As the year draws to a close and a new year is about to be ushered in, things don’t seem quite so rosy. You have no money. Your lifestyle has undergone drastic changes. Your dreams of buying Cuban cigars have gone up in smoke. Your fantasy of finally buying that BMW and running over pavement dwellers has been brutally run over. You can’t even fix a stupid magnet quench occuring inside a Large Hadron Collider. All because of sub-prime crisis and its after effects.
The global financial situation is rapidly approaching a very difficult turning point, originating from North America, spreading through the UK, increasingly in Europe and many parts of Asia. Australia also makes it to the list of affected continents. And even though Africa doesn’t have an economy, South America is interested only in this and that, and Antarctica has nothing but penguins with ‘frozen’ assets, it would be nice to mention them to intensify this paragraph and give it a ‘world citizen’ feel. On a more serious note, the crisis seems to have circulated throughout the world faster than a wardrobe malfunction video.
But I feel there’s no need to panic yet. There has to be a way out of this. I’m sure someone is working on it by now. So until they come up with the solution, let’s lull ourselves into a false sense of security by pretending to analyze and contemplate over the entire issue.
I strongly recommend that you wear a business suit, grow a goatee, fiddle with your gold rimmed glasses and put on a really serious face while reading this. Don’t forget to stroke your chin, look towards the ceiling and nod frequently to give the impression that you’ve thoroughly understood the gravity of the issue. That way, we can at least look the part.
The following is a detailed analysis of the current market situation, tips and tricks, and predictions for what lies ahead. For the benefit of readers who are not well versed with financial terminology and jargon, the author will be explaining everything in layman’s (or is it Lehman’s?) terms.
(Also, the author might be a complete sucker at finance related matters, but that’s not important. What’s important is that you’ve lost your money and you’re desperate for advice.)
So, what should one do when the markets are taking a dive just like Chelsea players in a synchronized diving sequence? Here goes:
A summary of the sub-prime crisis presented in an easy-to-understand format.
Our world is in peril! Gaia, the spirit of the earth, can no longer stand the terrible financial losses plaguing our planet. She selects 5 special young people who are the root cause of the problem – Kwame from Africa, with the power of Earth (real estate). From North America, Wheeler, with the power of Fire (burning cash). From the Soviet Union, Linka, with the power of Wind (blowing market rumours). From Asia, Gi, with the power of Water (liquidity). And from South America, Ma-ti with the power of Heart (less greed). When the 5 powers combine, they summon Earth’s greatest bankrupt champion, Captain Pauper!
Everybody sing along:
Stocks! *dit dit dish*
Cash! *dit dit dish*
Rumours! Housing! Fraud! Go Pauper!
By your powers combined, I am Captain Pauper!
Captain Pauper, he’s a hero,
Gonna take company capital down to zero!
He’s our mistakes magnified, and he’s slipping down the credit slide!
Captain Pauper, he’s a hero,
Gonna take asset value down to zero!
Gonna help him put asunder,
CEOs who like to loot and plunder!
[menacing voice] “Who’ll pay your loans Captain Pauper?”
“We’re the Marketeers, you can be one too, but saving our currency is the thing to do!
Investing and risking, is not the way, hear what Captain Pauper has to say…”
“The money is YOURS! (Well, not anymore.)”
[The original childhood classic here:
Chapter 11: Tips and tricks on how to avoid a financial mess.
So if there is one lesson that investors should take away from this, it is probably not to be too brave at the current time, but to focus on fairly safe investments, focus on having a decent level of cash and liquidity in their own mix of personal assets.
AVINASH PERSAUD: CHAIRMAN, INTELLIGENCE CAPITAL
I think the crisis is evolving over time. The beginning of the crisis was a liquidity problem. People were so uncertain, no one wanted to lend to anyone. We had banks who had assets but they could not get anyone to buy them.
Now we are moving away from a liquidity problem – which can be solved by central bankers – to a credit problem. People have got assets which have fallen in value and they are not going to recover in value.
GEORGE MAGNUS: SENIOR ECONOMIC ADVISER, UBS
As you can see, everyone is repeatedly mentioning about “liquidity”. What the sub-prime fuck is this liquidity, you may ask. Good question. Quite simply put, these finance “gyu-rus” are referring to the amount of fluid intake as a part of your daily diet. When Avinash talks about “decent level of cash and liquidity in their own mix “, all he wants to say is that you should spend a decent amount of cash to maintain a healthy level of liquids in your body. This is crucial because most of the investors start sweating heavily when the markets crash, and it could lead to loss of vital minerals.
Author’s Pro Tip: Drink at least 15 – 20 glasses of water everyday. If possible, eat fruits after buying shares. That way, you’ll at least have your health in mint condition. And health is wealth.
By Transitive Property
Water and fruits = health …(1)
Health = wealth …(2)
Therefore, water and fruits = wealth. (From (1) and (2))
Thus, you’ll improve your wealth. Hence proved.
And it’s not all about iPhones. Of course, there will always be a small minority who have acted irresponsibly, but most consumers have simply borrowed to give their families a roof over their heads at a time of rising property prices.
ANDREW MOSS: CEO, AVIVA PLC
Among its many shortcomings, iPhone’s biggest glitch remained undiscovered till the markets crashed. It was found that iPhone owners were so engrossed in understanding the retarded functionality of their phones, that they failed to keep up with the market trends. As a result, those who took a bite off the Apple, also got a bite of dust free of cost.
Author’s Pro Tip: Do not buy the evil iPhone. If you find an iPhone nearby, do not look at it for more than 5 seconds. However, if you’re hell bent on buying one, make sure you buy it on loan at a 750% interest rate. And download some cool songs too.
Governments and central banks and their policies or oversights were the causes.
Without realising this distinction, we will learn the wrong lessons, devise inappropriate solutions, and maybe end up with another financial mess all too soon after this one is cleared up.
GEORGE MAGNUS: SENIOR ECONOMIC ADVISER, UBS
Now did you realize where you went wrong? Of course you did. You don’t have a foresight!
Author’s Pro Tip: Develop a foresight. Learn clairvoyance. Consult your crystal ball (hey not that!) before investing. Use your Spidy sense to track down falling share prices.
It’s not that difficult if you put your mind to it.
Financial literacy also needs to improve – it is not taught in schools and it can not be learned from the previous generation because they have no experience of this global environment.
ANDREW MOSS: CEO, AVIVA PLC
Simply being literate won’t save you. You have to know a little about finance… at least the basic stuff – numbers, terms, risks, payoffs etc.
Author’s Pro Tip: Read Economic Times. It’s a slightly discoloured paper that never sells out from the news stands. It is a great source of information about … well, economy.
ET will furnish you with all the data that will help you in saving and multiplying your money.
Also, it sometimes carries those Big Bazaar discount coupons, so you’ll end up saving this way at least.
Economic depression cannot be cured by legislative action or executive pronouncement. Economic wounds must be healed by the action of the cells of the economic body – the producers and consumers themselves. How? Play Monopoly, gadheda!
JIGNESH KANTILAL BARODIA : WORLD BENK’S CHIEF ECONOMIC ADVISOR.
Author’s Pro Tip: When the times are tough and you’re flat broke, there’s nothing better to cheer up your family than a good game of Monopoly. Please note that the money you make here is not real, and this is just a way of deluding yourself from the harsh reality that’s staring you in the face. Aww, come on, cheer up! Your Community Chest card says “Grand Opera Night – collect $50 from every player for opening night seats”
Parker Brothers hit pay dirt with this classic board game, while the Lehman Brothers hit dirt in its real-life version. So sad.
It’s Just a Phase
Nothing lasts forever, even cold November rain. Whoa whoaooo whooaaaooo whoaaooooooo.
AXL ROSE : GUNS ‘N BULLS ‘N ROSES ‘N BEARS
Author’s Pro Tip: This is just a temporary phase and definitely won’t last long. Like the time you were 14 and you discovered something different about your body and then… uhh… well, it’s temporary.
By the way, the Mayans have predicted the end of the Earth in 2012, so we are absolutely sure that it can’t last for more than 4 years. Guess what me lads? We got away with it!
The Final Word
Don’t go by the hype; it’s mostly just nonsense. Nothing could get any worse than it is right now. Seriously, what’s the worst thing that could happen?
Well, there’s this one little thing that comes to mind:
What would happen if all the banks went bankrupt one-by-one? Countries would be left with zero currency. With no currency, people would be forced to adopt the barter-system again. But that won’t work. The countries would have to borrow money from somewhere. But with all the banks gone bust, who will lend them the capital? Ah, how can we forget the “Lender of Last Resort”, International Monetary Fund (IMF)? Of course they’ll bail out all the countries at a tiny interest rate.
What if majority of the countries fail to repay their loans? The IMF cannot sell the countries as nobody would have enough money to buy them. So in the end, IMF, the last resort lender finds itself under a motherload of debt and ownership of countries it can’t sell! And inevitably, the IMF will go bust too.
If all the countries are left with zilch and the last resort lender itself has gone bust, that means the entire Earth has gone kaput! There seems to be only one possible way out of this : lending from another planet in the solar system (how about Saturn? It has a lot of bling-bling around it). Saturn will be more than happy to oblige, and it will probably plan on buying some more rings with the interest money.
What if Earth can’t pay? Now Saturn is left with an entire planet that nobody’s willing to buy! Good God! The entire Milky Way would become nanga!
So what next? Uhh, Andromeda Galaxy is just a few light years away, and I’ve heard they’re doing pretty well…
I think that’s enough for today.
I have typed. You have read. It’s all upto you now. As Captain Pauper would say, “Ab shakti tumhare bas mein hain!”
Disclaimer: Reading this post is subject to a lot of risks other than market risks. Please read your crystal ball (hey not that!) carefully before investing.
[Kindly read the disclaimer really fast]