Some food for thought
"God is a challenge because there is no proof of his
existence and therefore the search must continue."
—Donald Knuth (American Scientist, Born 1938)
Word for the day
Impresario (n)
A person who organizes or manages public entertainments,
especially operas, ballets, or concerts.
First thought this morning
An analysis of the speeches made by BJP top leadership in past
six months highlights two clear trends:
(1) BJP leadership is
deliberately projecting Rahul Gandhi (and his family) as primary opponent in
the next general election. They are totally dismissive of the regional parties
in their public discourse. The strategy seems to make it more of a presidential
contest between the Congress President and the Prime Minister.
The strategy may be flawed for two reasons — (a) Post recent
assembly elections, Rahul Gandhi may not be as weak as he appeared a year back;
and (b) by focusing too much on Gandhi family, BJP may be providing too much
leeway to the regional parties in states where the Congress is not the principal
opponent.
(2) BJP leadership
appears totally unfocused insofar as their agenda is concerned. In fact, it has
already allowed Congress and other Regional parties to dictate the agenda.
BJP leadership is focusing on perils of Congress returning to power.
In the process it is undermining its own claim of having already decimated the
Congress party.
Secondly, they are focusing on 50yr of Congress vs. 5Yrs of BJP.
Many of their speeches imply that most of the targets have either been achieved
or put in process to be achieved in next 2-3years (Power for all, Sanitation
for all, Cleanliness, Roads everywhere, financial problems, tax reforms, ease
of doing business, jobs, clean energy, inflation under control, housing for
all, social justice, etc.) They are rarely seen promising new things. Which
voters may interpret to mean that they are seeking votes on the basis their
past performance and not on the basis of any future promise. Voters seldom like
this proposition. They want more sops and facilities.
Besides, there is total omission of long standing BJP agenda -
Article 370, Uniform Civil Code and Sri Ram Mandir in Ayodhya. Traditional RSS
and VHP supporters may be little disconcerted with this.
Chart of the day
It may not be over soon
With each passing day, evidence of slowdown in global economy is
increasing. The point that most investor must be pondering over is
"whether this slow down is a normal cyclical phenomenon after many years
of expansion; or something larger?"
Many experts have suggested that this slow down is much larger
than merely a cyclical economic phenomenon, which usually occurs as larger
economies achieve full employment.
For past 10years, monetary & fiscal authorities across the
world could avoid a deep recession type condition, by using non-conventional
policies. This trick successfully, inter alia, —
(a) Prevented the
collapse of global financial system;
(b) Supported the
aggregate demand by not letting the excessive liquidity (QE) cause inflation;
(c) Allowed the
stressed European countries almost a decade to mend their finances, at
negligible cost; and
(d) Promoted
realignment of global economic powers (G-20 instead of G-3 and G-7) for greater
economic cooperation.
Now after a decade, as the central banks and fiscal authorities
are seeking to wind up the non-conventional stimulus, it appears that the
stimulus might have been just a piece of cloth that kept the hole blocked so
that the stinking drain water does not flow into our drawing rooms. It may have
cured no disease or solved no puzzle.
The fears are emerging that, as soon as ECB and BoJ begin to
pull the cloth out, our drawing rooms may be inundated with the filth that
stayed blocked for more than a decade.
The so called trade war between USA and China, might also be a
manifestation of this phenomenon. As the adhesive of QE weakens and the bond of
G-20 loosens, we may see many members returning back to their original
positioning. Besides, the imbalances (trade and others) that must have been caused
by "abundant liquidity at Zero or Negative interest rate" need to be
restored back to the state of equilibrium. The asset prices (including FAANG,
Cryptoes, etc) fueled by this "free money" also need to find some
balance.
I would therefore like to believe that the corrective phase that
begins now would be a prolonged and painful one.
In the meantime:
The damage caused by President Trump’s trade fight with China
has spread farther and faster than many expected. Factories in China and the US
have seen orders slump. American farmers are hurting. A collapse in
Chinese demand for iPhones knocked nearly $75 billion off Apple Inc.’s market
cap in a single day. Slower growth just prompted China’s central bank
to ease monetary policy, and, despite last week’s encouraging news on U.S.
jobs, the Fed is having second thoughts about its plan to normalize interest
rates. (Read
more at Bloomberg)
My favorite fund manager has informed me that global steel
consumption had grown @1.2% CAGR for almost 30years between 1970-2000. Then
China fueled steel demand grew at 5.2% from 2000 to 2013. Since the Fed started
taper tantrums
in 2013, the steel demand growth has fallen back to 1.2% CAGR. If the trend
persists we may see this trend from 1970 continuing well into 2040s!
If this comes true, imagine the fate of companies which are buying
stressed Indian steel assets not at so much of a bargain price; and also the
fate of the bankers who are funding these acquisitions.
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