Yevhen Pentsak's advice: crisis can't stop continue?

Yevhen Pentsak (50) 24 March'09

Tags: investment portfolio, investments, fund market, IMF, banking system, NBU, Yevhen Pentsak

The informational background of the week: USA shares market grows rapidly, the problems of commercial banks has aggravated, doubtful results of the elections in Ternopil, the second tranche of the IMF loan to Ukraine is under threat, the budget deficit is growing etc.

Ex-minister of Finance Victor Pinzenyk has commented the state of the economic situation in Ukraine:

«I see no reason to stop the crisis».

He insists that the real budget deficit is 100 billion UAH, which is approximately 10% of GDP. In my opinion, V. Pinzenyk reasonably noted that the pension system in Ukraine is deeply immoral; it divides the people in the black and white. The latter’s pension is 90% of their official salary. The pension fund in any country will not survive with such approach.

Ex-minister foresees the pessimistic scenario for further developments in the coming months that is why he can’t see ways and means to stabilize the situation, to build demand in the Ukrainian economy and to settle problems of the banking system. It is hard to disagree with these conclusions.

Also it is hard to disagree with the head of the Verkhovna Rada. Regarding the election results in Ternopil, Volodymyr Lytvyn said:

«These results are shocking, because the result can not be differ significantly from the result of sociological evaluations, which were made and everybody agreed».

Total victory for the opposition (Svoboda, Partiya regionov, Edynyj tsentr) in Ternopil are the exponent of those business circles with a different positioning in the political spectrum. It is terrified, when it appears that this «explosive mixture» may come to power.

According to my estimates, gold and currency reserves of National Bank of Ukraine were to have been 25-26 billion of dollars at the end of March. However, Mykola Azarov at a popular political program has been repeatedly pointed that the quantity of reserves of the NBU - 21 billion of dollars. The question is: Where vanished another 5 billion of dollars? The reason could be the following - the part of gold and currency reserves has lost its value, as long as has been invested in risky securities of the United States. It is possible that the bad U.S. assets may continue to fall, and we will quickly find oneself on the verge of the chasm.

The only hope is The International Monetary Fund which will help with the second tranche.

However, I do not see a fair chance that the government negotiations with the IMF will pass to constructive way in the nearest future.

Paul Krugman, Nobel Laureate in Economics in 2008, does not believe in a plan of B. Obama about a rapid U.S. withdrawal from the crisis. The purchase of toxic mortgage assets ($ 1 trillion of dollars) by the U.S. government may lead to the inflation growth and at the same time does not save the stock market from stagnation. In the meantime we are observing the positive reaction of markets to the proposed plan of salvation. But will it continue for a long time?

Alarm signals are coming from the banking sector of Ukraine, the number of banks with the Interim Administration of the National Bank continued to grow. Bankers are in refinancing expectancy. Manage and rule - a simple recipe for the National Bank.

It appears that the life success depends on IQ (the level of mentality) only on 20%, whiles the remaining 80% - on emotional competence, that is the emotional mind. It seems to me that the formula of the state success is the opposite: 80% depends on the IQ of government officials and politicians, and only 20% - on their emotional competencies. And who said that government officials and politicians in Ukraine have to defend the interests of the state and its citizens? To each his own success!

Maintain the investment portfolio in the same form as last week.

You are what you eat. You have to eat good quality food because people say that the brain activity largely depends on what you ate for breakfast. Analysts recommend to eat half a banana and apricot for breakfast, and avocado and the California plum (nectarine) - for dinner. Take care of the healthy nutrition of your children and loved ones!

Find food for your thought (mental pabulum) and share your healthy thoughts with us!

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See also:

Мысли среди недели: индуктивные и дедуктивные методы исследования фондовых рынков

Очень часто мне приходится дискутировать о применимости тех или иных финансовых теорий к текущему анализу рынков, осуществление на его основе прогнозов и инвестиционных решений. Еще чаще мне приходилось наблюдать за спорами теоретиков и практиков на финансовом фундаменте. Меня всегда удивляло, почему они спорят? Ученые и исследователи используют общепринятые модели, описанные во всех классических учебниках, их знает каждый магистр по финансам. Почему выводы этих моделей не нравятся практикам?

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