"We are living in a
epoch where there is combat between commercialism, or the system of reckless
waste, and communism, or the system of neighbourly common sense."
—William Morris (English,
1834-1896)
Word for the day
Genethliac (adj)
Of or relating to birthdays
or to the position of the stars at one's birth
Malice towards none
India gets a new passion -
"Akash Ambani's wedding".
This shall keep us busy for
most of 2018.
Many thanks to the Lord
Almighty for it!
First random thought this morning
The important question which nobody is answering is "whether
the Government of India is a discreet time series or a continuous one?".
If it is a continuous series than the people at the helm must be
accountable for everything - all policies, programs, resources, inadequacies,
success, failure - everything. Then passing blame on the predecessors for
anything is not justifiable. Especially when the current dispensation does not
mind taking credit for their good deeds that start bearing fruits in its
regime.
If it is a discreet series, then everything needs to be reported
broken in the blocks of period during which various people/parties were at the
helm, and credits and blames may be assigned accordingly.
What is bothering Indian markets - concluding part
In past three weeks I have shared my assessment of the factors
that seem to be bothering the Indian equity markets presently. Many of these
concerns arise out of strong reasons like rising cost of capital, fresh round
of slippages in bank loans, and below par earnings' performance so far.
Whereas, many concerns are mostly anticipatory and hypothetical in nature,
e.g., political uncertainty, fiscal slippages beyond manageable levels, continued
GST led disruption, etc.
In this concluding part, I would like to highlight the concerns
over sustainability of current global growth rate, in the wake of rising rates
and inflation pick up.
In my view, debating or worrying about inflation (or deflation for
that matter) at this point in time may be meaningless. The global economy is at
the cusp of a number of material changes that will shape the future of global
economy for next couple of centuries perhaps. The comparable situation that
comes to mind is the industrial revolution days of 19the century.
Historically, energy and food inflation have bothered the people
most. There is little indication that we can have any bout of sustainable
inflation in both.
As the ageing demographics in the developed world inspires the work
automation technologies — the life styles, consumption patterns, trade balances
etc are all set to change beyond recognition.
In the medium term therefore the chances of world slipping into a
sustained period of deflation are much higher than any inflation outburst.
At the same time the demographic imbalances and technology
inequalities will inevitably trigger a wider unrest.
Given that an overwhelming majority of world's population lives in
poor and technologically deprived (on relative basis) countries, we might see
another round of colonization (this time virtual) taking place.
But these are long term concerns. In the near term stagflation
(lower growth and higher inflation) seems like a valid concern.
As the recent Absolute Return Partner's recent letter to investors (see here)
pointed out, "the US output gap has now vanished. It is therefore fair to
say that there is currently little slack overall in the US economy. Plenty of
economic slack in the post-crisis environment is very much why inflation has
been so modest in recent years – not only in the US but worldwide. If economic
slack has now largely disappeared, at least in the US, rising inflation and a
more aggressive FOMC is only what can be expected."
(It may be noted that the Absolute Return Partner do not appear subscribing
to the inflation bust theory. They seem more inclined to the deflation bust
story).
In a recent BoFA fund managers' survey, an overwhelming 74% of
respondents expressed that global economy is in late cycle of growth. This was
the highest percentage in Survey history. At the same time the respondents
voiced the highest inflation expectations in over 13 years. As a reminder, global
growth turns south coupled with inflation you get "stagflation", and
when as a result the "late cycle" economy end, recession begins.
The market worry may however be stemming from the paradoxical investor
behavior. The survey report notes that even as the "smart money" sees
both a stagflation and recession as just around the corner, they put in
even more cash into the market. Ominously investors yet to act on fears, as
rates and earnings are keeping the bulls bullish. Cash levels fell from 4.7% to
4.6%."
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