"Do you know because I
tell you so, or do you know, do you know."
—Gertrude Stein (American,
1874-1946)
Word for the day
Attenuate (v)
To weaken or reduce in
force, intensity, effect, quantity, or value, e.g., to attenuate
desire.
Malice towards none
Those clamoring for Rajput
pride and opposing #Padmavati may please do something to stop female infanticide
and incest that plagues their society and makes life hell for millions of
living Rajasthani women.
First random thought this morning
There is section of people who is accusing judiciary and regulators
for over enthusiasm and activism. Their grouse is that judiciary is
overstepping its jurisdiction and may even be infringing the legislative and
executive territory.
The point is how did our system reach this stage. It is clearly
the failure and corruption of the legislative and executive that is driving
this trend.
For example, if executive and legislature were proactive in
checking the menace of pollution, why would NGT be needed at first place, and
even if constituted, why would it need to pass some seemingly ridiculous
orders!
Mood of markets - divergent views
In past few weeks, I have read a
number of research reports and market analysis. I have also heard the views of
a number of fund managers and investment strategists. Unfortunately, I have not
been able to decipher much from all this. Admittedly, my prejudices could be
major culprit here. Therefore, I would not like to burden my readers with my
conclusions based on the views and opinions of experts.
I would however like to share some
guideposts that may help readers form their own judgment about the current mood
of markets.
I find that there are two distinct
camps of analysts and fund managers:
(a) First camp comprises of those who have seen the exuberance that
preceded the last global financial crisis (GFC) and also the melt down that
followed it. Experts in this group have seen high growth, full employment,
rising interest rates and double digit inflation, Lehman collapse, Merrill
Lynch sale and General Motors at brink of bankruptcy. These experts were stress
tested for 1930s type of global depression conditions. Many of these also
completed the cycle of million dollar bonuses to no pay hike for 5-6yrs. Many
of these navigated through GFC adroitly and manage to grow their stature. While
others sank with the market but have staged a comeback, but with bruised egos
and diminished stature. Most important, experts in this group have experienced
asset price falling 50-80% in a matter of one year, from a all blue sky
scenario.
(b) The second camp comprises of young people in their late 20s or early
30s, who started their investment career post GFC. These bright guys have
mostly worked in 'whatever it takes" and environment, characterized by
abundant liquidity, near zero interest rate, very low inflation, low growth
that is acceptable as "new normal". The people in this group have
only seen asset prices rising steadily while energy prices declined by more
than 50%. The belief seems to be that events like Greece default, Brexit, China
slowing down from 9%+ growth trajectory to 6%+ growth trajectory, major
emerging economies like Russia and Brazil struggling for growth, and India
growing at much slower pace are minor aberrations and asset prices have only
one direction to move and that is north.
The stance and arguments extended
by both the groups are obviously contrasting. Though fund managers from both
the groups might be fully invested, the asset allocation and sector preferences
do vary materially. Emerging Markets Debt, Gold, US Treasury, Euro, Japan,
Chinese mid and small caps, Bitcoins, Frontier Markets etc. are some of the
major divergences among the these two groups of experts.
Another stark difference is seen
in the valuation argument, especially for equities. While the first group
mostly sticks to the conventional valuation matrix, the second group is
innovating methods that would justify the current price....more on this next
week.
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