Minggu, 07 Oktober 2012

Domino effect resulting from improper risk management and overinvestment can lead to misallocation of investment volatility and the Economic Crisis

By : Edmond F. La'lang (economic and environment observer)

              Year of 2007 is the year of the teachings of the world's economic upheaval caused by the "subprime mortgage" crisis on the property sector of the low and middle class in the United States, that many countries have failed to pay property loans. More information can spread to the financial sector, particularly international investment banking assets to buy subprime mortgage derivatives for level degree. I think that the level of  MLM business is similar to a tiered network and marketed throughout the world, particularly in Europe, Japan and other countries. By the standards of subprime borrowers, it has caused great losses from derivatives giant approximately U.S. $ 15.4 trillion of investment. Derivatives are widely held by the investment bank, securities, commercial banking, insurance, hedge funds, corporate and retail investors worldwide. It has bankrupted property companies, especially Fannie Mae and Freddie Mac, as well as a great loss at Citigroup, Credit Suisse, Merrill Lynch, Goldman Sachs and many more U.S. companies financial giant. Peak turbulence and turmoil is the subprime crisis occurred in July 2008 with the collapse of Lehman Brothers Inc. The assets of about USD 640 billion have experienced tremendous loss due to misallocation of funds managed and overinvestment without good risk management and prudential banking, where the real funds in subprime mortgage and derivatives up to 10 levels. Lehman had forgotten the principle of  "do not put your eggs in one basket" is very critical in managing high business risk apetite.

             Many analysts and economists say that among Wall Street, including the CEO of Lehman Brothers was negligent, stupid and greedy to do business without professional management. The impact of the subprime crisis began to spread to the world's stock markets, including the Dow Jones (DJIA), which had reached its peak in April 2007 at 14.425 points and dragging the whole world market share by more than 50% correction and certainly will continue to weaken towards the starting point of the resurrection DJIA in 1992 were in the 4250 period (the early era of President Bill Clinton) could even reach the level of 2000-4000 when the severe deflation and Obama can not provide a healthy economic recovery (if economists just do a variety of conservative and linear thinking in macroeconomic policy and the fate of the main world stock index) but may fall again on the condition of "Double Dip Recession". The panic in the stock market also exarbating financial sector lost around U.S. $ 20.55 trillion.

            With world stock market disasters, especially in the U.S. and Europe in addition to heavy losses at every level of economic agents, retail investors, including pension funds put at stake Marlet. These losses will add to a growing number of poor people's purchasing power also decreased. And the effect is the United States, Europe and Japan began to sink into debt problems that face default in Greek, Iceland, Portuguese and possibly to Spain, Italy, France and Britain if they do not have a clever solution to a high debt. For solving the problem, the European Union has helped to save the large funds from the IMF and of course cut their budgets for efficiency. The same conditions that the face of the USA with greater debt at U.S. $ 14.1 trillion debt and may want more debt relief in recent years to cover their budget deficits and the Fed still giving QE 2 to the financial markets, which means to create jobs work and lead to economic recovery with a lower interest rate. 

           And shall the QE 3 will come back after QE 2? This is a difficult condition to do that without a lot more work to reduce high unemployment. During this turned QE 1 and QE 2 is only for rescue giant corporations, especially big banks, big insurance and securities, investment banking, auto industry, property and multi-property such as Fanny Mae and Freddy Mac. While small and medium corporations left alone and tend to be liquidated if the debts are, a monetary policy that is less good and fair. It is precisely these SMEs companies to absorb more labor, Hence the performance of QE 1 and QE 2 work for giant corporations, but not for small business. And it seems clear that the U.S. unemployment rate remains high with the people's purchasing power remains low even decline as well. And now in September 2012, the Fed has give more QE3 to the financial market with USD 40 billion every month, but are its really can be good work to generating the economic recovery or not is a real question for the many peoples.

Foot note :

         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 Natural, Galaxy and Universe Law (Universe Kingdom / Source One in Central Sun Universe) this will always affect every aspect of our lives on this planet, either consciously or unconsciously to anticipate properly.


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Contact :
Edmond F. La'lang
Email  :   edmond.lalang@gmail.com
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