Look at Chinese Market to understand Dalal Street

Posted on Leave a commentPosted in Economics, Interesting Idea

DO you wish to know, why Stock Market in India is going up and down. Read this.

“BULL market” does not adequately describe the frenzied buying of Chinese shares in the past two weeks, so local media have started calling it a “super-bull”. China’s stockmarket has surged 21% in the last ten trading days, and that is building on a 20% rally over the previous four months. One of the world’s worst performers for three consecutive years, China has suddenly shot to the top of the table for all major markets in 2014. The rally has also propelled China ahead of Japan as the world’s second-biggest equity market by value, with a total capitalisation of more than $4.5 trillion.

Courtesy : Economist.com. Read full story.

Today (9.12.2014) Indian Stock Market fell by 300 points..Look at Shanghai Index. Its down by 5%.

Though, correlation does not mean causation, in the stock market parlance, its a high beta phenomena.

I desist from making any final comments, or I may be completely wrong in drawing the parallel, suffice to say, far more complex events shape the Stock Market, and we naively assume its got to do with Macro Economic Fundamentals.

Crude Price is very low..There are N numbers of theories, yet I am unable to find reasons for such sharp decline and why no one predicted it happening. With every reduction in CAD (Current Account Deficit) our economy should improve, yet CAD is very high, may be due to lifting of Gold Import Ban in the last few months, despite dwindling crude price. Take your pick, choose whatever reasons to suit your prediction.

All this leads me to believe that Not to Believe in Macro Economics Indicator. In any case, mostly with complex financial world, it’s nearly impossible to collate macro economic data. So, maybe it’s time to look at new indicators.

Art of Negotiations BJP V/s Sena – Final Post

Posted on Leave a commentPosted in Interesting Idea, Negotiation

If you have read my blog post published few days back, you would recall, I predicted, the reconciliation could be on the way between erstwhile partners, provided Mr. Modi flags go ahead and that Sena accepts the fact that they are no more big brother in the state of Maharashtra.

This was subject to caveat that both parties realize the compromise is the only way forward. This assumption was based on the events unfolded in the last few months.

Now that Sena has joined the Government, it seems finally common sense has prevailed at both the ends. Each gains equally, for BJP, a stable government and for Sena, control at BMC, minister at the Center and can certainly call the shots in Maharashtra Government.

A win/win formula. Isn’t it obvious? But unfortunately, common wisdom does not follow, when each one tries to outsmart other by bluffing or by false bravado, ignoring the basics. At times, it requires tenacity and art of waiting to achieve ultimate victory.

In the final analysis, BJP played to its strength and got what it wanted. Sena acted like a brat, and became happy with a pacifier in the mouth.



Learn from Losers

Posted on Leave a commentPosted in Interesting Idea, Learning

In 1943, the American statistician Abraham Wald was asked to advise the US air force on how to reinforce their planes. Only a limited weight of armour plating was feasible, and the proposal on the table was to reinforce the wings, the centre of the fuselage, and the tail. Why? Because bombers were returning from missions riddled with bullet holes in those areas.

Wald explained that this would be a mistake. What the air force had discovered was that when planes were hit in the wings, tail or central fuselage, they made it home. Where, asked Wald, were the planes that had been hit in other areas? They never returned. Wald suggested reinforcing the planes wherever the surviving planes had been unscathed instead.

It’s natural to look at life’s winners – often they become winners in the first place because they’re interesting to look at. That’s why Wald gives us an important lesson. If we don’t look at life’s losers too, we may end up putting our time, money, attention or even armour plating in entirely the wrong place.

Credit : Tim Harford.