What changes do we need?

About $30 trillion of market value has been erased from global equities in 2008, according to data compiled by Bloomberg. Is that all because we did not regulate the mortgatge industry? In the late 19th century, we had faced problem for the rail road companies, and government stepped up and rescue them, after few years they rescued whole farming industry by grants. If any industry get bigger then open market has a significant factor on the economy and it need some level of regulation. We learn a lot for the short term, learn more for medium term and learn nothing for a long term.

There are few points I want to mention that I think does not work.

1. Rich getting richer: We moved from the economy from "opportunity for everyone" to rich getting richer. In the last few decade, huge amount of wealth is created. Usually, wealth is created by Intelligence and Hard work. It was not the case in past decade. People getting rich by housing, stock option and simply by speculation. As a result, it form a bubble of wealth, which we have seen bursted. In this down turn, the biggest loss was faced by the rich people and not the average Joe.
   
2. Deregulation: In late 20th century, governemnt implemented deregulation in various industry such as Telecom, Energy, Finance, Insurance, Airline. Telecom - Because of dereulation it gives huge opportunity to become success. Many companies has been created to take the opportunity. As a result it spurs growth. But at the end, only few big companies left AT&T, Verizon, Sprint. Similarly, in Energy, we have seen how Enron has manupilated the open market and in the same way how the crude oil has gone up. Finally Finance, investment banks has become very innovative in getting new product in the market - which no one understand the consequences. As a result, all the investment banks has gone. They have been converted to regular bank, so that it can be regulated. We know airline industry is also struggling and in merging phase. At the end you will see few companies and fewer competition and we as a consumer will have to take the hit.
   
3. Globalization: I cannot claim that Globalization does not work. But due to globalization, there is significant dependency that nobody knows the consequences of it. We have seen how the problem in Iceland, Argentina, Russia, and many more to come. Few years back when Indian PM, Manmohan Singh, interviewed on PBS. He mentioned that he does not want other country to participate and eventually manipulate in Indian Debt Market. Indian regulation such as Energy, Fianance is working very well. They regulate the Gas Price, Insurance, Banking Industries and it works. Their economy does not give much opportunity to create innormous amout of wealth that sustain longer time.
   
4. Semi-Socialism: We need to stop lobbying. We need to stop governement becoming socialist. Government is not only bailing out the company but they are now taking ownership in the equites of Finance Industry. Governement is writing big fat check to the companies like GM and Ford, who cannot compete with Japanese Car maker. Government has a strong relationship with the main street. Does this sound familer in other countries? Yes. China. When these companies were making big profits nobody bother to take big tax on them. We tend to be semi-social government. This was not capitalism, here tax payer are abused. Also we has a lot of companies has CEO also act as a Chairman of Board. How that company overlook what CEO is doing? I would never invest in company like this.
   

We have very big challenge ahead, and we need to change these policies. Leadership and Adivsors will determine the future of the country.

Healthy Living

For last few decade, when manufacturing jobs move abroad, the obesity level became high for an average American. Now our economy is only 20% manufacturing and 80% service based job. This makes us physical activity less than required. On top of that TV, Games, Internet make you sit in one place for hours and hours. Because of this - Corporate America found very good business Exercise related and Diet Food.

When I went to cruise this summer, I learn few thing in the seminar they gave. There are three things important for the good health. 1. Food, 2. Exercise and 3. Internal Health. While you see many commercials and products related to first two category but no one talk about the Internal Health.

1. Food - Food is important for your body either vegetables, meats, or water. The time, amount and what type of the food we take plays significant role. They were saying we should have more breakfast, less lunch and light dinner. I guess it change with the time. since we do lot less labor work. We should avoid the toxic substances such as Prescription/OTC medications, Alcohol, Caffeine, Tobacco, Preserved sugar, soda, frozen food etc. Preserved sugar is very dangerous and many people does not realize it. It is used in diet coke/pepsi. This toxic substances over the time raise the acid level ( called ph) in the body. When we born we have we have ph level of around 6.7. The diet coke has ph level of 1.7. When we consume this toxic substances the ph level go way below 5. Eventually, this bring lot of problem in our body including cancer. The reduce the acid level in the body, eat more alkaline food. One of the best alakline food is Sea Weed.

2. Exercise: Since we do very few physical activity, they says need to do 30-45 minutes a day for 5 days and other 2 days to recover the body. The time is also important early in the morning compare to during afternoon or late evenings.

3. Internal Health - To improve this you have to control the type of food you eat and air you breath. The liver play important part in this like - filtering the toxic sustances. It detoxifies the poisionesous chemical such as alcohol, drugs etc. It store the tonic substance such as iron reserver, vitamins, mineral, energy and control the sugar. It manufacture the blood. It deferes the germs going into the body. But, if you dring, eat too much of this, it cannot handle. The worst part is it won't warn you like heart or kideny. When you detect the problem in lever, it is too late. So Internal Health i.e. detoxification plays important role to become healthy.

The secret behind the flat tummy is not food or exercise but balanced ph level.

Talking Recession

Needles to say we are already in the recession. But there are some good part of the recession. First and foremost, it will kill inflation. We (American) spend more than we earn, consume more than required and leave way above our mean. Recession let people to look into this issue and force them to readjust. Recession will bring a best opportunity to invest in the equity market. And this recession will bring once in a life time kind of opportunity to invest. Recession will bring you the best deal that you always wanted to purchase. It bring less traffic on the road.

However, there could be lot of disadvantages - it will bring people out of job, so crime level increases. Companies will fail - every recessions, companies closes the door; especially - start ups (I mention as it is important in the valley), companies with negative cash flow, company with no cash on balance sheet, and company with huge debt. In this recession, you will not only see the bank will fail, but big company like Ford, GM and Chrysler will fail. Small business will hit the hardest in the recession. This recession is like in 90s, so most of the "Blog Reader" has not seen the effect of it. What we saw in 2001 was very tiny recession, and mainly on the corporate side which is 33% of economy. This one will be on both the side; consumer and corporate, so it will be deep and may last longer than 9 months. And this recession is global, which never happened.


Here is the excellent presentation from Venture Capitalist in the valley - Sequoia Capital. Which will tell you the picture of the coming month from the VC perspective.

http://www.slideshare.net/eldon/sequoia-capital-on-startups-and-the-economic-downturn-presentation?type=powerpoint

Recession is good for the economics, it's a normal economic cycle. The only fear with the recession is when it turns out to be the depression.

Capitulation begins

We have a bunch of idiots on the media who people love them and listen them, No.I idiot is Jim Cramer. Today, he comes out and says S-E-L-L everything you have. He told after market already been down. Few years back, I thought he was a smart guy, apparently he is totally worthless; but the tragedy is people listening him. He has a media power.

Anyway, the market is down a way down than anyone expected. And one fact is Market alway over-react whether in up trend or down trend. There is a good news and bad news, but bad news are on win as it is bear market. I am not sure if this is capitulation. The world is not going to end. I am holding tight and keep my finger cross.

TARP Bill Raise the National Debt to 11.3 Trillion

The new 700B (actually 800B) TARP passed bill will make national debt to 11.3 Trillion, this is almost double when President Bush took the office. The US Dollar will have to suffer and that will cause another longer term problem. Anyway, here is the highlight of the bill

1. The Treasury department can purchase troubled asset (CDO, MBS, CDS etc) from the Financial Institution upto 700B. 250 Billion immediately, and 100B as required and rest of them with the President advise. It expires by Dec 31, 2009 and can extend upto one year if Treasurey want to do so. They can define the terms and condition.
   
2. It is treasury responsibility to price the security based on the risk. They have to consider tax payer cost, national debt, stability of the financial market, preserving home ownership, need of financial institution and local communities; expect corruption with this line. There will be lot of regulation to avoid the conflict of interest though.
   
3. There will be Financial Stability Oversight Board to review and make recommendation. The board will have Fed Res. Chairman, Ben B, Sec. Hen P, Chairman of SEC, Director of FHA, Secretary of Housing Development. There will be also a special inspector general to supervise and coordinates audit and investigations. He has to provide the quarterly report to congress as well. There will be also a Congressional Oversight Panel, who will review the financial market, regulatory system and use the authority. They all have to cooperate with the FBI too.
   
4. Within 60 days treasury has to report to Congress what they have purchased, if it is more than 50B they have to provide detailed report. Within six month they have to report the effectiveness of this program. They have to also report the transaction within 2 days to public.
   
5. If any profit they have to pay the national debt. There will be profit for sure if it is managed properly.
   
6. Plan will try to avoid foreclosure by modifying the loan terms for the trouble and other home owners, who might consider foreclosure.
   
7. It prohibit the golden parachute for the executives who sell the trouble assets.
8. They will also study of mark to market accounting and its effect,
9. Raise the FDIC limit from 100k to 250k, until Dec 2009. Also raise the borrowing limit for the insurance.

The Question is: Will this works? If "works" means avoid recession then NO. If "works" means potential failure of other financial firms then YES. This program will be more effective if they did earlier; IMO its too late. Also to the other note it is government intervention in the open market, they are fixing the prices, as Ron Paul said. The company like GE and Goldman (both are AAA grade company) are paying 10% to their investor. How much is the cost to borrow the money for the BBB grade company? Costco is selling $100 Starbuck Giftcard for $80. How creative to raise the money? Will government come and rescue them as well? This is the problem and that will bring the economy into the recession. Furthermore small business; if mom and pop shop cannot borrow at sufficient cost, to do their business, that business is going to fail.

Full detail of House Bill here

Worst Vice-Presidential Candidate Ever

Generally I do not like to talk politics, because I hate all of them. But with the selection of our Vice President Candidate Sarah Palin, I cannot resist. We saw dollar declining, our (USA) status being strong declining, performance in sports declining (e.g. Olympic medals), Financial Power declining, Military power declining, and now leadership. I cannot stand the declining of our Leadership. Leadership is very important for the success of our country.

Looking at Sarah Palin, I would rate George W Bush better. It seems like she does not know anything except raising the kids; even their she did not do a good job, as her 17-year old daughter is pregnant. The only good part about her is her "Glasses". She is a total joke, she doesn’t answer questions. Simply because she doesn’t know the answers. Totally out of her league, she has no idea about anything at all. A disgrace to America, a disgrace to the world. The only thing she knows about the foreign policy is she can see Russia from her window. She read all the newspaper but she cannot name them. We cannot let her to be our vice president. And being Mccain very old and can get heart attack any time; she is going to be our President! I don't want to see that day. I think she is not qualified for this position. If Republican are smart enough they should pull her out as soon as possible. I think she knows it and she should step down. Being Governor of State with less than half million population does not qualify for the president.

The worst day is when McCain elected and by any chance Sarah Palin become President. I mean there is nothing worst can happen to USA than her being President.

God Bless America.