Haphazard Linkages

Bonhomie. So much of it wafts through the market air currently. Hannibal Lecter’s quote from Red Dragon in the subject line wells up in one’s head. (Though some would counsel against letting Dr. Lecter crawl into one’s brains.) The past decade has seen a major change in the way market participants think about positioning. Like a responsible parent helping toddlers to get on their feet, central banks globally have held the market’s hands through periods of disquiet. We have learnt to walk, indeed. Conditioning has nudged us to presume the parent’s omnipresence during future periods of turmoil. Assorted naysayers, bear mongers have been shaken out. Converts and survivors from The Resistance have taken to trend following, along the path of least resistance. Up. Momentum plays on liquidity – the ETF brigade – have added to the crowd. The zigging and zagging of prices – Volatility – has progressively entered hibernation, as a result. QUIETER...and QUIETER Vo...

With most market participants making money this year, the timeless quote by Napoleon in the subject line rears its head, once again. Regular non-readers know the wonderment I have on the impact of luck on investment outcomes. The markets have been on a tear (sure you didn’t notice), and my mailbox/chat is seeing two polarized stances. On one side is the  Bullish Apology . Where market participants pre-emptively share justifications for continued strong markets everywhere. This group exhibits hyper optimism, using recent history as the periscope through which to peer at and gauge the future.  The second, and potentially, the more interesting group, is the  Bubble Babble  crowd. This group looks askance at the rallies, and deems things a bubble. This year has given this group a great polarizer. Bitcoin. A tiny bit know much about it. Most know a bit about it; yet there is a growing supply of those sharing their two coins, calling Bitcoin a bubble. Both gr...

In what should evolve into a multi-part series, Mind of the Market will endeavour to peer under the hood of the largest laboratory of human psychology in the world; the financial markets. Where frigid numbers and emotive participants spar enthusiastically in an elaborate and often bewildering drama-in-motion. Where apparitions and reality merge so finely as to be mostly indistinguishable. Where paradoxes and circular relationships reign supreme, frequently, and fervently, questioning the very essence of rationality and cause-and-effect. Part I addresses the dynamics of Pavlovian Conditioning and market participant response to stimuli in investment decision-making. Intriguing paradoxes and the behaviour of asset prices - a cause (and consequence) of market participant response - is considered concomitantly. Finally, the psychology of herding closes Part I. Pavlovian Conditioning and Asset Price Behaviour When Ivan Pavlov discovered his lasting contribution to humanity - Class...

The Day of Resurrection is probably an opportune moment to pause and gauge the pulse of the market. After the forgettable dalliance with 2011, risk assets seem to have found an amenable ally in 2012 so far. Tepid interest from FII towards India in 2011 has been replaced by renewed fervour ($9 billion net inflows in 1Q2012 v/s -c.$1 billion net outflow in 2011).  Interestingly, very little has changed fundamentally. The March budget was a damn squib, with the Finance Minister hoping to walk the tight rope between taming inflation, curbing a burgeoning fiscal deficit, without fettering growth. The Budget was, however, low on major reforms and irksome issues continue to make their presence felt. Yet, FII continue to pile in.  One of the intriguing things about human behaviour is its stickiness in altering the status quo prevailing bias. After a prolonged period of bull market, bearishness/pessimism is a rarity; likewise, after a bearish period, bullishness/optimism ...

One of the alluring things about investing is the prospect of rare sightings of anomalies. In a torrid market, typically, the universe of value Longs tends to expand relative to bull times. The opposite - an anomalous over-pricing in certain pockets - is rarer. One such example is OneLife Capital Advisors Ltd ( Bloomberg: OCAP IN; "OCAL" or "Company"), a recently listed Indian  company engaged in providing  financial intermediary services, an  aspiring equity broking franchise and portfolio management services company.  'Aspiring' is the operative word, as OCAL was incorporated in 2007 and commenced business in September 2009. As the Company admitted, there is little to look at in their limited operating history. Nevertheless, market participants enthusiastically bought into the Company's prospective story. Overall IPO was subscribed 1.53x, with retail participation at 2.5x allotted portion and Institutional interest at 1.02x.   ...

US$1 million =  रु.5 Crore Country: India Home currency: INR This post focuses on Karuturi Global ("the Company"), the world's largest producer of cut roses and an aspiring agriculture company with a presence across India, Kenya and Ethiopia. Before getting acquainted with the Company, it is worthwhile to get introduced, briefly, to the business of rose production.  The Business: A thorny process to a rosy end The birth of a rose involves the following: Land and Equipment : The major fixed-cost components. The quantity of roses produced is a function of yield, which tends to vary depending on a slew of factors Planting Harvesting and Picking : It takes about a year for full production, from the time of planting. Picking is a critical activity that influences rose quality and prices. Trained personnel are a critical requirement here Packing and Transport : Once the roses are picked, off they go into a bucket of bacteria-enhanced water for preserva...