Vijay Kumar Gaba: Stock Price Crash

Showing posts with label Stock Price Crash. Show all posts

Wednesday, September 11, 2019

You must survive to enjoy the fruits of you labor!

As per the Hindu lunar calendar the ancestors' fortnight (पितृपक्ष), will start from tomorrow. As per the ancient Hindu traditions, all Hindus are obligated to serve Brahmins (Scholars) and feed crows during this fortnight. It is widely believed that serving Brahmins and feeding crows in this fortnight pleases souls of the ancestors and thus redeems the person performing this ritual from the debt of ancestors.

Hindu religious traditions also mandate that a grand feast must be organized by all Hindus within 3weeks of the death of their parents, spouse or children. In this grand feast Brahmins, Dogs, Crows and the poor are served with delicious food. Brahmins and poor are also given cloths, cash and other gifts.

I am not competent enough to comment about the traditions of other religions and cultures, but I am sure similar traditions are practiced by the followers of other religions also.

The anecdotal evidence that I have collected from my interactions with numerous villagers and urban poor, this feast (श्राद्ध) could be one of the top 10 reasons behind perpetual indebtedness, bonded labor and socio-economic distress of numerous rural Indian household.

Regardless of the religious significance and/or relevance of these rituals, I find it pertinent to to highlight that "the feast" will be held regardless of you. In case you want to enjoy the feast, you need to survive till good times arrive; otherwise it will be for the Brahmins, poor, cows and crows to enjoy the feast.

Relating this analogy to the economics, markets and politics—

In past two decades corporate India has invested huge amount of money in creating capacities. Many of these capacities, especially in infrastructure and real estate sector, have been created without bothering about the prevailing demand conditions. Consequently, a significant amount of these capacities became economically unviable. Promoters who created these capacities, bank managers who funded these capacities, and investors who provided equity to these promoters and lenders - are all in distress.

There is no argument against the need for these capacities. The demand will also come in next few years. But the question is who will enjoy the feast. The bank managers would have retired, sacked or shunted out for his poor performance. The promoters would have diluted his equity substantially at distress price or forced out by IBC. The equity investors would have booked the loss.

The Brahmins and Crows - the new bank manager in whose tenure these capacities will become viable adding to bank's profitability, investors who will buy equity at distressed prices and acquirers who would then be managing the show - will feast on the misery of others.

The traders in stock markets usually have this tendency to protract recognizing their losses. These losses could be due to wrong choice of stock, sudden change in external environment, or any other reason. But the first reflex of most traders is to average the cost by buying into the fall in prices. More often than not the traders end up losing more money than they would have lost had they booked the loss at first hint of trouble. The pain of loss rises exponentially when they see the whole market recovering, except the stocks they own.
It must be understood that to benefit from whatever good a government does, the political parties running that government will benefit from that good only if they survive to see the result of their good deeds. Otherwise, the party that will form the successive government will enjoy the benefit.

The moral of the story is simple - You must survive to enjoy the fruits of you labor!

Wednesday, September 4, 2019

Debating the slow down - 1

The dismal GDP growth data for 1QFY20 released last Friday has fueled a multitude of debates in the country. Most of these debates could be classified in three categories, viz.,

1. Political Debate: Whether the incumbent NDA government led by PM Modi has failed in handling the economy properly?

The debate encompasses a variety of issues, e.g., (i) whether demonetization and GST have impacted the growth momentum so severely that it may take many years to recuperate from the side effects; (ii) whether the government is focusing on too much on political issues ignoring the evident socio-economic concerns; (iii) whether the Narendra Modi administration has adequate talent to manage a economy in serious crisis; and (iv) whether UPA government led by Dr Manmohan Singh managed the economy well or is it due to the vacuum created by that government that the current government is trying hard to fill?

The former Prime Minister Dr Manmohan Singh has actively joined the debate by suggesting that "Our economy has not recovered from the man made blunders of demonetisation & a hastily implemented GST. I urge the government to put aside vendetta politics & reach out to all sane voices to steer our economy out of this crisis".

2. Economic Debate: The economic debate has many dimensions. Market economists, development economists, bankers, policy makers, market participants from financial markets, and business community are debating different dimensions of the Growth Conundrum.

Development economists are debating whether the current slowdown is (i) a demand side problem or a supply side problem; and (b) a structural or cyclical phenomenon.

Market economists are wondering whether the government has fiscal space to stimulate the economic growth through accelerating public investment & consumption and affording meaningful fiscal concessions to the consumers and businesses. "Need for aggressive Reforms" is a common jargon used in discussions but it continues to be vague as the specific suggestions are generally not made.

Bankers are debating whether rate cuts and other monetary stimulus can help achieving faster growth, especially when banking sector is still struggling with the asset quality issues and transmission of already effected monetary easing is not taking place adequately.

Financial market participants are discussing what does the GDP number means for credit growth, asset quality, auto & cement sales, flows, INRUSD, bond yields etc. They are also concerned with "avoidable" tinkering with tax rules especially in the current environment of global uncertainty.

Business Community is debating what concessions and relaxations the government could and should provide to help the struggling sectors like MSME, Real Estate, Automobile, etc. Incentives for exports, rationalization of excessive compliance norms, and "tax terrorism" also figures frequently in their discussions and debates.

3. Social Debate: The social debate is overwhelmingly focused on failure of the government in creating adequate number of jobs in past 5yrs. Rising unemployment that is leading to many distortions like low savings, rising household debt, higher petty crime rate; poor consumption growth etc.

In next few days, I shall reflect on some of the key dimensions of the slow economic growth.

Wednesday, August 21, 2019

Policy Paralysis vs Policy Haste

Policy Paralysis vs Policy Haste

In 2014, NDA led by BJP's prime ministerial candidate Shri Narendra Modi won a huge majority in the Lok Sabha. "Policy Paralysis" of the extant UPA government led by Dr. Manmohan Singh was one of the primary planks on which NDA election campaign was built.

A large majority of people, especially businessmen and capital market participants, had then celebrated the victory of NDA with great fervor. Assuming that the India's economic model based on Nehruvian Socialism (a distorted version of classical Keynesian model) will pave the way for the so called "Gujarat Model". Though not many people had clarity about what the much talked about Gujarat Model of growth is all about, and whether that template of socio-economic development could also be applied to the rest of India.

Most people had expected that the new regime will at least provide a proactive, clean, responsive, accountable and business/investment friendly administration that will ensure higher economic growth.

By the end of 2018, the general criticism of the PM Modi led NDA government was that—

(i) "Policy Paralysis" of Dr. Manmohan Singh government has been replaced with "Policy Haste". A number of policy decisions having deeper and wider repercussions (especially GST and Demonetization) have been taken without adequate preparation and consultation. This "Policy Haste" has led to the "Execution Paralysis" as the status quo has been disturbed materially without evolving the alternative mechanism;

(ii) NDA government has continued with the extant Nehruvian Socialism model rather than experimenting with the so called "Gujarat Model" at national level;

(iii) Frequent material changes have made the policy direction totally unpredictable, negatively impacting the business and consumer sentiments;

(iv) The key programs of the government are misconceived and poorly defined. Hence the outcome has been poor.

(v) Bureaucracy has been empowered too much without assigning corresponding matching accountability.

Notwithstanding the economic concerns and doubts about the sustainability of the NDA economic policies, the same NDA government returned to power with even bigger majority in May 2019. NDA swept metros like Delhi and Mumbai, industrial states like Maharashtra, Gujarat, Karnataka, and most populace states like UP, Bihar, MP, Maharashtra, and Jharkhand.

Less than 3months into the latest term, the government is again subject to the same criticism as before. It seems that people of Delhi and Mumbai, where BJP made a clean Sweep in 2019 general elections 3 months ago, were under the influence of a magic spell for few months. The spell has suddenly broken and they are finding their portfolio values diminished, property prices down and falling, businesses suffering losses, jobs vanishing, petty crime rising due to rising unemployment, and mood in general stressful.

Under the present circumstances, three points need detailed elaboration, viz.—

1. Whether the "Policy Haste" of the government is leading to "Execution Paralysis" at the operational level?

2. What proportion of the domestic growth slowdown is contributed by (i) policy action (or inaction); (ii) domestic cyclical slowdown; and (iii) global cyclical economic slowdown?

3. Are our economy and markets ready for the "Reset" that is becoming increasingly imminent?

Wednesday, August 14, 2019

What do we really want?

What do we really want?

To accelerate the economic growth in order to generate more employment and improve the quality of life of Indian populace, the country indubitably needs huge amount of fresh capital.

Various economists, government agencies and expert committees have suggested that to attain optimum level of employment Indian economy would need to grow 8-10% CAGR for next decade or so.

The capital investment required by private sector to create critical infrastructure to support 8-10% GDP growth is pegged in the range of US$10-12trn over next 10yrs. Energy sector alone may need investment of more than US$1trn over next one decade.

It is well recognized fact that such kind of long term risk capital may not be available internally. Foreign investment is therefore a pre-requisite for the process of economic planning, development and growth. Any debate on path, trajectory and sustainability of growth should therefore begin with this assumption that adequate foreign capital would be available.

A pragmatic economic development and growth plan under the current circumstances should therefore acknowledge the following in the preamble itself:

(a) India needs huge amount of long term risk capital to achieve the goal of fast, equitable and sustainable economic growth and development.

(b) Meeting of this goal is materially contingent upon flow of foreign capital.

(c) Despite unprecedented liquidity sloshing the global financial system, the risk capital that could be invested for long term in an emerging market like India is scarce and circumspect.

(d) The long term risk foreign capital will come to India at its own terms and not at the whims and fancy of the politicians and myopic bureaucracy.

...do we want to follow the herd?

However, what is true for long term risk capital (commonly known as FDI) may not be true for the short term arbitrage money (commonly known as Foreign Portfolio Investment or FPI).

This is the money that usually is not invested by the owner of the money. Instead professional investors, who are paid to maximize the returns for owners of the money, exercise the control over such money. Mostly, their interest in the investment is limited to the remuneration they would get. The remuneration is usually based on the relative performance of the money invested over a small period of time (usually 12 to 24months).

In order to maximize their remuneration, these fund managers would chase the relative outperforming assets in a most secular fashion - with no regional, racial or systemic bias. They would go to communist China, chaotic Russia, democratic but unpredictable India, war torn Africa, vulnerable Chile & Columbia, or struggling Venezuela and Argentina.

As most of them usually move in a herd, they are able to cheer the target market by driving up the asset prices with huge collective inflows in a short span of time. They invariably inflict severe pain and cause huge volatility by their ruthless collective exit.

There is little evidence to establish their long term positive impact on the investee market or economy. However, there is enough anecdotal evidence to show the damaging impact of the excessive volatility caused by their collective actions.

The South East Asian economies suffered tremendously at their hands during 1990's. Emerging markets crashed during subprime led global crisis, when some many of them were growing at 8% to 10% annual rate.

India too had have few instances of irrational boom and bust cycle driven by collective withdrawal of FPI money. 1998 post nuclear blast exodus, 1999-2001 dotcom bubble and bust, 2006-2009 easy credit driven boom and bust, and 2011-12 Grexit paranoia led selling are some major instances.

Besides, we have also seen frequent collective actions to pressurize the government and regulators over issues such as taxation (MAT, DTAA, GAAR) and transparency (P. Note disclosures), etc.

On most occasions the government and the regulators have given in to the pressure, deciding to maintain the status quo. Consequently—

(a) Many nagging issues got accumulated to keep the FPIs and agencies at confrontational path for many years.

(b) The message that goes to FPIs is that Indian government and agencies accord significant importance to the stock market indices and are willing to walk extra mile for a few billion dollars of FPI flows.

Currently Indian markets are witnessing yet another instance pressure tactics. This time most of the domestic participants are also pleading with the government to yield to the FPI demands. The indications are that the government will give in yet again.

The question that may still remain unanswered is "what do we really want?"

Do we want long term risk capital that would support out economy in achieving sustainable high growth? Or do we only care for the fleeting arbitrage money that would stay in India only until a better opportunity arises in some other corner of the world.

I am certainly not denigrating the importance and need of FPI flows to Indian securities markets. But I strongly believe that unlike the long term risk capital (FDI) these flows must be on our terms and within the regulatory framework designed to ensure orderly development of securities market.

Also read Modi Says Surplus Global Liquidity An Opportunity To Access Cheaper Funds

Friday, August 2, 2019

Miror, Mirror on the wall...who is ugliest of all

First thought this morning

The government's proposal to hike registration fee for new vehicles has met with widespread criticism. I am however not able to decipher what this criticism is about - timing of the proposal when the auto industry is struggling with poor demand and mounting inventories; the principle of sin tax being applied to the motor vehicles; or both.

I distinctly recall that last winter when the air pollution levels in many cities, especially the capital Delhi, crossed the last limits, many experts have suggested steep increase in parking and registration charges to demotivate people from buying more vehicles.

There have been numerous cases of young kids developing serious respiratory conditions like asthma, premature graying of hairs and problems related to eyesight. Recently, doctors in Delhi have suspected a case of lung cancer in a young lade due to air pollution in Delhi. The capital city witnesses many cases of violence including murders every year for parking of vehicles in colonies with inadequate parking space. It is therefore only appropriate that vehicle population is controlled through all means including policy measures like higher levies and better public transport.

The point whether the government could have waited for the automobile demand to normalize before taking a policy action is debatable.

I feel additional levy of Rs5000 for car registration and Rs1000 for two wheeler registration may not be a deterrent for the buyers at all.

Chart of the day

Miror, Mirror on the wall...who is ugliest of all

The market participants in their late 50s and older would distinctly remember the days when the practice of Badla Financing was banned from March 1994. This was the time when the country was witnessing massive regulatory and commercial changes.

Liberalization of economy had opened up many businesses to global competition. MRTPA and FERA dilution had liberated large businesses to grow larger, wider and faster. Thousands of SME businesses were winding up. Banks, UTI and Insurance companies were saddled with huge amount of losses. All three large development financial institutions namely, IDBI, ICICI and IFCI were saddled with bad assets, especially steel, cement and textile firms' loans that have been rendered totally unviable due to liberalization of economy and competition.

Stock markets had just recovered from the damage caused by the Harshad Mehta scam that caused huge losses to banks, intermediaries, traders and investors. Foreign investors were allowed to invest in Indian listed equities in 1991, but only had marginal exposure thus far. Non UTI Mutual Fund industry was still in nascent stage.

Ban on Badla trading (indigenous method of financing stock market transactions and stock lending) shook stock markets. Sensex (there was no Nifty then) fell ~10% in a month. Brokers and traders lamented the Finance Minister Manmohan Singh and his colleague from Delhi School of Economics Dr L. C. Gupta as destroyer. The common refrain was that Indian equity market has been killed for good as its fulcrum (Badla financing) has been broken. The 25 odd stock exchanges that were mostly run as private clubs of brokers were facing existential threat.

Then came a slew of SEBI regulations, NSE, Depositories, F&O Trading, a deluge of foreign investments, GDR/ADR issues, and Indian equity markets were soon making mark on global canvass.

India became first country in world to achieve 100% electronic trading, completely eliminating the trading floors. India was also the fastest country to achieve 100% dematerialized settlement of securities.

25years later, I see the market standing at the same crossroad again. The colossal failure of self regulation on part of exchanges, intermediaries, fund managers, and traders has caused a serious crisis of confidence in the markets. All this has happened when the financial system has been under unprecedented stress. A number of large businesses in steel, power, road, cement etc sector have failed. Increased global competition and implementation of GST is threatening to eliminate numerous MSME firms. New Insolvency and Bankruptcy Code (IBC) and deeper regulatory scrutiny has broken the banker-promoter nexus rendering both unscrupulous bankers and entrepreneurs liable to severe legal and regulatory punitive action.

Markets participants (intermediaries, traders, fund managers, financiers, non-compliant FPIs, unscrupulous promoters and market manipulators, et al) are obviously enraged. All are blaming the finance minister and regulators for not doing enough for salvaging the equity markets. But No One, yes you read it right, No One is talking about the total failure of self regulation that has raised the need for deeper and wider scrutiny and restrictive regulations which is the primary cause of the crash in stock valuations, in my view.

There have been many cases of mutual fund managers surreptitiously financing corporate and promoter in violation of prudent norms and inadequate due diligence. There are allegations that many such financing deals might have involved illicit payments to the respective fund staff. Stricter limits have been applied on mutual funds to check on excessive exposure to one entity or group. That has also caused some unwinding in markets.
NSE has infamously alleged to have conspired with certain brokers to grant discriminating access to trading system.
But the worst has been the traders using off market route to make abnormal gains. Misuse of "off market" transfer of securities to "others" account has been the most commonly used instance of self destructive self regulation violation has been. This practice, inter alia, includes the following modus operandi:

1. Transfer of securities to related party account, who shall use such securities for active trading, providing as margins or collateral or even lending purpose. The beneficial owner would usually make such transfer at beginning of financial year and a reverse transfer would be made towards the end of the financial year. This allows the transferee to over leverage and earn and share profits with the beneficial owner in cash, thus evading taxes.

2. Transfer of securities to broker, who would use this as margin deposit or collateral and allow excessive leverage to other clients charging interest as high as 20-25%. The interest so charged is shared with the beneficial owner in cash. Tax evasion and excessive & naked leverage makes market vulnerable to sudden crashes.

3. Promoters transferring share to financiers without creating a pledge and thus avoiding disclosure to market about the actual extent of promoter leverage. A default in servicing the loan would lead to sale of transferred shares without actually disclosing lowering of promoter stake.

4. Transfer of securities as collateral against temporary business or property loan allowing speculative positions in third party account.

These types of transfers have frequently caused substantial forced selling leading to higher volatility and undue destruction of wealth of investors.

All such "off market" transfers have been banned with effect from 3 August 2019. This has sent the "undisclosed borrowers" scrambling to unwind their positions so that the securities could be transferred back to the beneficial owners' accounts before the deadline.

Brokers would usually allow excessive leverage out of their own resources to earn extra brokerage and survive in competition with bank brokers. Stricter lending norms and disclosure requirements for NBFCs has curtailed this source of undesirable funding.
NBFCs financed the promoter-broker-operator Nexus with impunity to enable manipulation of market price of securities. Many PMS and funds are allegedly involved in this Game of fleecing gullible household investors. Stricter regulations, wider disclosure norms (including in IT return form) and tighter lending norms have certainly made a dent in this Nexus, if not broken it completely. This is causing lot of pain to brokers, financiers, promoters and investors.

Two points I am trying to make are as follows:

(a) Total failure of self regulation is equally responsible for sever correction in stock valuation, along with poor earnings growth. In fact, excessive taxation may or may not be bothering the markets too much, since for a lot of companies effective tax rates have been reduced thus positively impacting the post tax earnings. Perhaps, the loss of opportunity to manipulate markets and earn extra money at gullible investors' expense is more likely to be real cause of pain.

(b) Tighter regulation, better lending discipline and enhanced transparency will strengthen the market foundation significantly. The next market up move will be much sustainable, larger, wider and profitable for all participants.

The regulatory framework for Indian securities market itself has some congenital flswa. But that story some other time.

Thursday, August 1, 2019

What's bothering Indian equities - 2

Some food for thought

"A demagogue is a person with whom we disagree as to which gang should mismanage the country."

—Don Marquis (American Poet, 1878-1937)

Word for the day

Demagogue (n)

A person, especially an orator or political leader, who gains power and popularity by arousing the emotions, passions, and prejudices of the people.

First thought this morning

Founder of Cafe Coffee Day (CCD) succumbed to the pressure and decided to take the extreme step. This is a sad moment for many like me who had a truly good time enjoying coffee with friends in CCD.

In CCD, V. G. Siddhartha (VGS) created a brilliant institution. However, somehow I am finding the obituaries, comments and reactions from media, market participants, social media stars etc quite hypocritical.

Vijay Mallya (VM), also established a brilliant institution in Kingfisher Airlines. I had really good time travelling in Kingfisher. I am sure almost everyone did. Like VSG, he also had unpaid loans worth 8000-9000crs. Both claimed to have sufficient assets to pay their loans, but faced inadequate liquidity to regularly service their loans. Both had political connections. Income Tax and Enforcement agencies alleged evasion of tax and diversion of funds in both cases. Both chose to escape the situation instead of facing it.

The only difference is that VSG could escape to land beyond reach of anyone, whereas VM is within reach.

For VSG plight, system is being blamed, whereas VM is made out to be a villain.

I feel sorry for VSG, and I have no sympathy for VM. But I would not blame the system for the plight of both. It's the greed, vanity, managerial inefficiency, inability to manage the change, and disregard for the process of law that took both of them down. And they are not alone. Many more are finding themselves in the similar situation. I hope none takes the VSG or VM route to salvation.

Chart of the day

What's bothering Indian equities - 2

I noted yesterday (see here), there is not sufficient evidence to establish beyond doubt that the regulatory changes like LTCG tax, reclassification of mutual fund schemes, higher effective rate of tax for rich and certain class of FPIs, etc may be responsible for the severe correction in the broader markets in past 18months, or the fall in benchmark indices in past 8weeks.

I may add that outcome of an election fuelling a sustainable market rally is also mostly anecdotal and not conclusive by any measure. For example, look at the following chart of Nifty. The uptrend that started with RBI's strong measures to control CAD and improve liquidity, was broken in August 2015, despite a strong government perceived to be development focused at the helm. Nifty has never been able to break out of that trend line since then. Nifty has given up the entire post 2019 election rally within one month, despite the same government returning even with a stronger mandate.

It is therefore fair to assume that the market up move that started in February 2016 is in fact a shallow bear market rally that has held up well for more than 3yrs.

In this period about one fourth of the frequently traded 1300odd stocks on NSE have lost more than 50% of their value. Another 15% of these stocks have lost anywhere between 25% and 50% of their value. About 25% of stocks have moved between (-)25% and 25%. Only less than one third of the stocks have yielded a return better than bank deposit (~7% CAGR) since February 2016.

In conventional sense, the return on the investment in publically traded equity is a function of 3 factors (a) earnings growth; (b) changes in price earnings (PE) ratio and (c) dividend.

Earnings growth is a function of multiple factors, e.g., (a) capacity (production capability); (b) demand environment (market leadership); (c) competitive landscape (pricing power, cost advantage); (d) innovation and technology advantage; (e) resource availability (raw material, labor, capital, managerial bandwidth etc.), etc.

Price Earnings Ratio (PER), one of the most popular equity valuation criteria, is the ratio between the earnings of a company and its market value. It broadly signifies that at the current rate of earnings how many years it will take for the company to add the value which an investor is paying today.

Principally, an acceptable PER for a company's stock is defined by (a) the return on equity (RoE) a company is able to generate on sustainable basis and (b) the growth rate of earnings that could be achieved on sustainable basis. A company that could generate higher RoE consistently and is likely to grow faster, should be assigned a higher PER as compared to the ones which generate lower RoE or has low or highly cyclical earnings growth.

A rise in PER, if not commensurate with the rise in earnings profile needs deeper scrutiny. Sometime the rise in PER occurs due to correction in anomalies (undervaluation) of the past. This is a welcome move. Sometime, PER changes (re-rates) due to relative forces, e.g., rise of PER in comparable foreign markets or change in return profile of alternative assets like bonds, gold, real estate etc. This is usually unsustainable and therefore a short term phenomenon. Many times, demand-supply mismatch in publically traded equities also drives re-rating of PER (excess liquidity chasing few stocks and vice versa). This is again usually a short term phenomenon.

Sustainable rise in dividend yield is generally a sign of stable profitability growth (P&L improvement) and strong financial position (B/S improvement) and stronger cash flows. In some cases however it could reflect stagnation in growth

Analyzing the present Indian market context, I find that most of the market gains in past 6years occurred due to PE expansion. The earnings growth had been anemic, and dividend yield has in fact contracted since 2013.

It highlights that 75% to 80% of the equity return in past 6 years is consequent of PE ratio expansion and only 20% to 25% is due to earnings growth. In this period Earnings have in fact grown at measly 3.7% CAGR.

As I wrote a couple of months ago also, once the market participants are through with their affair with the politics, budget, global trade war, rate cuts, need for fiscal stimulus etc, they would need to sit, put their heads together and contemplate the following:

(1) How much is the scope for further PE expansion of Indian equities?

(2) How much earnings will have to grow in next 3years to normalize the rapid PE expansion of past 6years?

(3) Is there enough visibility of earnings growth for next couple of years at least?

(4) Though the premium of midcap to the benchmark indices has moderated considerably in past one year or so, but does absolute valuations are attractive enough to provide decent returns over next 3-4years?

(5) Is it reasonable to assume that due to higher domestic inflows into equities, we might not see any dramatic price correction, nonetheless a prolonged time correction cannot be ruled out?

Answer to these inquisitions would guide how much return one should be expecting from Indian equities in next couple of years.

Given the turmoil in corporate debt market and moderate gilt yields, on risk weighted basis the overweight equities strategy will still make more sense than a balanced asset allocation in my view. However, the return expectations may need material moderation.

Besides the fundamental issue of earnings and overvaluations, there are some market related issues that are of major immediate concern to the market participants. I would like to highlight these issues also, in my next post.