Do it yourself

The year 2024 is proving to be one of the worst years for political soothsayers. After a debacle in the Indian general elections last summer, psephologists have failed in the US presidential elections. The challenger Donald Trump emerged a winner, gaining popular votes to occupy the White House for four years with a clear majority in the US Congress and Senate. This kind of decisive mandate has been a rarity in US politics in the past four decades. Most of the media, political commentators, psephologists, and other experts completely failed to read the peoples’ mind and anticipated a victory for Kamala Harris. Post the election results, thousands of experts – research analysts, economists, strategists, geopolitical experts, money managers, etc. – have written reports running into millions of terabytes, forecasting the likely impact of Trump's victory on financial markets, currencies, commodities, geopolitics, and trade etc. Most of this analysis is based on Trump's election p...

2023 was a watershed year in many respects. The global economy, politics, geopolitics, climate, and technology witnessed some material changes that would have critical long-term impacts on human life. Global economy The global economy resumed the process of normalization after two years of disruptions caused by the pandemic and the Ukraine war. Supply chains were mostly restored. Fiscal and monetary stimulus unleashed to mitigate the impact of Covid-19 started to wind up. The prices of most commodities that had witnessed a sharp surge in the previous couple of years retraced back to their pre-covid trajectories. The interest rate cycle, which witnessed one of the sharpest hikes in policy rates in decades to rein the runaway inflation, also appears to have peaked. The developed economies have been mostly successful in avoiding a meaningful recession, despite material monetary tightening, higher rates, and fiscal restraints. Most notably, Japan, which has been struggling with defla...

In the past one year, inflation has been one of the primary concerns for most countries across the globe. Rising prices of food and energy in particular have materially impacted the lives of common people on all continents. The central bankers of most major economies have hiked policy rates in the past one year to control inflation. In the current year 2023 so far, 13 major central bankers have taken policy action(s) and all of these actions have been hike in policy rates. However, in recent weeks inflation has shown some tendency of cooling down. It is difficult to assess how much of this cooling down is due to tighter monetary conditions; and how much could be attributed to other factors like restoration of supply chains that were broken during the pandemic and warmer winters resulting in lower energy demand in the northern hemisphere, etc. Nonetheless, some central bankers have adjusted the pace of tightening to smaller hikes. Most of them, though remain...

  The toughest job in the present day environment is risk management. Of course, it has never been an easy job; but when we consider the proportion of moving parts, fragility of systems, disregard for conventions, total lack of mutual trust and disillusionment with the status quo, managing risk appears the toughest job. I can now appreciate the risk managers’ plight during the first half of 20 th   century; when similar conditions were prevailing. To illustrate my point, let me highlight the following instances which may not appear ominous to a common man, but could give cold sweat to risk managers. Interest rates have risen in most parts of the world in the past one year. In many cases the rise in rates has been rather steep, especially the developed economies. Most of these economies were struggling with deflation pressures for the better part of the past two decades. Obviously the rates were low (close to zero and negative in many cases). Many businesses were built assuming...

  Some of the most popular video clips shared on social media in India in the recent past were of India’s External Affair Minister, Mr. S. Jaishankar, giving stern replies to the global media about India’s stand on Russia-Ukraine war. In these clips, the minister is seen ‘exposing’, the hypocrisy of European media and politicians in raising questions over India’s purchase of energy from Russia, despite sanctions imposed by US and EU, while the European countries continue to buy natural gas from Russia. Most social media constituents who shared these clips cited the confident and unabashed counteroffensive by the Indian minister as a harbinger of ‘rising India’ and ‘declining west’. I personally have no disputes with the social media warriors on this issue. It does feel good to see a representative of the Indian government taking a firm stand against the developed nations on global platforms. However, the point I am presently more concerned about is ‘declining west’. Worsening d...

 I find nothing more disturbing than demolition of a long preserved and much cherished image or belief. Occurrence of this often gives rise to cynicism, shaking the core of the belief system. The recent act of violence in Japan is one such event. People of my generation have known Japanese people for their politeness and commitment to non-violence. The pictures of Japanese crowds showing remarkable patience and calmness during adversities have been much cherished by post WWII generations. The assassination of the former Japanese Prime Minister Shinzo Abe, last week, while he was addressing a public meeting has shattered many images I was carrying in my mind. This is perhaps first of its kind of act of violence since assassination of Inejirō Asanuma, the then Chairman of the Japan Socialist Party. However, in the pre-war era, political assassinations were rather commonplace in Japan. Japanese people took pride in their martial and imperialistic traditions. Many believe the 1945 nu...

I am pleasantly surprised to see an overwhelming response to my random thoughts on geopolitics, economy, businesses and markets shared through yesterday’s post (see Market’s tryst with reality ). Even more surprising is the fact that all respondents are in agreement with my thoughts. This has happened for the first time since I started writing this blog. Some respondents have taken the discussion further and raised some issues. I find it pertinent to address these issues and offer some more random thoughts in this context. Some have asked for more examples of arch rivals burying their hatchet and coming together for a common good. There are numerous examples of such deals in corporate history. Some notable ones include BHP Billiton and Rio Tinto; Kraft Heinz, Glaxo Smithkline, Unilever; Pfizer, Allergen, Astra Zeneca and Gilead Sciences; Altria and Phillip Morris; Broadcom and Qualcom; Barclays and ABN Amro; Merril Lynch and Bank of America; Shenhua and China Guodian Corp; AB InBev...

  As I indicated last week ( see here ) to me markets are not looking good, at least for now. And it is definitely not only due to the latest episode of Russia-Ukraine conflict. This conflict has only added to the caution. My primary problem is the lack of adequate growth drivers for the Indian economy. There is a virtual stagflation in the domestic economy, constraining private consumption. The exports have helped in the past couple of years to some extent. However, the higher probability of slowing growth in the western countries due to tightening monetary policies and the spectre of a prolonged geopolitical conflict in Europe and probable reorganization of the global order (political realignment, trade blocks, currency preferences, energy mix etc.) clouds the exports’ growth in FY23. Another key driver of growth in the past few years has been public expenditure. The government made decent cash payments to the poor and farmers to support private consumption. It also accelerat...

  “Kaya lag raha hai?” (How is it looking?) I am sure most of the financial market participants must be overwhelmed by this question in the past week. Obviously there is no accurate answer to this question in the present uncertain and volatile times. Regardless, every market participant is trying to answer this inquisition to the best of their ability and understanding of the situation. As the situation is still evolving and new complexities are getting added with each passing day, it is natural that the answers to this question will keep changing every day, and sometimes even within the same day. If I have to answer this question as someone who is an independent observer of the markets, I would prefer to take a myopic view of the market rather than getting influenced by the hourly news flow. Also, I would mostly remain focused on the Indian markets, as my lenses do not show me the long distance view. For example, I am incapable of commenting on the likely effect of the Russia-Uk...