SICK BULL IS DEAD

SINKING BULL IS DEAD

The bull, stuck in the deep mud since last year, kept alive with rope around its horns, is now grasping for its last few breaths. Even with all the ropes (bailouts and emergency loans), the bull is destined for the history book like Bear Stern and Lehman Brothers. And the rest of the once mighty corporations like Citibank, UBS, RBS, AIG, GM etc are all hanging precariously on the cliff. Any burst of strong wind will see some of them falling off the cliff into oblivion.

Locally, despite the enormous budget, there was no post market rally. The massive stimulus budget announce by Barack Obama does not tickle the market. Around the world, from Australia, China and Japan, similar massive stimulus budgets were also announced. And stock markets continue to ignore and even react negatively. Such indifference points to the market resignation and scepticism. There seem to be an air of hopelessness and helplessness.

Around the world, the dreaded R word has become reality as countries after countries announce 3Q GDP contractions and officially confirm recession in these countries. Next quarter, most countries expect even worst contraction. Countries only hope to see improvement at 3Q or 4Q. It won’t be long when the dreaded D word will become the fashionable and most commonly used word from analysts and politicians.

With all these stimulus packages and some restructuring processes in place, there are concerns that all these measures may not work. So what is next? There has been talk about the G20 entering into a new Brettonwoods. There is a dire need for the world to look deeply in how to better regulate the banking system, SWF, hedge funds and all the financial instruments that have been emancipated from free and unfettered capitalism. There is a real need for a new set of universal regulations for the globalised world.

But do the world’s leaders, especially the US and the European have the political will to stomach the painful changes need to address the financial ills of this world. The world may be able to absorb the colossal financial loss, but the social cost will definitely take a political toll on many governments. And that, I hope will not become the ‘Waterloo’ for politicians who have to make the tough decisions. On a more optimistic and positive note, this crisis may become a catalyst for politicians to act decisively. It is often believed crisis create great leaders.

Of course there will always the dangers of trade protectionism for domestic politics. We need responsible leaders with vision to lead the world out of this economic mess. Any further deterioration will lead this world into depression, bringing unimaginable hardship to the entire world.


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