On February 6, 2007, I wrote the first of my weekly columns for MINT, then a newly launched newspaper. Today, I just sent my article for the next column that appears tomorrow. So, the 11th year has begun. I am proud of my association with them. I do not know how they feel, though 🙂
Those were the heady days – both for the Indian stock market and for the economy and not to mention the global economy. Niranjan Rajadhyaksha and I were warning about the unsustainability of it all.
The paper has grown and gained respectability and credibility for fact and data based coverage of news. It is a credible voice among Indian newspapers and it is a privilege to be associated with it.
Here is the article I wrote then to kick off my column:
On global macro and markets
(Dr. V. Anantha Nageswaran)
The birth of something new is joyous, by and large. It is a declaration of hope over despair. That is how human beings celebrate the birth of new children. In the media, the birth of a new newspaper is welcome because it heralds more choice for the consumer. A competitive market place takes the market one step closer to completion. For a market place to be competitive there ought to be a large number of buyers and sellers. Hence, any addition to both sides is welcome. Particularly, in the market place for ideas and opinions, it is good to have diverse views so that homogeneity does not come about, even accidentally.
In that regard, it was very heartening to read the philosophy of the Op-Ed page as articulated by Niranjan few days ago. It is about free people, free economies and free societies. Notwithstanding imperfections, economic activity dominated by markets as opposed to governments delivers either superior or less inferior outcomes.
This idea has stood the test of time well in empirical economics. Rather simply, the collapse of the Soviet Union and the economic ideology (alive in India, Cuba and Venezuela) it espoused is proof enough. Central bankers in most of the developed world have taken that to heart in dealing with financial markets. Financial markets, in theory, have more participants than those engaged in economic market place. Hence, the outcomes of their buying and selling decisions – as reflected in asset prices – should be more superior to the judgement of a few men sitting around the table in an austere government building, deciding whether financial markets are in a bubble or not.
Yes, it is usually only men that dominate central banks. Very few central banks have been led by women. Right now, the central banks of Malaysia and Thailand are led by women. I would be glad to learn about more. Surprisingly, a search through Google shows that central banks in the developing world have found more jobs for women than central banks in the (so-called) developed world. One wonders if some of the monetary policy decisions taken by the Federal Reserve or the Bank of England would have been different had they been led by women. Perhaps, we might have had fewer asset price bubbles and busts. That remains a topic of interesting speculation. Readers should feel free to chip in. I am digressing.
To reiterate, the reason central bankers hesitate to intervene when asset prices keep climbing is that they find it unreasonable that few men could overrule the judgement of hundreds and thousands of market participants. Perhaps, the real reason is that it is also politically unpopular to throw sands under the wheels of asset markets. In any case, it is hard to say whether asset prices were in a bubble or were discounting rational optimism (an oxymoron?) until after the fact. Precisely such a debate is underway in India right now. The all-important question is whether the Sensex at over 14,000 is a product of global liquidity (the definition of liquidity and its measurement is a subject of future columns) or is a rational reflection of the current and prospective high economic growth in the country.
Regardless of which side of the debate one favours, investors and investment advisors have to acknowledge that their portfolios are marked to market and not the other way around. In other words, the market is the final arbiter. In a way, acknowledging the final authority of the market is equivalent to acknowledging the existence of a power that dominates and consummates human endeavours. That is the first step towards spirituality. Spirituality starts with the admission by our egos that our opinions are not the final word on the subject – whether it is in the world of investment or otherwise. Indeed, sustained and long-term successful investing involves many behavioural traits that bear remarkable resemblance to a high degree of spiritual evolution. That too is a topic for a future column.
By now, readers would have got some inkling of what this column would be dealing with, every Tuesday. It would discuss global economics and anticipate its outlook. It would deal with global financial markets and dare, stupidly, to make prognostications. The reason is simple. I have been doing it now for twelve years in my profession that I do not know much else to do.
More seriously, this column is about global macro and markets. Certainly, “global” includes India and yours truly would not flinch from adding his two paise worth of opinions on the raging topics that engage the Indian minds – whether it is the endlessly futile debate on India vs. China or the debate over the valuation of the Indian stock market or the uniquely Indian way of reforming the Indian economy.
Of course, the column would do so with the awareness that one’s opinion is not the final word on the subject but with the conviction that the market place for opinions is strengthened by adding one more to it. I solemnly promise that it would be strong, controversial but clear.
The dividing line between noise and information is thin these days. In the days ahead, I hope that readers would find this column to be a useful addition to their information and subtraction from the noise surrounding the world of finance and economics.
(Dr. V. Anantha Nageswaran is the Head of Investment Research for Bank Julius Baer (Singapore) Ltd. His views are personal. Feedback about the column could be sent to him too at firstname.lastname@example.org)