Tuesday, May 26, 2009

India acquires the world

Today's front pages of The Times of India and Indian Express:

I've never understood why what we Indians do on the global centre stage should be worth more than a few words in the back pages of a national daily, if at all. I mean what's the logic of relegating the Punjab riots news to some corner, in the face of Bharti's plans? With all due respect to Mr. Mittal, the market doesn't like his acquisition plans (if you go by the stock price's 10% fall in the last two trading sessions).

But obviously the TOI thinks Bharti's plans are of burning importance to it's readers. Why? The Economic Times had a section on Thursdays called The Great Indian Takeover. Who are we taking over? When? Where? And why should I care?. Oh wait, is the explanation this - with the newspaper market moving to smaller towns and cities, the aspirational reader has to be served with these 'feel-good' news. Perhaps this fits in with the overall theme (as I call it) of Shining India versus Chee Chee India. And this theme, I think, was best displayed in TOI's India Poised campaign. While I found that campaign fit in very well in the WTF tag, the Amitabh-over-the-sealink video was forwarded enthusiastically by everyone's aunt, cat and dog. It found its target.

And now look at the front pages today. One India is planning to takeover the world. The other India keeps fighting. Which India do you want?

Word of the day

(Via Urban Dictionary)
Manufactured outrage:
A falsified righteous outrage at things that are basically unimportant and meaningless, frequently employed by politicians, political activists, or the media. Politicians and talking heads use it to garner support for their causes, to claim the moral high ground and to tar their opponents; the media often just uses it in a cynical bid to increase ratings.

Which reminds me of the Times of India. And that chota post, coming up next.

Wednesday, May 13, 2009

On the markets

I've constructed a very elementary chart tracking the 2000 post-tech bubble crash and comparing it with the current one. Indice levels have been re-based to 100 for better comparison. Now, to put things in perspective..

In the 2000 fall:
1. The Nifty hit its all-time high of 1,756 on 11th Feb 2000, when the tech bubble burst
2. From that level it fell to a low of 854 on 21st Sep 2001(post 9/11) - a correction of 51%
3. In the interim there were many rallies but the pattern of lower-tops-lower-bottoms persisted
4. From the bottom in Sep-01, the Nifty saw a huge 40% rally which lasted for five months, and saw the Nifty peaking at 1,193 in March-03
5. From here, the Nifty stagnated till Aug-03, before taking off again
6. Finally, in Dec-03, the Nifty regained it's earlier high of 1,756 in Dec 2003 – almost four years after the tech bubble crash

So far in the 2008 crash:
1. The Nifty hit its all-time high of 6,288 on 8th Jan 2008, when the US financial crisis triggered a collapse in global equity markets
2. In less than 10 months, the Nifty fell to a low of 2,524 on 27th Oct 2008 - a correction of 60%
3. Once again - there were many rallies but the pattern of lower-tops-lower-bottoms persisted
4. The Nifty came close to testing the low of 2,524 once again in March 2009. However, the low held out and from there the Nifty rallied to a high of 3,681 yesterday - a move of 46%

The comparison is a crude one and ignores economic realities as well as the role of liquidity. But there are enough similarities. Bottoms are made when everyone expects the markets to fall another 50% after falling 50%. No wonder then that it was fashionable to be negative around Diwali (when the Nifty hit 2,524) and for a lot of time after that. When in doubt, sell the shit out. That's the only way you preserve capital.

But in March this year, around the time when the Nifty looked to going back to its Diwali level, a lot of veterans (like Mark Mobius and Jeremy Grantham) got their global equities call right. On hindsight, maybe they figured that a commodities rally had to be followed by an equities rally. Not surprisingly they didn't have many believers.

No wonder then, that this rally - arguably the sharpest in any bear market in India – has taken the wind out of many investors sails. It had disbelievers from Day 1. It was called the Seinfeld rally because it was a rally about nothing. In the end, those fund managers who were extolling the virtues of holding cash were left hopelessly out as even index funds beat them hollow. Those who had taken the risky call of being fully invested - this gent in particular - turned out tops.

If you're a fund manager, you can't ignore a 50% move on an indice and laugh it off as a suckers rally. It's painful, believe me. You have to answer to many people. Least of all the retail investors who most likely didn't have the money or the guts to invest when the market gave them the opportunity not once but twice.

But it's not over. It never is. The old highs are a long way away. This crash was far more sharp and swift as compared to 2000. It might not even be over. As we saw in 2000, it took a long time for the market to find its bottom. And even when it did, it didn't exactly blaze away to glory. After the first rebound, there was enough time when the indices basically did nothing. And that was the time to invest - again courtesy hindsight.

What’s the bottomline? My thoughts as under:
1. Can the Nifty go back to 2,524? Of course it can. If the US financial crisis and the US recession throw up nasty surprises, anything is possible. But China seems to be getting its act together. And there must be something to the whole green shoots thing. Besides, Wall Street needs to keep up the positive-optimism act. So even if the news is bad, a Lehman-style Armageddon now seems unlikely. The next disaster might well be a very well managed, controlled implosion.

2. What about India? A 45% move on any index in two months is such a mouth-watering opportunity to short. And yet no one has the guts to do it. I think the Election results won't matter to the markets. Maybe in the short term, but not in the long term. India's economy runs despite the Government and not because of it. But in the backdrop of this 45% up move, a correction seems very likely. A comparison to the 2000 crash confirms that. If an adverse verdict (Third Front Govt) triggers this correction, so be it.

3. Buy in the correction? I don't want to get into recommendations on my blog. I know I had said that my Dec-2009 target for the Sensex was 9,000. And look what's already happened. So here's the deal - I'm putting my money in this correction. You need to figure what you want to do. Because if the 2000-2003 comparison holds out this time as well, then it shouldn't take the markets more than 2-3 years to get back to its earlier high. Do the math - it's a lot better than putting your money in fixed-income. But obviously a lot riskier too.

The usual disclaimer: These are my personal views and I have money invested in the market across stocks and mutual funds.

Monday, May 11, 2009

Why Twitter Killed The Blogging Star

(due apologies). Here's why I think why:

1. It's quick: That's why they call it micro-blogging. Contrast this with writing a long post. I'm not saying posting is better than tweeting. But tweeting is quicker than posting. There's just a "send" button and no "publish" button. You get what I mean.

2. It's always on: Thanks mainly to my mobile phone, which is always on and with me wherever I go. I've not tried writing a blog post on my cell phone and I won't. I know it's too tedious. But Tweetie is the most used app on my iphone. And my data usage is many times more than my voice usage on my cell phone. That kinda tells you it's own story.

3. It's about nothing: With due apologies to Seinfeld, but you can tweet anything. Yeah I know that's what they said about blogging too. But this is different. For example: even though there is an entire blog post in this tweet - "The day someone explains to me what Viva La Vida (the song) is about, I will be grateful. For some reason I can't explain I know St. Peter.." I don't know if I can add more to that thought. (btw, on Coldplay, do read Sasha Frere Jones' take on Coldplay - especially the bit on the lyrics of the ipod song)

4. It's an ego trip: You'd kill to have someone called "sexyhawt69" following you even if you realise later it's just a bot. See the words "follow", "follower" and "following". And then the words "post", "comment", "trackback". 50 comments on your post or 50 new followers in 10 days? Go figure.

5. It's voyeuristic: I just have to know what you're doing to. Digging your nose, sitting on a bus, having a miserable day, angry, happy, joy, sad. What is about our mundane lives that makes others more excited than us? Who knows. But go write a blog post that talks about what you did from morning to night. And then write 10 tweets over 10 hours. No, really do it, to understand what I mean. And then tell me. Because I've not figured it out myself.

6. It's a conversation: This is the part I enjoy the most. A blog post is a monologue, followed by some more monologues in the form of comments. Twitter is conversation. It happens by the minute and goes haywire. No waiting for a response. I've had long tweet debates over politics, music, tech, and a whole lotta more stuff. Sometimes one-on-one and then with two-three people. It's as close as I can get to a real life conversation.

7. It's about who you follow: And not about who follow you (as Twilight Fairy - who introduced me to Twitter - told me early on). I've met some hugely fun people with whom I tweet on a daily basis. And even I'm surprised at what all I've tweeted to absolute strangers. From my son's birth (live between 12am and 8am last year), to his naming and re-naming, to when I was in the ICU a few months back with chest pain. I don't know if I like sharing or I just get a kick out of people staring at my life. Who knows. It's fun.

So here's the deal: It's not that I'm obsessed with Twitter. Or that I'm bored with blogging. It's just that for the last one odd year whatever I've been thinking has been expressed better in a few seconds and in a few words. Which is the other thing about Twitter. You have to shrink everything in those few words. All your emotions and feelings and your very boring life. Which never interested anyone on a blog post. Is suddenly the only thing you want to tweet about. And others want to read about.

I don't think Twitter is even comparable to blogging. There is a joy in writing a post that no 140char tweet can ever replace. Which is the other thing about Twitter. If it shrinks your words, it shrinks your span of attention too. Not something I want on a permanent basis. I will always love to blog. I will always want to blog. If I had the time and patience to sit and type. Like I did today.