Better Safe Than Sorry

The financial world is just getting tougher. An asset valued at $80/sh plummets to $2/sh in a matter of a month. Bear Stearns’s balance sheet of $400bn will be severely eroded. This bad news had had immense negative impact on global financial markets. What better example of globalization than a US company going bust in US and liquidating its assets in India. If you peruse through the fund action data for Friday, you will find that Bear Stearns sold huge quantities of stocks like Dabur Pharma, Bombay Rayon, C C construction and CEAT among others erasing significant amounts of Market Capital and Sentiment. What is of concern is the transparency of news flow. Two days back, the CEO of Bear Stearns Alan Schwartz comforts the market that there is no reason to worry which gave a record breaking rup up to the markets. Today, one wakes up to see once dominant investment bank on life support system from fed and fellow friend JP Morgan. No one has an idea as to how many ailing patients we are dealing with. There are rumors of Lehman Bros going the Bear Stearns way and who is it question that until the air clears.

The point I am driving at is the uncertain environment we are in, exposed to whims and fancies of the US markets. Further, what worries is the kind of speculative activity across currencies and commodities. There seems to be no cover to hide. Swiss franc is appreciating fast breaking 1.0 level to US dollar. Yen is appreciating faster breaking the 100 to US dollar and going all the way to 96. Crude getting stronger by the day breaching $110/bbl level. Gold crossing $1000/oz level all the way to $1032. Unless the dust settles the strategy to sit tight on cash seems like a good strategy. Its better to be safe than sorry.