Tuesday, December 02, 2008

The Bad, The Worse and The Worst...

Apologies for going off the radar for a while. I have been on holiday in Uzbekistan for a good part of October. Since, I have been working on one or two other things in addition to my day work (which I thankfully still have!).

Gosh, what happened since the end of September? Bad became worse, worse became even worse - superlatives aren’t enough to describe what is going on.

Here is what analysts at Merrill Lynch charted (click to enlarge):

According to the chart, world stock markets shed more than $35 trillion in value in the past year – i.e. they more than halved. Remember, this is just an equity value of listed stocks. If you include lost value of unlisted companies, corporate debt, consumer equity (e.g. housing equity) and consumer debt, it is easy to see that the total cost of this crisis is much higher than $35 trillion. I wouldn't be surprised if in a few years time we recall this crisis as a $100 trillion crisis.

Folks at Doug Short produced a great chart comparing how stock market performed during the last 4 mega bear markets, including the current one (click to enlarge):

Commentators liken the current crisis to the Great Depression in 1929 and Japanese crisis of the 1990th. During those periods Dow lost c.90% of its value whereas Nikkei lost 75%. So it seems we are not quite there yet. The frightening part is, the Japanese index has never recovered since (shown in the chart)…
See here, here and here for more on Japanese lesson.

On a positive note, I had a great time back in Uzbekistan; I loved the sunny weather and tasty food, and a chance to see my relatives and enjoy a company of my friends have been superb. My friends in Uzbekistan tell me “Crisis? What crisis?”. I hear this has changed since…

ps: I will be less frequent for some time, but if anyone has urgent need in certain topics, do let me know.

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