Thought for the day
“Economists perform the same function as shamans and witch doctors in tribal societies, who regard the entrails of some animal and predict the future, which generally corresponds to what the chief wants to hear. Economists are far more advanced than that, of course. We painstakingly gather data and develop complex computer models to show what our politicians want to hear.”
-John Mauldin (American, 1951- )
-John Mauldin (American, 1951- )
Word for the day
Entrails (n)
Internal parts of anything
(Source: Dictionary.com)
(Source: Dictionary.com)
Teaser for the day
Both BJP and Cong promising reforms, i.e., incremental changes to existing policies. We need revolution, complete change, not reforms.
Trading strategy and themes
In my view it is clear that we are headed towards a major
trading rally in Indian equities over next 12-15months. I will not be surprised
if this rally actually transcends into bubble territory as the “US rate hike”
clamor gains further momentum. Also there is little doubt that this bubble will
also meet the same end as the previous ones, more recently 1998-2000 and
2005-2007.
Having this view in mind, I set my strategy for trading with
following assumptions:
1.
The new government in India will follow the
classical Keynesian method to revive economic growth. Both fiscal and monetary
stimuli shall be provided to spur consumption and investment demand. Monetary
policy will not be further tightened.
2.
Government will raise substantial resources
through aggressive assets’ sale to recapitalize struggling public sector banks.
3.
US Fed achieves the QE tapering target driven by
consistent improvement in housing and job market. US rate hike anticipations
lead to stronger USD, and massive rotation from US bonds to risk assets like EM
equities.
4.
No major geo-political event occurs that would
create supply disruption in energy market.
Caveat: Remember, this is trading strategy focused on next
12-15months. It may differ in places from our core investment strategy.
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