Looks like we are headed for a recession! By academic terms, recession is two straight quarters of negative GDP growth. Not only has the GDP growth slowed over the past two quarters, there are definite signs that the real GDP growth has stalled! Some economists now predict we are headed towards negative growth which would officially signal a recession. Remember when US coughs, the world economy sneezes. In my opinion, the world economy is a lagging variable when tied to the growth of the American GDP. The effects are already been felt around the world:

1. The canadian trade balance shrunk to the lowest levels in the past 9 years. Two biggest contribution factors are the high value of the loonie coupled with sluggish demand from our neighbours south of the border.
2. I haven’t been following the Bank of England and the European central banks but I believe they are also under pressure to cut rates.
3. In India, the productivity slowed down last much at a rate much slower then predicted. The GDP growth last month slowed below 8%, first time in 3 years.

Along with these definite signs, the smart money on Wallstreet has already placed their bets on a recession and have gotten into their positions.

I wonder what the yields in the bond markets are predicting? especially the 10 Year .

Have so much uncertainty and havoc in the market for me signals a GREAT buying opportunity. The good stocks are going to be cheaper then ever and it will create a great buying opportunity in the next 3-6 months for those looking to invest for the long run!

We will stay tuned.

Warren..

Today was probably one of the most eye opening experiences I have ever had in a long time. I attended the Trader in Residence program at the Allen H. Gould Trading Floor to listen to Arjun Kumar Equity Investment Analyst at Spurcegrove Investment. Working in a trading environment over the past two years and following financial news extensively, I realized today that I have been bogged down in details rather then looking at the bigger picture.

His topic of presentation was "Value Investing" and he really gave a different perspective on investing. Watching CNBC and other news publications for several hours per day, I realized I was getting bombarded with information, most of it was unnecessary. I think today’s presentation not only produced an interest on the "Buy" side of Investing but I was also able to learn that there is MORE TO FINANCE THEN I-BANKING. At this time, I am not too sure whether I-banking was my cup of tea but my thinking was that it is the only thing in finance where there is growth potential and tons of money. Mr. Kumar if in the future I do end up working in Buy side of Investing, you will be one of the people I will thank for giving me such an eye opening perspective.

I was browsing through YouTube that night and came across an interesting video on the best value investor of all time - Warren Buffet! After doing some research on Wikipedia, I am going to take on the initiative of reading some of his recommended books. Hope I will be able to pick up on ideas which will help me become a better investor.

Books Recommended by Warren Buffett
1984 -- The Intelligent Investor
1992 -- The Theory of Investment Value by John Burr Williams
1994 -- The Story of My Life by Ted Williams
1997 -- The Science of Hitting by Ted Williams
2000 -- The Farmer From Merna by Karl Schriftgeisser
2001 -- The Warren Buffett CEO by Robert P Miles
2001 -- Security Analysis by Ben Graham and Dave Dodd
2001 -- Jack, Straight from the Gut
2002 -- Common Sense on Mutual Funds, John Bogle
2002 -- Take on the Street by Arthur Levitt
2003 -- First a Dream by Jim Clayton
2003 -- Bull! by Maggie Mahar
2003 -- The Smartest Guys in the Room by Bethany McLean and Peter Elkind
2003 -- In an Uncertain World by Bob Rubin
2003 -- The Intelligent Investor -- 2003 Revised Edition by Jason Zweig
2004 -- The Intelligent Investor
2004 -- The Financial Times, Amercian Edition Newspaper
2004 -- The General Theory by John Maynard Keynes
2004 -- Nuclear Terrorism: The Ultimate Preventable Catastrophe by Graham Allison
2004 -- Poor Charlie’s Almanack
2006 -- Seeking Wisdom: From Darwin to Munger by Peter Bevelin
2006 -- Where are the Customers’ Yachts? by Fred Schwed

An interesting article published in "The Economist" few weeks back and it’s a good read regarding the world's biggest i-bank. While the likes of Merrill and Citi have struggled to maintain their position within the industry, Goldman on the other hand, has posted stellar earnings beating all analysts estimation. How is this possible - aren't we in a credit crunch and possibly heading for a recession?

-----------------------------------------------------------------------------------------------Bumper profits and a stellar reputation. Time to worry “IT IS important to be a bit institutionally paranoid, especially when things are going well.” Thus Lloyd Blankfein, chief executive of Goldman Sachs at a conference in November. After the year Goldman has had, Mr Blankfein cannot be far off hearing imaginary voices. On December 18th the investment bank unveiled full-year results that contrived to be both widely expected and astonishing.

Earnings in the fourth quarter stood at $3.2 billion, a 2% rise on the same period in 2006. Even as most of its peers have been dragged down by subprime-related investments, Goldman's fixed-income business has boomed, thanks in part to a proprietary bet that the value of mortgage-backed securities would fall. The rest of its businesses are also steaming ahead. Its share price, as of December 18th, remained (just) up from the start of the year. Its status as Wall Street's employer of choice is gold-plated, not least because of a bonus-and-salary pool of $20 billion. “If Goldman Sachs comes calling, you have to consider it,” says one headhunter.Mr Blankfein's neurotic impulses are well founded, however. Being at the summit of the banking industry is all very well, but the only way left is down. There are reasons, besides the impact of a slowing economy, to think that Goldman's triumphant 2007 contains the seeds of a less comfortable 2008.The first is that success on this scale always reaps a harvest of envy (never mind that Mr Blankfein's handsome bonus will be dwarfed by the pay-off given to Stan O'Neal for leaving Merrill Lynch in incomparably worse shape). Rich, well-connected bankers have a limited call on sympathy at the best of times. Goldman's gamble that many of America's overstretched borrowers would default on their mortgages is unlikely to win it new friends. Signs of a backlash are visible: Christopher Dodd, a Democratic senator, has raised questions about the part played by Hank Paulson, who ran Goldman before becoming treasury secretary, in fuelling the subprime mess.The second cause for concern surrounds Goldman's finely balanced (or horribly compromised: take your pick) business model.

As well as acting as an adviser and financier to clients, Goldman makes lots of money from putting its own capital to work. Proprietary trading and investments accounted for two-thirds of the firm's revenues in 2007. The tensions inherent in this approach are neither new nor unique to Goldman, but they have become much more obvious now that its traders have made hay taking short positions against debt instruments of a type peddled to clients by other parts of the bank. Accusations that Goldman has been issuing deliberately bearish research in order to drive markets down and make even more money are fanciful. But some of its clients may become more questioning.The third trapdoor concerns Goldman's risk appetite.

You may think that serenely stable share price suggests Goldman is a safe haven; its low price-earnings ratio tells a different story. Between 2003 and 2006 Goldman's traders were losing money on many more days than other Wall Street firms (see chart). The bank's risk-sensitive culture is rightly lauded; its agility in times of trouble has been proven. But it is neither cautious nor transparent, qualities that investors are likely to prize in coming months. Mr Blankfein's antennae are right to twitch.

day 1

So it begins. I have decided to create a blog which I hope will help me put my thoughts onto paper, or in this case e-paper, and help me improve my writing. I plan on discussing topics which I have great passion for: finance - equities and currencies, poker, economics and cricket! I will update the blog atleast twice a week and hopefully by end of it, I will have accomplished what I have set out to do.