A holiday through last week has been a welcome break...albeit from doing nothing. And where I would normally have struggled to find something meaningful to ponder, the last 10 days have been a veritable trove.
Soon's I got back to the chores of calling up Poor Foreigner Investors (to tell them, yet again, that nothing had changed since I last called them!), I have been beseiged with questions about the Third Front that's apparently woken up after a 10 yr hiatus. Somehow, that particular bunch of politicians has given me nothing but loads of cringe-worthy memories. Of Prime Minister Gowda sleeping through Parliament proceedings, countless seminars & conferences, public rallies, and heck, I think even one international summit (if I'm not mistaken!). And of the venerable Sharad Yadav sneering at Prime Minister Gujral, and taunting him & calling him names in public, that I would have used for street fights when I must have been 12 yrs old!
So, the second most popular question that PFIs (Poor Foreigner Investors) have been bombarding me with, all morning, is precisely this: what is the probability of this bunch coming to power come Jun 2 & what would that mean for their PPIs (Poor Portfolio Investments)? (The most popular one was whether we would end up being ruled by a narrow coalition or a broad coalition, and what, incidentally, did the two bloody terms really mean!!) I am no psephologist, but does one really believe this rag-tag bunch, united by nothing save an unwillingness to support the 500-pound gorillas (Congress & BJP), could come to rule the country.
All past four instances of Third Front governments have been in existence only with support from either of the gorillas (VP Singh & Chandrasekhar propped up by the BJP, and Gowda & Gujral by the Congress) and brought down precisely at the behest of the self-same gorillas. And this bunch is about to rule us, all by themselves?? You got to be kidding me!
To be fair, I did think of the possibility of (heavens!) Mayawati becoming the next Prime Minister, and I confess to a real shudder that passed through me (much to the bemusement of my colleagues today!). Actually, Jayalalitha & Deve Gowda as other potential candidates for the job, cause me the same amount of consternation. Mayawati is arguably the richest politician in the country, with billions of rupees worth of declared assets, and more obviously, not all of it could have been earned through the scrupulous means of public service that she claims to be engaged in. On becoming PM, will she now propose to build shopping complexes around the Qutub Minar, Rashtrapati Bhavan, Gateway of India & the Victoria Memorial now (reminiscent of the Taj project!)? What kind of foreign policy initiatives can one expect from the likes of Jayalalitha, who was unable to make any impact in relation to the LTTE even when she was in power in Tamil Nadu? Precisely at a time when the country will need careful economic stewardship to avoid a further ballooning of a dangerous fiscal deficit (projected to be 12% of GDP in FY10), how much faith can one repose in a motley bunch who have not been guilty of good governance at the state level, much less the centre?
Can someone tell me, what really, is the ideology of the BSP? (Did anyone notice them claiming that "true to their ideology", they would NOT be releasing an election manifesto!!!) Or that of the JD (S), for that matter? Has Chandrababu Naidu finally figured out what he stands for - utopian CII-promoted dreams or a farmers' revolution? And most importantly, what is the common ground that these parochial satraps will come to stand on? The fact of these regional parties coming to be of such importance on the national political stage is testament to how venal governance has come to be. This utter lack of scruples & naked display of ambition for power is ultimately to be blamed on no one but our own selves. I was highly amused to read today that another Ram Sene equivalent blocked the erection of a Charlie Chaplin statue on the sets of a Kannada film, on the grounds that Chaplin was Christian! Ironical!! (Ask Senator McCarthy who indicted Chaplin of being a Communist!) The moot point of the incident was the fact that blind tolerance on our own part, for such pathetic posturing under the garb of cultural policing, is leading to our own ruin at a larger scale.
In all fairness, though, even from a numerical stand-point, I find it difficult to believe that said Third Front will find it possible to reach the magical 272 figure. Even if Mulayam Singh Yadav were to, suicidally, decide not to align with the Congress in the UP, the upper limit to the number of seats that Maya might win is just 50 (compared to the 16 she holds now). This gain just about neutralizes the loss of around 30-35 seats that the Left front faces in West Bengal & Kerala. Add to this, the maximum upside possible for the likes of Deve Gowda, Jayalalitha, Naveen Patnaik and (shudder again!) Deve Gowda, the most optimistic prediction could not possibly be much in excess of 200 seats.
Ergo, we can all rest at relative peace. However much you might hate the dynastic, arrogant & inertia-bound politics of the Congress or the communal fervor that a resurgent BJP would stoke through its allies, even if not by itself, you have to accept it - really, T.I.N.A. - There Is No Alternative! (And to think, the last serious time this slogan was used in politics, an iron-fisted lady led her country out of a deep economic morass!!)
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The next time you decide to take a break in Goa, and want to be away from the crowds, try checking out Colva beach. I stayed at a little gem called William's Beach Resort. Nothing fancy, but fantastic food & an absolute break from any crowds...and of course, the sea right at your doorstep!
Monday, March 16, 2009
Wednesday, March 4, 2009
The messiah is leading us to a golden age (part-II)
Seeing the lone response to my last post, I am tempted to clarify my stand. Yes, it's true that I am cynical about the entire hype surrounding the massive positive change that President Obama is supposed to signify. Clearly, in comparison to the last 8 yrs of mis-governance that US citizens have suffered, even Mickey Mouse would appear a sane alternative. But my concern centres primarily around the way the current administration is bungling up the one fantastic opportunity it has, to make a clean break & start afresh. So much for change-we-can-believe-in!
Obviously, this is not the most unique bust-up in financial markets that has ever taken place. Nor is it unique that the malaise has spread to affect Main Street as well. What is unique, though, is that because the household economy is hyper-leveraged, any stimulus in the form of tax breaks, rebates & the like will only go toward paying down debt (in my view, the savings rate for the US households bottomed out in 2007 at around -4%). This is exactly in line with previous recessions which occurred on account of corporate hyper-leverage, and in which extra money was ploughed to pay back debt instead of completing investment plans. Further increases in savings by households are inevitable; you may as well perish the thought of stimulating consumption by doling out checks. The worst-case scenario is a debt-deflation spiral!
The other disappointment is in the sphere of the financial sector clean-up. Instead of a ring-fencing of dodgy assets (to be dealt with, independently) to permit otherwise-healthy banks to continue lending to keep the economic engine moving, an extremely dangerous dithering on policy direction has not only exacerbated the situation for corporates but also spilt over into EM currency & debt markets. IMHO, a rigged financial system with a "No Bank Left Behind" approach is doomed to fail in a societal context that adheres to Darwinian laws related to survival. The icing on the cake is a dangerous obsession with superfluous issues. Senator John Kerry's attack on banks that spend money on clients (as last evidenced in the Northern Trust Corp case) appears extremely short-sighted & seems to borrow a leaf from the books of some glorious Indian TV news channels (viz. India TV, Aaj Tak, I could on & on!). He is wont to call business promotion expenses "idiotic". Why Congressmen should be permitted to stand in judgment of how businesses should entertain clients, foster stronger relationships & subtly ferret out cues for the next opportunity, I will never quite gather. If anyone were to ask me (which is the pity really - no one ever does!!), I'd say one man's idocy is clearly another man's business investment.
Yet, the biggest crisis facing the world may not turn out to be the US consumer. Nor even the US Dollar. In spite of a now-certain blow out in deficit spending & government borrowings on the anvil, the USD appears to be winning the battle of lousy currencies. It has come to resemble a beauty pageant featuring butt-ugly naked women! The bigger crisis concerns the future of the Euro - as evidenced in sky-rocketing sovereign spreads for Greek, Italian, Spanish & Portuguese bonds. By corollary, this can be expected to have immense bearing on potential defaults by East European countries. This will likely be the next shoe to drop in the race to the bottom! (more on this in another post, I guess)
In case anyone ever wondered about the title of the last post & this one, the context is precisely this: are we headed back to the Gold standard for currencies? The recent tear that Gold has been on (and has since marginally corrected) would, on the face of it, appear to be a natural reaction to fears of inflation taking root for the long-term, fueled by the super-cheap money binge that the messiah's administration has embarked on. But then, one look at TIPS blows that hypothesis to bits. According to last trades, long-term inflation expectations implied by TIPS prices suggest that the market does not expect inflation to average more than 1% over the course of the next 10 years. Hardly hyper-inflations, wouldn't you say?
My take on this is the exact opposite: I suspect more folks just want to hoard Gold to protect themselves from all-round asset deflation, instead of hedging against inflation. After all, it's the only form of currency not contaminated by credit, spending binges, outright monetization & dubious stimuli! In sum, maybe we go back to proving our forefathers (Who used gold as the prime currency for international trade) right....the messiah is leading us back to the golden ages!!
p.s : This is not to say that I am in favor of using the gold standard, but more on that later.
Obviously, this is not the most unique bust-up in financial markets that has ever taken place. Nor is it unique that the malaise has spread to affect Main Street as well. What is unique, though, is that because the household economy is hyper-leveraged, any stimulus in the form of tax breaks, rebates & the like will only go toward paying down debt (in my view, the savings rate for the US households bottomed out in 2007 at around -4%). This is exactly in line with previous recessions which occurred on account of corporate hyper-leverage, and in which extra money was ploughed to pay back debt instead of completing investment plans. Further increases in savings by households are inevitable; you may as well perish the thought of stimulating consumption by doling out checks. The worst-case scenario is a debt-deflation spiral!
The other disappointment is in the sphere of the financial sector clean-up. Instead of a ring-fencing of dodgy assets (to be dealt with, independently) to permit otherwise-healthy banks to continue lending to keep the economic engine moving, an extremely dangerous dithering on policy direction has not only exacerbated the situation for corporates but also spilt over into EM currency & debt markets. IMHO, a rigged financial system with a "No Bank Left Behind" approach is doomed to fail in a societal context that adheres to Darwinian laws related to survival. The icing on the cake is a dangerous obsession with superfluous issues. Senator John Kerry's attack on banks that spend money on clients (as last evidenced in the Northern Trust Corp case) appears extremely short-sighted & seems to borrow a leaf from the books of some glorious Indian TV news channels (viz. India TV, Aaj Tak, I could on & on!). He is wont to call business promotion expenses "idiotic". Why Congressmen should be permitted to stand in judgment of how businesses should entertain clients, foster stronger relationships & subtly ferret out cues for the next opportunity, I will never quite gather. If anyone were to ask me (which is the pity really - no one ever does!!), I'd say one man's idocy is clearly another man's business investment.
Yet, the biggest crisis facing the world may not turn out to be the US consumer. Nor even the US Dollar. In spite of a now-certain blow out in deficit spending & government borrowings on the anvil, the USD appears to be winning the battle of lousy currencies. It has come to resemble a beauty pageant featuring butt-ugly naked women! The bigger crisis concerns the future of the Euro - as evidenced in sky-rocketing sovereign spreads for Greek, Italian, Spanish & Portuguese bonds. By corollary, this can be expected to have immense bearing on potential defaults by East European countries. This will likely be the next shoe to drop in the race to the bottom! (more on this in another post, I guess)
In case anyone ever wondered about the title of the last post & this one, the context is precisely this: are we headed back to the Gold standard for currencies? The recent tear that Gold has been on (and has since marginally corrected) would, on the face of it, appear to be a natural reaction to fears of inflation taking root for the long-term, fueled by the super-cheap money binge that the messiah's administration has embarked on. But then, one look at TIPS blows that hypothesis to bits. According to last trades, long-term inflation expectations implied by TIPS prices suggest that the market does not expect inflation to average more than 1% over the course of the next 10 years. Hardly hyper-inflations, wouldn't you say?
My take on this is the exact opposite: I suspect more folks just want to hoard Gold to protect themselves from all-round asset deflation, instead of hedging against inflation. After all, it's the only form of currency not contaminated by credit, spending binges, outright monetization & dubious stimuli! In sum, maybe we go back to proving our forefathers (Who used gold as the prime currency for international trade) right....the messiah is leading us back to the golden ages!!
p.s : This is not to say that I am in favor of using the gold standard, but more on that later.
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