Vinaash Kaale Vipreet Buddhi

With the EU in accomplice with IMF has come up with a bailout package of approximately $1 trillion, with rhetoric expression of saving the EURO, I cannot be more amused. High on sentiments (which is self explanatory) given the nations involved, this news has given some respite to the markets - the Eurofirst 300 rallied 6.7 per cent with the FTSE 100 up 4.4 per cent, sending the UK stock market index almost back into positive territory for the year to date. Banks led the gainers, with European financials up 12.8 per cent and France’s Société Générale, the continent’s third highest riser among large cap stocks, up 22.2 per cent (Source: FT.com)

In the US, the S&P 500 climbed 4.4 per cent by close – its sharpest one-day move since the market bottom in March 2009 – led by financials and industrials. Having climbed dramatically last week on contagion fears from Greece, Wall Street’s “fear gauge”, the Vix index, was down 29.7 per cent at 28.8. (Source: FT.com)

The government has also agreed to issue Currency swaps for stopping this plague. However, in doing so, they are acting like a doting parent trying to pamper its children even though children have made a cardinal mistake.

INR depreciated by almost 60p over a period of few days as the demand for Dollar increased on the back of recovery. However, am sure this is temporary, it’ll be back to normal very soon, with investors running for safer havens. India and its corporate sector should stay put for now and continue doing their business as usual. I presume, they will soon have good opportunities for cross border acquisitions

But, I still fail to believe why is government financing or rather more politically correct statement would be ready to finance the already bleeding institutes. The money financed has already been pocketed by a few vested bodies probably closely knitted with policy making. Why is the government greasing the (over)greased economies. They are giving banks money to honor their commitment on their borrowings to engage trust in the system; however, as the wheels are round, the banks will start lending to the same people again. What they need to understand is that, more than instilling confidence in the system a much larger problem which persists is instilling responsible borrowing amongst the borrowers. These borrowers will return under different companies, under pseudo names to be given credit to. This would obviously give dollar a boost, however, a much larger problem lays ahead in term of handling the Greenback from falling further. We can be rest assured that the markets will rally now, especially with the banks invested in Bonds of EU who would be expecting their money back, will have more credit on their hands. Expect the interest rates to fall in the coming few weeks. The mood is upbeat for some time to come, especially for US and Crude prices, both of which are like a DD these days (delicate darling). They shake with any news, be it the ash cloud over Iceland or Greece crisis.

However, as this news subsides over the next few days, I am expecting focus to come back and look east again over the undervalued Yuan and Yen. I expect China to be back in action, with the respite of a week or two over Greece or rather PIIGS (Portugal, Italy, Ireland, Greece and Spain) news. It has given China some time to rethink their policies over not only how to control the rising asset bubble, but also if now it revalues its Yuan, it will be helping the PIIGS.

The corporate(s) in order to make their shareholders happy are lobbying to keep all economic numbers satisfactory. Well I think most happy right now is private businessman, who does not have to impress anyone or give out any results. By not parting with their businesses for a couple of extra bucks, most of which is loitered away in needless luxury acquisitions like private jets or yachts or behind the scene corporate parties. While I agree that some real value is also created, but nowadays like we witnessed in IPL, the name at the back of the jersey and the wants of those names is becoming more important than the vision and mission of the name printed on the front.

The people handling the biggest banks and financial institutions are not responsible enough. To make a few extra bucks, loans are issued through handshakes. Countries are being financed aimlessly just to save pride and not reputation. Money is being thrown in already monetized markets. The question is there are no more weapons to be bought, no more roads to be built in these countries or no more industries to be developed. Hence, where will all this money be absorbed? The question still remains unanswered….