48 in short term and should head up again to conquer previous highs of 51.17.

Reasons are very apparent. Some rebound in stock markets and commodities from recent sell off will give respite to rupee for some time and then renewed Global sell off should push down all markets(Equity, Commodity , Bullion) and rupee ,too, will fall again sharply to lower levels of 52 and might be 54.

Regards

Dhaval Shah

Blog: http://investmentacademy.wordpress.com/

Mob: 98255 28815

EQUITY TRADING ADVISORY SERVICES

Dear Investor

I have been writing about Markets since last 4 years and accurately forecasting about Market movements that Include World Economy and Markets, Indian Economy and Markets, Bullion, Commodities and Currencies.

In fact, these are intertwined markets. Movement of each market unintentionally affect others and their combined effects decides the future course of Economies.

Since long, there was a demand and even my personal interest to focus and forecast Indian markets more accurately and even to generate trading calls. This required me to focus more on several traditional and non traditional, technical and fundamental tools. That eventually ended up in a model designing which takes into consideration various TECHNOFUNDAMENTAL parameters and generates a call for short term i.e. 1 to 2 week.

Model has been tested in live markets and has given excellent results. Since, I had tools which I used in predicting US fall out in 2008, buy call on Gold in July 2007, buy call on markets in March, 2009,and many more very accurately in last 4 years, helped me lot to design it accurately.

I welcome to all of you to test new product that is Equity Trading Advisory Services.

I have sent SMS to those whose numbers are with me. This service is free till 5th Oct. Those who want to avail free service can send me their cell no( via Mail or by SMS on 98255 28815).

About Equity Trading Advisory Services

It is unique service provided to Investors to generate decent returns from market.

Under this service

§ Client will receive Trading Calls on Equity Market only.

§ We intend to give Short Term Trading Calls only which should achieve target in time frame of 1 to 2 week.

§ We do not intend to give Intraday Calls under this service.

§ We may give Intraday calls as Bonus Calls at our discretion.

§ 4 calls would be given a week. ( It may exceed 4 depending on market condition but minimum calls a week would be 4)

§ Calls would be largely from NSE future segment so that client can participate in Cash and Future both depending on his risk appetite.

§ We warn not to participate in Options ( Call and Put ) on our calls unless specified so while giving call.

§ We recommend ideally Client should not risk more than 5-8% of Trading capital on each call at a time.

§ We may give bonus calls on other market segments like Bullion ( Gold and Silver), Commodities and Currencies at our discretion but not as part of Equity Advisory Trading Services.

Subscription Criteria

Client can subscribe to the service for 1 month to 3 months.

Charges

1 Month – Rs. 2500/-

3 Months – Rs. 6500/-

To Subscribe, You can send Cheque in the name of Dhaval Shah at B-8, Vallabh Darshan Society-2, Near Parivar Cross Roads, Waghodia Road, Vadodara.. PIN 390019 or can deposit direct into HDFC Bank account No. 0416 114 0000010.

Please send me mail or SMS with primary details after sending cheque or depositing in account like Name, Address and Mobile Number to facilitate us to generate receipt and courier it to your address.

Please refer Terms and Conditions before subscribing to the Service

Terms and Conditions

1. Calls would be given depending on market conditions.

2. Our best endeavour would be to give 4 calls a week but if market condition warrants, we may not generate a call.

3. Equity Trading Advisory services are our opinions based on our experience and that does not guarantee achievement of price target.

4. Clients participating in Equity Trading Advisory Services are participating at own risk and Equity Trading Advisory Services does not hold responsibility of any losses arising out of it.

5. Calls would be given via SMS only

6. Calls would be from NSE Future segment only. We may give calls outside NSE Future segment at our own discretion.

7. Equity Trading Advisory Services would not entertain any calls regarding justification of price target.

8. We recommend 5 to 8 % exposure only of your total capital to a call at a time.

9. If market opens gap up or gap down and because of that if stop loss does not trigger, it would be client’s risk.

10. Equity Trading Advisory Services has right to change the terms and condition as and when required.

11. Sometimes, Depending on Market Condition, We may need to flash exit from call before achievement of Price Target and/or before hitting Stop Loss.

12. Due to network congestion if SMS reaches delayed to your Mobile Number would not be our responsibility.

13. Subscription once paid would not be refundable.

Regards

Dhaval Shah

Office: Investment Academy, E 314, Kashivishweshwar Township Tower, 3rd Floor, Besides Airtel Office, Above Swagat Restaurant, Jetalpur Road, Vadodara.

Mobile : 98255 28815

Blog: http://investmentacademy.wordpress.com

Since last many months, I have been predicting big bang market correction. Though, I was early in predicting and markets had gone up 5 to 10% from my forecasted level. It took just 13 days for Dow to correct full 17%, Europe corrected even worse full 25% in just 8 days. Indian market has been correcting since Jan, 2011 and with recent slide, it totals to 20% fall.

Meaning, sometimes it seems to investors that Predictions are not working but when you look into totality, it does work, but sometimes with time lag.

Let us cover World Markets first..

2011 -12 = 2008 + Higher sovereign debt + Lower consumption + Lower Employment + Lower GDP + Higher Inflation + Lower Consumer Confidence + Lower Business Confidence

Yes, You read it right. That is the present state of world.

In last 2 years, We have converted even favourable factors of economic growth into unfavourable and worst into anti recovery, de growth factors.

Wealth is more concentrated in developed world than it was 2 years before. Govt declared huge stimulus packages and bailout packages to prevent “ Too big to Fail” from failing. All at the cost of common taxpayer who is becoming poorer.

In 2008, big banks and institutions failed, their balance sheet had shrunken. Govt was in bad condition but at least not worst in 2008. To stem the fall and prevent big banks and institutions, Govt decided to expand its balance sheet to improve the balance sheet of private organisations. Recent data showed significant increase in private bank assets in last 2 years vs loss to Govt.

In next 2 yrs, the same problems are going to resurface repeatedly. Too much debt was the problem and with all great research the solution found by great nations on earth is much more debt. US, Europe, UK and Japan are in the same boat. Crisis in Europe is getting more acute and hence it may remain focal point giving relief to US for some time.

Emerging markets are no different. But, the differentiator is still good growth with good consumption and favourable demographics.

I Wrote in Feb, 2011 (Link: http://investmentacademy.wordpress.com/2011/02/04/a-crash-in-progress/ )

For emerging markets inflation stability is No. 1 priority and as I had indicated in my last column, Govt in EM would rather prefer to give up 0.5 %—1% GDP growth to control inflation. Because they have ample experiences on hands, How out of control inflation leads to social unrest, civil wars and finally political changes???

You heard ditto same from RBI governor last month.

How do I see markets shaping up in next few months?

We have seen 1st phase of correction. For next 1 to 3 weeks, markets may remain cool with some short covering. And then 2nd leg should start.

I expect Dow to correct up to 9600 at least and 9000 in worst case. Indian Sensex should find support somewhere between 15500 -16000.

Gold

I believe Gold is in distribution phase. Gold has made high of $ 1814 and from there it has corrected to $ 1740 as I write this article. Gold should find support between 1660- 1690 and should rally back to $ 1814 and may go up to %1840-50. I do not see run away Gold prices from here onwards except Dollar index breaks down below 72.60 level.

I expect Gold to correct 25-40% in coming months. I will give levels as correction progresses.

Silver

I had been warning, do not touch Silver even with 10 feet pole. It is world’s most manipulated metal. It corrected rather abruptly some 25% in a week. I see correction to continue in silver further breaching $ 28 level in coming months.

Oil

Oil too should continue downside. Support lies around $ 68. In worst case, can come down to $60.50.

Agri Commodities

Agri Commodities should remain subdued in next few months. For next 1- 3 weeks, it may rise just to facilitate short covering. Another leg down is still on cards. But, remember, that would be the best time to load up Agri stocks and commodities.

China

It has not performed as per my expectation in last 6 months. Though, fundamentally, China is still growing strong in all parameters. Demand is still strong. Exports also hitting new benchmarks and consumption story also breaking new records.

Recently , many banks and institutions have forecasted 40 to 60% rally in china market in next few years. Some are expecting even 25% return by year end. I will write in detail about it shortly.

In all, Picture is not perfect. It will take time to turn the tide.

Until next time

Bye

Dhaval

Blog: http://investmentacademy.wordpress.com/