Pink Slips

I was reading an article by Saritha Rai on Indian Express website titled 'I signed the letter, took the cheque and walked out... it was over in five minutes'. The protagonist of the story is a 27-year old professional in India's outsourcing industry who had only seen the good times ... and was sacked unceremoniously from his company, the obvious reason being the "bad market conditions".

What I want to say is, what we always heard of happening in the West has arrived in our Bangalore as well. I think the situation is similar, if not more morbid, in Gurgaon, Noida, Pune or Hyderabad where the outsourcing industry is the mainstay of their economies. During my years of working (2005 - 2007) at Convergys in Gurgaon, I have seen how the young professionals took the advantage of the explosion in the outsourcing industry by hopping companies, demanding and getting handsome pay hikes.

Many of my peers lived a lavish lifestyle on their plastic money; a few of them had bought a house or owned a car by taking loans. I can imagine if some of them lose their jobs in a jiffy may land up in a jobless state with a market debt of Rs. 30 - 40 lacs (60 - 80 thousand US$). Most of these young professionals were spendthrift and had the least propensity towards savings. In the past years the same people who were besieged with jobs are now having the nightmare of "pink slip".

But the recent, serial bust-ups in Wall Street and a recessionary US economy has badly hit Indian outsourcing firms. With American companies — their biggest customers — facing an economic dip, outsourcing companies are cutting back and, in turn, choking the job market. As a ripple effect it is showing up in unexpected ways in Bangalore; restaurants and drinking lounges reporting 30% - 50% dip in revenues, real-estate companies slashing prices of apartments and introducing low-end options, and outsourcing workers switching over to two-wheelers and company cabs rather than driving their cars.

With The Fall In Oil Prices, The Gulf Economies Now Appear Vulnerable

According to few oil analysts the Gulf countries are not immune to the overall problems in financial system. If they get below $60 a barrel, some of these countries will suffer. This is evident to an extent when the benchmark indexes in Qatar and Oman fell more than 8 percent Sunday. Kuwait stocks fell 4.4 percent and Saudi Arabia's main index, which fell 8.7 percent Saturday, fell an additional 1.7 percent Sunday.

Stocks in the Gulf region are off about 40 percent so far this year, in line with the decline in the Standard & Poor's 500-stock index on Wall Street and the 45 percent decline in the Dow Jones Euro Stoxx 600 index.

On Saturday, finance ministers from the Gulf Cooperation Council and central bankers met in Riyadh, the Saudi capital, to discuss a more coordinated response to the crisis. In their communiqué, officials "underlined their confidence in the stability of the monetary system in their countries," and said their economies should continue to grow.

But they also expressed concern that the downturn in the world economy would hit home. "We should all work to avoid the negative effects and reduce their impact on our economies by coordinating policies and measures," the Saudi finance minister, Ibrahim al-Assaf, told the Saudi Press Agency. In addition to Saudi Arabia, the Gulf Cooperation Council includes Bahrain, Qatar, Kuwait, Oman and United Arab Emirates.

Globally, banks have posted losses and write-downs totaling $681 billion since the start of the credit crisis, according to Bloomberg News. But so far the damage has been limited in the Middle East. Any big ratcheting up of losses in the region could require governments to bail out their own lenders and dash hopes that sovereign wealth funds from the region would be able to help rescue troubled institutions in the West. Gulf Bank's chief executive, Louis Myers, said the loss would have "no major effects on the soundness of the bank's financial position, and will not affect its ability to continue business."

KPMG International, the accounting firm, warned last week that financial fraud in the region could run into the billions of dollars a year. Colin Lobo, a KPMG partner said the financial crisis was creating an environment "where the risk of fraud will increase as businesses come under pressure to show results. Likewise, individuals will also be tempted where costs are rising and income levels are flat."

What The New Bailout Bill Won't Fix

If Monday’s rejection of the president’s bailout bill means one thing, this is it: You must take action to protect yourself from the next 777-point collapse because it’s abundantly clear that Congress won’t. Today’s 300-point decline that comes on the back of the Senate’s new bill proves what I mean.

Congress’s bungling of the bailout bill out has me shaking in my boots. But not because of another impending disaster. I’m shaking because the no vote and today’s sell-off isn’t the end of the line for America—it’s actually the beginning of a better deal for taxpayers and investors.

Hard to believe? You bet. But not when you see what will happen when a new and improved bailout bill passes. As you’ll see…

The market will reverse its 777-point decline as the U.S. financial markets—and the whole world—sighs a breath of relief. Just look at how the market jumped 450-points higher on Tuesday hopes a new improved plan is in the works!

Mark my words—the same thing will happen again Monday when Congress votes to approve compromise legislation on Friday! The chain reaction will result in more stable and responsible financial .

What’s more, the strong companies will get stronger. You needn’t take my word. Just look at Bank of America’s takeover of Merrill Lynch, JP Morgan’s takeover of Washington Mutual and Citibank’s take over of Wachovia, and you’ll see what’s headed your way.

MOST IMPORTANT: Cash will be king on Wall Street again as banks no longer pass out credit like pancakes at a fireman’s picnic. Despite what the Feds want you to believe, the NEW and IMPROVED bailout bill that’s ultimately passed will not only make credit tougher for individuals to get, but also tougher for businesses, as well.

Is Fed's Bailout Going To Be Dramatic?

Companies with blockbuster earnings, little to no debt, and with the strength to gobble up the weak companies and expand their market share and their profit margins will be the biggest winners of all. Specifically, the oil and gas sectors will rise along with transportation and utilities as the dollar strengthens around the world. You’ll also see big gains in chemical and fertilizer companies as the Fed’s action will have no effect on rising food inflation. Surprisingly, you’ll see strength in niche tech stocks as these companies continue to increase sales and earnings light years away from the financial mess on Wall Street.

If today’s BIG GAINS in National Oil Well Varco (12%) Weatherford International (+12%), Fluor Corporation (11%) Cameron International (10%), Apple (+4%) and Rimm (+4%) are indicative of mammoth sector shift that’s headed your way, this is a situation that you simply cannot ignore. And the shift may have already just begun!

As a result of the Fed bailout, interest rates on 30-year mortgages enjoyed their biggest weekly drop in 28 years, from 6.35% to 5.95%—spurring home sales throughout the U.S. While housing continues to collapse, we’re beginning to see signs of a rebound. In Southern California, for example, homes sales jumped 13.8% in July—the biggest jump in three years. We’re not just talking about California real estate rebounding. Some of the toughest states, like Ohio, are seeing a rebound in home sales as well. We’re not out of the woods yet, but thanks to falling mortgage rates, experts are estimating that a rebound in the housing sector could take place nationally in the early months of 2009.

U.S's top-performing consumer stocks, with 292% and 105% earnings per share growth, could easily deliver 30% to 40% profits in the next 12 months. And that’s just in the short term. The long-term effect of the Fed plan could result an even bigger sector shift in the commercial services sector as well—thanks to a stronger dollar—which surged against the euro, the franc and the yen again.

When you consider that a weak dollar was one of the key factors behind rising fuel costs, a rising dollar will continue to push fuel prices lower, crimping inflation. In fact, today’s collapse in oil prices to $94 a barrel—and the rise in U.S's two top transportation stocks (+7% and +3%)—could be just a sneak preview of what’s headed your way. When you consider that U.S's two top transportation stocks are up 38% and 28% over the past 12 months, you can only imagine how much more profitable these companies will be in the weeks and months ahead.

The bottom line is this: In a world where bank failures, a weak dollar and worldwide illiquidity have been the driving force behind the market’s decline, the repercussions from the Fed’s new bailout are not only going to be quite dramatic……but will also favor a new set of stocks in new sectors.

Who Wants To Be The D-e-p-r-e-s-s-i-o-n President? Obama or McCain?

What a load of bull! The worst isn’t over – not by a long shot. We’re going to see runs on small-town banks, as people steamroll each other to get their money out while they still can. We’re going to see more “safe” money markets worth under a buck a share. And mark my words, we’re going to see several more big names go belly-up, as the politicians finally realize they can’t stop this panic with smoke and mirrors.

The truth about the economy is so bad that Barack Obama and John McCain might be changing their minds right about now. I’m betting neither one of them is looking forward to being tagged as the next Depression President. That’s right. D-e-p-r-e-s-s-i-o-n.

Even just typing the word makes me shudder. But at this point, the Americans would be foolish not to own up to the very real possibility. Wall Street understands. Year-to-date, Lehman Brothers is down 99%. American International Group is down 95%. Washington Mutual, Fannie Mae and Freddie Mac, down 94%, 98% and 99%, respectively.

These are not sniggering little companies. These are giants. These are some of the very pillars of American finance. Throw in Merrill Lynch, Citigroup and Bank of America, and it’s very plain that the foundation of U.S economy is crumbling. And as far as the average Joe or Jane is concerned, the economy is already in shambles.

And it’s going to get a whole lot worse. Worse? Yes, unemployment soared to 6.1% in August. That came as a surprise to economists. Home prices are down some 16% year over year. The magnitude of the drop surprised economists. Retail sales fell 0.3% in August. They were revised down 0.5% for July. Both numbers came as a surprise to economists.

Are you starting to see a trend here? All the eggheads and government wonks have consistently underestimated the depth and breadth of economic troubles. They said the housing problems would be “short-lived.” They said their financial system was “resilient and strong.” They said the stock market would “recover by the end of the year.” None of that is happening. And if you hold your breath waiting, it just might be the last breath you ever take. 2009 is going to be a devastating year for Main Street and Wall Street.