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  • Some Relief For An India ETF... Maybe [View article]
    Am writing this so that you can bring to the market’s attention another fraud that has unfolded - surprisingly from the Indian central bank this time. Ivy educated fund manager here in amchi Mumbai.

    This concerns the swap arrangement between the oil companies and the RBI on foreign exchange that the oil companies require for oil imports.

    The RBI is basically telling India’s currency market – “Look guys we don’t like the exchange rates the currency market is producing, so guess what, we’re suspending a large part of the market.”

    They are doing this by making the oil companies buy dollars directly from the RBI, and not from the market.

    This takes the oil companies off the currency markets, and reduces demand for dollars and selling of rupees in the currency markets. This presumably strengthens the rupee temporarily. The specimens who call themselves traders in Indian currency markets are actually happy with this.

    But notice the absurdity. The RBI in effect has created a two tier market for the currency. It has also prevented genuine price discovery of the most important price in the economy – the exchange rate. It is slowly and gradually suspending current account convertibility in India.

    Note another absurdity. This means the monthly 9 billion in US dollars the oil companies need has to be bought from the RBI. This directly draws down the country’s foreign exchange reserves in the middle of a currency crisis. So the RBIs forex reserves should reduce by 9 bln a month. In 6 months, that’s over 50 billion in reserves.

    Clearly this is unacceptable to the RBI. The RBI could therefore look for trading partners with whom India has a trading (ie) current account surplus and then swap the rupees they get from the oil companies for dollars, thereby maintaining their reserves.

    But notice these countries are few and far between. It is impossible to arrange 9 billion dollars a month in swap deals with trading partners with whom we have a trade surplus. After all the overall current account is in a massive deficit ! So this avenue is not possible.

    So the next stage of the con game. The oil companies have to REPAY, yes REPAY, the RBI at some time in the future the reserves they have drawn down. They have to do this by accounting for the arrangement as a “swap” deal.

    Basically since the oil companies have bought dollars and sold rupees their accounting is complete. So presumably, they have to treat the swaps as an off balance sheet item. Presumably the RBI will also treat it as an off balance sheet item. So technically the RBIs reserves are not touched as they can claim the amount will be repaid. So the RBIs balance sheet will also reflect the swap as an off balance sheet item, and the foreign exchange reserves will not be affected !!

    Analysts will now have to ask the RBI if the declared foreign exchange reserves are before - or after - accounting for the swap arrangement.

    This is ofcourse the same sort of nonsense that destroyed Enron. The Indian central bank is now reduced to Enron type accounting and finance measures to hide its exposure. Enron tried to hide debt this way, and the RBI is trying to hide forex reserve losses this way !!

    Notice also that this exposes India’s oil marketing companies to exchange rate movements and effectively makes them speculate on future exchange rates. If the rupee dollar pair goes to say 75, the OMCs will have to take a hit, as they buy at this rate and repay the RBI in dollars.

    Conveniently, that is also taken care off. The OMCs are allowed to INDEFINITELY keep rolling over the swaps in the event of this happening.

    This is typically Indian nonsense at its worst.

    This is the reason the world simply does not trust us anymore. At some point the markets will see through this nonsense, and the rupee will continue its slide.
    Aug 30, 2013. 01:12 AM | Likes Like |Link to Comment
  • Rupee dives to more fresh lows after food bill passed [View news story]
    Am writing this so that you can bring to the markets attention another fraud that has unfolded - surprisingly from the Indian central bank this time. Ivy educated fund manager here in amchi Mumbai.

    This concerns the swap arrangement between the oil companies and the RBI on foreign exchange that the oil companies require for oil imports.

    The RBI is basically telling India’s currency market – “Look guys we don’t like the exchange rates the currency market is producing, so guess what, we’re suspending a large part of it.”

    They are doing this by making the oil companies buy dollars directly from the RBI, and not from the market.

    This takes the oil companies off the currency markets, and reduces demand for dollars and selling of rupees in the currency markets. This presumably strengthens the rupee temporarily. The specimens who call themselves traders in Indian currency markets are actually happy with this.

    But notice the absurdity. The RBI in effect has created a two tier market for the currency. It has also prevented genuine price discovery of the most important price in the economy – the exchange rate. It is actually gradually suspending current account convertability in India.

    Note another absurdity. This means the monthly 9 billion in US dollars the oil companies need has to be bought from the RBI. This directly draws down the country’s foreign exchange reserves in the middle of a currency crisis. So the RBIs forex reserves should reduce by 9 bln a month. In 6 months, that’s over 50 billion in reserves.

    Clearly this is unacceptable to the RBI. The RBI will therefore look for trading partners with whom India has a trading (ie) current account surplus and then swap the rupees they get from the oil companies for dollars, thereby maintaining their reserves.

    But notice these countries are few and far between. It is impossible to arrange 9 billion dollars a month in swap deals with trading partners with whom we have a trade surplus. After all the overall current account is in a massive deficit !

    So the next stage of the con game. The oil companies have to REPAY, yes REPAY, the RBI at some time in the future the reserves they have drawn down. They have to do this by accounting for the arrangement as a “swap” deal.

    Basically since the oil companies have bought dollars and sold rupees their accounting is complete. So presumably, they have to treat the swaps as an off balance sheet item. Presumably the RBI will also treat it as an off balance sheet item. So technically the RBIs reserves are not touched as they can claim the amount will be repaid. So the RBIs balance sheet will also reflect the swap as an off balance sheet item, and the foreign exchange reserves will not be affected !!

    Analysts will now have to ask the RBI if the declared foreign exchange reserves are before - or after - accounting for the swap arrangement.

    This is ofcourse the same sort of nonsense that destroyed Enron. The Indian central bank is now reduced to Enron type accounting and finance measures to hide its exposure. Enron tried to hide debt this way, and the RBI is trying to hide forex reserve losses this way !!

    Notice also that this exposes India’s oil marketing companies to exchange rate movements and effectively makes them speculate on future exchange rates. If the rupee dollar pair goes to say 75, the OMCs will have to take a hit, as they buy at this rate and repay the RBI in dollars.

    Conveniently, that is also taken care off. The OMCs are allowed to INDEFINATELY keep rolling over the swaps in the event of this happening.

    This is typically Indian absurdity at its worst.

    This is the reason the world simply does not trust us anymore. At some point the markets will see through this , and the rupee will continue its slide.
    Aug 29, 2013. 02:12 AM | Likes Like |Link to Comment
  • Rupee freefall continues [View news story]
    Am writing this so that you can bring to the markets attention another fraud that has unfolded - surprisingly from the RBI this time. Ivy educated fund manager here in amchi Mumbai.

    This concerns the swap arrangement between the oil companies and the RBI on foreign exchange that the oil companies require for oil imports.

    The RBI is basically telling India’s currency market – “Look guys we don’t like the exchange rates the currency market is producing, so guess what, we’re suspending a large part of it.”

    They are doing this by making the oil companies buy dollars directly from the RBI, and not from the market.

    This takes the oil companies off the currency markets, and reduces demand for dollars and selling of rupees in the currency markets. This presumably strengthens the rupee temporarily. The specimens who call themselves traders in Indian currency markets are actually happy with this.

    But notice the absurdity. The RBI in effect has created a two tier market for the currency. It has also prevented genuine price discovery of the most important price in the economy – the exchange rate. It is actually gradually suspending current account convertability in India.

    Note another absurdity. This means the monthly 9 billion in US dollars the oil companies need has to be bought from the RBI. This directly draws down the country’s foreign exchange reserves in the middle of a currency crisis. So the RBIs forex reserves should reduce by 9 bln a month. In 6 months, that’s over 50 billion in reserves.

    Clearly this is unacceptable to the RBI. The RBI will therefore look for trading partners with whom India has a trading (ie) current account surplus and then swap the rupees they get from the oil companies for dollars, thereby maintaining their reserves.

    But notice these countries are few and far between. It is impossible to arrange 9 billion dollars a month in swap deals with trading partners with whom we have a trade surplus. After all the overall current account is in a massive deficit !

    So the next stage of the con game. The oil companies have to REPAY, yes REPAY, the RBI at some time in the future the reserves they have drawn down. They have to do this by accounting for the arrangement as a “swap” deal.

    Basically since the oil companies have bought dollars and sold rupees their accounting is complete. So presumably, they have to treat the swaps as an off balance sheet item. Presumably the RBI will also treat it as an off balance sheet item. So technically the RBIs reserves are not touched as they can claim the amount will be repaid. So the RBIs balance sheet will also reflect the swap as an off balance sheet item, and the foreign exchange reserves will not be affected !!

    Analysts will now have to ask the RBI if the declared foreign exchange reserves are before - or after - accounting for the swap arrangement.

    This is ofcourse the same sort of nonsense that destroyed Enron. The Indian central bank is now reduced to Enron type accounting and finance measures to hide its exposure. Enron tried to hide debt this way, and the RBI is trying to hide forex reserve losses this way !!

    Notice also that this exposes India’s oil marketing companies to exchange rate movements and effectively makes them speculate on future exchange rates. If the rupee dollar pair goes to say 75, the OMCs will have to take a hit, as they buy at this rate and repay the RBI in dollars.

    Conveniently, that is also taken care off. The OMCs are allowed to INDEFINATELY keep rolling over the swaps in the event of this happening.

    This is typically Indian absurdity at its worst.

    This is the reason the world simply does not trust us anymore. At some point the markets will see through this nonsense, and the rupee will continue its slide.
    Aug 29, 2013. 02:07 AM | Likes Like |Link to Comment
  • India ETFs In A Tailspin With Rupee [View article]
    Am writing this so that you can bring to the markets attention another fraud that has unfolded - surprisingly from the RBI this time. Ivy educated fund manager here in amchi Mumbai.

    This concerns the swap arrangement between the oil companies and the RBI on foreign exchange that the oil companies require for oil imports.

    The RBI is basically telling India’s currency market – “Look guys we don’t like the exchange rates the currency market is producing, so guess what, we’re suspending a large part of it.”

    They are doing this by making the oil companies buy dollars directly from the RBI, and not from the market.

    This takes the oil companies off the currency markets, and reduces demand for dollars and selling of rupees in the currency markets. This presumably strengthens the rupee temporarily. The specimens who call themselves traders in Indian currency markets are actually happy with this.

    But notice the absurdity. The RBI in effect has created a two tier market for the currency. It has also prevented genuine price discovery of the most important price in the economy – the exchange rate. It is actually gradually suspending current account convertability in India.

    Note another absurdity. This means the monthly 9 billion in US dollars the oil companies need has to be bought from the RBI. This directly draws down the country’s foreign exchange reserves in the middle of a currency crisis. So the RBIs forex reserves should reduce by 9 bln a month. In 6 months, that’s over 50 billion in reserves.

    Clearly this is unacceptable to the RBI. The RBI will therefore look for trading partners with whom India has a trading (ie) current account surplus and then swap the rupees they get from the oil companies for dollars, thereby maintaining their reserves.

    But notice these countries are few and far between. It is impossible to arrange 9 billion dollars a month in swap deals with trading partners with whom we have a trade surplus. After all the overall current account is in a massive deficit !

    So the next stage of the con game. The oil companies have to REPAY, yes REPAY, the RBI at some time in the future the reserves they have drawn down. They have to do this by accounting for the arrangement as a “swap” deal.

    Basically since the oil companies have bought dollars and sold rupees their accounting is complete. So presumably, they have to treat the swaps as an off balance sheet item. Presumably the RBI will also treat it as an off balance sheet item. So technically the RBIs reserves are not touched as they can claim the amount will be repaid. So the RBIs balance sheet will also reflect the swap as an off balance sheet item, and the foreign exchange reserves will not be affected !!

    Analysts will now have to ask the RBI if the declared foreign exchange reserves are before - or after - accounting for the swap arrangement.

    This is ofcourse the same sort of nonsense that destroyed Enron. The Indian central bank is now reduced to Enron type accounting and finance measures to hide its exposure. Enron tried to hide debt this way, and the RBI is trying to hide forex reserve losses this way !!

    Notice also that this exposes India’s oil marketing companies to exchange rate movements and effectively makes them speculate on future exchange rates. If the rupee dollar pair goes to say 75, the OMCs will have to take a hit, as they buy at this rate and repay the RBI in dollars.

    Conveniently, that is also taken care off. The OMCs are allowed to INDEFINATELY keep rolling over the swaps in the event of this happening.

    This is typically Indian nonsense at its worst.

    This is the reason the world simply does not trust us anymore. At some point the markets will see through this nonsense, and the rupee will continue its slide.
    Aug 29, 2013. 02:04 AM | Likes Like |Link to Comment
  • Invest In India, With Or Without Government Reforms [View article]
    Really. Joseph... Read on..

    India. Reforms ? Really?

    As predicted, the Indian government has started its divestment drive. The Indian government is behaving like the corrupt and bankrupt zamindar in a Tagore novel, who has to go to an older lady of the night, instead of the younger fresher one, because that is all it can afford. As outlined earlier, this is part of its plan. It is talking up the markets, announcing reforms that can never be developed on, and then selling its paper. It will recover Rs 40000 cr. from divestment and Rs. 30000 cr. from spectrum auctions. They say, the money will be applied towards the deficit. In reality it will be used to fund further sops and giveaways in the next budget. The deficit will be kept at 6 % of GDP and they will take their chances with the rating agencies like S and P later. (SELL ALL STOCK).

    Much has been made of the "burst of reforms" unleashed by Finance Minister Chidambaram in recent weeks. The stock market has rallied and animal spirits it seems are back. Everybody's babbling about how the UPA, after eight years in power, has found religion ie "reforms".

    The market is now at 21 times price to earnings (trailing twelve month free float adjusted as per the National Stock Exchange). Once more the mood swings violently. More interestingly the India VIX , the fear index is at 3 year lows of 15. This is usually an indicator of complacency, and historically such lows have signified a massive sell off. The combination of the stretched price to earnings and the VIX means the market is ripe for a big sell off. My two bit as an Ivy educated fund manager in Bombay who has worked internationally on some of the world's major structural adjustment and economic reform programs.

    In reality, the reforms amount to bureaucratic tinkerings with percentages - of a sort that only tax mavens and accountants can comprehend. Witholding taxes go down by a percentage point or two. FII margin percentages change. Service tax percentages for insurance companies change. Now an attempt's been made to increase the percentages foreigners can hold in insurance and pensions. (This last will never pass through Parliament given the unanimous opposition to it). Blah Blah Blah.

    The Indian economy, in fact, requires Parashurama's ax and not the surgeon's scalpel. The reference is to the mythical woodcutter of Indian mythology who wields a massive axe when needed. Wholesale violence will have to be committed on large areas of India's economy with Parashurama's axe, if we are to resume a decent growth rate.

    The government had no choice but to unleash this wave of tinkering and call it "reform". It is trying to keep the capital markets buoyant because it needs to sell or "chipkao" (i.e. stick, as we say in the business) close to Rs 40,000 crores worth of equity. This with spectrum auctions, hopefully plug the budget deficit a little by March. More crucially, it will also free up resources for massive election giveaways in next March's budget. This is especially needed if the Food Security Bill -Madame Sonia's chosen strategy for reelection - is to be passed.

    Real reforms for India will not happen for a long time. These include financial sector reform, and an end to the financial repression signified by the statutory liquidity ratio. Privatization of the banking system that's put an end to the ridiculous spectacle of 75 % of the banking system being owned by the government in a market economy. Bankruptcy and exit laws will have to be introduced. Labour market liberalization and the freedom to hire and fire labour will have to be allowed.

    The collapsed state of Indian cities will have to be addressed by building 30 to 40 cities to accommodate massive rural urban migration. Land acquisition which is impossible now will have to be addressed. This list does not even include the sector changes required in mining and real estate and infrastructure and banking and power and sugar, and so on and so on. None of this is happening ever, it seems.

    Everybody's babbling in the media about how crucial the February budget is going to be for the UPA because it will be packed with big ticket sops like the Food Security Bill. Remember game theory however. It is crucial to take your opponent's reaction into account. The Opposition also knows that the budget will be crucial to the UPA's reelection chances ! Why then will they allow the UPA to present the budget at all. Especially when they have the numbers and the government is already on life support and in a minority. !!!

    The government therefore, will, in all likelihood, fall in November-December, during the winter session of Parliament. Elections will take place in March-April as India needs the school system for a general election. This will allow the Opposition the chance to deny the government's attempt to pass a budget full of sops and giveaways. The February budget will consequently be a vote on account. This scenario will suit all parties except the Congress and hence it will happen.

    Is the market discounting the possibility that in a few weeks, all these guys PC, Montek etc. will be gone ? Is it realising that this whole reform effort is a sham that will be exposed in a few weeks when the govenment falls ? Looking at the way its going up, I think not.

    The logical conclusion also is that this is the high point of the markets move this year. India has gone from having the most incompetent FM (Pranab) to the most cunning FM (Chidambaram). The later is deliberately doing all he can to talk up markets to implement his plan. There is little need to oblige him and his plans of using the stock market as a financing vehicle, by buying high and losing one's hard earned capital.
    Nov 6, 2012. 11:34 PM | Likes Like |Link to Comment
  • Foreign Investment Bolsters India ETFs [View article]
    Reallyyyyyyy Tommmmmmm.. Do read below.. And save your readers their capital..

    India. Reforms. Really?

    As predicted, the Indian government has started its divestment drive. The govt. is behaving like the corrupt and bankrupt zamindar in a Tagore novel, who has to go to the old r a n d i (prostitute) to satisfy his private needs because the younger fresher one is too expensive. As outlined earlier, this is part of its plan. It is talking up the markets, announcing reforms that can never be developed on, and then selling its paper. It will recover Rs 40000 cr. from divestment and Rs. 30000 cr. from spectrum auctions. They say, the money will be applied towards the deficit. In reality it will be used to fund further sops and giveaways in the next budget. The deficit will be kept at 6 % of GDP and they will take their chances with the rating agencies like S and P later. (SELL ALL STOCK).

    Much has been made of the “burst of reforms” unleashed by Finance Minister Chidambaram in recent weeks. The stock market has rallied and animal spirits it seems are back. Everybody’s babbling about how the UPA, after eight years in power, has found religion ie “reforms”in the last eight weeks.

    The market is now at 21 times price to earnings (trailing twelve month free float adjusted as per the National Stock Exchange). Once more the mood swings violently. More interestingly the India VIX , the fear index is at 3 year lows of 15. This is usually an indicator of complacency, and historically such lows have signified a massive sell off. The combination of the stretched price to earnings and the VIX means the market is ripe for a big sell off. My two bit as an Ivy educated fund manager in Bombay who has worked internationally on some of the world’s major structural adjustment and economic reform programs.

    In reality, the reforms amount to bureaucratic tinkerings with percentages – of a sort that only tax mavens and accountants can comprehend. Witholding taxes go down by a percentage point or two. FII margin percentages change. Service tax percentages for insurance companies change. Now an attempt's been made to increase the percentages foreigners can hold in insurance and pensions. (This last will never pass through Parliament given the unanimous opposition to it). Blah Blah Blah.

    The Indian economy, in fact, requires Parashurama’s ax and not the surgeon’s scalpel. The reference is to the mythical woodcutter of Indian mythology who wields a massive axe when needed. Wholesale violence will have to be committed on large areas of India’s economy with Parashurama’s axe, if we are to resume a decent growth rate.

    The government had no choice but to unleash this wave of tinkering and call it “reform”. It is trying to keep the capital markets buoyant because it needs to sell or “chipkao” (i.e. stick, as we say in the business) close to Rs 40,000 crores worth of equity. This with spectrum auctions, hopefully plug the budget deficit a little by March. More crucially, it will also free up resources for massive election giveaways in next March’s budget. This is especially needed if the Food Security Bill –Madame Sonia’s chosen strategy for reelection – is to be passed.

    Real reforms for India will not happen for a long time. These include financial sector reform, and an end to the financial repression signified by the statutory liquidity ratio. Privatization of the banking system that’s put an end to the ridiculous spectacle of 75 % of the banking system being owned by the government in a market economy. Bankruptcy and exit laws will have to be introduced. Labour market liberalization and the freedom to hire and fire labour will have to be allowed.

    The collapsed state of Indian cities will have to be addressed by building 30 to 40 cities to accommodate massive rural urban migration. Land acquisition which is impossible now will have to be addressed. This list does not even include the sector changes required in real estate and infrastructure and sugar, and so on and so on. None of this is happening ever, it seems.

    Everybody’s babbling in the media about how crucial the February budget is going to be for the UPA because it will be packed with big ticket sops like the Food Security Bill. Remember game theory however. It is crucial to take your opponent’s reaction into account. The Opposition also knows that the budget will be crucial to the UPA’s reelection chances ! Why then will they allow the UPA to present the budget at all. Especially when they have the numbers and the government is already on life support and in a minority. !!!

    The government therefore, will, in all likelihood, fall in November-December, during the winter session of Parliament. Elections will take place in March-April as India needs the school system for a general election. This will allow the Opposition the chance to deny the government’s attempt to pass a budget full of sops and giveaways. The February budget will consequently be a vote on account. This scenario will suit all parties except the Congress and hence it will happen.

    Is the market discounting the possibility that in a few weeks, all these guys PC, Montek, etc. will be gone ? Is it discounting the possibility that this reform drive is a sham, that will be exposed in a few weeks when the government falls ? Looking at the way its going up, I think not.

    The logical conclusion also is that this is the high point of the markets move this year. India has gone from having the most incompetent FM (Pranab) to the most cunning FM (Chidambaram). The later is deliberately doing all he can to talk up markets to implement his plan. There is little need to oblige him and his plans of using the stock market as a financing vehicle, by buying high and losing one’s hard earned capital.

    Nov 1, 2012. 01:48 AM | Likes Like |Link to Comment
  • Indians Answering The Call To Rebuild Their Economy [View instapost]
    sure thing col..
    Oct 25, 2012. 12:07 AM | Likes Like |Link to Comment
  • Indians Answering The Call To Rebuild Their Economy [View instapost]
    India. Reforms. Really?

    As predicted, the Indian government has started its divestment drive. The govt. is behaving like the corrupt and bankrupt zamindar in a Tagore novel, who has to go to the old r a n d i (prostitute) to satisfy his private needs because the younger fresher one is too expensive. As outlined earlier, this is part of its plan. It is talking up the markets, announcing reforms that can never be developed on, and then selling its paper. It will recover Rs 40000 cr. from divestment and Rs. 30000 cr. from spectrum auctions. They say, the money will be applied towards the deficit. In reality it will be used to fund further sops and giveaways in the next budget. The deficit will be kept at 6 % of GDP and they will take their chances with the rating agencies like S and P later. (SELL ALL STOCK).

    Much has been made of the “burst of reforms” unleashed by Finance Minister Chidambaram in recent weeks. The stock market has rallied and animal spirits it seems are back. Everybody’s babbling about how the UPA, after eight years in power, has found religion ie “reforms”in the last eight weeks.

    The market is now at 21 times price to earnings (trailing twelve month free float adjusted as per the National Stock Exchange). Once more the mood swings violently. More interestingly the India VIX , the fear index is at 3 year lows of 15. This is usually an indicator of complacency, and historically such lows have signified a massive sell off. The combination of the stretched price to earnings and the VIX means the market is ripe for a big sell off. My two bit as an Ivy educated fund manager in Bombay who has worked internationally on some of the world’s major structural adjustment and economic reform programs.

    In reality, the reforms amount to bureaucratic tinkerings with percentages – of a sort that only tax mavens and accountants can comprehend. Witholding taxes go down by a percentage point or two. FII margin percentages change. Service tax percentages for insurance companies change. Now an attempt's been made to increase the percentages foreigners can hold in insurance and pensions. (This last will never pass through Parliament given the unanimous opposition to it). Blah Blah Blah.

    The Indian economy, in fact, requires Parashurama’s ax and not the surgeon’s scalpel. The reference is to the mythical woodcutter of Indian mythology who wields a massive axe when needed. Wholesale violence will have to be committed on large areas of India’s economy with Parashurama’s axe, if we are to resume a decent growth rate.

    The government had no choice but to unleash this wave of tinkering and call it “reform”. It is trying to keep the capital markets buoyant because it needs to sell or “chipkao” (i.e. stick, as we say in the business) close to Rs 40,000 crores worth of equity. This with spectrum auctions, hopefully plug the budget deficit a little by March. More crucially, it will also free up resources for massive election giveaways in next March’s budget. This is especially needed if the Food Security Bill –Madame Sonia’s chosen strategy for reelection – is to be passed.

    Real reforms for India will not happen for a long time. These include financial sector reform, and an end to the financial repression signified by the statutory liquidity ratio. Privatization of the banking system that’s put an end to the ridiculous spectacle of 75 % of the banking system being owned by the government in a market economy. Bankruptcy and exit laws will have to be introduced. Labour market liberalization and the freedom to hire and fire labour will have to be allowed.

    The collapsed state of Indian cities will have to be addressed by building 30 to 40 cities to accommodate massive rural urban migration. Land acquisition which is impossible now will have to be addressed. This list does not even include the sector changes required in real estate and infrastructure and sugar, and so on and so on. None of this is happening ever, it seems.

    Everybody’s babbling in the media about how crucial the February budget is going to be for the UPA because it will be packed with big ticket sops like the Food Security Bill. Remember game theory however. It is crucial to take your opponent’s reaction into account. The Opposition also knows that the budget will be crucial to the UPA’s reelection chances ! Why then will they allow the UPA to present the budget at all. Especially when they have the numbers and the government is already on life support and in a minority. !!!

    The government therefore, will, in all likelihood, fall in November-December, during the winter session of Parliament. Elections will take place in March-April as India needs the school system for a general election. This will allow the Opposition the chance to deny the government’s attempt to pass a budget full of sops and giveaways. The February budget will consequently be a vote on account. This scenario will suit all parties except the Congress and hence it will happen.

    Is the market discounting the possibility that in a few weeks, all these guys PC, Montek, etc. will be gone ? Is it discounting the possibility that this reform drive is a sham, that will be exposed in a few weeks when the government falls ? Looking at the way its going up, I think not.

    The logical conclusion also is that this is the high point of the markets move this year. India has gone from having the most incompetent FM (Pranab) to the most cunning FM (Chidambaram). The later is deliberately doing all he can to talk up markets to implement his plan. There is little need to oblige him and his plans of using the stock market as a financing vehicle, by buying high and losing one’s hard earned capital.
    Oct 18, 2012. 04:01 AM | Likes Like |Link to Comment
  • Finally, A Well-Balanced Emerging Markets ETF Hits The Market Tuesday [View article]
    As long it doesnt include an Indian company. Read on.

    India. Reforms. Really?

    Much has been made of the “burst of reforms” unleashed by Finance Minister Chidambaram in recent weeks. The stock market has rallied and animal spirits it seems are back. Everybody’s babbling about how the UPA, after eight years in power, has found religion ie “reforms”.

    The market is now at 21 times price to earnings (trailing twelve month free float adjusted as per the National Stock Exchange). Once more the mood swings violently. More interestingly the India VIX , the fear index is at 3 year lows of 15. This is usually an indicator of complacency, and historically such lows have signified a massive sell off. The combination of the stretched price to earnings and the VIX means the market is ripe for a big sell off. My two bit as an Ivy educated fund manager in Bombay who has worked internationally on some of the world’s major structural adjustment and economic reform programs.

    In reality, the reforms amount to bureaucratic tinkerings with percentages – of a sort that only tax mavens and accountants can comprehend. Witholding taxes go down by a percentage point or two. FII margin percentages change. Service tax percentages for insurance companies change. Now an attempt's been made to increase the percentages foreigners can hold in insurance and pensions. (This last will never pass through Parliament given the unanimous opposition to it). Blah Blah Blah.

    The Indian economy, in fact, requires Parashurama’s ax and not the surgeon’s scalpel. The reference is to the mythical woodcutter of Indian mythology who wields a massive axe when needed. Wholesale violence will have to be committed on large areas of India’s economy with Parashurama’s axe, if we are to resume a decent growth rate.

    The government had no choice but to unleash this wave of tinkering and call it “reform”. It is trying to keep the capital markets buoyant because it needs to sell or “chipkao” (i.e. stick, as we say in the business) close to Rs 40,000 crores worth of equity. This with spectrum auctions, hopefully plug the budget deficit a little by March. More crucially, it will also free up resources for massive election giveaways in next March’s budget. This is especially needed if the Food Security Bill –Madame Sonia’s chosen strategy for reelection – is to be passed.

    Real reforms for India will not happen for a long time. These include financial sector reform, and an end to the financial repression signified by the statutory liquidity ratio. Privatization of the banking system that’s put an end to the ridiculous spectacle of 75 % of the banking system being owned by the government in a market economy. Bankruptcy and exit laws will have to be introduced. Labour market liberalization and the freedom to hire and fire labour will have to be allowed.

    The collapsed state of Indian cities will have to be addressed by building 30 to 40 cities to accommodate massive rural urban migration. Land acquisition which is impossible now will have to be addressed. This list does not even include the sector changes required in real estate and infrastructure and sugar, and so on and so on. None of this is happening ever, it seems.

    Everybody’s babbling in the media about how crucial the February budget is going to be for the UPA because it will be packed with big ticket sops like the Food Security Bill. Remember game theory however. It is crucial to take your opponent’s reaction into account. The Opposition also knows that the budget will be crucial to the UPA’s reelection chances ! Why then will they allow the UPA to present the budget at all. Especially when they have the numbers and the government is already on life support and in a minority. !!!

    The government therefore, will, in all likelihood, fall in November-December, during the winter session of Parliament. Elections will take place in March-April as India needs the school system for a general election. This will allow the Opposition the chance to deny the government’s attempt to pass a budget full of sops and giveaways. The February budget will consequently be a vote on account. This scenario will suit all parties except the Congress and hence it will happen.

    Is the market discounting the possibility that in a few weeks, all these guys PC etc. etc. will be gone ? Looking at the way its going up, I think not.

    The logical conclusion also is that this is the high point of the markets move this year. India has gone from having the most incompetent FM (Pranab) to the most cunning FM (Chidambaram). The later is deliberately doing all he can to talk up markets to implement his plan. There is little need to oblige him and his plans of using the stock market as a financing vehicle, by buying high and losing one’s hard earned capital.
    Oct 17, 2012. 12:34 AM | Likes Like |Link to Comment
  • QE3 Continues To Rev Up Emerging Market Corporate Bonds And Currencies [View article]
    India has been one of the biggest beneficiaries of QE3 and is now headed for a sharp fall. Consider the following arguments..

    As predicted, the Indian government has started its divestment drive. The govt. is behaving like the corrupt and bankrupt zamindar in a Tagore novel, who has to go to the old r a n d i (prostitute) to satisfy his private needs because the younger fresher one is too expensive. As outlined earlier, this is part of its plan. It is talking up the markets, announcing reforms that can never be developed on, and then selling its paper. It will recover Rs 40000 cr. from divestment and Rs. 30000 cr. from spectrum auctions. They say, the money will be applied towards the deficit. In reality it will be used to fund further sops and giveaways in the next budget. The deficit will be kept at 6 % of GDP and they will take their chances with the rating agencies like S and P later. SELL ALL STOCK. ( post below)


    India. Reforms. Really?

    Much has been made of the “burst of reforms” unleashed by Finance Minister Chidambaram in recent weeks. The stock market has rallied and animal spirits it seems are back. Everybody’s babbling about how the UPA, after eight years in power, has found religion ie “reforms”.

    The market is now at 21 times price to earnings (trailing twelve month free float adjusted as per the National Stock Exchange). Once more the mood swings violently. More interestingly the India VIX , the fear index is at 3 year lows of 15. This is usually an indicator of complacency, and historically such lows have signified a massive sell off. The combination of the stretched price to earnings and the VIX means the market is ripe for a big sell off. My two bit as an Ivy educated fund manager in Bombay who has worked internationally on some of the world’s major structural adjustment and economic reform programs.

    In reality, the reforms amount to bureaucratic tinkerings with percentages – of a sort that only tax mavens and accountants can comprehend. Witholding taxes go down by a percentage point or two. Now an attempt's been made to increase the percentages foreigners can hold in insurance and pensions. (This last will never pass through Parliament given the unanimous opposition to it). Blah Blah Blah.

    The government had no choice but to unleash this wave of tinkering and call it “reform”. It is trying to keep the capital markets buoyant because it needs to sell or “chipkao” (i.e. stick, as we say in the business) close to Rs 40,000 crores worth of equity. This with spectrum auctions, hopefully plug the budget deficit a little by March. More crucially, it will also free up resources for massive election giveaways in next March’s budget. This is especially needed if the Food Security Bill –Madame Sonia’s chosen strategy for reelection – is to be passed.

    Real reforms for India will not happen for a long time. These include financial sector reform, and privatization of the banking system. Bankruptcy and exit laws will have to be introduced. Labour market liberalization and the freedom to hire and fire labour will have to be allowed.

    The collapsed state of Indian cities will have to be addressed by building 30 to 40 cities to accommodate massive rural urban migration. Land acquisition which is impossible now will have to be addressed. This list does not even include the sector changes required in real estate and infrastructure and sugar, and so on and so on. None of this is happening ever, it seems.

    Everybody’s babbling in the media about how crucial the February budget is going to be for the UPA because it will be packed with big ticket sops like the Food Security Bill. Remember game theory however. It is crucial to take your opponent’s reaction into account. The Opposition also knows that the budget will be crucial to the UPA’s reelection chances ! Why then will they allow the UPA to present the budget at all. Especially when they have the numbers and the government is already on life support and in a minority. !!!

    The government therefore, will, in all likelihood, fall in November-December, during the winter session of Parliament. Elections will take place in March-April as India needs the school system for a general election. This will allow the Opposition the chance to deny the government’s attempt to pass a budget full of sops and giveaways. The February budget will consequently be a vote on account. This scenario will suit all parties except the Congress and hence it will happen.

    Is the market discounting the possibility that in a few weeks, all these guys PC etc. etc. will be gone ? Looking at the way its going up, I think not.

    The logical conclusion also is that this is the high point of the markets move this year. India has gone from having the most incompetent FM (Pranab) to the most cunning FM (Chidambaram). The later is deliberately doing all he can to talk up markets to implement his plan. There is little need to oblige him and his plans of using the stock market as a financing vehicle, by buying high and losing one’s hard earned capital.
    Oct 15, 2012. 02:56 AM | Likes Like |Link to Comment
  • China Bounces Back [View article]
    China's still a lot more preferable to India where the govts. perpetuating a giant con on the markets. Consider the argument below.

    As predicted, the Indian government has started its divestment drive. The govt. is behaving like the corrupt and bankrupt zamindar in a Tagore novel, who has to go to the old r a n d i (prostitute) to satisfy his private needs because the younger fresher one is too expensive. As outlined earlier, this is part of its plan. It is talking up the markets, announcing reforms that can never be developed on, and then selling its paper. It will recover Rs 40000 cr. from divestment and Rs. 30000 cr. from spectrum auctions. They say, the money will be applied towards the deficit. In reality it will be used to fund further sops and giveaways in the next budget. The deficit will be kept at 6 % of GDP and they will take their chances with the rating agencies like S and P later. SELL ALL STOCK. ( post below)


    India. Reforms. Really?

    Much has been made of the “burst of reforms” unleashed by Finance Minister Chidambaram in recent weeks. The stock market has rallied and animal spirits it seems are back. Everybody’s babbling about how the UPA, after eight years in power, has found religion ie “reforms”.

    The market is now at 21 times price to earnings (trailing twelve month free float adjusted as per the National Stock Exchange). Once more the mood swings violently. More interestingly the India VIX , the fear index is at 3 year lows of 15. This is usually an indicator of complacency, and historically such lows have signified a massive sell off. The combination of the stretched price to earnings and the VIX means the market is ripe for a big sell off. My two bit as an Ivy educated fund manager in Bombay who has worked internationally on some of the world’s major structural adjustment and economic reform programs.

    In reality, the reforms amount to bureaucratic tinkerings with percentages – of a sort that only tax mavens and accountants can comprehend. Witholding taxes go down by a percentage point or two. Now an attempt's been made to increase the percentages foreigners can hold in insurance and pensions. (This last will never pass through Parliament given the unanimous opposition to it). Blah Blah Blah.

    The government had no choice but to unleash this wave of tinkering and call it “reform”. It is trying to keep the capital markets buoyant because it needs to sell or “chipkao” (i.e. stick, as we say in the business) close to Rs 40,000 crores worth of equity. This with spectrum auctions, hopefully plug the budget deficit a little by March. More crucially, it will also free up resources for massive election giveaways in next March’s budget. This is especially needed if the Food Security Bill –Madame Sonia’s chosen strategy for reelection – is to be passed.

    Real reforms for India will not happen for a long time. These include financial sector reform, and privatization of the banking system. Bankruptcy and exit laws will have to be introduced. Labour market liberalization and the freedom to hire and fire labour will have to be allowed.

    The collapsed state of Indian cities will have to be addressed by building 30 to 40 cities to accommodate massive rural urban migration. Land acquisition which is impossible now will have to be addressed. This list does not even include the sector changes required in real estate and infrastructure and sugar, and so on and so on. None of this is happening ever, it seems.

    Everybody’s babbling in the media about how crucial the February budget is going to be for the UPA because it will be packed with big ticket sops like the Food Security Bill. Remember game theory however. It is crucial to take your opponent’s reaction into account. The Opposition also knows that the budget will be crucial to the UPA’s reelection chances ! Why then will they allow the UPA to present the budget at all. Especially when they have the numbers and the government is already on life support and in a minority. !!!

    The government therefore, will, in all likelihood, fall in November-December, during the winter session of Parliament. Elections will take place in March-April as India needs the school system for a general election. This will allow the Opposition the chance to deny the government’s attempt to pass a budget full of sops and giveaways. The February budget will consequently be a vote on account. This scenario will suit all parties except the Congress and hence it will happen.

    Is the market discounting the possibility that in a few weeks, all these guys PC etc. etc. will be gone ? Looking at the way its going up, I think not.

    The logical conclusion also is that this is the high point of the markets move this year. India has gone from having the most incompetent FM (Pranab) to the most cunning FM (Chidambaram). The later is deliberately doing all he can to talk up markets to implement his plan. There is little need to oblige him and his plans of using the stock market as a financing vehicle, by buying high and losing one’s hard earned capital.
    Oct 15, 2012. 02:49 AM | Likes Like |Link to Comment
  • Individual ETF Investors May Wish To Lean Toward Revenue Beaters [View article]
    Whatever happens dont buy India ETFs. And heres why.

    India. Reforms. Really?

    Much has been made of the “burst of reforms” unleashed by Finance Minister Chidambaram in recent weeks. The stock market has rallied and animal spirits it seems are back. Everybody’s babbling about how the UPA, after eight years in power, has found religion ie “reforms”.

    The market is now at 21 times price to earnings (trailing twelve month free float adjusted as per the National Stock Exchange). Once more the mood swings violently. More interestingly the India VIX , the fear index is at 3 year lows of 15. This is usually an indicator of complacency, and historically such lows have signified a massive sell off. The combination of the stretched price to earnings and the VIX means the market is ripe for a big sell off. My two bit as an Ivy educated fund manager in Bombay who has worked internationally on some of the world’s major structural adjustment and economic reform programs.

    In reality, the reforms amount to bureaucratic tinkerings with percentages – of a sort that only tax mavens and accountants can comprehend. Witholding taxes go down by a percentage point or two. FII margin percentages change. Service tax percentages for insurance companies change. Now an attempt's been made to increase the percentages foreigners can hold in insurance and pensions. (This last will never pass through Parliament given the unanimous opposition to it). Blah Blah Blah.

    The Indian economy, in fact, requires Parashurama’s ax and not the surgeons scalpel. The reference is to the mythical woodcutter of Indian mythology who wields a massive axe when needed. Wholesale violence will have to be committed on large areas of India’s economy with Parashurama’s axe, if we are to resume a decent growth rate.

    The government had no choice but to unleash this wave of bureaucratic tinkering and percentage changes and call it “reform”. It is trying to keep the capital markets buoyant because it needs to sell or “chipkao” (i.e. stick, as we say in the business) close to Rs 40,000 crores worth of equity. This will, with other measures like spectrum auctions, hopefully plug the budget deficit a little by March. More crucially, it will also free up resources for massive election giveaways in next March’s budget. This is especially needed if the Food Security Bill –Madame Sonia’s chosen strategy for reelection – is to be passed.

    Real reforms for India will not happen for a long time. These include financial sector reform, and an end to the financial repression signified by the statutory liquidity ratio. Privatization of the banking system that’s put an end to the ridiculous spectacle of 75 % of the banking system being owned by the government in a market economy. Bankruptcy and exit laws will have to be introduced. Labour market liberalization and the freedom to hire and fire labour will have to be allowed.

    The collapsed state of Indian cities will have to be addressed by building 30 to 40 cities each with a population of 4 to 5 million to accommodate massive rural urban migration. Land acquisition which is impossible now will have to be addressed. This list does not even include the sector changes required in mining and power and fertilizers and real estate and infrastructure and sugar, and so on and so on.

    None of this is happening ever, it seems.

    Everybody’s babbling in the media about how crucial the February budget is going to be for the UPA because it will be packed with big ticket sops like the Food Security Bill. Remember game theory however. It is crucial to take your opponent’s reaction into account. The Opposition also knows that the budget will be crucial to the UPA’s reelection chances ! Why then will they allow the UPA to present the budget at all. Especially when they have the numbers and the government is already on life support and in a minority. !!!

    The government therefore, will, in all likelihood, fall in December, during the winter session of Parliament. Elections will take place in May as India needs the school system for a general election. This will allow the Opposition the chance to deny the government’s attempt to pass a budget full of sops and giveaways. The February budget will consequently be a vote on account.

    This scenario will suit all parties except the Congress and hence it will happen.

    Is the market discounting the possibility that in a short while all these guys PC etc. etc. will be gone ? Looking at the way its going up, I think not.

    The logical conclusion also is that this is the high point of the markets move this year. India has gone from having the most incompetent FM (Pranab) to the most cunning FM (Chidambaram). The later is deliberately doing all he can to talk up markets to implement his plan. There is little need to oblige him and his plans of using the stock market as a financing vehicle, by buying high and losing one’s hard earned capital.

    Postscript
    As predicted in earlier posts, the government has started the process of “chipkaoing” equity to the markets to meet its divestment targets. Now its RINL and NTPC. It attempted to talk up the markets, started the hype of reform, and now is using the euphoria to sell its paper
    Oct 11, 2012. 02:16 AM | Likes Like |Link to Comment
  • The Investment Case For Emerging Market Currencies After QE3 [View article]
    Not the Indian rupee or its equity markets though. Both due to fall of the cliff. Read on.

    India. Reforms. Really?

    Much has been made of the “burst of reforms” unleashed by Finance Minister Chidambaram in recent weeks. The stock market has rallied and animal spirits it seems are back. Everybody’s babbling about how the UPA, after eight years in power, has found religion ie “reforms”.

    The market is now at 21 times price to earnings (trailing twelve month free float adjusted as per the National Stock Exchange). Once more the mood swings violently. More interestingly the India VIX , the fear index is at 3 year lows of 15. This is usually an indicator of complacency, and historically such lows have signified a massive sell off. The combination of the stretched price to earnings and the VIX means the market is ripe for a big sell off. My two bit as an Ivy educated fund manager in Bombay who has worked internationally on some of the world’s major structural adjustment and economic reform programs.

    In reality, the reforms amount to bureaucratic tinkerings with percentages – of a sort that only tax mavens and accountants can comprehend. Witholding taxes go down by a percentage point or two. FII margin percentages change. Service tax percentages for insurance companies change. Now an attempt's been made to increase the percentages foreigners can hold in insurance and pensions. (This last will never pass through Parliament given the unanimous opposition to it). Blah Blah Blah.

    The Indian economy, in fact, requires Parashurama’s ax and not the surgeons scalpel. The reference is to the mythical woodcutter of Indian mythology who wields a massive axe when needed. Wholesale violence will have to be committed on large areas of India’s economy with Parashurama’s axe, if we are to resume a decent growth rate.

    The government had no choice but to unleash this wave of bureaucratic tinkering and percentage changes and call it “reform”. It is trying to keep the capital markets buoyant because it needs to sell or “chipkao” (ie stick as we say in the business) close to Rs 40,000 crores worth of equity. This will, with other measures like spectrum auctions, hopefully plug the budget deficit a little by March. More crucially, it will also free up resources for massive election giveaways in next March’s budget. This is especially needed if the Food Security Bill –Madame Sonia’s chosen strategy for reelection – is to be passed.

    Real reforms for India will not happen for a long time. These include financial sector reform, and an end to the financial repression signified by the statutory liquidity ratio. Privatization of the banking system that’s put an end to the ridiculous spectacle of 75 % of the banking system being owned by the government in a market economy. Bankruptcy and exit laws will have to be introduced. Labour market liberalization and the freedom to hire and fire labour will have to be allowed.

    The collapsed state of Indian cities will have to be addressed by building 30 to 40 cities each with a population of 4 to 5 million to accommodate massive rural urban migration. Land acquisition which is impossible now will have to be addressed. This list does not even include the sector changes required in mining and power and fertilizers and real estate and infrastructure and sugar, and so on and so on.

    None of this is happening ever, it seems.

    Everybody’s babbling in the media about how crucial the February budget is going to be for the UPA because it will be packed with big ticket sops like the Food Security Bill. Remember game theory however. It is crucial to take your opponent’s reaction into account. The Opposition also knows that the budget will be crucial to the UPA’s reelection chances ! Why then will they allow the UPA to present the budget at all. Especially when they have the numbers and the government is already on life support and in a minority. !!!

    The government therefore, will, in all likelihood, fall in December, during the winter session of Parliament. Elections will take place in May as India needs the school system for a general election. This will allow the Opposition the chance to deny the government’s attempt to pass a budget full of sops and giveaways. The February budget will consequently be a vote on account.

    This scenario will suit all parties except the Congress and hence it will happen.

    Is the market discounting the possibility that in a few months all these guys PC etc. etc. will be gone ? Looking at the way its going up, I think not.

    The logical conclusion also is that this is the high point of the markets move this year. India has gone from having the most incompetent FM (Pranab) to the most cunning FM (Chidambaram). The later is deliberately doing all he can to talk up markets to implement his plan. There is little need to oblige him and his plans of using the stock market as a financing vehicle, by buying high and losing one’s hard earned capital.

    Postscript
    As predicted in earlier posts, the government has started the process of “chipkaoing” equity to the markets to meet its divestment targets. Now its RINL and NTPC. It attempted to talk up the markets, started the hype of reform, and now is using the euphoria to sell its paper. All this so that the next budget will have some money for election sops.
    Oct 11, 2012. 01:31 AM | Likes Like |Link to Comment
  • Why Emerging Markets Will Become A Core Of Global Tactical Allocation [View article]
    One key emerging market - India- is due for falling off the cliff though. Read on.

    India. Reforms. Really?

    Much has been made of the “burst of reforms” unleashed by Finance Minister Chidambaram in recent weeks. The stock market has rallied and animal spirits it seems are back. Everybody’s babbling about how the UPA, after eight years in power, has found religion ie “reforms”.

    The market is now at 21 times price to earnings (trailing twelve month free float adjusted as per the National Stock Exchange). Once more the mood swings violently. More interestingly the India VIX , the fear index is at 3 year lows of 15. This is usually an indicator of complacency, and historically such lows have signified a massive sell off. The combination of the stretched price to earnings and the VIX means the market is ripe for a big sell off. My two bit as an Ivy educated fund manager in Bombay who has worked internationally on some of the world’s major structural adjustment and economic reform programs.

    In reality, the reforms amount to bureaucratic tinkerings with percentages – of a sort that only tax mavens and accountants can comprehend. Witholding taxes go down by a percentage point or two. FII margin percentages change. Service tax percentages for insurance companies change. Now an attempt's been made to increase the percentages foreigners can hold in insurance and pensions. (This last will never pass through Parliament given the unanimous opposition to it). Blah Blah Blah.

    The Indian economy, in fact, requires Parashurama’s ax and not the surgeons scalpel. The reference is to the mythical woodcutter of Indian mythology who wields a massive axe when needed. Wholesale violence will have to be committed on large areas of India’s economy with Parashurama’s axe, if we are to resume a decent growth rate.

    The government had no choice but to unleash this wave of bureaucratic tinkering and percentage changes and call it “reform”. It is trying to keep the capital markets buoyant because it needs to sell or “chipkao” (ie stick as we say in the business) close to Rs 40,000 crores worth of equity. This will, with other measures like spectrum auctions, hopefully plug the budget deficit a little by March. More crucially, it will also free up resources for massive election giveaways in next March’s budget. This is especially needed if the Food Security Bill –Madame Sonia’s chosen strategy for reelection – is to be passed.

    Real reforms for India will not happen for a long time. These include financial sector reform, and an end to the financial repression signified by the statutory liquidity ratio. Privatization of the banking system that’s put an end to the ridiculous spectacle of 75 % of the banking system being owned by the government in a market economy. Bankruptcy and exit laws will have to be introduced. Labour market liberalization and the freedom to hire and fire labour will have to be allowed.

    The collapsed state of Indian cities will have to be addressed by building 30 to 40 cities each with a population of 4 to 5 million to accommodate massive rural urban migration. Land acquisition which is impossible now will have to be addressed. This list does not even include the sector changes required in mining and power and fertilizers and real estate and infrastructure and sugar, and so on and so on.

    None of this is happening ever, it seems.

    Everybody’s babbling in the media about how crucial the February budget is going to be for the UPA because it will be packed with big ticket sops like the Food Security Bill. Remember game theory however. It is crucial to take your opponent’s reaction into account. The Opposition also knows that the budget will be crucial to the UPA’s reelection chances ! Why then will they allow the UPA to present the budget at all. Especially when they have the numbers and the government is already on life support and in a minority. !!!

    The government therefore, will, in all likelihood, fall in December, during the winter session of Parliament. Elections will take place in May as India needs the school system for a general election. This will allow the Opposition the chance to deny the government’s attempt to pass a budget full of sops and giveaways. The February budget will consequently be a vote on account.

    This scenario will suit all parties except the Congress and hence it will happen.

    Is the market discounting the possibility that in a few months all these guys PC etc. etc. will be gone ? Looking at the way its going up, I think not.

    The logical conclusion also is that this is the high point of the markets move this year. India has gone from having the most incompetent FM (Pranab) to the most cunning FM (Chidambaram). The later is deliberately doing all he can to talk up markets to implement his plan. There is little need to oblige him and his plans of using the stock market as a financing vehicle, by buying high and losing one’s hard earned capital.

    Postscript
    As predicted in earlier posts, the government has started the process of “chipkaoing” equity to the markets to meet its divestment targets. Now its RINL and NTPC. It attempted to talk up the markets, started the hype of reform, and now is using the euphoria to sell its paper. All this so that the next budget will have some money for election sops.
    Oct 11, 2012. 01:26 AM | Likes Like |Link to Comment
  • The Next Generation Of Emerging Market Investing [View article]
    One BRIC component - India - is overdue for falling off the cliff. Read on.

    Much has been made of the “burst of reforms” unleashed by Finance Minister Chidambaram in recent weeks. The stock market has rallied and animal spirits it seems are back. Everybody’s babbling about how the UPA, after eight years in power, has found religion ie “reforms”.

    The market is now at 21 times price to earnings (trailing twelve month free float adjusted as per the National Stock Exchange). Once more the mood swings violently. More interestingly the India VIX , the fear index is at 3 year lows of 15. This is usually an indicator of complacency, and historically such lows have signified a massive sell off. The combination of the stretched price to earnings and the VIX means the market is ripe for a big sell off. My two bit as an Ivy educated fund manager in Bombay who has worked internationally on some of the world’s major structural adjustment and economic reform programs.

    In reality, the reforms amount to bureaucratic tinkerings with percentages – of a sort that only tax mavens and accountants can comprehend. Witholding taxes go down by a percentage point or two. FII margin percentages change. Service tax percentages for insurance companies change. Now an attempt's been made to increase the percentages foreigners can hold in insurance and pensions. (This last will never pass through Parliament given the unanimous opposition to it). Blah Blah Blah.

    The Indian economy, in fact, requires Parashurama’s ax and not the surgeons scalpel. The reference is to the mythical woodcutter of Indian mythology who wields a massive axe when needed. Wholesale violence will have to be committed on large areas of India’s economy with Parashurama’s axe, if we are to resume a decent growth rate.

    The government had no choice but to unleash this wave of bureaucratic tinkering and percentage changes and call it “reform”. It is trying to keep the capital markets buoyant because it needs to sell or “chipkao” (ie stick as we say in the business) close to Rs 40,000 crores worth of equity. This will, with other measures like spectrum auctions, hopefully plug the budget deficit a little by March. More crucially, it will also free up resources for massive election giveaways in next March’s budget. This is especially needed if the Food Security Bill –Madame Sonia’s chosen strategy for reelection – is to be passed.

    Real reforms for India will not happen for a long time. These include financial sector reform, and an end to the financial repression signified by the statutory liquidity ratio. Privatization of the banking system that’s put an end to the ridiculous spectacle of 75 % of the banking system being owned by the government in a market economy. Bankruptcy and exit laws will have to be introduced. Labour market liberalization and the freedom to hire and fire labour will have to be allowed.

    The collapsed state of Indian cities will have to be addressed by building 30 to 40 cities each with a population of 4 to 5 million to accommodate massive rural urban migration. Land acquisition which is impossible now will have to be addressed. This list does not even include the sector changes required in mining and power and fertilizers and real estate and infrastructure and sugar, and so on and so on.

    None of this is happening ever, it seems.

    Everybody’s babbling in the media about how crucial the February budget is going to be for the UPA because it will be packed with big ticket sops like the Food Security Bill. Remember game theory however. It is crucial to take your opponent’s reaction into account. The Opposition also knows that the budget will be crucial to the UPA’s reelection chances ! Why then will they allow the UPA to present the budget at all. Especially when they have the numbers and the government is already on life support and in a minority. !!!

    The government therefore, will, in all likelihood, fall in December, during the winter session of Parliament. Elections will take place in May as India needs the school system for a general election. This will allow the Opposition the chance to deny the government’s attempt to pass a budget full of sops and giveaways. The February budget will consequently be a vote on account.

    This scenario will suit all parties except the Congress and hence it will happen.

    Is the market discounting the possibility that in a few months all these guys PC etc. etc. will be gone ? Looking at the way its going up, I think not.

    The logical conclusion also is that this is the high point of the markets move this year. India has gone from having the most incompetent FM (Pranab) to the most cunning FM (Chidambaram). The later is deliberately doing all he can to talk up markets to implement his plan. There is little need to oblige him and his plans of using the stock market as a financing vehicle, by buying high and losing one’s hard earned capital.

    Postscript
    As predicted in earlier posts, the government has started the process of “chipkaoing” equity to the markets to meet its divestment targets. Now its RINL and NTPC. It attempted to talk up the markets, started the hype of reform, and now is using the euphoria to sell its paper. All this so that the next budget will have some money for election sops.
    Oct 11, 2012. 01:23 AM | Likes Like |Link to Comment
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