Monday, June 9, 2008

Why you should worry about the latest market crash

At a point when the Sensex has fallen by 5,000 points — that’s by 25 per cent — from over 20,000 in early January to 15,000 today, why should a 500 point fall make news? Because these 500 points bring out the first sentiments of investors: fear and greed.
History tells us that we’ve lost money in earlier falls, the greed years of the dot-com boom, for instance. Then, some of the tech shares that quoted at over Rs 1,000 could be picked up for a few paise. Many investors are still holding on to them, in physical form, waiting for them to rise to their previous levels — or at least to Rs 500 or thereabouts so that the investment can be salvaged.
The bad news is that that’s not going to happen in their lifetimes.

Opinion in Hindustan Times, June 09, 2008

Wednesday, June 4, 2008

The future lies in history

By raising the prices of diesel and petrol by Rs 3 and 5 per litre respectively and that of LPG by Rs 50 per cylinder, the UPA administration has shown rare courage. This is especially brave in these ominous times of political economy constraints. But beyond the petty politics of power-seeking and power-sharing lies one fact: the price Indians pay for petrol has no relationship with the usual demand-supply equilibrium under which any free economy operates. All developed economies pay more, few emerging economies pay less. Inflation, say political parties, will rise and wreak havoc on the household economics of the common man. There will be strikes by the Left; then by other parties; and, of course, criticism from the BJP.
It is coincidental that the price rise follows the the BJP’s electoral victory in Karnataka last week. Among the many reasons being cobbled up for the Congress loss is the rising inflation rate, which after yesterday’s oil price hike will go up by 0.5 percentage points. How much of this is a cause-effect relationship and which half is the effect leading up to ‘cause-seeking’, I’m not so sure. For, to stay afloat in this Age of the Sound-bite is not easy unless you have a short, snappy and easy-to-digest ‘analysis’ to offer. Hence the popular misconception that inflation was the prime reason for voters turning away from the Congress — and that this ‘morning’ will show the ‘day’ in other states like Madhya Pradesh, Chhatisgarh and Rajasthan.

Opinion in Hindustan Times, June 04, 2008