Do it yourself

As I mentioned yesterday ( see here ), the current conditions are very different from the conditions in the 1980s when the US Federal Reserve under the chairmanship of Paul Volcker, managed to kill inflation with a deeper recession, but without pushing the world into an economic depression. But this does not imply that we have nothing to learn from history. A key learning from the past 150 years of economic history is that every major economic cycle has been a function of a different set of factors like war; decolonization; politics triumphing over economics; major demographic shifts; major technological evolution (industrial or technical revolution); etc. The policy responses to various economic cycles have depended upon the mix of factor that were responsible for the cycle. Industrial revolution, destruction due to world wars and then reconstruction effort; emergence of Communism (command economies) and cold war; decolonization of European colonies; population boom (baby boomers)...

May 2021 Bulletin of the Reserve Bank of India , carries some useful insights about the performance of NBFCs during the pandemic. Being a critical source of consumer and MSME finance, performance of NBFCs is usually a broad indicator of the consumption demand, and consumer and business sentiments. The key highlights of the NBFCs performance, especially during 2H2020, are noted as follows: ·          Pandemic has hit NBFCs hard. “The impact of the pandemic can be seen on both asset quality and liquidity, although the latter was addressed to a considerable extent through timely policy measures.” ·          An unfavourable mix of COVID-19, sell-offs in financial markets and the abrupt winding-up of specific schemes by a mutual fund contributed to NBFCs facing record spike in yields on their debt in Q1: 2020-21. The sharp market differentiation continued between the highly rated and other NBFCs, notwithsta...

In the recent Global Competitiveness Report, the World Economic Forum examined how different countries are traversing on the road to recovery from the health and economic shock of Covid-19 pandemic, which “impacted the livelihoods of millions of households, disrupted business activities, and exposed the fault lines in today’s social protection and healthcare systems”. On the positive side, the shock is believed to have accelerated “Fourth Industrial Revolution on trade, skills, digitization, competition and employment”. There is large section of observers who reject World Economic Forum in general and its research in particular, as mostly elitist and prejudiced against developing economies. I do not have any strong objection to the views of this section of people. However, I do occasionally study the work done under the aegis of WEF and find it useful for identifying the problem areas and directions for further study. I read the Global Competitiveness Report 2020 also with this persp...

UK has allowed the administration of vaccine for SARS-CoV-2 virus (commonly known as Covid-19) developed by Pfizer. Russia and Chinese authorities have also confirmed approval of separate vaccines. In India also couple of developers has expressed confidence that an effective vaccine will soon be available for Indian population. This is certainly a matter of relief for the distressed mankind living in fear since outbreak of the pandemic. However, for the investors in stock markets wider availability of vaccine could be a matter of slight concern. So far the investors in equity have had a decent run in 2020, regardless of the severe correction in the early days of the pandemic. In my view, a large part of the price gains in equity stocks could be attributed to the accommodative monetary policy adopted by the central bankers world over. In past 9 months, a significant part of the cheap and abundant money may have actually flown to the financial assets (mostly equities) as (i) the re...

 I have always believed that “equity investment” is a serious business but mostly done in a casual manner. In past three decades I have observed that most investors take equity investment decisions based on factors that are not related to the underlying business of the company they are investing in. While this may be more true for the small household investors (Retail) and High Networth Individuals (HNI); the professional fund managers (Institutions) and large traders are also seen taking decisions based purely on factors like politics, geopolitics, and monthly or weekly data (trade, jobs, production), etc. No wonder the “breaking news” on TV channels causes more volatility in stock prices than the management guidance about the business of the company. I have seen many Retail and HNI investors spending less effort and time in taking equity investment decisions than they would normally spend on buying a shirt. And worst, they spend much less effort and time in taking a decision to...

 With each passing day, the realization is growing that it will “years” not months or quarters before the normalcy returns to the global economy. Regardless of the statistics on global trade, national income and corporate earnings, the impact of pandemic on humanity, especially poverty, inequality, and suppression is overwhelmingly devastating. The pandemic has indubitably undone the decades of efforts in poverty alleviation and public health in numerous developing and underdeveloped countries. As per a recent Bloomberg report based on a study conducted by the World Bank and Philippine’s local agencies, “almost half of shuttered businesses were unsure when they could reopen”. As per the report, “in emerging parts of Southeast Asia, where a wave of job losses and weak social safety nets mean millions are at risk of losing their rung on the social mobility ladder. The region is likely to come in second behind the Indian subcontinent in charting the number of new poor in Asia this y...