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Are we staring at the end of an era? - Views on News from Equitymaster
 
 
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  • Feb 27, 2009

    Are we staring at the end of an era?

    "GM lays its future on Washington's doorstep," cries a headline on The New York Times. The company, the world's second largest automaker after Toyota, yesterday reported a deeper-than-expected quarterly loss as revenues plunged by more than a third. The company, which has been kept afloat with emergency loans from the US government, posted a net loss of almost US$ 31 bn for the full year ended December 2008. This is the company's second biggest annual loss in its 100 year history (the record is a loss of US$ 39 bn in 2007). The company is now staring at a possible bankruptcy unless it gets a 'going concern' certificate from its auditors.

    Dr. Doom predicts more gloom

    Marc Faber, publisher of the Gloom, Boom and Doom report has been a long time critic of the way the global financial system works. He had predicted the bust long back. He now believes that the financial industry is in for an even bigger contraction. "Financial professionals have been in paradise for the past 25 years," he said at an event hosted by CLSA in Tokyo. Faber, incidentally, also believes that the safe haven of gold can be a mirage for investors as the yellow metal has reached extremely high waters and is expensive relative to other commodities.

    India's GDP grows at 4-year low pace

    Even as Faber maintains a gloomy view on the global financial system, the weakening Indian economy continues to bring shivers to investors and economists. As reported by Bloomberg, a survey of 21 economists has estimates that India's GDP expanded by 6.1% during the quarter ended December 2008, which is the slowest pace of growth since the last quarter of 2004.

    India is already facing the demons of rising fiscal deficit and lower credit ratings as the government tries to pump-prime the economy through its stimulus packages. While a GDP growth of 7.1% in FY09, as projected by the government, makes India still the second-fastest growing economy in the world after China, the fact remains that this growth is not enough to generate jobs in a country where the number of people looking for employment increases by more than 10 m each year.

     

     

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