Liquidity Trap

The U.S. dollar's continuous southward sliding due to rock-bottom interest rates and a Himalaya like budget deficit has become a boon for U.S. exporters,particularly for those technological giants.The Federal Reserve's rate-setting committee will keep the interest rate at where it is, at least for a 4-5 months.So,the Short-term rates will remain near zero till 18th September,which would drive up the prices of oil and gasoline.

Meanwhile,the situation in Japan looks gloomy as the country is devastated by 9.0 magnitude quake and tsunami followed by a nuclear power crisis,The Monetary Authority in Japan was in hibernation for the past twenty years as they didn't do anything to end the deflation.Recently,they had taken the correct measure and by August-September 2011,they will go for another round of easing,that is moving the long-term interest rate to downwards through additional purchase of Japanese government bonds,bypassing the bank note rule.

So,from a liquidity point of view,the additional asset purchase program by the Monetary Authority in U.S. and Japan looks workable to me.

Usual Disclaimer apply

Fiscal mismanagement

Standard and Poor's(S&P's) decision on the long-term credit outlook for the United States from stable to negative is a clear indication that the U.S. administration is in mid of a chaotic fiscal mismanagement,which could spark another financial crisis,if left unchecked.

In the coming months,the rising interest rates combined with a Himalaya like fiscal burden could jeoparadize the economic recovery and subsequently could drive the economy right back into the recession !

The immediate task for the over-confident Obama administration is to reduce the mammoth debt ,which is 99 per cent of G.D.P. to a safe level,or else the Investor will dump the U.S. debt and in some extent,the dollar for a safe heaven like Gold and German bonds.

NYSE and the hostile bid by Nasdaq

Chances are high that 219 years old NYSE, a symbol of American capitalism may reject the increased offer of $47.98 a share bid by Nasdaq OMX/ICE.Of course,borrowing the additional amount could be a herculean task for Nasdaq,but in 2005,the company somehow managed to overcome the borrowing process when the management in Nasdaq was successful on their bid to the Inet electronics system.Yes,its very risky but at the same time,Robert Greifeld looks very confident and calm right from the beginning.

So,how much would Nasdaq OXM/ICE owe if the company managed to succeed with the bid? Well,it could be around $6.48 billion with an additional refinancing cost which would be very difficult to payback.Things are now quite different from 2005, So Mr.Greifeld should be careful.

In my view,NYSE should reject the pauper bid by Deutsche Boerse's as well as of Nasdaq OMX/ICE offer.That would be good for the general investor and shareholders in the long run. Deutsche Boerse's offer comes with a nationalistic concern while the hostile bid by Nasdaq OMX/ICE,though very attractive, would be a catastrophe for the shareholder in the long term.Splitting the company dose not makes sense to me.With piles of debt and a massive job cut on the card,the Nasdaq bid would be too povre for NYSE as well as for the economy.

Debt trap-part 2

The continuous arm-twisting by Germany over those indebted countries like Greece,Ireland, Portugal and Spain could spark a revolt within Southern European countries. Yes,I agree that Greece,Ireland,Spain and Portugal would be much better off without the common currency,but unfortunately there is no provision for allowing a member country to leave the Euro-zone.We can say that this is a political debt trap which would destabilize the region in the coming months.

The Southern European countries have to leave the common currency so they can devalue their own currency as soon as possible.The five year Greek credit default swaps climbs to as high as of 1,070 basis points while Portugal 10 -year bond yields hit euro with skyrocketing 9.16 percent ! Its so chaotic all over the Mediterranean due to the austerity measure taken by these countries.

Time has come for the Mediterranean countries to think more sensibly about staying together in the Euro-zone and to be controlled by Germany to follow the austerity measure blindly.

Insider trading: Rajaratnam episode-2

As the insider trading trial of Galleon Group captivated much of the wall street with suspense,it becomes clear that Raj Rajaratnam will face the jail term in the coming days.The taped conversation that can spoil all the hard work done by Mr.Rajaratnam's lawyer going to be a decisive factor.


Mr.John Dowd,a lawyer for Mr.Rajaratnam would find it difficult in his bid to keep his billionaire client out of prison.This case is different from the trials of John Rigas or David .L.Sokol,who the prosecutor says that he brought nearly 100,000 shares of Lubrizol on illegal tips.


In those trial,there were no recorded call tapes as well as those documents presented by the two sides didn't match correctly ! But things are quite different in Rajaratnam's trial.He will face the jail sentence,at least for a ten to twenty years.

Debt Trap

The E.C.B.'s rate hikes for the first time since 2008 credit crisis digs a permanent hole for Spain,Ireland,Greece and Portugal.In the coming days,people living in the Southern European countries will witness a draconian austerity measure.Yes, I agree that Greece and Ireland so far received a generous amount of money from the E.U. and I.M.F.But the so called'the aid money' /loan comes with a skyrocketting interest rates which could be a herculean task to pay back.

The government of the debted countries will go for a drastic spending cuts which will further depressed the economy.As a result,their pile of debt will touch the Mount Everest in the coming months causing an outright recession.

So,how will those indebted countries escape from the 'debt trap' remains a puzzle.The indebted countries must reject the common currency as soon as possible so they can devalue their own currency.Alternatively,E.U. should divide the common currency into two separate currency,betweenSouthern European countries and Northern European countries or else there is no light at the end of the tunnel.

German Dreams

NYSE Euronext has rejected the takeover bid by the Nasdaq OMX Group/ICE.Nasdaq /ICE cash stock bid of $11.3 billion was much higher than Deutsche Borse's all stock bid of $9.7 billion.It is a different story that how could Nasdaq borrow that much of money to finance its offer remains a mystery. Robert Greifeld,CEO of Nasdaq has an option to appeal directly to tha NYSE shareholder,but that dosen't looks workable to me.Interestingly,there was a tremendous pressure from companies like General Motors and others who prefer to be listed on Deutsche Borse if Nasdaq's bid gets green signal ! Meanwhile, the German investors are quite happy with the deal as this is going to be the first steps by Chancellor Angela Merkel towards arm twisting in Global financial world.Reto Francioni of Deutsche Borse would become the chairman of the combined company and will take all the major decicion while Duncan Niederauer of NYSE-Euronext would become its chief executive and will work as a subordinate to the chairman. The combined company plans to keep dual headquarters in Frankfurt and New York which is not possible in long term,agreed to work closely with each other.The Germans has a hidden intention to keep the headquarter in Frankfurt.