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I must admit I was a bit impatient when I saw the book being postponed for publishing for February 2010. Not only because “Freefall - America, Free Markets, and the Sinking of the World Economy” by the famous Joseph Stiglitz is a book which promissed to demistify the current prolonged global crisis in a more academic manner (read - with some stone hard economic analysis behind, not the small talk books written usually on the topic). I was expecting it with impatience also because Stiglitz is a non-compromises author - he does not fiddle around the topics, but shoots and moves ahead. And my expetations were actually a bit exceeded.
So, an “Freefall” is an economics book about the recent global crisis and how it spread from US to the rest of the world. I think that besides me, the first one thousand copies were bought by the following characters:
- president Obama and his financial advisors;
- ex- double president Bush, Alan Greenspan and all the economic advisors who accompanied him and
- the bankers who invented lots of arguments to get trillions of dollars in cheap loans from the US government to make even more profits.

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I think I said this before, here on doitinvest.com: banking is a trust business. And when the trust is lost, you can bet that half of your clients are almost gone for the emergency exit.

The reason for this is quite simple - in banking a customer buys your ability to deliver a promise. He/she wants your financing for the long term (mostly desirable for the seller), your ability to generate revenue for the customer, your superior investment yields.  It is all about the money.

In their book “The Trusted Advisor”, the Harvard professors who authored it argued that a counselor of any king must strive in essence to do 2 things:

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I was reading recently an article regarding the imminent bankrupcy of the emerging markets (especially the ones from Eastern Europe). The author said in his investment blog that banks are now forcing up the interest rates in those countries. The increase in the interest rates would lead to a wave of personal bankrupcies in those markets, allowing the foreign investors to buy the local assets (especially the real estate assets from those emerging markets) very cheap. The scenario would be unfolding as we speak, whilst the peak of the crisis in the Eastewrn Europe should arrive somewhere in the middle of 2010.
The fallacies of this story are many. I will not enter into the details of the cosnpiration theory which seems to hide behind this pessimistic approach to the Eastern Europe economies. I will also not discuss here the fact that it is hard for the big banks to cooperate among them. Or the bank cooperating with the big investment funds, their competitors, would be a highly unlike - ier scenario. I will just mention the recent lessons that Dubai and Greece, two sovereign countries, whose recent developments are linked tot tourism and real estate investmentst, taught us.

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This piece of news is interesting not because it would impact on any investment strategy…but rather because we are in July 209 and the subprime crisis still haunts the US Treasury. The US government was simply forced to bail out one more bank - this time the smaller CIT bank was impacted.

CIT’s problems surfaced two years ago due to the CEO Jeffrey Peek’s decision taken earlier in the decade to expand into subprime mortgages and student loans, both potentially highly profitable but fraught with added risk. CIT has about $40 billion of long-term debt, according to independent research firm CreditSights. About $1.1 billion of debt will come due in August, followed by about $2.5 billion by the end of the year.

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Here we go again with one more doitinvest.com survey on how long might still last the current financial crisis / recession. Compared to the last two surveys we had a couple of months ago, this one seems to be pretty more optimistic. This optimism is fueled by the recent slow recovery of the stock markets (see the Dow Jones recovering sharply in the last two weeks), as well as by the pace of the bad news pouring in at a slower pace.
The financial investing experts surveyed by doitinvest.com point out at four main causes of their optimism:

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As we mentioned in a previous blog, it was impossible that the Lehman Brothers did not know what was the price of their assets - and this months ago before the collapse. Maybe Fuld did not have a precise idea of total dimensions of the issue, but he knew how close he was for sure.

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 Yes, it’s here. Based on the scary prospects faced by many banks, the FDIC (Federal Deposit Insurance Corporation) has announced they will use some of the $700 billion package to increase the insured values of the owners deposits to $250,000 per depositor.

In other words, if you are a US citizen FDIC can help you claim back a maximum of $250,000 from your baknk deposits from one single bank account. The new calculator has a human face and it’s called Edie. You could see Edie in action here, with tutorials and other useful stuff included.

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As anticipated in our previous posts (unfortunately), shares continue to decline today on all the major markets, especially in Europe and Asia. There is an old investment adagio which says that “No news is bad news” (Ernest Hemingway, “For Whom The Bell Tolls). In this particular case, no good economic news means bad news for our shares investments.

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