Thought for the day
”I never see what has been done; I only see what remains to be
done.”
-
Buddha (563-483BC)
Word for the day
Disambiguate
(v)
To remove the ambiguity from; make unambiguous
(Source:
Dictionary.com)
Teaser for the day
Mr. Natwar Lal!
Is it the fat lady singing?
The readers may recall, late last summer the most hotly debated
topic in financial markets and related media was unmistakably the
"tapering" - euphemism for moderation in bond buying by the US
Federal Reserve. This was the single most important consideration in many
investment strategies. A sizable majority of analysts believed that
"tapering" will push global markets back several miles.
A hard landing in China was often termed a certainty.
Disintegration of common currency area in Europe was spoken about by every tom,
dick and harry. The commentary for foreign flow dependent emerging markets like
India was even more scary. Added to the scare of tapering was fear of a full
blown balance of payment (BoP) crisis in India.
Three quarters later, here we stand - US Federal Reserve has
already moderated its bond buying program by 75%. US unemployment rate has
almost fallen to desired 6% level from over 9% a year ago. US economy has grown
4% in 2Q2014. China's has managed to slow down her economy in a controlled
fashion. India has mostly corrected its fiscal and current account deficit
problems; even managing to grow its Fx kitty. Global equity markets are back to
"exuberance" territory where the word "bubble" is used more
than recession or depression. The German bund yields are lower than 2007 level.
PIGS (Potugal, Ireland, Greece and Spain) are able to raise money at easy
terms. London house prices are well past their 2007 peak.
The Fed's decision to reduce the bond buying by a further
US$10bn on Wednesday did not make to headlines.
What has changed in these 9months that the whole paradigm of
global financial markets has changed?
One thing, as Gavekal's Anatole Kaletsky puts it, "the US
economy now seems to have reached ‘escape velocity’. From this point it can
continue expanding and creating jobs even in the face of exogenous shocks such
as cold winter weather, geopolitical turmoil and the chaotic introduction of
Obamacare."
Though, the situations in Europe and Japan are still fragile,
and the risk of financial defaults in Chinese banking system appear real, the
investors appear confident that if the latest policy experiments have worked in
US, then Europe, Japan and other countries would also see success, may be with
a lag of a year or two.
In Indian context particularly, the leadership seems to be
making some difference. First, the former Finance Minister P. Chidambaram and
RBI governor Raghuram Rajan took the lead and took some seemingly harsh steps
to put the fiscal and trade account in order, and now PM himself is assuring
the investors and businessmen alike. However, the real support so far has come
from US investors and consumers only.
