Where the market goes..

Liquidity, you crazy crazy drug that fueled the mother of rallies since March, when does thou disappear?

Since Mar09 most benchmark indices have doubled across all geographies. The main reasons attributed to this sudden rally has been liquidity. Central banks in their quest to encourage growth have made money cheaper and more accessible. Some of this has paid of and signs of growth are visible. The dilemma that Central banks now face, is how to structure the withdrawal of this liquidity without hampering growth.

In my mind, the market just realized that you cant fall of the floor. Sometime in march the market felt we were at rock bottom and going lower wasn't an option. But the impact of this realization has been rather startling, a one way rise to current levels.

Now the next question that comes up, is if this rally is sustainable. The global growth story is still hazy, the U.S. and Europe continue to grapple with issues they haven't fully understood. This leads me to believe that maybe being patient with your cash would be a good option.
The critical issue is whether the market will sustain without liquidity and higher interest rates.
Only the central banks know when they will reduce the morphine dose..

A Little Bridge

Each year a fresh batch of business graduates step into the corporate world. New ideas, high zeal and a sense of purpose not witnessed since Jawaharlal Nehru's 'tryst with destiny' speech. The fundamental quality of over confidence rides high over any sense of rationality.

The situation changes drastically once work begins. All the illusions of acquiring companies, rolling out businesses and expanding capacities are shattered into pieces. Realization sets in, that to do all these activities one needs to spend time on the ground. The planes of reality are significantly different and challenging. The discomfort in the grind consumes a few, who move to cooler climes like migratory birds.

This a big dilemma, as you cannot stop people from dreaming, at the same time work on the ground level is important. So the best solution is to connect these two little islands of reality and idealism. And here is when the little bridge of phased induction makes life comfortable.

Attaining Happiness

There lived a young boy named Gopi  in a small quaint village in central India. He was an inquisitive young teenager with a philosophical bent of mind. He was passionate about things around him. He kept probing into matters far deeper than people his age normally do.

Close to his village was a great monastery. The monk who resided there, was highly revered. People came from distant lands to seek his advice and blessings. Gopi often visited the monastery, sitting there and meditating. The monk observed Gopi but they never exchanged more than a smile.

One day Gopi approached the monk and asked him, "How can I always be happy?"
The monk reflected on the question and responded, "What makes you happy?"
Gopi replied, "Chasing my pet hen in the garden" , to which the monk said, "pursue it".

Gopi thought the response was fairly mundane, but did not want to question the monks wisdom. After all, this monk had followers across the country. He did as the monk said, and he had to admit; there was a strange sense of joy. Over time the joy subsided. After six months he visited the monk again.

Gopi asked the monk, "How can I always be happy?"
The monk again replied, "What makes you happy?"
Gopi replied, "Tilling my farm land", to which the monk said, "pursue it".
Gopi had hoped the response would change on this occasion. Again he controlled his urge of questioning the monks response. As time went by, Gopi was intensely focused on his farm land and crops. He did feel a divine satisfaction when he was on the farm. The same level of joy was absent once he got home. His pets did provide him with moments of joy. He felt he needed something else, he was a bit distracted lately. He decided to visit the monk again. He resolved that he will question the monk further this time.

He gathered courage from his past visits and asked the monk, "How can I always be happy?"
The monk again replied, "What makes you happy?"
Gopi replied, "Marriage to the baker's beautiful daughter", to which the monk said, "pursue her".
Gopi hesitated for a second, then said, "Every time I came to you with my question, you respond by saying pursue the matter. How are these related to my happiness?"

The monk smiled and said,"Every time I asked you your source of happiness, you told me a part of your dream, hence I asked you to pursue them. As you accomplished each target, your mind moved towards a new one. Happiness is a moving target of achieving your dreams. As time goes by, your goals and objectives change, you need to pursue them with vigour."

Gopi silently stared in awe. It was now clear to him why so many people approached the monk The monk did not give him the answer in the first visit, he helped him discover it before explaining it to him.
Gopi married the bakers daughter............

In Reality - There is no Versus

This century is proclaimed to belong to the Asian nations of China and India. It will be remembered in history as the arrival of these two giants on the world stage. Facts and data on various parameters involving these countries have been dissected and analyzed by all and sundry. Each 'expert' has painted a new portrait and given a new dimension to the economic successes of the two nations.Constant comparisons, vivid analogies, dramatic graphs and diagrams, have all romanticized the great 'China vs India' focus.  

I will try and replicate some views to highlight  some observations I made while reading economist views and media reports about these nations.

Reports in China

• China's economy grew by x% to reach of a figure of $y billion
• China constructing a bridge to connect mainland to Hongkong
  

Reports in India

• India's economy grew by a% to reach a figure of $b billion, but China's economy grew by x% to reach of a figure of $y billion, what does this mean?
• Bandra worli sealink completed, but China constructing a bigger bridge. 

These are not isolated comparisons. If you Google 'India vs China', you will find mostly Indian or American websites discussing the two countries in tandem. Read the interview of Chinese economists (click here) and then you will realize that China is not concerned about India. There is not a single mention of India in the entire article. Its we who are obsessed with them with our constant comparisons. Our media has created the drama, our economist are constantly comparing, our kids are writing essay and preparing for group discussions on this topic.

China is working on a export driven economy and India is building a strong domestic driven economy. It makes more sense to focus on our own path and channel energy towards our own goals. Probably the reason for their success lies in the fact that they are not paying attention to us. Maybe the two 'engines' of global growth need to discover their own destinies.

"My bat talks to me"

In a recent interview Sachin Tendulkar was asked on what parameters does he evaluate his sports gears before selecting them. He mentioned the usual ones about his gloves, pads and bats. Then went on to say that, 'The bat speaks to him", thus he knows which one to select. It might sound ridiculous when you first read it, talking to to an inanimate object. Then you read the statement again; this guy is truly genius.

Champions in the past have often talked about the connectedness with various aspects of their profession. In all aspects of life, the dedicated champion has an additional element apart from skill, focus and luck. This zen like state of mind is when you and your art become one. You talk to and listen from your heart. You are in complete control of every movement and action. Your mind, body and spirit is totally immersed into the space of calm achievement.

One can aspire to achieve this state. Till then, keep trying is the mantra.

Crisis Rollover

On the last Thursday of every month, the analyst appears on the television discussing the rollover in the derivatives market. Rollover is a term used to describe the closing of a derivative position for one month and opening it for the next month. Its rather strange that we have been rolling over one crisis after another, without much to cheer, for the last 18 months. Here is a quick recap of events.

• April 2007 - World wakes up to the concept of subprime mortgages and its implications.
• June 2007 - S&P downgrades over a 100 bonds.
• Aug 2007 - Large banks halt redemption's for a few fund offers.
• September 2007 - Central banks increase liquidity by reducing interest rates.
• October 2007 - U.S. Treasury announces the HOPE NOW initiative, an alliance of investors, mortgage market participants.
  
• December 2007 - U.S announces the Troubled Asset Relief Programme
  
• January 2008 - Stock markets across the world start collapsing.
  
• March 2008 - Bear Stearns is acquired by JP Morgan Chase in a distress sale
  
• September 2008 - Lehmann Brothers collapses.
• October 2008 - There is total freeze in the credit markets.
• November 2008 - The U.S. Treasury purchases a total of $125 billion in preferred stocks in nine U.S. banks.
• December 2008 - The U.S. Treasury authorizes loans of up to $13.4 billion for General Motors and $4.0 billion for Chrysler to bail them out.
• March 2009 - Stock markets bottom out and reach the point of despair.
• April 2009 - Swine flu scare grips the world.
• June 2009 - India receives deficient rainfall and the threat of drought looms large.

Its been a tumultuous few months for everyone. In this typhoon the small fry have been really badly hit. It seems to me, and I say this without data, that the tide is turning. The news cycle will move towards positive and so will the rollover.

Two Brothers - One Nation on its knees

This is a fascinating tale of two brothers. They grew up together with their parents in perfect harmony. Life seemed perfect and abound in happiness. But you know these things hardly last forever. The entire neighborhood looked at them with pride and sometimes a little envy.

Their father bought them a new GI Joe action figure. This was no simple action figure, it was a unique GI Joe collectors special. One of its kind figure. The brothers loved it, they played with it together all the time. Slowly a mild discontent starting brewing between the brothers. The GI Joe being the focal point of existence. Each tried to stake a claim over it. The situation deteriorated by the day, the parents intervened to no avail. The matter got so serious that the people in the neighborhood would discuss it with great detail. Slowly the battle ground became clear. You had to be supporting one of the two brothers, there was no middle ground. There were ugly exchanges between the two brothers and their associates. The local media for lack of other stories covered this one with great excitement. True to its style, the media added new twists to the saga. Somehow the local politicians also got involved. Things snowballed out of control. The amount of interest generated reached hysterical proportions.

Some sort of resolution had to be reached. The parents could not side with one and hence tried remaining neutral. After much thought and debate they confiscated the GI Joe. One wrap on the knuckles set things right. It was now clear to the brothers that unless they resolved their differences the GI Joe would be lost forever.
Conflict resolution was difficult. The politicians thought that the issue will distract the nation from more meaningful problems, so they wanted the battle to continue. They became party to the 'resolution meetings'.
Just like when god send the devil to count the political parties in the country and the devil never returned, these 'resolution meetings' continued without progress.

The episode had far reaching consequences. GI Joe never manufactured another toy in the country. A generation of children grew up without GI Joe's to play with.
And the saga continues...........

P.S - I apologize for my lack of subtlety.