Thought for the day
" Each player must accept the cards
life deals him or her: but once they are in hand, he or she alone must decide
how to play the cards in order to win the game. "
-
Voltaire (French, 1694-1778)
Word for the day
Slubber (v)
To perform hastily or carelessly
(Source:
Dictionary.com)
Teaser for the day
After so many decades, in Manohar
Parrikar, we have a minister who is not a superman. He wants sometime to
understand the complex issues of his ministry. Usually, ministers become
authority on the subjects of their ministry the moment they sit on the chair
for the first time.
Heads or tail - it's your call
Traditionally, the divergence of global markets from the real
economic conditions is usually followed by a sharp correction that leads to
convergence of realty with hopes.
I have not been able to derive a pattern in such corrections.
But sentimentally I feel that the correction are sharper and more painful when
hope runs much ahead of ground realty. Many more people lose money in this
correction as compared to the people who earn supernormal profits the during
the course of divergence.
In the reverse case, i.e., when real economy does much better
than the markets, the corrections are protracted and less euphoric. Few people
participate in the up move. A majority of investors join the party late,
usually when all the fruits have been plucked by smart investors. What is left
is either few scarred fruits at the top which are risky to pluck or the
overripe rotting stuff scarred all around.
The key point to ponder this morning is what pattern market is
forming today.
Is it a case of hope leaping much ahead of the realty? Are we
thus heading toward a convergence correction that will be sharp and painful.
The recently concluded earnings season supports this hypothesis.
Barring a few pockets, we have not seen realization of hope in any sector.
Discretionary consumption demand has remained elusive. Investment demand is at
multiyear low level. Global markets are showing distinct signs of deflationary
conditions. Sharp fall in energy prices ahead of an expected severe winter in
western part of the globe are telling a rather gloomy story.
On the other hand there are indicators which suggest that
probably the markets have just completed a long protracted convergence
correction, where the global markets have just converged with economic realty.
USD has recovered the entire loss it incurred post July 2007
when sub-prime concerns first spooked the global markets. The financial system
looks reasonably stable. The households are cautious but out of deleveraging
mode.
JPY has yielded all the gains made since 2007 majorly due to
safe haven demand. Euro is converging to USD to reflect poor economic and
fiscal conditions in the Europe.
Energy and other mineral prices are down as Chinese extraordinary
investment cycle is coming to an end, the OPEC cartel and Russian mafia is on
the verge of breaking due to a variety of reasons. Global inflation and wage
hike cycle are not visible on the horizon. Food prices are at multiyear low and
availability high. Geo-political tensions are palpable but the economics and
demographics are completely against a war. No major country has enough youth
and fiscal leverage to go into a major war at this point in time. Regional
conflict are small and mostly immaterial in global context. The threat of ISIS
and Ebola would hopefully come out to be a routine....to continue
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