Is a global market crash around the corner?
The stock markets around the world are heating up and gaining beyond a logical reason.
Most of the recent growth in Indian stock markets is fuelled by the excessive liquidity in the system and the FII and FDI cash inflows more than the inherent strength in the corporate fundamentals.
And in the US, the Wallstreet gained much due to the money pumped into the system in the form of stimulus packages than the actual growth in the economy.
The reason is that the real problems that caused the 2008 crash have not yet been fully solved, but the hefty stimulus packages announced by the USA administration to bail out its financial institutions simply caused the funds to flow into the stock market rather than to lending and loans.
The article states non-banks hold nearly half of all the “problem loans” in the US, in spite of accounting for just 21 per cent of the total lending pool.
What is worse, more than one in three of their loans went sour in 2009, compared with just 11.5 per cent for US banks.
The article states that Titans like Goldman Sachs and JPMorgan Chase are making fortunes in hot areas like trading stocks and bonds, rather than in the ho-hum business of lending people money.
But the Giants like Citigroup and Bank of America, whose fortunes are tied to the ups-and-downs of ordinary consumers, are struggling to turn themselves around, as are many regional banks.
So the case discussed in the above articles shows that the economy has not shown enough growth since the last year to justify the current stock market growth.
Hence a crash or a significant correction is predicted any time soon.
The stock markets around the world are heating up and gaining beyond a logical reason.
Most of the recent growth in Indian stock markets is fuelled by the excessive liquidity in the system and the FII and FDI cash inflows more than the inherent strength in the corporate fundamentals.
And in the US, the Wallstreet gained much due to the money pumped into the system in the form of stimulus packages than the actual growth in the economy.
Can this growth be sustainable?
An interesting article published in Financial Times predicts a financial crisis in the USA around the corner.
The reason is that the real problems that caused the 2008 crash have not yet been fully solved, but the hefty stimulus packages announced by the USA administration to bail out its financial institutions simply caused the funds to flow into the stock market rather than to lending and loans.
The article states non-banks hold nearly half of all the “problem loans” in the US, in spite of accounting for just 21 per cent of the total lending pool.
What is worse, more than one in three of their loans went sour in 2009, compared with just 11.5 per cent for US banks.
Another interesting article published in Newyork Times boldly states that the Bailout Helps Fuel a New Era of Wall Street Wealth.
The article states that Titans like Goldman Sachs and JPMorgan Chase are making fortunes in hot areas like trading stocks and bonds, rather than in the ho-hum business of lending people money.
But the Giants like Citigroup and Bank of America, whose fortunes are tied to the ups-and-downs of ordinary consumers, are struggling to turn themselves around, as are many regional banks.
So the case discussed in the above articles shows that the economy has not shown enough growth since the last year to justify the current stock market growth.
Hence a crash or a significant correction is predicted any time soon.
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