Friday, May 26, 2017

Is it a case of Cognitive dissonance?

"Patriotism is the willingness to kill and be killed for trivial reasons."
—Bertrand Russel (British, 1872-1970)
Word for the day
Cantankerous (adj)
Disagreeable to deal with; contentious; peevish, e.g., A cantankerous, argumentative man.
Malice towards none
Where would you place the dignity of a human being, in your order of priority?
Would you like "if" and "but" to be used when it comes to your dignity?
First random thought this morning
According to various legends related to the medieval king Vikramaditya, his throne, studded with 32 statues of fairies, had two qualities: (a) the throne would allow only such people to sit on it who would possess qualities of a noble and strong human being; and (b) anyone who would sit on the throne would automatically acquire the qualities of a great king, e.g., valor, justice, magnanimity, foresight etc.
We the people of India continue to believe that the thrones of CM and PM etc possess similar qualities. We sincerely believe that any crook, anarchist, bigot, or criminal will become a noble king as soon as he/she sits on the throne!

Is it a case of Cognitive dissonance?

Under normal circumstances the economic behavior of a person should be a subset of his general behavior.
For example, the outlook about socio-political and geopolitical environment shall normally reflect in the business strategy.
If one believes that the disharmony, strife and stress is likely to rise in the society and politicians do not have an appropriate strategy to deal with social strife and unrest, then such person should normally—
(a)   not be investing in fresh capital in business;
(b)   should be looking to minimize leverage;
(c)    should be seeking higher protection on his life and property;
(d)   should be seeking to geographically diversify his assets by investing or hoarding in foreign assets; and
(e)    certainly look to minimize his exposure to the state.
Similarly, if an investor or businessman believes that geopolitical risks are rising to a specific jurisdiction, he should be diversifying his economic assets away from such jurisdiction.
Now applying this thought to the current Indian context, we get a mixed picture.
If we accept the trends in media, social media and popular political discourse at their par value - our country is facing heightened degree of social stress and unrest; and elevated level of geopolitical threats.
Politically, our country not stands vertically divided, with about 45% voters supporting the incumbent government and the parties supported by over 35% trying to stitch together a united opposition. Such polarization has occurred in Indian politics almost after 4 decades.
Total dominance of an individual (PM Modi) over the day to day executive functions in states comprising more than 65% of India's population shall also alarm an investor or businessman. While this dominance brings many positives, it also raises the specter of (a) erratic policy changes, e.g., abolition of currency; (b) probability of a full scale war (I would say from 0% under MMS to 5% under Modi, is a 5x jump in risk perception), etc.
Regardless of these trends and circumstances, we have seen that—
(a)   domestic investors have increased their stakes in risky assets (small and midcap securities) materially, while investment in gold has fallen;
(b)   the growth in insurance is not commensurate with the risk perception;
(c)    The exposure to government (deposits in PSU banks, participation in government projects, gold bonds etc.) has increased materially;
(d)   outward FDI has fallen dramatically and outward remittances have not shown any acceleration;
(e)    corporate debt stays at elevated level, and the ownership has moved away from banks to public......to continue next week

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