For once every one in the world appears to be playing the game
of cat and mouse. All appear to be running in circles, falling, rising, trying
hard to outsmart others and in the process hurting themselves badly. The bad
part is that spectators who are not in the arena are being forced to pay for
these games which are not even funny.
Ben Bernanke is playing with financial markets. Fully aware that
his seemingly innocuous comments at some random symposium might cause billions
of losses/gains in a matter of few hours – he is not showing any reluctance in
making those comments. Markets, fully aware that QE is a matter of fact and
could be withdrawn only and only if economic conditions improve substantially
to warrant such withdrawal are swinging wildly at each such comment. Ben does
retreats to his den after each such wild swing but only to reappear a little
later.
The global research and rating agencies are also playing a
similar game in a different arena. Fully aware that these random data has no
meaning in the present global macro context – they are frequently emitting
drivel only to clean it up the next day. The financial markets swing to each
such emission, and make poor investor a little more poor. Euro Zone PMI which
totally contradicts the employment and trade data, China trade data which
contradicts the PMI and consumption data, UK house prices which contradict
every other economic indicator are but a few examples of this game.
Financial analysts might be playing against God – trying to
foresee things that are not even likely to happen. Many are full time busy
guessing the date of QE withdrawal/tapering and rate hikes. Some saw great
rotation from debt to equity. Others found great rotation from commodities to
equity more interesting. Someone is highlighting
great rotation from ‘smart investors’ to ‘dumb investors’ as in USA
institutional investors turn largest seller of equities since 2008 and
household investors are piling up. Some Gurus have been busy predicting EM to
DM great rotation since 2008; and with some Japanese renaissance is the only
passion.
We see little problems in attempting to foresee these supposedly
long term trends. The problem however does arise when they suggest a trade
today based on their hypothesis into eternity.
Back home, RBI and FM are playing an interesting game. FM is
promising heaven on earth, fully aware that we are slithering fast into hell.
RBI is not buying any of their promises and tightening with singular focus on
prices. Befuddled investors and analysts are listening to both, believing both
and jumping up and down, losing substantial hope, confidence and money in the
process.
The mute spectators, poor household investors have lost money in
equity, bonds, treasuries, liquid funds, real estate silver and gold. With CPI
at ~13%, the agony could only exacerbate in coming days. At this point cannot
even tell them “Cash is King”.
In this melee, the mother of all mayhem could be seen in the
ensuing monsoon session of the Parliament beginning 8th of August.
Thought for the day
“It was only literally hours after the wedding when he felt he didn't have to keep up the facade.”
-Trisha Goddard (1957-)
Word of the day
Sidle (v):
To move sideways or obliquely.
(Source: Dictionary.com)
Shri Nārada Uvāca
Reports suggest that the Royal Baby may support struggling UK economy tremendously.
A study has suggested that he may add £245mn in additional sales, as Britons celebrate the birth of prospective King.
Should Rahul Gandhi take a leaf out of this episode and help the struggling Indian economy?
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