Do it yourself

In past couple of weeks, some news items, and market & economic trends have attracted my attention. All these news items & trends somehow reflect on the reflation trade that has dominated the global markets for past few months. The rise in commodity prices in past one year is seen mostly a function of a combination of demand and supply side factors. Post global financial crisis (GFC 2008) the investment in new capacities had slowed down considerably. The economic lockdown due to outbreak of pandemic further curtailed the supply of many industrial commodities. The logjam at Suez Canal further impacted the supply chain. The supply of commodities obviously could not match the recovery in economic activity as the economies began to open up. The trillions of dollars in pandemic related stimulus further boosted the demand, as all three activities, viz., consumption, capex and trading got boost from worldwide stimulus. The US government’s plan to invest US$1trn in building nation’...

On the eve of 75 th Independence Day when you buy a plastic Tricolour from a young child on the traffic signal, would you (a) pause to think that this flag may be of Chinese origin, (b) buy with the idea of helping the poor child; or (c) just buy to demonstrate your feeling of patriotism? In the post-independence period, the Indian economy has been persistently suffering from a variety of deficits. Though in the financial market parlance the twin economic deficits, viz., current account deficit and fiscal deficit, have been discussed most, these could be the least of worries for Indian economy in the current circumstances. Some of the most worrisome deficits, in my view, include: ·          Growth capital deficit ·          Advanced technology deficit ·          Skill deficit ·          Trust deficit ·   ...

Tokyo2020 has been the best Olympic for India, in terms of Medals won. Prior to this we won 6 medals (2 Silver and 4 bronze) in London2012. This performance has naturally brought cheers to 1.4billion people mostly starved of good news. Each victory and loss has been celebrated with a sense of pride. The fact that a large number of our Olympic participants belong to the underprivileged sections of the society makes it even more special. The stories of these sportspersons and their families’ struggle, grit, and perseverance are heartwarming and highly motivating. These stories are much more valuable than the medals won. The fact that more and more Indian sportspersons are now reaching closer to medal is reassuring. Of course we will win many more medals in years come. The 27yr old Australian swimmer Emma McKeon has won seven medals (4 Gold and 3 Bronze) at the Tokyo Olympic 2020. Overall, she has won eleven Olympic medals (5 Gold, 2 Silver and 4 Bronze). In comparison, India has ...

The benchmark Nifty 50 crossed the 16000 mark for the first time this week. Predictably, the moment was celebrated by media and “market influencers” with gaiety and fervor that is usually shown at Nifty50 crossing every subsequent thousand (K) mark. The fact that from 10k to 11k - it is a 10% rise; whereas from 15K to 16K it is just 6.67% rise, is usually disregarded in celebrations and recounting of the journey from one ‘K’ mark to the next “K’ mark. It is also mostly ignored that Nifty, like any other statistical number, is meaningless in isolation. It must be juxtaposed with some “other” statistical number to derive any inference. The selection of this “other” number, however, usually depends upon what the data user wants to conclude. If the user wants to feel good about the current Nifty number, a comparison with an inferior set of statistics is preferred (e.g., Nifty has performed better than gold over past decade); whereas if the user wants to show the current Nifty number in a...

  While equity markets do enjoy better attention of investors, it is the bond market that usually guides the direction of financial markets, including equity and currency markets. The following recent signals from the bond market are worth noting: US Junk Bond Yields fall below inflation Investment demand for speculative-grade debt and high-yield bond exchange traded funds has been so high that yields on the riskiest U.S. companies are now below that of inflation. The rally in corporate debt rated below investment grade has also pushed yields down to record lows around 4.54%, compared to consumer prices that rose 5% in May year-over-year. The head of equity research at Julius Bär, summarized the situation as “Inflation has risen to record-high levels in recent months, and the 10-year US bond yield has fallen to a fresh five-month low. What is the reason for the rally in US Treasuries? Obviously, investors believe that peak growth and peak expectations are already behind us. T...

  “The afternoon knows what the morning never suspected.”―Robert Frost In past few years, cryptocurrencies (especially Bitcoin) have gained material importance in the global financial system. Though the character of Bitcoin (or cryptocurrencies for that matter) is still evolving and it is not certain if it will assume the character of a currency; end up just being a collectible asset like Art, wine, vintage vehicles, old coins, etc.; or just end like a bad dream. But as of now, the debate over its relevance, sustainability, desirability, etc., is intense and wide. In my view, 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 at some point in time. Majority of experts still skeptical A large number of prominent personalities in the field of finance, technology and economics, like Warren Buffet, Jamie Dimon, Peter Schiff, Paul Kru...