Memories of a chilling moment again here, near to our door steps! A year back, this same day, 2008 September 15th, world freezes by the shock of hearing the fall of Lehman Brothers, an eminent investment banker from US. Waves of panic spread across the world. Investors community was not able to believe the news. It was so difficult to believe. But, yes, it was not a fiction. It was a sad truth. Layman stepped up to the pages of history leaving hundreds of people jobless and throwing hundreds of families to poverty and financially unstable!
Who can forget the pictures appeared in the front page of newspapers showing Layman employees with hopeless face leaving Lehman’s office with a handful belongings? Yes, it was a saddest moment by global melt down in the year 2008. It still remains as a symbol of lost hopes with smell of tears. Its background filled with weeping voice of kids and families. It was so heartbreaking one.
It happened at the peak of killing dance by global melt down. Not only layman but, number of reputed, large and small financial institutions all over the world realized the scary heat. Most of them finally surrendered as a victim of global meltdown.Started at the end of year 2007, global melt down slowly spread its arms to the global market. At the beginning of 2008, bear phase started in the stock markets all over the world which forcibly blocked hopes of investors and cost lives of many. At the second week of March 2009, global markets end with a total crash which recorded a total loss of 57%! A clear approach of high speed to maximum down!! Comparing 48% in 1973-1974 and 49% in 2000-2001, this fall was hilarious and dangerous. It mercilessly thrown number of financial institutions includes eminent payers like layman and Merrill Lynch, into the pages of history. More than 40 banks and financial institutions in US got devastated. Thousands of people became jobless thus their families too, suffered the heat.This context left some questions in my mind as an investor. My study reveals some open facts that could be able to turn as a base to build a perfect survival solution for investors to meet any such meltdown or market crash without panic;
1. Is it was the ever largest stock market crash in the history?
2. What influenced Warren Buffett to invest millions of dollars on Goldman Sachs to make enormous profits, even the time recession was not under control?
3. What factors leads giants like layman and Merrill lynch and many others to its death?
4. Why a little group of investors around the world enjoyed and celebrated this global melt down as a god given gift to them?
5. What would be the possible economic forecast for 2010?
Answers to the above 5 questions capable to wipe out investors worry and re-vitalize their hopes.
Starting from first question, “Is it was the ever largest stock market crash in the history?” No. It was not. At the time of 1929-1932, American stock market crashed to 89%! In 1972-1975, Britain stock market crash was 72%. 1989-1992 crash in Japanese stock market was 64%. After suffering a little, all these stock markets bounced back to make investors more wealthy.
Moving to the answer of second question “What influenced Warren Buffett to invest millions of dollars on Goldman Sachs to make enormous profits, even the time recession was not under control?” Buffett is the most admired value investor in this world. In other word, he is a living miracle! Started with only 105000 dollars, he reached to billions with discipline and patience. His extraordinary analyzing brilliancy to reach at the root level of a company to identify its profit possibilities along with sharp timing supported him identifying the profit possibility long time before he invested to Goldman Sachs. He is not a man who fears macroeconomic changes and its affects to various or whole economies. His success was the result of his self identified, fail proof strategies.
Answer to the third question “What factors leads giants like layman and Merrill lynch and many others to its death?” points our fingers to the management quality of those bankrupted companies. Creation of fail proof strategies and shaping these strategies according to changing situations never happened in the case of Lehman, Merrill Lynch or others!
We have already heard why US president Obama slammed some company management on their extravaganza with received packages from government.Any management which doesn’t have business ethics, responsibility, lack of right business strategy which required time to time changes and ultimately, no respect to investors money is sure an open door to the hell along with its investors and customers trust and hope. Anyone who had done a dig to identify the major reasons behind failure happened to companies like Layman, might have wondered by knowing the huge role played by management inefficiency to lead them bankrupt!
If you look for an answer to the fourth question “Why a little group of investors around the world enjoyed and celebrated this global melt down as a god given gift to them?” We have found investors crying in a side by huge lose. In the same time, a group of investors cheering up other side by seeing the fantastic opportunity for treasure hunt, that approached them after patiently waiting for long time. We can’t call them as opportunists, but they have carved fail proof, disciplined investing strategies as rock solid investing principles that lead them to joy when found the right chance. If you look into the word of Philip Fisher or Buffett, they were always conscious to identify right time lead by macro factors than micro factors. Also, they have not missed any such chances of treasure hunt.
Finally when reaching to “What would be the possible economic forecast for 2010?” it’s true, only god knows what will happen in the coming years. An economic forecast is difficult at present but, can easily say the economies are on the way to recovery. Waves of economic meltdown are still there. Nations jointly working to recover and once their efforts start producing results, third quarter of year 2010 will be certainly an investor friendly one. Countries like China and India already registered fantastic growth rate more than 6.5% and soon other countries will also follow this trend. We hope, these changes will bring the markets to the next new levels in the end of year 2010.
As an investor, this is the right time to evaluate the soundness of our investing principles to build more better, fail proof investing strategies that never fear to meet such huge melt down or become panic on hot news’s like fall of huge organizations like Lehman Brothers. Product/service position in the market as monopoly, management capability, and financial performance even at the time of global meltdown would be there in the top of an investor list to evaluate possible investments.