Happy birthday Black Thursday!

Today is the 80th anniversary of the Stock Market Crash of 1929. Its an interesting time to reflect back on the 80 long years that have passed by to see if things have changed. Have they? The more boom/bust cycles look different the more they look the same.

So what lessons have we learnt?

- That hope has driven - and will always drive - people to monetary dope.
- That lending schools eventually end up bending rules.
- That a borrowing binge frequently ends in a harrowing cringe.
- That in a boom...greed goes up, fear down.
- That after the bust, greed dies and fear gains renown.
- That in a boom...an allusion to delusion is dismissed as an illusion.
- That after a bust...the delusion of an illusion leads to reclusion.
- That people buy when they should sell, ignoring the alarm bell.
- That people sell when they should buy, ignoring the market's sigh.
- That when we hear things get cheaper as they rise and dearer as they fall, its time for Cindrella to leave the ball.
- That the 'smart money' ain't that smart after all.
- That after a market chasm, capitalism gives way to socialism.
- That the prudent end up paying, while the indulgent end up staying.

...That history is doomed to repeat itself...

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Halls of the Blind

I can see what you see not Vision milky, then eyes rot. When you turn, they will be gone, Whispering their hidden song. Then you see what cannot be Shadows move where light should be. Out of darkness, out of mind, Cast down into the Halls of the Blind.

- Diablo

I usually avoid referring to stuff from the 90s as the opening act. It risks giving away my vintage…
But the above words from one of the most successful role-playing games from the 90s – Diablo – (who remembers it?) is apt for this edition.
Auditor Problems.
It’s an opportune moment to dive into the Corporate Halls of the Blind.
*****
Indian markets have been beset by a sudden wave of auditor resignations from listed companies in recent times. Stock prices of the affected companies have taken a beating. Runaway auditors have caused market participants to speculate over the next defection, as alpha monkeys smell quick gains. Auditor issues have surfaced after a period of widespread price correction. Wounded consciences that were assuaged by …

Book review: In the Long Run we are all Dead

In the Long Run we are all Dead: A Macroeconomics murder mystery The US economy faces a deep recession, raging inflation and an impending run on the dollar. President Wedik likes economics as much as a fish likes land. Should he listen to the Keynesians, who favour government intervention or the Monetarists, who favour market fundamentalism?

Unable to decide, he delegates the tough decision to his Chief of Staff, Admiral Harcourt Green. Green laboriously goes through the process of coming up with an economic policy package...only to be mysteriously murdered on D-day. Details of the economic package dies with him...
Something has to be done soon to avoid an economic collapse. What? How?
Who committed the murder? And why?
The murder story could probably have been constructed better but the crux of the book is economics! Recommend it to those looking for a light read on macroeconomics without running the risk of drowning in jargon.
In this delightfully light read, Wolfson & Buranelli, weav…

The Strange Life of Abraham de Moivre

This edition is about a topic that fascinates me: bidding behaviour.
On how people make decisions under conditions of uncertainty. And the notion of ‘rationality’. ***** Many of you participated in a game I played with you recently. (I’m sure you are glad that I didn’t ask you to predict your expiry dates!)
An investment prospect offers 100% return potential over your benchmark return (your ‘required return’). How much of this excess return would you be willing to pay/share upfront to participate in the idea?
There were no right answers for this ‘buy in’. Only interesting answers.
Chart time.

Buyin for ‘50%’ represents 50% and above. Participants comprised of finance and non-finance backgrounds. The left bins generally had finance people; who opted for some variant of upfront fee and profit share structures. Many non-finance guys populated the higher bins. Interestingly, several finance folks populated the 50% and above bin. And I had some friends who were steadfast in populating the left mo…

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