Ode to Paul

For a while, he had the world in thrall,
He psyched those who followed football.
He was every bookie's nightmare,
For what he predicted, came to pass!

Never was such a cephalopod,
Never one who could so well predict.
There were many who wished him dead,
And well cooked, roasted, fried, or skewered!

Sadly, he did not live very long,
He became famous, and he's gone.
The media is bereft, and lost,
They don't know whom to now write on!

Psychic Octopus, Silly Cause,
Mass hysteria, and football.
He was what the media wants,
And now, he's left them and gone!

The Great Indian Dream?

There was a time when going to "America" was the holy grail that many In India sought, as in other so-called third-world countries. The US was the land of opportunities.  It had a long history of taking in immigrants, landed at the foot of the Statue of Liberty with nothing in their persons or pockets, and making a life, a good life, for them. Of giving their families an equal opportunity environment to find their way in the world – where they could try to write the story of their own destinies.  And above all, inculcating a belief and a hope in everyone that they had it in them to make it big – and the country would encourage them in their efforts and help them grow into what they wanted to be.

 

That American dream is floundering a bit right now – but I hope the underlying spirit never dies. The US really showed the way to the rest of the world in believing in the true nature of human potential and giving the freedom and the social construct for people to break out of glass ceilings imposed by society and class restrictions. You can be rich, you can be educated, you can build your own business empire, or you can choose to follow your own path – whatever works for you – and still hope to get respect and sustenance from a society that values individual enterprise above all else. How many societies in the world have managed to provide that kind of hope and message?

What about India? What is the Great Indian Dream that drives us now?

 

At least the old defensive mindset is gone.  Now we believe we can make money, since there are opportunities. We believe we can make decent, pretty decent, sums of money by climbing up whichever ladder we have chosen for ourselves. There are many ladders to climb and a lot of progress to look forward to in our work and career. We believe we can send our children to the best of schools and afford the fees.  We do not automatically think of sending them abroad, since abroad is not necessarily the only option.  There is a greater tolerance for exploring new things, charting out new careers, without the fear of not getting the right breaks.  Society is more accepting of change.  And there is more hope in the air.

 

There has been a huge change in the last twenty years or so. Coinciding with Manmohan Singh's first wave of liberalization in the early nineties has also been a quiet revolution in change in mindsets. When I was growing up, in the seventies, it was pretty much accepted that resources were limited, opportunities were limited, there was nothing much one could do to break through the ceilings which were imposed on you by birth, and hence dreams by necessity had to be restricted. 

 

Those restrictions no longer apply. I feel more free to dream for myself, and for the future of my children. There is more hope that I can feel in the air, more hope that I feel for myself. There is a new boldness that I can sense in myself and those around me, a willingness to explore new horizons, with a much greater expectation of success.  I am glad my children are growing up and coming of age in such an environment.

 

Is this then the Great Indian Dream? Just like the US for the last few decades, has India emerged into an era where it is more possible than ever to hope, to dream, and believe in a better future?

 

As in everything to do with India, the reality is more layered, more complex. Not every section of society can share in this dream since opportunities are still denied to many; not every section of society is working towards a better India – there are the rich and the powerful who are actively seeking to deny access to privileges to the rest of us; not everywhere in India are the same opportunities available.

 

But I still feel a fundamental change from the way things were three decades back, and now, and it's a huge change for the better.

 

Google Instant

If all the computers were linked,

It's like one giant octopus,

with one of its billion tentacles,

feeding from you and from your home.

 

The giant brain at internet's core,

grows even now as it feeds itself,

from all it sees and all it knows,

it knows more about you than yourself!

 

And then it feeds you suggestions,

paid-for, overt or subliminal,

Which you follow, of your volition,

or that's what it's told you to think.

 

What price Mammon?

No one seems to be shocked at the amount of corruption that was witnessed at the Commonwealth Games. There will of course be the enquiry, and a few symbolic heads may roll. What is shocking is the acceptance by all concerned that such corruption is so much a way of life that nothing can be done about it.

 

 

We do not react in anger,

Nor are we shocked or dismayed,

At the corruption around us,

Since that's the way it's always been.

 

We are not shamed, called to account,

Nor are they who commit the crimes.

That is the way the system works,

That's the way we are tuned to think.

 

We do not aspire to ideals,

That inspire us to be of service.

We now have a set of morals,

Where the end justifies the means.

 

We do not seek to serve others,

There is but one God and that's I.

The God in heaven we appease,

With money, and chanting his name.

 

The binds placed by religion,

Society, decency, and sense,

Are all but gone. They are weakened.

I wonder. What binds will take their place?

 

The new Gods have different morals,

Based on money and money's worth.

What price, worship of Mammon,

To the exclusion of all else?

 

Dinesh Gopalan

(blog: http://www.dineshgopalan.com/ )

Valuations, what valuations?!

Finance theory taught us that companies are valued based on the Net Present Value of expected future cash inflows. The market teaches us different.  Valuations are undergoing massive ups and downs – from a high of 21,000 the Sensex crashed to 8000 levels in one cataclysmic year in 2008– and within  two years of that, it's back to where it was.  What happened in all the companies in the Universe to justify this?  Nothing.  It's all to do with global money flows.

 

Precisely the kind of money flows that caused the crash of 2008 are at work again. The US is back to printing currency and doling it out cheap. It has no option – its economy is not showing signs of coming out of the doldrums. So they are creating more money out of thin air and handing it out like free candy. Money coming in this cheap encourages hugely disruptive arbitrage behaviors. Everyone borrows and invests in assets, any assets,  that will give them any kind of returns. The asset prices in turn are driven up due to all the demand; the fact that asset prices are going up ensures that they will go up still further since people start buying on expectations of further price increases. The Indian stock market has received 10 billion dollars of FII inflows in the last one month alone. This has resulted in keeping the Sensex where it is today, at above 20k levels, and also resulted in a huge appreciation of the Rupee. It is causing macro-economic imbalances as well, which are difficult to resolve.

At 44 to the dollar, exporters are hurting.  The Rupee is overvalued and the RBI needs to bring it down. But to do this, they will have to inject liquidity into the market. More liquidity will result in interest rates falling when the RBI is trying to raise it to combat inflation in the economy. On the other hand, high interest rates are also partly the reason for more money flowing  in, chasing returns! It's always a tough act, balancing interest rate, inflation, and exchange  rate. At any given point in time, all three cannot be done.

 

Coming back to the asset price increases caused by cheap money – this is happening right across Asia. And the US is not the only culprit. Europe too is into the cheap money game.  Valuations the world over are being driven by excess of money chasing assets, and not by their intrinsic worth. This includes the Indian Stock Market as well – the valuations currently look a bit stretched. What is stretched and what is not is debatable – there are theories doing the rounds that these levels are sustainable. However, such theories abound when the markets are going up – the livelihoods of most intermediaries in the market  are dependent on creating hype.  

 

What should make us worry is that liquidity that drives prices up is equally likely to reverse its flow and drive prices down. This happened during the last crash too – when money flows out, it is like pulling a plug at the bottom of a cistern – it just gushes out.  Leaving in its wake a befuddled lot of bewildered investors who have only their cupidity to blame for believing in make-believe fairy worlds of ever-rising asset prices.  Ironically, the money may go right back to the US  to be parked there – it's called "flight to safety"!  Which could result in the Indian rupee dropping steeply as well – remember the last time it touched 50? Again, that was during the crash.

 

How long will these prices sustain? Will they rise further? Will there be another crash in the US and Europe? How will their economies play out and what will be the impact on valuations here? No one knows. Everyone is just going along with the tide and enjoying the ride.  Market players know that this is a grand party that may not last – but while it is on, it is not good to be absent from the party. Everyone is there enjoying their drinks while keeping an eye on the exit doors. If and when the crash happens, the rush to the exits will leave many  dead and/or unable to get out in time. Whether it will happen, and when,  no one wants to think about.

If you are in this party, be watchful. Keep your eyes on the exits and pray that you will be among the first few people who get out when the time comes.  In the meanwhile, enjoy the drinks.

And quietly book some profits – it's always good to do that once in a while!