Finally on Tuesday, Oct 1st, 2008, The House of Senates cleared the BAILOUT package for recovering US from the financial turmoil its facing since the subprime crisis started.
According to my knowledge, I learned somewhere that the actual losses are of 95 TRILLION DOLLARS and 700 BILLION DOLLARS are just like a drop in the ocean. But this will give a sentiment boost to the markets in the short term. In the House of Senates, out of 100, 83 voted in favor, so it was cleared with a vast majority, but its still to be passed by the House of Representatives.
700 BILLION DOLLARS means much because its equal to the 17th biggest economy Netherland's GDP and its 66% of INDIA's GDP. Also, if the 700 BILLION DOLLARS are distributed amongst the US citizens then each of the citizen is entitled to receive 2300 USD, that means approximately 6900 USD per family of 3. With this amount US citizens can fill petrol/deisel/gas in all of their cars for 16 months. This amount is equal to the yearly budget of NASA, Education Dept, Health Dept, Military Dept.
I would advise all my readers to exit from the equity markets during this rally. This will be the best change to exit the markets. As 700 BILLION DOLLARS will not allow to correct the bubble, which was created. The real estate prices should have been allowed to correct fully. The companies which made mistakes due to thier greed, and provided loans upto 28,000 USD to persons capable of just 1,000 USD, should not be given any help. The tax-payers money should not be used to buy those bad assets, which have ZERO value in real.
MORE CREDIT = MORE BUBBLE = BIG CRISIS
Saving the companies this time, will not allow to clear the bubble and a bigger bubble will be created. Finally we will see a bigger crisis later after 3-4 years and that will be worse in the economic history. The markets can correct upto 90-95% that time. The toxic bad assets should be removed from the market for better functioning, but Henry Paulson, who once worked in Goldman Sachs, doesn't want this. He removed Baring Securities, Bear Sterns, Fannie Mae, Freddie Mac, Lehman Brothers, Merrill Lynch from the competition and now Goldman Sachs will rule the market.
There are many companies inline to go bankrupt and the credit crisis is too much worsened in USA. The banks are not lending to each other fearing which bank may go next. Auto companies and airlines are in line too. We can see UBS, Citibank, JP Morgan Chase, GE, General Motors, Ford, American Airlines, United Airlines, Delta Airlines and even Bank of America. We can see CIVIL WAR in USA and it can go USSR way.
I will advise all of you to invest 20-30% only in your equities and take home 10-20% profit whenever you make it. Keep invested in GOLD. GOLD will be above 2000 USD within a year. If you are invested in ULIPs, then change premium paying mode to monthly, that would do better averaging and you will have more cheaper units and less costlier units. In the long run (20-30years) that will give you the most unimaginable returns.
Remember, HISTORY repeats itself. In 1929 similar packages were offered. The result was ECONOMIC DEPRESSION of unimaginable scale.
Feel free to contact me for any investment advise and SAVE your capital, so that you can generate more later.