Thought for the day
"It is the mark of an educated mind to be able to
entertain a thought without accepting it."
-
Aristotle (Greek, 384-322BC)
Word for the day
Celerity (n)
Rapidity of motion
or action; quickness; swiftness.
(Source: Dictionary.com)
Teaser for the day
In Indian politics, last week who said to whom:
"Revenge is a dish that tastes best when served cold!"
Toffees
on trees and fish on streets
A popular Gulzar song from 1980 Hindi film Khoobsurat, coaxed
people to break rules and think out of box. The current popular market
sentiment seems to have taken the cajoling far too seriously. Investors are
actually looking for toffees on trees and expecting to find fish running on
streets.
Speaking to some large investors/traders, businessmen and
analysts in Mumbai last weekend, I discovered the following:
(a) There is an absolute consensus that USD
shall gain further strength from here. However, the opinion is divided on
INRUSD trends. The estimate vary from (a) Stronger INR vs. USD; to (b) a
materially weaker INR vs. USD to (c) a gradually depreciating INR vs. USD.
Most opinions are based
on the premise that current account gains are structural due to medium to long
term shift in energy price equilibrium.
Most believe that there
is strong, almost unchallenged TINA factor behind FII flows to India.
Many believe the
weakness in oil based middle east economies and strength in US economy will
accelerate remittances - in former case due to fear and in latter case due to
abundance.
(b) There is a conspicuous race to offer
innovative arguments in support of higher valuations - much like 1999-2000 when
obscene ICE valuations were justified using "differentiating"
valuation techniques.
(c) Lower inflation, higher growth and falling
rates is an overwhelming consensus. No one is willing to account for a Lehman
type collapse.
Only a couple of people
accepted my argument that it is not only about "inflation", i.e.,
rate of change. It is also about the price levels which are becoming
unaffordable for lower middle class in most cases, especially when wages are
stagnating and employment market is intensely competitive.
Higher prices and
stagnate or slowly rising wages do not support the higher saving higher
investment matrix.
(d) Most concerns were expressed in feeble voices,
clearly emitting fear of being singled out or losing on the market rally.
(e) The hope is seen driven by vision statements
like "Make in India", "Clean India", "Ease of
Business", "Red Carpet for Red Tape" etc.
Paradoxically,
positioning is similar to 1980's era of pseudo socialism and no growth. MNCs
and domestic oligarchs (holding myriads of licenses) did well and commanded
higher popularity amongst investors and therefore higher valuations. Similar is
the situation today.
The underlying trade,
as someone beautifully put it, is entirely on the small luxuries that large
masses are now enjoying - biscuit, noodles, tampons, motor cycles, dental
cream, watches, shoes, fans & coolers, etc. The "Growth" is just
driver of hope; far from converting into a trade.
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