Thursday, November 27, 2008

Mumbai Carnage

As I was flipping through the channels I saw CNN streaming about terrorist attack in Mumbai. It took me time to figure out how bad it really was. I do not think Mumbai really recovered from the blasts of 2006. This time however, their audacity seems to have gone up. Instead of planting bombs, these guys actually went on a rampage, shooting indiscriminately and mowed 125 ppl. The terrorists have become more ambitious. They are not happy just killing India's common man, they want international recognition. And boy, did they get it? CNN in US is streaming nothing else but terror in Mumbai for the last 30 hours.

I think the entire intelligence system in India is rotten. Terrorists have been able to strike at will and at any location of their choice, without our intelligence ever knowing anything about it. Be it Jaipur or Bangalore or Delhi or Surat or Ahemedabad. We haven't really been able to crack these cases even afters months of investigation. Something is seriously broken somewhere. The terrorists are ahead of us and they know how to leverage technology better than us.

Its a problem cutting across party lines and administration. We need to make the right investments in upgrading our forces and making our nation more secure.

I wish I could help, if only I knew how.

Saturday, November 08, 2008

Will Obama Succeed?

There are so many expectations around the world from President Elect Obama that he may look like the messiah in a 100 years from now. This article in Nytimes collates the hope of the world. It would be a tall order to live upto the hope or hype as you may see it.

I personally think that Obama has just too many Challenges to overcome. Good thing is he is focusing on the economy first. That itself would take most of his initial months, if not years. As for foreign policies, the middle east would give him a fair chance to come through. It all depends on how he balances Isreal and the Arab world.

I think he will not be able to live up to the hype. When McCain talked about lack of track record, he was right. We do not know which way Obama is going to lean. But this certainly is America's best chance to make up to the world. Somehow I don't feel reassured. I want to be wrong on this one. I want him to be the Glue that holds the world together and yet, I'm not so sure.

Tuesday, November 04, 2008

Real Danger of Deflation

We have been worried sick by rising prices of commodities. It was largely due to movement of money from stock markets to the commodities market. The issue with commodities is that for most things (such as oil and food) the demand is price inelastic. That is world has to live with whatever the Oil costs. The decrease in consumption due to price shock is not very high. Same with food. In the past year a lot of liquidity left stock markets and fled to commodities. All of that is now changing with tightening liquidity. Punters are unwinding their positions and so size of the futures market is shrinking. I've not seen the numbers but I can promise you that the capital in futures mkt has shrunk more than the equities mkt.

This is also causing the prices of underlying commodity itself to crash. Oil has already come down from 147 to 64 in 3 months despite OPEC cutting production. Same will happen to food and other commodities and by this time next year a large part of the world will see deflation. It would be largely on account of high base in 2008, but I do expect prices to go down.

Same will happen to interest rates in India. By end of next year housing demand will pick up due to softening of interest rates.

Rupee is going to Appreciate

Now that the Credit Freeze in US is thawing, tide of Dollars is also going to reverse. I think the reason Dollar went up against all the currencies(except yen for the same reason though) is that US money was invested in all corners of the world. When the Credit Crisis happened, the US investors bolted from these market, dumped everything they had in local investments to convert to Dollars and brought that money over to US.

With the Credit Crisis blowing over, some of this money will find its back to these markets. In January, with the start of new financial year, US investors will start putting their money in various countries including India. Also, the price of Oil is now more reasonable and therefore I would think that the rupee now should appreciate to 45 like levels by Jan-09

Impact of Global Meltdown on China

This could be the biggest challenge for the most populous country in the world. For decades China has been growing by being the world's manufacturing base. Prosperity had kept the dissenters from voicing their thoughts against the communist regime.

All that is now set to change. With the slowdown, will come slower growth(the GDP growth in China for 3rd Quarter is already come down to 9%) and joblessness and with it will come mass unrest putting great strain on the country's political system.

Unless China can generate internal consumption to keep its people engaged and prosperous the political scene could change there in the next 3-4 years. There will be a meltdown in coming years. How long can the govt differ it is to be seen.

What could help is large scale govt spending on Infrastructure projects and welfare schemes. Good news is that with 2 Trillion dollars they have the deep pockets to make it happen. How well they manage it still needs to be seen. One thing is for sure, in this Global Financial Crises, the stakes for China are as high as for US.