Some random thoughts

Thought for the day

”It does not matter how slowly you go as long as you do not stop."

-          Confucius (Chinese,551-479BC)

Word for the day

Frisson (n)

A sudden, passing sensation of excitement; a shudder of emotion; thrill

(Source: Dictionary.com)

Teaser for the day

"57% of Mumbai citizens surveyed say our MLAs are corrupt."

This reflects upon whom?

Some random thoughts

Nobel prize

"You don't need to wear a patch on your arm to have honor", Lt. Kaffee (Tom Cruise) told marine LC Harold Dawson (Wolfgang Bodison) in the last sequence of popular 1992 Hollywood drama "A Few Good Men".

Two gentlemen Kailash Satyarthi and K. Radhakrishnan have made India and all Indians feel proud in past two weeks. These two have certainly inspired millions of youth and children to pursue the path of justice and excellence.

I have still not heard any voice asking Bharat Ratna for them. I will indeed not be surprised if a large majority of our politicians and studio experts, who had a rather cacophonous debate on the subject few months back, had never heard about them before their recent accomplishments.

I am also confident that their exist thousands of more similar silent achievers who do not need any medal in recognition of their services to the society. It is the society which honors itself by recognizing their effort. Looking back at the quality of people our government/society has recognized in past couple of decades reflects poorly on us, in my view.

State elections

Many readers have asked why have I not written anything on the two important state elections scheduled to be held this week. Perhaps my extensive coverage of last general elections has conditioned their expectations.

I feel that these two state elections are just a continuation of the political trend that began to take shape four years ago and got firmly established with the May 2014 general elections. I do not see any change in that trend. I see a decisive mandate against agenda of crony socialism and divisiveness.

I have not traveled to Maharashtra recently. But from my discussion with people on the ground there I understand that Shiv Sena will be the biggest loser in these elections and BJP will be a clear winner.

Insofar as Haryana is concerned, I did make couple of trips to the state in past three weeks. I could see women and youth voters breaking away from traditional caste and personality driven politics.

Contrary to most opinion polls, I feel INLD will only get support of 50+yrs old Devi Lal loyalists and some stray youth. Kuldeep Bishnoi, Vinod Sharma, Gopal Kanda etc. may be relevant only in 5-7 constituencies. It is mostly between Congress and BJP, with BJP having an edge there also.

I am also not surprised to see Akali Dal and JDU putting their weight behind Chautala's INLD. These relatively stronger regional parties need to find some common ground to create a viable national alliance against Modi led BJP.

However, I still feel (see here) that most degenerated socialist would get extinct in next couple of decade and all well meaning socialists would congregate under Congress umbrella to make it a right vs. left politics in the country.

Power of denominator

Thought for the day

”The lack of money is the root of all evil."

-          Mark Twain (American, 1835-1910)

Word for the day

Concomitant (Adj)

Accompanying; attendant; occurring or existing concurrently.

(Source: Dictionary.com)

Teaser for the day

I heard Modi implicitly claiming in an election rally that for the first time in the entire history of Bharat because of him the world community has recognized India as a force to reckon with.

Do RSS and other Hindu nationalist organizations accept this?

Have not we always believed that Bharat had been a world leader since the beginning of human civilization?

Power of denominator

My father once explained me the formula of happiness. He said, "your happiness is equal to your income divided by your needs. If your needs are zero, your happiness is infinite and if your needs are infinite, your happiness is zero, notwithstanding whatever is your income.

The problem with most people is that they focus only on enhancing the numerator (income in this case), which is completely irrelevant if you leave the denominator (in this case needs) uncontrolled. The better way to control problems is to focus on denominator, while keeping an eye on the numerator.

Applying this formula to the current economic conditions provides some interesting insights for the managers of the economy. For example consider the following:

The headline employment data in U.S. has shown steady improvement in past many months. The current reported unemployment rate is down to about 5.9% from post Lehman collapse period high of close to 10%. This sounds great at once. But how do we explain the struggle with low inflation, poor wage growth, slow household consumption growth, and higher number of temporary and part time workers, more people living off food stamps and rising stress on state and local authority finances.

I feel it will be useful to evaluate the denominator used for unemployment rate, i.e., the total number of workers offering themselves for work. Data suggests that labor force participation rate remains 3 percentage points lower than before the crisis and part-time employment remains high. A whole generation of labor might have become redundant in past 7years due to technology advancement and closure of many traditional businesses. These people may now be dependant on the State for their food and healthcare. Some of them might take up petty part-time jobs. But this does not restore their purchasing power to pre-crisis level.

Similarly, while talking about the growth rate of Indian economy, most discussions and arguments are focused on the rate of real GDP growth over previous corresponding period.

This growth number certainly has a statistical importance. But for most of the people, including me, the more important number is the absolute amount of per capita real national income in general and my actual real income in particular.

This real GDP growth in percentage terms will have little meaning if the base or the denominator is very low (which is the case at present) or it is not adjusted for the population growth or the real household inflation. A 5% real GDP growth with 2% population growth would mean just 3% growth in per capita income. This is not likely to cause any material improvement in my lifestyle. Especially when it is deflated by WPI and not the household inflation.

The denominator in our case, viz., population, household inflation and lower number for previous periods are too powerful for the official 6% real GDP growth to have any material impact on my lifestyle. Politicians and corporate though may have a reason to cheer!

It's windy, wet and depressing out there

Thought for the day

”All generalizations are false, including this one."

-          Mark Twain (American, 1835-1910)

Word for the day

Foremost (Adj, Adv)

First in place, order, rank, etc.

(Source: Dictionary.com)

Teaser for the day

Lalu Prasad Yadav was given bail after 10months. So may be the case with J. Jayalalithaa.

So what is the law here?

Should we have a definite law for bail in different cases, or it should continue to be a matter of discretion of the presiding judge?

It's windy, wet and depressing out there

The weather in global markets has suddenly turned grey. The sunshine has disappeared. It's all windy and wet out there. The chill is not biting yet.

The Absolute Return Letter for the month of October puts the mood succinctly, and I take liberty to quote - "When I look at the world passing by outside my window, there is little doubt in my  mind that the world is not as safe today as it was six months ago. For starters we  have just had a very important referendum in Scotland. We now know the outcome but not yet the full implications. In about 3 years – unless Labour regains

the control of the UK parliament – we will have an even more important referendum in the UK (more important economically if not emotionally) on the future relationship between the UK and the EU.

In the meantime, Putin and his cronies have played a very dangerous game in Ukraine. This is his third war, following armed conflicts with both Chechnya and Georgia, and the signs are that he is not going to walk away quietly. Even without Putin’s (outright) involvement, we have armed conflicts and new terror threats in many countries at present. Libya, Syria, Iraq, Sudan and Israel/Palestine to name a few.

In Europe, the economic recovery is limited to a handful of countries and the ECB has been forced to not only prolong but also intensify its de facto QE programme. The European powerhouse of yesteryear, Germany, looks surprisingly vulnerable and Italy is not in a good state either. The combination of almost zero inflation and high national debt, as in the case of Italy, is a bad one."

Many other are echoing the same sentiments. Some like Stephen King even going to the extent of calling the situation akin to 1984 where war was a constant thing.

Analysts at Brookings find that "The economic recovery in many advanced economies is stalling and growth in emerging markets seems to be losing its momentum, according to the latest TIGER (Tracking Indexes for the Global Economic Recovery) update. The U.S. is now the sole major economy still showing signs of strength."

The latest release of TIGER (Brookings-FT Tracking Indices for the Global Economic Recovery) paints a grim picture. The world economy is in a parlous state, with just a couple of bright spots discernible through the gloom.

The global economic recovery has stalled and become unbalanced, with the U.S. now the sole major economy still showing signs of strength. Growth in China and many other major emerging markets seems to be losing momentum. The world economy is now being powered along essentially by one engine, with the U.S. business cycle at least temporarily delinking from the rest of the world. (read more detail here)

Indian economy has shown signs of stability, though at a much below potential level of growth. Accordingly, this oasis has received significant attention from the yield hungry global investors.

The mute point is could India and US sustain their outperformance in a world that is under serious turmoil? If yes, for how long? I will discuss this in more detail later.

My "truth" not the same as yours

Thought for the day

”To succeed in life, you need two things: ignorance and confidence."

-          Mark Twain (American, 1835-1910)

Word for the day

Supplant (trn verb)

To take the place of (another), especially through intrigue or underhanded tactics; as, a rival supplants another.

(Source: Dictionary.com)

Teaser for the day

Congress in catch-22 over the issue "whether it carries a national legacy or its legacy is limited to the Party itself."

If Gandhi, Nehru, Patel, Azad were national leaders then any Indian can claim their legacy. If they were just Congress leaders, what legacy is there to claim?

My "truth" not the same as yours

I believe this world is like a prism. You see different pictures, colors and hues depending upon from which angle you are viewing the world and in what light you are viewing. Therefore, while all views and colors are equally valid, your "truth" is always what you see from the point you are standing at a given point in time and under the current light.

In past few years inflation has been the driving force of RBI's monetary policy. Both Gov. Subba Rao and Gov. Raghuram Rajan have consistently emphasized on perils of higher inflation. In his recent statements Gov. Rajan appeared very firm and committed in his fight against inflation.

I spoke to 10 people from various sections of society yesterday to understand how inflation affects their lives. To my surprise, all of them had different perception about inflation. Certainly they all view the issue from their own angle and under the light of their own circumstances.

My problem is under such conditions what is the relevance of RBI's fight against inflation? From my interaction with people and experience of travelling across the country I understand that through tight monetary policy only a small part of the problem could be handled. The development, fiscal, monetary authorities may need to work in tandem to provide a holistic solution to stabilize the prices. The following are the few pertinent points to consider in this context.

(a)   For almost half the population, primarily living in rural areas, food inflation may not be a matter of serious concern. This section mostly survives on grain based nutrition and obtains their staple ration through PDS or sustenance farming. Healthcare, agri input, and to some extent transportation inflation is a matter of serious concern for them. Effective implementation of food security, better connectivity, drinking water, sanitation and primary healthcare close to home would provide material comfort to this section of the society.

(b)   Urban, semi-urban households suffer from a variety of inflation. Prominent amongst these are education, health, energy, transportation, communication, rental, protein, fruit and vegetable. The political rhetoric and central banker's focus exclude many of these critical elements in their fight against inflation. Better public health, education and transport services, energy efficiency, affordable housing, and better employment opportunities closer to home would be a more suitable solution here.

(c)   Debt laden infra and realty developers are more concerned with inflated cost of capital and wage inflation. Energy and transportation cost also bothers them. Better execution standards, simpler administrative procedures, automation, good corporate governance structure, stricter compliance norms and vibrant retail debt market could alleviate many problems for this sector.

We need to appreciate that maintaining the negative real rates for households (household inflation minus term deposit rate) for a long period is the biggest scam perpetrated on the poor people of this country. The inflation tax, as I call it, paid by poor and middle class savers for cheaper financing of “crony socialism” and unscrupulous businessmen, has after all caused serious damage to the basic fundamentals of the Indian economy.

Some catching up

Thought for the day

”It is better to keep your mouth closed and let people think you are a fool than to open it and remove all doubt."

-          Mark Twain (American, 1835-1910)

Word for the day

Stoic (n)

Not affected by passion; indifferent to pleasure or pain, joy or grief.

(Source: Dictionary.com)

Teaser for the day

Should the government enforce a mandatory "Annual Cleanliness Certification" for all residential areas (urban and rural). All elected representatives (Corporator/Panchayat member, MLA, MP etc, of the areas should be collectively responsible for obtaining the certificate from the "National Cleanliness Authority of India".

Some catching up

After having a great holiday in panoramic Himachal Pradesh, I am back to work. I have spent past two days catching up with the events of past ten days. It appears to me that last week was quite eventful in terms of news flow. Though I could not find little material that about which I can say authentically that "I missed it", there are few things worth taking note of.

In particular I find the following event noteworthy as these could have long term impact on general economic environment of the country and therefore may influence the investment strategy.

(a)   Law of the land caught up with the mighty Ms. J. Jayalalithaa. She is the third tall leader after Lalu Prasad Yadav and O. P. Chautala to have been sentenced in a corruption case. Though Mr. Chautala has shown brazen contempt for the law last week, I am sure he will regret it, much like Sahara group chief Subrata Roy, in days to come.

(b)   The prime minister Narendra Modi made most of his elusive US VISA by staging a grand show at famous Madison Square Garden of New York city. A typical Indian shown organized by the local Indian community seems to have impressed many US lawmakers. May be many of them will want to emulate Modi's campaigning style for their forthcoming elections. PM also seems to have promised a lot to global businessmen in terms of the quality and length of "Red Carpet" waiting for them on Indian shores.

       I guess they take some time in formulating their fresh India plans. A hurried visit may compound their disappointment.

(c)   After Sardar Patel, BJP and RSS have sought to appropriate legacy of Mahatma Gandhi. This is an auspicious sign for the socio-economic structure of the country. I have been advocating since long that salvation for Indian economy lies only in Gandhian economic thoughts. (For example, see here).

       Besides, the attempt to mainstream RSS is also approvable. In my view, it is akin to listing of a PSU. The board who is used to work in surreptitious ways, suddenly becomes transparent and accountable to public and open to media scrutiny. The content of the supremo Mohan Bhagwat's RSS establishment day's speech only advocated secularism, tolerance, nationalism and inclusiveness.

(d)   The PM Modi made yet another serious attempt to move up the political ladder. Rising above the image of a protagonist of free market and business interests, he sought to don the robe of a Lok Nayak. A success in this endeavor could potentially accelerate India's socio-economic development exponentially.

(e)   Hong Kong students scared the mighty Chinese regime by putting up a spirited demonstration. In my view, we shall see far reaching impact of this resistance on Chinese administrative and governance structure.

(f)    Commodities' world witnessed turmoil with oil, metals, food, rubber all taking a serious plunge. Equities corrected slightly, while USD surged.

At the end I would advice tourists to Himachal Pradesh to avoid Shimla, a city having 1000x more people & vehicles than it is designed to handle.

New jargon on the street

Thought for the day

”The woods are lovely, dark and deep. But I have promises to keep, and miles to go before I sleep."

-          Robert Frost (American, 1874-1963)

Word for the day

Malversation (n)

Misconduct, corruption, or extortion in public office.

(Source: Dictionary.com)

Teaser for the day

After telecom licenses, coal blocks, should SC look at cases of large land allotment also?

New jargon on the street

I had the most uneventful visit to India's financial capital early this week. I met some large investors, business consultants, equity analysts, wealth managers and businessmen.

Despite a stupendous run in the stock market on the back of stable macros, political stability not seen in past three decades, improving US economy, huge foreign flows, return of domestic risk appetite after six long years, super success of couple of IPOs, I found the mood on the street rather underwhelming. The Euphoria seen during the interactions early this summer had given way to suspicion and confusion.

Though hope still survives and there is no major disbelief, the certainty of "Good Times" in immediate term is widely doubted.

I learned some latest jargon on the street, i.e., "Quality Bubble", "Power Consumer" and "I of the BRICS".

Few things in particular I find pertinent to share with my readers.

·         Quality bubble is a popular term for the crowded trade in high quality stocks that has led the valuations to cross over to bubble territory. This is probably first time that Indian equity markets are witnessing beginning of an economic and therefore market cycle beginning with such high valuations in quality stocks. Usually this happens at much later stage in the bull market.

The worrisome part is that nobody is showing any willingness to go down on the quality ladder and look at the relatively cheaper peers.

·         There appears to be a consensus that availability of electricity is going to improve substantially in next 2-3years. The power industry consultant I met confirmed that while PLF at thermal plants may substantially improve in next 12-15months, and substantial wind and solar capacities will likely become operational in next 24-48 months. The market has sensed this trend. Most electrical appliance manufacturers have seen their market value rising 2-4x in past few months. No one is yet betting on power producers or capital equipment suppliers.

·         In past one year India has decoupled from its BRICS peers in terms of macro improvement. With EU, Japan and most of Asia not looking great, India is becoming a center of hope (outside USA) for investors.

·         The cyclical rally that was expected to gain momentum after unexpected election results in May'14 has completely fizzled out. With industry leaders like DLF, BHEL, JP Associates, SBI, and L&T etc. giving away all the gains seen in past few months. The exporters (IT, Pharma and Auto) and consumers have led the rally so far. They now appear tired.

·         The derivative traders are frustrated by record low implied volatility.

The market participants and observers are therefore perplexed about the next market move. I will share my take on this tomorrow.

By-polls and markets

The market reacted negatively to the recent by-poll results in which the ruling BJP has received serious setback, especially in the state of Uttar Pradesh.

In my view, the market participants should be encouraged by the current political trend as it will more likely:

(a)          Lend further urgency to the efforts of the government to put the things in order insofar as the economic growth and development agenda is concerned;

(b)          Push the hardline elements within BJP to fringes.

(c)           Motivate scattered opposition to unite to make it BJP vs. the rest in coming elections as well as in the parliament. This brings a strong (though hostile) opposition in place to exercise necessary check and balance on the government. This may also mark the end of fractured coalition politics.

(d)          As Amit Shah will emerge as the biggest loser after all this. His brand of polarizing politics will face serious challenge in forthcoming elections.

Some part of the correction is also ongoing due to jitteriness over what Fed will conclude tomorrow evening.

In my view, a change in guidance for rate hike may not be due as yet. However, if it does happen, this could disturb markets in the short term.

This could be a good opportunity for investors looking to buy for long haul.

Mythology of bubbles

Thought for the day

”I have been impressed with the urgency of doing. Knowing is not enough; we must apply. Being willing is not enough; we must do."

-          Leonardo da Vinci (Italian, 1452-1519)

Word for the day

Geep (n)

The hybrid offspring of a goat and a sheep

(Source: Dictionary.com)

Teaser for the day

If BJP makes a government in Delhi and works for common good, in 2018 no one will remember how the government was formed.

For all you know AAP may not even be there to remind people! 

Mythology of bubbles

In Hindu mythology, once the forces of good (Sura) and evil (Asura) had a protracted battle. The battle lasted so long that both the groups exhausted all their resources and valor. Completely tired, wounded, frustrated and exhausted, they approached the savior Lord Vishnu. The Savior advised them to go and explore the great ocean to find new resources and vigor to make a fresh beginning.

Following the advice, both the groups went to the great ocean and explored it extensively. During their exploration they discovered huge amount of wealth and resources that included the nectar that would immortalize the consumer and venom that would destroy whoever consumes it.

Realizing that if the evil forces get the access to nectar and other resources found during the exploration it would seriously jeopardize the interest of the forces of good, Lord Vishnu tricked the forces of evil and appropriated the entire nectar for consumption by the forces of good.

Lord Vishnu also requested the almighty Lord Shiva to absorb the venom so that it does not harm anyone and the balance of the universe is maintained. Obliging, Lord Shiva drank the entire venom and preserved it in his throat.

Post this the forces of good became more powerful. But whenever they deviated from the path of common good, they were overpowered by the evil forces and dethroned. Each time only after a great deal of repentance they would be rehabilitated with the help of Lord Vishnu, Lord Shiva or the Mother Supreme.

Over the years I have realized that it is not just a mythological story to be heard during religious ceremonies and forgotten immediately thereafter. It is also not a usual morality emphasizing victory of good over evil. It is much beyond. This applies to all aspects of life, even economics.

In modern economic parlance, the ocean exploration is akin to the period of irrational exuberance that eventually lead to building of a 'bubble' in the economic sphere.

Bubbles are initiated when all the participants get tired, frustrated and exhausted from prolonged economic weakness. At that point in time, all the stakeholders muster the courage and supported by the 'authority' do things they would never do in normal times. They do excessive and seemingly irrational borrowing, investing and spending. Capacities are built to the scale unfathomable during normal times.

The nectar or the good that emerges from these bubbles is shared by all. However the venom is consumed only by the financial investors who invariably end up poorer after every bubble is burst.

If you are not able to correlate to what I am saying - imagine would India be a ITeS superpower without Y2K or technology bubble during late 1990s! Had we built so many houses, roads, malls, power plants, cement plants etc. during last decade but for a credit bubble! Would capital be so easily and cheaply available to Indian entrepreneurs without a QE bubble in the west! ...to continue tomorrow

Yet another midway diversion proposed

Thought for the day

”If you can look into the seeds of time, and say which grain will grow and which will not, speak then unto me."

-          William Shakespeare (English, 1564-1616)

Word for the day

Maudlin (adj)

Tearfully or excessively sentimental.

(Source: Dictionary.com)

Teaser for the day

Does Arvind Kejriwal know that you could only buy the things which are put on sale by the present owners!

Yet another midway diversion proposed

A recent Deutsch Bank research report highlighted that India is witnessing emergence of a "clear and internally coherent economic model" that includes "export oriented manufacturing, heavy infrastructure building and urbanization". in a material shift away from "India’s current services-driven growth trajectory" This emerging model is found akin to "an East Asian growth model based on the mass deployment of labour and capital".

The DB analysts believe that "The new strategy will require keeping the Rupee weak and dramatically expanding the financial system. International experience shows that the model can generate growth and jobs, but sustaining such rapid financial expansion is not without risks."

The report highlights that while India's export growth so far has been driven by services, auto sector has demonstrated that with right kind of policy support Indian enterprise could do well in global manufactured product market also.

The key to shift would be our ability to substantially augment energy supply to the industry and "ability of the domestic financial sector to sustain rapid expansion".

The Prime Minister Narendra Modi in his public discourse has strongly emphasized on the need for expansion of manufacturing sector to create jobs for millions of youth joining the work force every year. In fact during his election campaign Congress leader Rahul Gandhi had also echoed the same sentiments.

In April 2013 in a series of five articles (see side bar) I had expressed my concerns over frequent midway diversions on core issues taken by Indian policy makers.

I still feel that he current socio-economic mess in the country is outcome of total adhocism in policy and program formulation & implementation, non compliance with the comprehensive socio-economic structure conceived in the Constitution, and lack of committed leadership, especially in past three decades.

The political establishment has so far mostly failed in justifying the midway diversion from the prescribed socialist framework taken in mid 1980’s. The obduracy shown by successive governments in relinquishing enormous amount of discretions enjoyed by political establishment has been a consistent obstruction in the way to evolve the intended quasi capitalist or neo-socialist policy framework that would lead to sustainable and faster growth.

A brief spell of high growth, which many may find accidental in hindsight, has probably misplaced the popular aspirations and thus added to the complexity of the problem.

I feel the country needs to comprehensively review the constitutional framework for evolving a wider consensus on the policy direction for sustainable socio-economic development in the current context. Blindly following East Asia model of capital and energy intensive growth may not be ideal in our context.

I will write more on the current flavor "Make in India" next week.

Related articles

A midway diversion to nowhere

A midway diversion to nowhere - Disinvestment

A midway diversion to nowhere – Foreign capital

A midway diversion to nowhere – Energy policy

A midway diversion to nowhere – youth policy

Some books to finish and few places to visit

Thought for the day

”Maids want nothing but husbands, and when they have them, they want everything."

-          William Shakespeare (English, 1564-1616)

Word for the day

Plebeian (adj)

Vulgar; common; crude or coarse in nature or manner.

(Source: Dictionary.com)

Teaser for the day

TRS chief says "Will bury anyone who dares disrespect Telangana"!

What could be worst disrespect to the motherland than suggesting that it is capable of being disrespected by any tom dick harry?

Some books to finish and few places to visit

In past few days, I have outlined my thoughts on hurdles Indian economy faces in achieving a sustainable 8%+ growth path.

Positively, many readers have appreciated that there is little on the ground which could kick start the virtuous cycle of "higher income - saving - consumption - investment - income" in near term.

Most also agree that morning star is now visible and signs of a brilliant dawn are emerging on the horizon.

Some active participants in the equity markets have however suggested that hurdles in achieving higher savings and investment rate should not be deemed as "no profit making opportunity" in the market in near term. I could nothing but agree with them. I receive plenty of "stupendous trade" ideas every morning. Many of them actually go up 2-20% for several days.

Every day morning I find a slew of companies which traded at their all time high levels. Admittedly, I have never heard about 70% of these companies. A preliminary enquiry shows a large number of these "multi baggers" have little to show in their financial statements. Surprisingly, their profits jump with investor's sentiments and ebb accordingly. Obviously I am not at all excited about these "circuit hitters".

The tremendous response to some recent IPOs also reminds of exuberant times seen during 1989-90, 1994, 1999, 2005-07.

But what is catching my attention is small bubbles on the surface of services sector suggesting a strong undercurrent and high temperature underneath. Retailers, e-commerce platform providers, logistic services, pharma R&D, ITeS, telecom, entertainment, E&C contractors have all seen their market value burgeoning exponentially. Many players in this space have been able to raise risk capital at rather elevated valuations in recent past. Though comparatively smaller in overall macroeconomic context, this space appears to have decoupled and moving ahead alone.

I am a big fan of enterprise, innovation, large scale and ideas that directly touch of people. However, I do not like to invest in businesses (a) I fail to understand; (b) where visibility of positive cash flows is low; or (c) where valuations are high just on hopes.

I would therefore be very selective in venturing in this space. I guess I have enough time at my hand to make the selection. The nagging feeling I get from conditions in Europe provides me comfort that soon there will be an opportunity to buy at my will. I need stand in long queue at the upper circuit freeze level to buy any stock.

This soon however may not be tomorrow morning or next week. But that is fine with me. I have some books to finish and few places to visit. I can therefore wait little longer without getting bored.

For those getting itchy I would suggest studying the market behavior during July 2007 when subprime problem first hit the market and September 2008 when Lehman actually collapsed. The yield curves across Europe are also depicting a story.