- Wealth PMS (50L+)
Happy Diwali, folks. It’s 2012, and this is the sixth series of the Diwali posts when I analyze my last year, and the last predictions and laugh my head off.
1. I moved to Bangalore. The weather here is great. The traffic sucks eggs. I started a full time consulting gig with a friend’s company and learnt that corporate life is very different from, well, life. This is new to me and has reduced my blogging and investment research substantially. (My apologies)
2. The market went nuts in the year, but didn’t really break out. The recent rally in September came on the back of a hope that the government is waking up. But it doesn’t look like it’s holding; the problems are compounded by repeated revelations of corruption in high offices.
3. Broad economic indicators have worsened. Inflation is sticky. Growth has come down to the 5% levels. Bank credit growth is slowing. CRR has been cut substantially to help bank bottomlines. Real estate continues to skyrocket.
4. Internationally, markets seem to have stabilized, but only on the back of unlimited monetary easing by both the Fed and the ECB. However the situation in Greece seems un-rescuable, and Spain gets increasingly worse. Obama got re-elected, which raises fears about the "fiscal cliff" in January when tax cuts will expire and they will cut spending to curtail the deficit.
In my last post I’d spoken of a few things that would come.
Prices will fluctuate. I think I’ll get that right.
+1 on that front, at least. (Phew)
I doubt we see the end of the crisis in Europe in the near term. There will be some sudden disasters and perhaps tiny elements of relief when everyone decides to do something, then more disasters and so on. India will be impacted, largely when it becomes contagion; but given the ability of our leaders to kick the can down the road, I can’t say if it will happen the next year. But there will be serious strains within the Euro.
So I’m going to claim this one because I weaseled out of actually saying what would happen.
Europe did see some drama, and there was relief when the ECB said boss, I will buy anything even if it is toilet paper. There was no contagion. And strains within the Euro persist, as they will forever, largely because they secretly hate each other.
Inflation and then high rates will hurt Indian businesses, and we will see some big, but not crippling, defaults.
DCHL defaulted. Suzlon has kinda sorta defaulted. Kingfisher has also defaulted. Nothing has crippled the system yet.
Almost as a consequence the Indian stock market will be choppy. I think banks will fall big time. I think much of the commodity space will come down, and if there’s a big crisis in Europe, everything else. Volumes will remain low. (But in the meantime, there will be fabulous 10-15% rallies in the index). I think the operating range is 4400 to 5800, which is so wide a range it’s silly to even call it that. Maybe I should take that back.
Oh boy. The market was exactly in that range. Volumes were low. There were fabulous rallies. Commodities remained stable.
But banks did not fall big time.
So I’ll take no points.
The Jan Lok Pal bill will come back and take more of our mindspace. If a JLP is created, there will be one spectacular case or so. Then it’ll fizzle out (but that could take a few years). In the meanwhile, markets will react violently if the spectacular case relates to a publicly traded company.
The US will first do well. Then after about three quarters of doing well, wonder why it’s not recovering. Obama has an election to fight and the battle will involve taking sides, initially, against wall street.
We saw Raj Rajarathnam and Rajat Gupta go to jail. Obama’s battle seemed to be against the rich (which Wall Street typically represents) We also see the US faltering, in a way, now. I think this prediction might just come true, though it’s not entirely apparent. So let me just take a +1 now.
The macro will trump the micro – that means our information sources will not concentrate on stocks, they will concentrate on large problems – like GDP, or Europe or China or the Dollar or such. In doing so, I will miss many moves on great stocks. (I hope I’m wrong)
I did miss the biggest moves. MCX, which went down to 900, went all the way to 1,600 in a couple months and I missed it. SKSMICRO, which doubled in a few months, was on my radar; missed the move entirely. I might blame it on the job, but that is just an excuse.
The macro did trump the micro. There was QE3, there was ECB openness, there were Repo cuts and CRR cuts, there were issues with government action, all of which impacted markets. Heck, I even gave a presentation at a conference about the macro impact.
I think I won. But it doesn’t change anything because none of these predictions matter in terms of making real trades.
Hope you had a great day!
Earlier Diwali Posts: