Selasa, 13 Maret 2012

Implications of Financial Tsunami (subprime mortgages) as trigger to the World Recession

By : Edmond F. La’lang

A muse for the global business economy, including the stocks, forex and commodities market to not repeat the same mistake. Do not climb the mountain with high speculation and more greedy,but hike the hill with good and strong fundamental driven to prevent disaster from recurring economic crisis like multi dimensional crisis in Indonesia (1997-1998) and financial sub-prime mortgages in USA (2007) that have a big domino effect to global economy.

Domino Effect and Risk Management as Unprudential Mistakes

Year 2007 is the yeat of world economic upheaval caused by the “subprime mortgages” in property sector from lower middle class in the USA that many countries have failed to pay property credit. Futher spread to financial sector, particulary international investment banking assets that buy subprime mortgages as well to derived to degress. According to me that Multi Level Marketing business is similar to a tiered network and marketed worldwide, particulary in Europe, Japan and other countries. With this subprime borrowers default, it has caused great lossess in derivative giant about US$ 15.4 trillion that has been experiences by many institutions investment banking, securities, general banking, insurance, hedge fund, corporates and retail investors worldwide. This has bankrupted many property companies, especially Fannie Mae and Freddie Mac, as well as huge loses at Citigroup, Credit Suisse, Merryl Lynch, Goldman Sachs and many more US giant companies financial. Peak turbulence and turmoil is the subprime crisis occurred in July 2008 with collapse of Lehman Brothers Inc. Which assets approximately to USD 640 billion has experienced tremendous loss because misallocation managed of funds without good risk management and prudential banking, where in fact of the funds in the subprime mortgages and derivative until 10 levels. Lehman has forgotten the principle of “do not put your eggs in one basket” is very urgent in the management of high risk apetite business.

Many observers abd economist have said that among Wall Street, including the CEO of Lehman Brothers was negligent, foolish and greedy of doing business without professional management. The effect of this subprime crisis began to spread to world stock market, including Dow Jones (Djia), which has reached its peak in April 2007 at 14.425 points and dragged the whole world stock markets with more than 50 % correction and certainly will continue to weaken toward the starting point of the resurrection Djia in 1992 which is at its 4,250 point (early era of President Bill Clinton) can even reach the level of 2,000 – 4,000 if to the severe deflation and Obama was unable to provide a healthy economic recovery (if economist only perform a variety of conservative and linier think to the macro economic policy as well as the fate of main world stock indexes) but maybe fall again in “Double Dip Recession”. The panic in stock markets is also exarbating the loses of world financial sector about US$ 20.55 trillion.

With catastrophic of the world stock market, especially in US and Europe in addition to large losses in any level of economic agents, retails investors, including retires put their funds in stock marlet. This loss will add to the increasing number of poor people with decline purchasing power also. And the effect is USA,Europe and Japan began sink to the problem of default debts that face in Greek.Iceland, Portugese and maybe to Spain, Italy, France and England if they don’t have a smart solution for their high debt. For problem solving, the EU have help with bail out with huge funds and from IMF and of course cut their budget for efficiency. This same condition that face by USA with much more huge debt on US$ 14.1 trillion debt and maybe want to more highly debt in a couple years to cover the deficit of their government budgeting and the Fed still give QE 2 to the financial market that means to create jobs and trigger to the economy recovery with lower interest rate. And QE 3 will be come after QE 2 ? This is difficult condition to do that without much more jobs to reduce high unemployment.

Footnote :

         Fluctuations in short-term (daily and weekly) will occur naturally influenced by state of mentality, passion, taste, motivation of global mass psychology to take trading positions in a market that is crowded and often chaotic. If there is data or news that very fundamental economic conditions, business and politics, fluctuations in stock price movements will occur dynamically and both meteoric and volatile free fall in excess of the daily forecast. But in the medium and long-term investment will be influenced dynamically by biocycle and biorhytmic of legal and natural forces are always moving up and down dynamically. So you not only have to Globalization with Globalnet (internet system) but also now should have a vision in a way Galaxization with Galaxinet * * (Astronomical).

         Where we can know the strains and the condition of the Universe Kingdom in the short term (10 years), medium term of 50 years and long term 100-200 years), which will also be evident in a "Certainty of Life rather than Uncertainty Life " who always complained of many parties, including the leaders of the state policy makers, leaders of business policy (industrialists and traders) as well as experts in various fields of life. The power and influence of Universe Law (Universe Kingdom) this will always affect every aspect of our lives on this planet, either consciously or unconsciously to anticipate properly.

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