Land and sea, weakness and decline are great separators, but death is
the great divorcer forever.
—John Keats (English, 1795-1821)
Word
for the day
Apparition (n)
Anything that appears, especially something remarkable or startling,
e.g., the surprising apparition of cowboys in New
York City.
Malice
towards none
The current inflation
adjusted price of beer in US is down by 33% since 1952.
During the same period, the
inflation adjusted prices of cigarettes are higher by 350%.
Replicate that trend in
India during 1990-2050 and you get a great investment theme.
First random thought this morning
Those who are worried about Trump winning the US presidential
election are presuming:
·
US president is omnipotent and he could drive
the economic, foreign and defence policies of the country as per his whims and
fancies;
·
Donald Trump is a knucklehead who immediately
after assuming office in January 2017 would close all US borders; snap all
commercial relations with China; throw all Muslims in pacific ocean; and
trigger WWIII;
·
Hillary Clinton is better than Trump.
If you promise to forgive my inanity, may I ask what is the basis
of these presumptions; I mean apart from the election rhetoric.
Arranging pieces of the puzzle
1. US
Fed's decision (or rater indecision) on hiking policy rates and consequent
movement in USD and treasuries.
2. Outcome
of US elections.
3. Implications
of UK vote to leave European Union (Brexit).
4. RBI
monetary easing.
5. Anticipation
of GST implementation and its impact on Indian economy and corporate
bottom-line.
The impact of earnings has mostly
been confined to the individual companies, though in some cases sector wide
impact was felt briefly, e.g., in IT. The impact of the controversy involving
Tata group management has also been mostly localized to the group companies.
The impact of macro-economic data
like PMI, core sector growth, GDP growth, 1HFY17 fiscal deficit, spectrum
auction etc has been seen just for a couple of hours during intraday trade.
The geo-political tension,
especially Indo-Pak relations, has impacted market sentiments for a couple of
days.
The policy statements of ECB, BoJ,
BoE and PBoC have mostly been noted without much excitement.
The global macro data like China
PMI, US retail sale and employment numbers, Japan, UK, Europe inflation, has
mostly evoked academic interest; even though these data have been often cited
as key input for policy decision by respective central bankers.
The initial euphoria over GST has
mostly subsided. We might see another spurt when the rules are notified and a
definite timeline is set.
The current stock prices are not
reflecting the RBI easing, and consequent reduction in lending rates by banks
(reportedly SBI has cut home loan rates to six year low levels). One could
argue that but for RBI easing the fall could have been sharper. But that
argument may not convince many to go out and buy stocks of stressed banks,
highly indebted infra builders, and/or real estate companies. Neither it seems
to be encouraging someone to initiate major capex or buy new houses.
7th PCR money has been disbursed
and Kharif crop has been harvested. Except for auto, the impact is rarely
visible elsewhere.
Despite some earnings beats, the
FY18 earnings growth forecast of 15-18% looks challenging.
In next couple of days of I would
share my thoughts on the likely impact of the aforementioned five events on my
investment strategy.
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