Thursday, 18 September 2008


The plunge protection team of all the central bankers is on an overdrive trying to rummage through the debris created by the sub-prime and the derivatives market and salvage whatever can be salvaged. The choice of the salvage is in question. do we need to salvage stock prices of companies whose PE ratios are 50 and above in such a market? That's the moot question.
Central bankers want to provide liquidity to what CDOs? My question is why should these bonds have a market at all and who in their sane minds will buy them? Real estate prices have been jacked up by speculators and these prices have been considered as "values" and then securitized. Do we need to bail out such operations?
Another difficult thing to understand is the commodity ETF. Lets take an example GOLD ETF, what kind of people are buying these things? Aren't they speculators in gold? Are we going to encourage speculation in gold now that our help in speculation in real estate has come to a nought?
Again, if there is some lucky sane mind reading this blog, please sell dollars, dollar is a goner as of now. US stocks will be available for their fair prices and Indian stocks too. Remember the golden rule is to buy only those stocks whose PE is less than 10 don't touch high fliers they will not survive. Money is always made in unglamorous ways by working hard and soiling ones hands and not by speculating and putting values on others toils. Go back to basics, follow the oracle of Omaha and buy value, buy businesses that you understand and diligently add money to your wallet.
Expect a knee jerk reaction from the European zone over the weekend. All these central bankers are throwing good money (supposedly) after the bad.

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