"Beware of the man who
does not return your blow: he neither forgives you nor allows you to forgive
yourself."
—George Bernard Shaw (Irish,
1856-1950)
Word for the day
Stardust (n)
A naively romantic quality,
e.g., There was stardust in her eyes.
Malice towards none
The order of nature is that
nights are for resting and days are for working.
Should government consider
criminalizing all night shift work and order shutting down 24x7 call centers?
First random thought this morning
As per media reports, a Kolkata based steel company facing
bankruptcy proceedings has received huge interest from potential suitors. The
best bet received so far reportedly implies a 55% haircut for the lenders. The stock
price of the company has gained 67% since September 2017.
The primary principle of limited liability company form of
business is that in case of insolvency the equity shareholders get paid in the
end after satisfying all the liabilities of the company. So, if the lenders
take 55% hit, should not the equity shareholders must get 100% hit. If yes, why
the company's stock is trading at just 36% discount to the face value. And
also, why is it being allowed to trade in the first place?
VIX vs. Gold
The following three most popular Chinese curses are worth
remembering by investors at all times, viz—
1. May you live in
interesting times
2. May you attract
the attention of the government
3. May you find what
you're looking for
The times are certainly interesting. Brexit widely predicted as a
disaster for the global markets, has not created many ripples so far. The
threat of material rise in right wing fundamentalist forces across Europe and
US has not materialized. Donald Trump, popularly seen as a disaster for global
trade and geopolitics, is not doing as bad. Cryptocurrencies are seeking to
challenge gold and USD as global currencies and not CNY. Unprecedented and
humongous amount of money printing has not created any inflation. Despite all
the noises, the world has not witnessed any significant geopolitical
escalation. The stray cases of terrorist attacks in Europe and US have been
tolerated peacefully without any reckless reaction.
Back home, the right wing BJP has gained political dominance that
was only enjoyed by Congress in early days of post independence period. The
Congress and other socialist parties have been totally decimated. But,
regardless of the rhetorical debates in mainstream media and election rallies,
there is little sign of any unusual civil unrest. Religious riots are also
limited to prime time TV debates.
Secondly, the government attention has certainly increased in the
post global financial crisis (GFC) world. Money laundering, tax evasion, and
other non-compliance have become difficult. Tighter regulations, improved
surveillance, stricter supervision and better coordination has certainly made
the life of people enjoying easy money rather fearful.
Inflation is one of the things, that a number of central bankers,
regulators, investors and businesses have been looking for. There are enough
indications to suggest that they may finally get this in next few quarters.
To the seasoned and grey haired this may seem like an usual
economic cycle. But the problem shall arise for the young and dynamic. These
are the people who entered the markets in last decade or so. These people have
not experienced hyperinflation, rise in rates, bond prices falling materially,
tighter liquidity, growth collapsing when everything looked poised for a
spectacular rally and the picture on the economic canvass turns purple from
pink. And the problem for the market is that these young Turks in their 30s are
in overwhelming majority everywhere.
So when people ask me, why you are worried about inflation, I tell them,
its not the inflation per se I am worried about. I am worried about the panic
reaction that it may invoke amongst the unsuspecting. The best hedge for
inflation therefore may not be gold this time. I would rather prefer VIX
puts....to continue tomorrow
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