Do it yourself

I vividly remember it was the winter of 2007. The global markets were in a state of total disarray. The subprime crisis was unfolding in the developed world. In the US, the financial system was on the verge of collapse. Several banks, insurers, and other financial institutions were reporting massive write-downs on their subprime Collateralized Borrowing and Lending Obligations (CBLO). The cost of protecting debt (Credit Default Swaps) was rising sharply. The US administration and Federal Reserve were mostly in denial, at least in their public posturing; even though the Fed had started to cut the benchmark fund rates from September 2007. Signs of a sovereign debt crisis had started emerging in peripheral Europe. In countries like Portugal, Iceland, Greece, and Spain (popularly called PIGS) treasury default swaps had spiked to indicate imminent default. The financial markets in the developed world had started correcting sharply. Both equity and bond prices had fallen. The emerging ...

  One of the major trends in the post global financial crisis (GFC) world is the weakening of the United States of America’s (USA) clout as an undisputed global economic and strategic leader. In the past 15 years, the US administration has consistently failed in achieving its economic, financial, technological, and strategic objectives. The economic performance of the US has been below par in the past decade. The handling of the pandemic has been highly questionable. Both monetary and fiscal policies have not yielded the stated objectives of price stability (inflation has been persistently high and rates have become growth restrictive) and financial stability (many regional banks have failed, delinquencies are rising and capital adequacy & reserves of banks have deteriorated, particularly in the past couple of years). Fiscal profligacy has benefited the rich much more than the poor. The efforts to restrict the benefits of advanced technological innovations flowing to China thr...

  Last year, while discussing this subject, I mentioned , “it is a debate that will continue for many more years and no one will remain unaffected by it. Almost everyone who transacts in money or is part of the global economic system will need to deal with it at some point in time.” I note that the debate is intensifying, widening, and deepening. Moreover, it is becoming more balanced with many conventional money managers, regulators, bankers, and administrators coming in support of digital currencies as an alternative to fiat currencies. A few days ago, Larry Fink, the Chief Executive Officer of BlackRock, one of the most influential financial firms globally, commented in a TV interview that under the current circumstances “Crypto will play a role as flight to quality”. He was reported to have said, “Bitcoin is a hedge against the devaluation of your currency”. This comment is in total contrast to his comments in 2017 when he had emphatically condemned the idea of cryptocurre...

  The benchmark Nifty50 has oscillated in a tight range in the past eight weeks. On a point-to-point basis, it’s hardly changed - remaining mostly in the 19500-19700 range. More importantly, it has weathered a barrage of bad news in this period and stayed calm as reflected in the low volatility index. Some of the noteworthy events weathered by the market include - hawkish commentary from central bankers (including the RBI and the US Fed); downgrade of global growth estimates; poor growth guidance by IT services companies; a truly ominous escalation of hostilities between Israel and Palestine; erratic monsoon season and consequently elevated food inflation & cloudy outlook for the rural demand leading to a sharp rise in global crude oil prices; opinion polls indicating some setback for the ruling BJP in the forthcoming state assembly elections; etc. The bond yields in developed countries have risen to levels not seen in the past two decades. The US benchmark (10yr G sec) bon...

WPI in Contraction for the Sixth Month; core inflation higher (Centrum) WPI inflation witnessed a yet another contraction in the month of September and registered a deflation of 0.26% YoY, down from -0.52% in August. The print came in slightly lower than the estimates as the general consensus was around -0.5%. This was the 6 th month where we have seen a contraction. All the segments witnessed a deflation in prices, except for the Primary Articles. However, on a monthly basis primary articles contracted while Fuel & Power and Manufactured products saw rise in prices. Core inflation rose in September India’s WPI based inflation witnessed a further contraction in August. The persistent moderation in WPI since May-22 has been mainly because of constant decline in mostly all the major sub-indices. Although at a slower pace than previous month, this month’s fall in the wholesale prices can be mainly attributed to all the sub-indices except for the primary articles, as food prices...

In the past 6 years, several significant events have occurred that would shape the new global order in the next decade or two. I would particularly like to mention the following ten events that in my view could potentially prove to be transformative for the global order: 1.      Incorporation of the Belt and Road Initiative (BRI) into the Constitution of the Chinese Communist Party. (2017) 2.      Abolition of time limits, allowing Xi Jinping to remain General Secretary of the Chinese Communist Party and chairman of the Central Military Commission for life. (2018) (After winning an overwhelming majority in the 2020 elections, Russian President Vladimir Putin is also eligible to stay in office until 2036.) 3.      The Exit of the UK from the common European market (the EU) (2017-2020); and the elevation of the first non-white person (Rishi Sunak) to the office of Prime Minister of the UK in 2022. 4.      The ...

  Continuing from yesterday…( see here ) In the enterprise world, new ideas or innovations are usually valued much higher than the ability to execute such ideas. I believe for a successful enterprise both ideation as well as execution are equally important. The question of execution would not arise if there is no idea to execute. Similarly, an idea, howsoever innovative and brilliant it is, would remain just a thought or piece of paper unless it is executed well. Nonetheless, since the idea is the starting point of any enterprise, the innovator deserves to get a relatively higher valuation. Taking this further, in the realm of politics and governance, the two key components of good governance are: (i)     Conceiving, formulating, and instituting policies that would ensure inequitable, sustainable, and accelerated socio-economic development and growth. (ii)    Execution of instituted policies through a set of structured programs, efficient delivery m...

“Policy paralysis” of the preceding Dr Manmohan Singh led UPA government was one of the main planks of PM Modi’s election campaign in 2013-2014. The business community, middle classes, and poor, all were convinced that the UPA government suffers from a severe degree of inertia in policymaking and is therefore responsible for the poor growth of the Indian economy. It was alleged that large-scale and blatant corruption, nepotism (lack of meritocracy), and weak leadership are the primary reasons for the “policy paralysis” and poor execution. The campaign against the incumbent government was so effective that it swayed the big industrialists and SMEs which directly benefited from the government’s developmental efforts; the poor who benefited tremendously from the transformative social initiatives; and the middle classes who were protected from any potential collateral damage from the global financial crisis and events in its aftermath, against the government. In their disappointment wi...

  The traders and investors, who directly access the trading platforms of brokers, are reminded and forced to acknowledge, every time they log in to the trading system, “9 out of 10 individual traders in the Equity Futures and Options Segment, incurred net losses”. This is in fact one of the conclusions of a study conducted by the Securities and Exchange Board of India (SEBI) (published in January 2023). From my study of the Indian stock markets in the past three decades, I understand that this conclusion is no exaggeration. This state of affairs raises two pertinent questions: (i)        How sustainable a market is where 90% of participants are losing money consistently? (ii)       Does not this pose a material systemic risk for our markets, especially under the present circumstances where the global financial and geopolitical conditions are worsening every day, and the probability of an eight-sigma event like 9/11 attack and ...