|»5 Minute Wrap Up by Equitymaster|
On This Day - 7 FEBRUARY 2009
Bond guru's prescription for the economy
In this issue:
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Gross further says, "Capitalism at its philosophical and practical center depends on credit, and while new loans can be and are being advanced via the banking system, it's a much more difficult task to force shadow banks to lend. That lending depends on securitization which in turn depends on stable and eventually higher asset prices than currently exist."
Of course, the situation is not going to be as bad as the developed world but growth if any, is likely to be tepid at best in the world's second fastest growing auto market. Investments however, continue to pour in from certain quarters. Companies like GM, Ford and Volkswagen are indeed going ahead with their Indian expansion plans, as they seek to spend US$ 6 bn combined by 2012. Infact, even we believe that once the dark clouds hovering on the near term horizon lift, India will once again emerge as one of the most attractive auto markets.
This deal would mark the sale of Ford's last European luxury brand and is expected to get less than what it paid for Volvo in 1999 (US$ 6.4 bn), considering the bad market conditions and the plummeting sales at Volvo. As per reports, Ford's long line of creditors are likely to get at least some of the proceeds from the sale of Volvo.
Shopper's Stop, one of the country's pioneer in retailing, has reported overall decline in like to like sales. However, like to like sales growth of entertainment business has been growing. The same is on account of an increase in sales of specialty stores like Crossword. It seems like in times of economic slowdown, people prefer to read more. Even Tata Group's Trent Ltd foresees book retailing segment to emerge as recession proof segment. Trent caters to book and music lovers' needs through its 'Landmark' stores.
The worst US housing slump since the Great Depression is deepening as foreclosures drain value from housing prices and make owners give up properties that are worth less than their mortgages. It is estimated that about a third of owners whose home values drop 20% or more below their loan principal prefer to opt for foreclosures. The US banks, no wonder, have plenty of 'bad' assets on their books now.
Other major markets round the globe also posted decent gains. As for the European region, Germany and France saw gains of 7.1% and 5% respectively. The US markets too performed fairly well with a 3.5% gain for the week on higher expectations from the economic stimulus package.
Concerns about all the negative data led crude oil to decrease 4% during the week to close at about US$ 40 per barrel, while gold declined 2% to close at a level of about US$ 911 for an ounce of the yellow metal.
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