Macro

At Yahoo: Market Interventions

I write at Yahoo on Market Interventions:

(Posted in entirety)

There were riots in Bangladesh on Monday when markets went down 9% in an hour. Stocks fell, presumably because their central bank decided to tighten down on bank exposure to equity, and the general index has been slowly sliding from December. It may sound unreasonable to have such an event create a loss of 9% in a single day — or indeed the 27% loss in a month that Dhaka saw — but it comes on the back of a 2010 that saw the index rise 95 percent. Now that fall doesn't seem quite as bad, does it?

Shaken by the public furore, Bangladesh's central bank instructed banks to please buy stocks — and as expected, their index rebounded by 15% on Tuesday. The idea is to never mess with a good thing, I guess.

Intervention doesn't always work. In 2008, Pakistan's stock markets fell about 43% and to somehow stop that, the authorities decided to set a floor price on the index; meaning, stocks couldn't go below a certain value. What happened then, was that the floor became a ceiling — stocks would simply not trade above that level. When the floor was removed in December 2008, stocks fell another 35% before they rebounded.

BDI Drop No Big Deal? Careful with Shippers

In the MarketVision Newsletter #1 I mentioned the Baltic Dry Index, and that it may be a concern as the rate was the lowest in nearly two years.

Calculated Risk pooh poohs that idea. The fall is explained by more ships being built, and the current fall may be because of the floods in Queensland being empty as there’s too much flooding to be able to put ore on board.

That might be true. The index rose from a bottom in 2009 to fairly large values in 2010 (on a percentage basis, it went up more than 100%) and then has had a squiggly move.

Senseless Sensex EPS Projections, and a Dividend Yield Problem

I wonder why I get all worked up when I see utterly bizarre Sensex EPS estimates. Basically, the modus operandi seems to be:

  1. Pick a number out of your a** thin-air.
  2. Blurt it out on TV or other media with a tie on, and carry the name of big-name finance company.

In the Sensational Sensex EPS Story, in July 2008, I noted that projections of the Sensex EPS between Feb and March 2008, for the EPS ending March 2009 (note: nearly two years ago) was 1000. Four big name fellows said so. Where were we at the end of March 2009?

750. The Sensex EPS was Seven hundred and fifty. A full 25% below what they thought just one year earlier.

The Senseless Sensex EPS Prediction story continues.

Primary Articles Inflation at 15.35%, up 2%

Primary articles is up 2% since last week, and stands at 15.35%.

Primary Articles Inflation at 15.35%

I’d mentioned that last year this was a benign period, and I expect headline inflation numbers to stay high for the next few weeks anyway. Add to it the fuel price hikes, skyrocketing onion prices, increase in sugar prices (not yet in India) and the transition into manufactured goods and WPI as a whole is likely to stay very high.

(Note: Overall inflation is only reported once a month. PA inflation is announced every week)

Past revisions continue to be a problem, as the 16 Oct. data was revised to 17.91%, substantially higher than the first reported 16.62%.

Primary Articles Inflation Revisions

 

At Yahoo: Innovations and Curses

At Yahoo, I write about Innovations and Curses:

In the last 10 years, India has grown at a rate that defies belief. Yet, the rate of growth and the dramatic increase in technology that accompanies it has come with certain curses — the side-effects of what has been a fantastic decade for India.

Curse #1: Floating Rates, Pre-closure charges, Teaser-rates

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