Sunday, September 4, 2011

2011 predictions revisited – expect a rough ride in September 2011

If you thought August was tumultuous and volatile -get ready for September – it’s going to be a rough ride globally.

Nouriel Roubini, the economist who predicted the 2008 crash correctly, has said this week that "we are in a worse situation than we were in 2008” – He thinks that there is a 60% chance of a second recession (

World Bank President Robert Zoellick said on 3rd Sept that “the world economy is stepping into a new danger zone" (’

Europe’s sovereign debt crisis will test the waters again in Sept. Greece is due for another round of International aid around 15th of Sept. But before that aid is cleared, they will have to work with IMF/EU /ECB to show that they are implementing fiscal austerity measures agreed upon and they have only 10 days to do that.

Italy is also on the edge – they had promised to get their public finances in order and balance their budget by 2013 and now they are struggling politically to implement their promises. As the Italian politicians debate the austerity measures - there is a growing alarm in Europe over the credibility of the Italian govt’s ability to keep its promises.

US is also staring at a long period of low growth – US economy has slowed down last quarter - last week’s employment report which showed that US economy has not added any jobs in August –all this has increased investor fears that US may be headed for another recession.

President Obama is going to unveil proposals on Sept 8th to create new jobs – but with political bickering between Democrats and Republicans -there is little hope for anything substantial in the short run.

There is a G7 Finance ministers and central banker’s meeting in France on Sept 15th – they are supposed to discuss ways to reinvigorate global effort to support growth, jobs and financial stability – I do not believe it will have much impact in the short term.

There is a US Fed meeting scheduled for Sept 20-21st  - it is expected to further discuss measures to support the US economy – but they too are not expected to announce another round of quantitative easing (QE3).

As these events unfold, I see investors being nervous –  FII's will pull out money from Indian markets –  sensex will be very volatile and may go below the 15750 levels it touched in August. This can open up opportunities for investing in equities if one looks at a 2 year plus horizon. Gold is expected to go further up due to this global nervousness – I am not recommending that one invests in Gold at these levels –But if you have already invested – you can look at further growth in your returns from Gold.
Overall just tighten your seatbelts and watch the events unfold.