Where is the liquidity world is talking about?

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Where is the liquidity world is talking about?

Total sub prime market in US is about 4 trillion, total liquidity infused is of about 1000 billion dollar. Yes Fed is guaranteeing AAA rated securities to the tune of about 1 trillion by way of TALF, but they are guarantees only and may or may not have a significant impact on the liquidity at least in the immediate future.

also the economy will take some time to go back to its optimum level and hence the the chances of inflation coming back in a big way globally look subdued.

if that is true then USD may not see a correction yet this will put downward pressure on commodity prices and that will again ensure we have a low inflation till some time to come.

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A good IIP number is a good news for the economy. Also because this has showing signs of improvements from some time now, this coupled with a healthy credit growth and ample liquidity will defiantly propel economy forward. I am sure the capex will start again and so the good numbers from companies.
What can really change the consumption in the economy is a proposed plan to change the tax slab from current 1.5, 3 & 5 million to 1.6, 10 & 25 million. I think following will be the implications of the change;

1. this is a fantastic news for the internal consumption, and for FMCG companies.
2. India has about 15% of the world population, and a huge middle class. A change in consumption pattern might lead to inflation
3. Fiscal deficit will surly go up; improving the number of tax payers, that the government is talking about may not be all that easy. So the fiscal deficit will go up.
4. It's a simple rule one gets money, when you have enough of it. All this money will improve savings and investments, which will in turn attracts more investments from FII and FDI.

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Is it not a good time to sit in cash?

My answer is Yes it is. I am no way trying to say that markets are always predictable and safe, but there are times when you know that things are not clear. We are just coming out of a sever meltdown of global economy, inflation looks a certainty (Look at prices of pulses, sugar and all other commodities), monsoon is way below normal, and don't forget the H1N1.

Yes i agree that the uncertainty of the market is the reason why i write and you read and visa verse. But a patient coming out of a hospital should not just start running. The correction was sever and a bit more then warranted, but market going back to 15/16 plus PE in just a matter of six months looks a bit too optimistic.

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