"Man never thinks
himself happy, but when he enjoys those things which others want or
desire."
— Alexander Pope
(English, 1688-1744)
Word
for the day
Potboiler (n)
A mediocre work of literature or art produced merely for financial gain.
Malice
towards none
Congress is desperately
trying every trick in the trade to stay relevant in UP.
Genuflecting to Ms. Mayawati
is perhaps the only thing left!
First random
thought this morning
The online retailers are joyously claiming huge growth in sales
this season. Their offline counterparts are echoing their sentiments.
This may therefore be a case of some shift of customers from off-line
to on-line; and not necessarily reflect the growth in consumer spending.
Regardless, the customer is benefitting from lower prices and
manufacturers may also benefit from lower sales and distribution expense. The
retailers in both the worlds may end up funding the Diwali of producers and
consumers:)
"Beginning of the end" or a "New beginning"
(a) After rising 8% from the lows of Brexit vote (US$1256/oz) gold
prices have fallen to the same level. (Some analysts are now suggesting that it
may still be overvalued by 20-25%, (See here)). Base metals like copper have also seen similar
trends.
(b) After falling 20% in July (~US$42/bbl) from highs of early June
(~US$52/bbl), the Brent crude prices and are almost back to those levels.
(c) The benchmark 10yr US treasury yields fell 25% from highs of June
(~1.84%) in July (~1.36%) and have recouped most of the ground since.
(d) Equity prices have seen a wider divergence. Nasdaq (~10%), FTSE
(~9%), Nikkei (~10%), Hang Seng (~16%) have seen material gains in past
3months; while most EM indices (including) are higher by 3-5% in this period.
S&P5001 and Dow Jones are up just ~2% in past 3months.
(e) Currencies have also seen a wider and diverging movement against
USD. While EUR and CHF are almost flat, GBP has depreciated materially and JPY
has appreciated. CNY has depreciated ~1.5% and INR has appreciated ~1.5% over
this period.
It is easy to guess that the life
of most market participants traders must have been quite challenging and less
rewarding in this period.
If someone asks me, I am
completely at loss in understanding the reasons behind such volatility and
divergence. However, I must say, I am clear about the following three things:
1. The
conditions (including policy narrative) that have prevailed since collapse of
Lehman Brothers in autumn of 2008, are set to change in next few years. You may
call it "beginning of the end" or a "new beginning", as you
like.
2. The
central bankers have propped up many a bubbles in the global markets since 2008
- including in currencies, gold, bonds and equity markets (more on this next
week). The major challenge therefore would be to deflate this bubbles in an
orderly fashion.
I
am unable to lay my hands on any empirical evidence of such orderly deflation
of a bubble. Nonetheless, I accept that all things once happen for the first
time.
3. The
geo-political realignment shall have a role to play in the "next global
market era." I am inclined to order some cold war era books (both fiction
and non-fiction) to get some guidance as to how the global markets may look
like in next 20years. As things stand today, India seems set to play an active
role this time (Nehruvian legacy of non-alignment has been given a quiet
burial).
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