Most of us have read about the 2008 crisis of the global melt down and have experienced it first hand as well. Most of the analyst thought it might end up in a “Great Depression” like 1890’s – because the financial system collapsed. It took down a lot of mighty ones - Most of the banks were bailed out and some went down. Well I had my own experience of that as well. Well to tell the truth – it scared the hell out of us, the fear factor – are the dreams coming down? Do we stand any chance in the market now? Lot of questions and most of the people were frantically searching for the answers. But finally it all ended well – at least here in this side of the world.
When financial systems break or there is a perceiving sense that the whole world economy is coming down, all grounds goes loose – not just from jobs scenario, but just the fact everyone suddenly seem noticing change, inflation, equity markets, price of gold and what not. But the simple question is, are we all Socrates or a Nostradamus to predict future? But it does bring to us a lot of information – you start researching on everything related to a meltdown and then you start joining the dots. To tell the truth, when you start doing that you began to believe in the views people express as news.
Well in 2008 I was right in the middle of the storm and my forte was Chapter 11 of Bankruptcy, Mortgage Back Securities & Credit Default Swaps. The vibe that something was wrong was pretty evident at that time, probably because I was in NY @ that time for a short stint @ my old firm and had a first-hand experience of what was happening on the ground before the whole global economy collapsed because of financial system collapses. Probably people knew it was coming but to what extent... An in depth information on the collapse of biggies in Wall Street was captured pretty well in A Colossal failure of Commonsense and Too Big To Fail. Come to think of it, A Colossal failure of Commonsense has been aptly titled if commonsense is tied to ego and perseverance that it will only take a short time to grow big and mighty.
Its 2011, things have relatively changed. We are no longer talking about bankruptcy or MBS or CDS, there are larger issues now - Global economy, Inflation, Crude Prices, PIGS defaults (not the animal but the countries Portugal, Italy, Greece & Spain), Price of Gold, Silver Thursday and full circle back to Double dip recession?. Well now we read what Wikipedia provides, what SIFMA provides and what the street provides and we become an epitome of all evils (yeah too much of knowledge is worse, you add 2 and 2 and say its 5 J). It’s been going rounds for quite some time that Greece may (Stock markets nose dives when it’s swaying to this side) or may not (Flat or slightly higher because there are other Euro zones which can come into effect) default and would need a bulk load of bullion $ to save it from default. And suddenly the whole world is talking about country rating, US downgrade and if India will be re-rated. End result – No change for India.
So just like we have a high frequency trading desk to do analytics based on market conditions and do the correct bets and make money for the firm or instruments which can warn geological or natural catastrophe is there an option to warn a global meltdown or do we go by our Deja vu instincts.. That’s Food for thought or a sword hanging out there?
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