According to an Asian Development Bank report, the total loss from this crisis will reach 50 trillion dollars, almost equal to the annual GDP of the world. With 50 trillion you can give everybody in earth $8000 or buy enough burgers to cover 10 times the distance of earth and sun, or give a  BMW 3 series car to every household on earth. You could also buy enough rice or wheat or corn to feed for the lifetime of every human on earth (assuming an average consumption of 350kg/year).

http://www.bloomberg.com/apps/news?pid=20601087&sid=aZ1kcJ7y3LDM&refer=worldwide

The value of global financial assets including stocks, bonds and currencies probably fell by more than $50 trillion in 2008, equivalent to a year of world gross domestic product, according to an Asian Development Bank report.

Asia excluding Japan probably lost about $9.6 trillion, while the Latin American region saw the value of financial assets drop by about $2.1 trillion, said Claudio Loser, a former International Monetary Fund director and the author of the report that was commissioned by the ADB. The report didn’t give a breakdown of asset declines in other regions.

Here is the full study.

Japan is joining the United States club. I guess it got tired of keep saving to just see its strength get eroded. Heck, now US is saving more than Japan J.

http://www.economist.com/finance/displayStory.cfm?story_id=13240636&source=hptextfeature

In the six months to January, it had an annualised trade deficit of ¥4 trillion ($39 billion), compared with a surplus of almost ¥11 trillion a year earlier.

total current-account surplus plunged to only ¥125 billion in December, 92% less than a year ago.

the saving rate of households has fallen from 18% of income in 1980 to an estimated 1% last year

The fall in saving is exactly what the “life-cycle hypothesis” would predict. People like to smooth consumption over their lifetimes, so during their working years they spend less than they earn and accumulate wealth, which they then draw down once they retire.

While me might all argue about why US healthcare is broken and how to fix it, I guess the fact of the matter is clear – US healthcare is broken. In fact it is ridiculously broken.  There are plenty of research works out there with generous stats. In almost every health stat, US looks extremely poor.

• US healthcare spending/GDP is the second highest in the world (next to Marshall islands)
• US spending for healthcare of $6102/percapita is almost double than most other OECD countries – $3165 in Canada and $3043 in Germany and $1149 in Korea – highest in the world

• United States ranks 49th in Life-expectancy and 45th in Infant mortality in the world. Its health stats are more closer to Third World than first world.
• Half of all Bankruptcies in US are related to medical-bills – highest in the world
• US healthcare spending growth of 2.3 times GDP growth,since 1970 is the highest among OECD countries.
• US has the least among the elderly population among OECD countries – at about 13% of population, compared to ~20% in Japan. Elderly cause far more expenditure than middle aged people.
• 40% of Americans and 5% of Canadians lack access to adequate health care.
• Medicare/Medicaid alone will take more than ~20% of US GDP by 2050

US has substantial lead in so many other indicators, but if you lose in health, you lose everything. However, Obama’s current proposal on healthcare can complicate the issues, as he focuses on making it affordable for consumers rather than reducing costs at the supply. This can skew the market.

Sources:

1. https://www.cia.gov/library/publications/the-world-factbook/rankorder/2102rank.html
2. https://www.cia.gov/library/publications/the-world-factbook/rankorder/2091rank.html
3. http://www.oecd.org/dataoecd/46/33/38979719.pdf
4. http://people.bu.edu/kotlikoff/Who%20is%20%20going%20Broke,%20August%2029,%202006.pdf
5. http://assets.opencrs.com/rpts/RL34175_20070917.pdf
6. http://www.msnbc.msn.com/id/6895896/
7. http://www.gao.gov/cghome/centrist20050121/img2.html

Header image courtesy of: Ortizmj

Congress wants to bring a new tax on trading. For every $5000 you trade, government wants to take $12.50. Well that doesn’t sound bad for long term investors, right? No. Taxing trade can significantly impact the market efficiency. Take a look at chart 1 that has transaction costs (in basis points) for a few economies.

Chart 1

Data source: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp322.pdf 

Well, Venezuela, Thailand and Turkey have more transaction costs, so they must be great markets, right?

Venezuela produced a real returns of –2.04 between 1937 and 1996, compared with over +5% returns in US markets.

You think this is a bad thing for traders, but you are a long term trader, so why should you bother? Chart 2 is the returns for an efficient portfolio with annual and semi-annual rebalancing. In Latin America and Asia, the transaction costs can reduce the returns substantially compared to US. Long-term investors watch out!!!

Chart 2 – Return on efficient portfolio with transaction costs

Source: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp322.pdf

What were traders paying before 1975?

Btw.. this was the minimum commission schedule before 1975. People routinely paid $100+ for pretty small transactions. This crippled the entire market and wall Street. Sadly, we are looking at the same direction.

http://www.lesechos.fr/medias/2008/0915/300292512.pdf

Here is an interview with the security trader’s association:

70% of small investors are bearish. This could mean that the temporary bottom is getting closer. While I still believe that the long bottom is much lower, maybe even below 5000 for Dow, we might be due for a bear rally based on various indicators.

Image source:http://www.ritholtz.com/blog/wp-content/uploads/2009/03/aaii-bears.png

Globe mail article on this Retail Investors say “Run” 

Barron says this might indicate a bottom:

Also see:

http://www.marketwatch.com/news/story/Wheres-bear-market-rally/story.aspx?guid=%7B1C37217E%2D85AD%2D4413%2D80F1%2D84684FB1DA6A%7D

http://latimesblogs.latimes.com/money_co/2009/03/panic-equals-op.html

Here is a list of 10 things marketwatch considers to be the signal of a bottom. It is an interesting reading, though I don’t accept all their conclusions.

http://www.marketwatch.com/news/story/Analysts-devise-list-10-signals/story.aspx?guid=%7B80474254%2D89F7%2D4859%2D80CC%2D9A9D807C28C8%7D

1. A significant (more than 10%) one- or two-day drop in the market.

2. Timothy Geithner is replaced with Paul Volcker.

3. The 100th day of a bankruptcy by General Motors Corp.

4. Gold at $2,000 an ounce.

5. The Dow Jones Industrial Average changes more than two names at the same time, and/or adds names to increase the overall number of stocks in the index.

6. New York Stock Exchange daily volume drops to 1 billion shares for 30 sessions in a row. "Sometimes you just need everyone to give up to make a bottom," the analysts reasoned.

7. One million jobs lost in a month.

8. The market starts to rally on bad news.

9. Stock market favorites see 15% to 20% declines. When standout companies — such as Wal-Mart Stores Inc.) — "get clobbered" you’ll know a bottom is near, they said.

10. CNBC goes off the air.

Wall Street Journal identifies the beneficiaries of the AIG bailout for the first time. 

CDOs and Synthetic CDOs are the biggest culprits of the current crisis. But, how much of it do you know. Spend some time, understanding them through these tutorials.

Day 1:

Day 2: