QE-2....Quantitative Easing Two

I have been away from the blog for a while now. Today however I thought I must update the blog with some new observations.

The US economy guided by Mr Ben Bernanke has been printing paper money relentlessly. The term is 'Quantitative Easing Two' (QE-2), meaning second tidal wave of US dollars hitting the world economies. This makes the dollars cheap and hence their exports competitive. This also forces other currencies to appreciate thereby reducing their competitiveness. In our context our IT companies and other exporters are going to have a tough time ahead.However our oil imports are going to cost us less. That is good news. Since we are a domestically driven economy we are in a sweet spot. Export dependent economies are going to face some head wind ahead. Also almost all major currencies are going to face a lot of volatility in the near future.

What does this mean for you and me? We must buy stocks of businesses driven by domestic consumption. We should buy stocks who do not need to take large hedges on currencies. We should buy stocks of companies with competent CFOs.

USA and China are having a silent economic war for supremacy in the future. We Indians must tighten our governance and bring in foresight in our planning. Intellectuals must be respected and brought in decision making processes. Political expediency must be done away with.

Let us hope someone of substance reads this seriously and takes appropriate steps.

rgds
Vibhas