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Obama is President, Markets Drop 4-5%

Obama’s speech yesterday was inspiring, admitting the challenges ahead and asking for a greater responsibility of America. It’s time the world owns up too. We all rode the American dream. From cheap American money came expensive Indian houses too, so much that even now, people cannot fathom prices falling below 2006 levels. America seems to have admitted it – they’re in some deep doo-doo. From the president in his speech, to the markets, which later dropped 4% (NYSE DOW) and 5% (S&P and NASDAQ).

Meanwhile, the UK markets are in the toilet too, after RBS announced a $41 billion loss. That is perhaps greater than the net profits of the entire Nifty 50 combined. The UK continues to bail out people, introducing levels of moral hazard I can only talk about in a separate post.

I was in Goa the last four days. I’ve visited Goa nearly every year in the last five, and have never seen the lack of activity like I did this time. Staffers at the hotel were surprised (but incredible service, by the way; Hotel Lalit Intercontinental is going to be my haunt next time as well) by the dropping volumes. Taxi drivers mentioned their first loss in 5 years. It’s a depressed economy out there waiting to come out…and it gets worse each passing day, or seems like it.

One thing though: When a market can push an Axis bank down 16% after announcing fantastic results (50% EPS growth), it makes you sit back and wonder. It’s a bad bad market out there, and it’s likely reflecting people’s thoughts on the economy itself. This isn’t the bottom. The bottom is when you’re not even reading this page. T

Obama will bring with him interesting times. Depressing perhaps, but interesting all the same. The economy, Iraq, Russia, Afghanistan, America’s banks, Madoff’s ripoff, mortgage foreclosures, liquidity issues, crisis, crisis, crisis. There will be a response, and in my current pessimistic state, totally useless, but it will drive markets crazy for a while. May be a good time to make some money.

In India we have an election coming up, a potential hostility-increase with a neighbour, another series of frauds, a budget and various unrelated dramas. Do not believe what you hear; only what you see. It’s time to mistrust everyone, including ULIP offerings by insurance companies. I’m sticking with gilts, and some trading money. Safety and total risk – this is no time to be in the middle!