Dear members,

Fall of ICELAND

            Last few weeks we witnessed banks filing bankruptcy. Around 45 Banks were broken in few weeks. But the ICELAND bankrupt is interesting a country fully gone same stage. ICELAND is main supplier of frozen fish in Europe, small area is suitable for agricultural, highly educated people, 82% schools using computer, Average living age is 82, 1000 people have 1007 phones. Iceland was a poor country in few years before in 1990s it expanded banking areas to Europe and other countries by help of pension funds, government and national funds. Remarkable Growth witnessed in few years very soon it came to 4^th place in world based on earnings.

In 2008 problem started , initially in October 3 banks filed bankrupt, and government take all these banks, dept was 6 times earnings, means country gone bankrupt.

We can divide their growth and fall to 5 stages

First stage

ICELAND banks given high rates, attracting marketing, loans given quickly, and online banking which given good growth mainly in Europe. 3 lakh British deposited 500 crore dollar.

Second stage

To give more loans these banks taken more money from market, as the bank was very good that time huge chunk of money given as loan. In 2008 their dept increased to 1 lakh crore dollar.

Third stage

As the subprime problem started in USA, ICELAND banks were not able to get more loans, due to this government forced to give support, naturally credit rating agencies decreased rating, it increased difficulty for banks to get loans from market. Deposit was decreased as the out flow was high, as the time gone out flow was unusually high and deposited came down to very low level. It forced banks to stop services, banks information was computer programs were damaged. At last bank stopped online banking.

Fourth stage

To prevent bankrupt government taken banks. Government decided to give money to depositors from insurance companies, but only in ICELAND.

Fifth stage

As the ICELAND not ready to give insurance money to British people, president of Britten taken all assets of ICELAND banks by using British rules, all shopping malls, real estate all control were now in British hand.

Sixth stage

Due to national problems Iceland rupee "Krona" started falling corrected more than 60%. Importing stopped, at last ICELAND Bankrupt.

Ukraine & Pakistan is on same way. Credit rating companies given grade "CCC" to Pakistan. Below C only one grade left it is D, which will give only when country goes bankrupt.

Little bit about Inflation in Zimbave

Zimbabwe inflation is actually not a hot news item any more. But with it hitting over a land mark of one lakh, (yes, one lakh) the news value keeps coming back. 

Now, Zimbabweans will need only one bill to pay for it. Authorities recently introduced a new 50 million bank note. The new Zimbabwe dollar note is worth $1 at the widely used black market trading and can buy just three loaves of bread. It was the third time in three months that the nation's central bank issued a higher denomination note in response to record inflation. The new note is part of bearer cheques that were first introduced by the central bank at the height of cash shortages about four years ago. 

The 50 million dollar note is expected to be introduced on the market Friday after the RBZ also increased the maximum withdrawal limit for individuals to 5 billion Zimbabwean dollar a day. The introduction of the 50 million dollar note graphically captures the depth of Zimbabwe's unprecedented economic crisis. Fifty million dollars is enough to buy two loaves of the cheapest quality bread in Zimbabwe. Cash shortages which had disappeared in January following the introduction of the 10 million dollar note had resurfaced over the past month as Zimbabwe's economic crisis continued without let-up. 

Zimbabweans have battled severe cash shortages over the past four years due to an economic crisis described by the World Bank as unprecedented for a country not at war. 

In addition to cash shortages, Zimbabweans are also grappling with shortages of virtually every basic survival commodity, essential medicines, fuel and foreign currency.

Points selected from Client copy

USA & World in focus

 

Bail out package started even though now the problem is growth. Market expecting USA growth can go low levels in several months, Jobless is expected to increase more so selling expected in USA. Dow below 7600 is considered to be indication long recession. As the situation is worse than expected it can reach this level.

 

People are scared USA may go recession like 1930, signs are giving same signals. Crude touched $68 yesterday, now trading $72 level, it is expected to go 60 levels soon. If USA goes 2-year recession $40 likely. Consumption is also dipping. Jobless registered is above 4 Lakh., Fed reserve chairman Ben Bernake and Vice chairman Donanld kone stated that USA problem will continue several months.

Beej book also pointed that manufacturing in all 12 American states are very bad. If Bail out package is not a success expecting

 

1. By quarter 2 around 117 Insurance companies can face.

2. By next summer 110 can go same situation, most of these companies assets will

be around 85000.

Global trend is also in terribly slowing. Switzerland approved 6000 crore dollar to USB Bank. Also approved to take more 1000 crore from market and to give Credit Swiz Bank, which is the second large bank. 8 European mutual banks agreed to help each other maximum 1500 crore Euro to survive present problems but in last day they canceled and deposited 21080 crore euro in European central bank, which shows they don't trust each other. European central bank agreed to give 500 crore dollar to Hungary. IIMF is now in talk with Ukraine. World Bank agreed to help Asian countries. Japan president said that more money would need to pump in market as the trust on growth is not yet came to positive even though

70,000 crore dollar packages approved.

 

Even though the situation is terrible, there is some positive news, big players started buying in USA. Recently Warren Buffet also taken, according to him if u wants to be rich this is the time.

 

Crude

 

As expected crude started falling from $140, it is now near to our target 60$, expecting very soon. If USA goes recession it will touch $40.

Advice to people

            Most of stocks beaten down heavily due to unwinding by FIIS and sentiment, it does not mean companies growth is down, or company price is going to Zero as far as fundamentals are good. Present trend is certainly as you know due to USA problems, if USA able to witness bottom out at present levels or able to escape from 2-year recession fear it will help most of fundamentally good stocks to reach high levels again. If below 10,000 mark in Sensex real then 21000 or more is possible once recession fear appears. So don't get panic time is to hold good stocks patiently or take more.

Happy Trading, 

Neeraj M S

Mathruppillil(H),

Thrissur (Dist),

Kerala.

E-mail: neerajms@...

Web Site: www.lakshmistockgroup.com

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