Risk factors in the present market...
Here are some risk factors that I can see in the market today. Thought I should share it with you:Risk No. 1: No fund manager is talking about interest rates going up. Ben Bernanke who thinks all problems can be solved by keeping interest low may have a problem. Did you notice a few small countries bought gold recently? So Greenback could be in some tight spot in the longer run. As an investor, we need to be prepared for the cumulative effect of credit deterioration around us – sovereign defaults will increase, big corporates will struggle, and Euro competitiveness is a joke – see the Chinese power equipment pricing power. The recession may have just started – remember W is just 2 Vs stuck together? So we may be in a double dip recession in the world. And India may not create enough jobs for the 3-4 million MBAs, engineers, C As, we churn out.
RiskNo 2: We ignore what we want to ignore: When Dubai happened; we said Dubai is not U.S.A. When Greece happened, we said Greece is not USA. When Spain happened we said...When the Red Shirts disturbed Thailand, we said Thailand is not India. Dubai, Greece, and Spain are symptoms of a world living beyond its means. One day it will catch up. We are all hoping when the music stops, the parcel will not be in our hand.
Risk No. 3: Throwing US currency from being the ‘reserve’ currency will be bloody. The US thinks the rest of the world owes it a living. It subsidises cotton – which leads to farmer suicide. Even Sharad Pawar will have to wake up to this. Dollar is strong because the Euro is worse! Watch this space it will be bloody. Our blood.
Risk 4: We think India is insulated from all this. We are not. Our luck is whichever currency is strong, there will be enough Indians working there and remitting money from there. Thank God for Keralites, Sindhis, Punjabis, Gujaratis, and Tamilians – and their wandering spirit!
Risk No. 5: Thinking that only the above 4 risks matter.
Risk No. 6: Thinking all risks will be nicely tabulated and given to you in a website as a slide show. That too, most of us want a slide show with only 7 slides – problem, example, what will happen, what is supposed to have happened, what is the solution, scenario of this solution applied to past data, and therefore will apply to the future, thank you and contact details.
Risk No. 7: The risk that will get your net-worth down is not listed here from 1 to 6. It is only your behavior when the market is up or when the market is down. Investor behavior is much worse than Market behavior.
Amusing risk: I just received a ppt from a broking house – showing about 20 companies that were supposed to do well in the future. I had not heard about this research house, so I opened it out of curiosity. The sender Mr. J had called them ‘Multi-beggars’. Of course I do not wish to share the name of the analyst of the name of the company. This I think is the worst risk. There are 20 good analysts, but 2000 people masquerading as analysts…this is perhaps the biggest risk – if it is not the media!
