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An Anonymous Post.

April 26, 2019 Leave a comment

Warning:

 

I am not entirely comfortable posting it here because I don’t have the author’s permission to do so.  In fact I don’t know who the author is.  But it makes some important points & offers crucial insight into how “appropriation” works and why it is important to recognise it.  Akaar Patel had once offered a similar insight but he appears to have lost his voice these days.  So take with a pinch of salt.

 

Text of DM:

 

 

“There is a proverb in Malayalam that says that when a trivial man suddenly becomes wealthy, he will hold an umbrella at midnight to avoid the sun. That’s the story of cringeworthy Modi.

His latest interview shows the extent of his megalomania, his vanity, his pretensions and pomposity. He is so in love with himself as PM, so enamoured at getting such a plum post that he perhaps never dreamt would be his, that he now cannot see any boundaries to that ambition. It’s overvaulting. It’s unchecked. It’s urgent. A monumental personality flaw.

So, in his manic hurry to grow exponentially in stature,he merely appropriates all the symbols available of greatness. In the first year, the monogrammed suit and meeting with Obama where he broke all protocols and went into first name calling and informal bear hugging on the first meeting, was intoxicating. It turned his head irrevocably. It catapulted him into a rarified space of wealth, influence, and most importantly power leading to hubris. It’s what classically happens when you get something too precious too soon. You lose its value. You begin to think it’s your birthright. You take it for granted. A niggle of worry about losing it ignites rabid fear.

Then your humble past, the housemaid status of your mother, the tea selling boy, the chowkidar nomenclature, the begging fakir, the visits to the lower middle class house of mother (almost stationed there like a prop) all simply add to the heights you scaled. You use it to fill the ordinary people harbouring modest ambitions, with extraordinary awe.

It is clear from the recent puke worthy interview with Akshay, that that first brush with the most powerful world leader, even today, makes him blush and flush with pleasure as he very immaturely brings in Obama’s name, completely irrelevantly into an unrelated question and claims intimacy of a childhood friend’s familiarity. The tu nonsense will be trolled for a long time. This paints over the grimy beginnings and appropriates all that Obama stands for. Education, class, power, wealth and prestige. In one sweep you try to own it. People who see through want to puke. Many, who don’t, are impressed.

This macro appropriation of colossal power is seen in the speeches where he never fails to tell you he represents 1.3 billion Indians. He made it 6 billion at Davos appropriating 80% of world population in a Freudian slip.

Then he talks about purana naata with all countries he visits thereby creating an earlier bond that increases his network of influence.

The travels, the hugs are part of this appropriation of international spaces where he probably thinks he has conquered hearts and loyalties by landing on the soil in a Caesar-like veni vidi vici mode. This is reflected in his bhakts telling you about how he put india on the international world map.

Then we have the threats. If you are not with Modi you are anti national, traitor, seditionist, terror sympathiser, Pak lover etc. Here, he appropriates nationhood, patriotism, loyalty, pride of all ancestral history, in order to again, in one giant sweep glutton up the country of its past, present, and future.

Furthermore, recently he appropriated the might and significance of our entire armed forces. His minions will swagger about how it is ‘Modi’s army’ as if he were Alexander on an interminable mission of conquest. He tries to buy votes on martyrs as he genuinely thinks they are his foot soldiers.

He will use every tragic event to politically push his agendas. All work done by previous governments are disregarded so that he can have that last applause by placing the cherry on top and claiming to have done the whole job himself.

A master of image management he will announce schemes with pomp and pretend they are achievements merely by virtue of their having been announced. He is not a man pretending. I do believe he is in a mentally delusional state where he believes that he has truly achieved. Hence the allergy to questioning. It will break the mould. That pain, a lot of self deluding mental patients living in denial will tell you, is excruciating.

Several interviews, created on the eve of the elections have put paid to the criticism that he fears the Press. But then, in those meticulously crafted interviews of Prasoon Joshi and Akshay Kumar, we clearly see impotent anchors asking benign rhetorical questions that are all couched in predicated glorious praise embedded in, and preluded by How can you be so amazing Mr. superhero? Are you for real? There’s no one quite like you baby! kind of trash. Yes, it puts your teeth on edge.

This very small dwarf of a man then smiles in self indulgent pleasure desperately trying to control his ecstasy and dons a benevolent, self satisfied, karmic, wise expression before spewing forth a bunch of hallucinations, scripted to make him look progressive, contained, objective, magnetic and well connected. None of which is remotely true. A congenital liar needs no cloak of shame. One that has begun to believe his own lies lives in a parallel, altered universe.

The submissive, obsequious and pusillanimous anchor putty clan simper along with the patience of Job. They could be interviewing God Himself! No counter points, no uncomfortable questions, no interruptions, no interventions, no screaming , nothing! The one with Akshay on mangoes and other trivia tried to paint him as an accessible human while heaping praise and allowing for truckloads of bragging.

If Modi could make a trip to outer space, even if they flew him to a satellite station, he would appropriate the stars, the galaxy and the universe. They would come back with stories of miracles. And the bhajan mandali on Earth would say he is an avataar of none other than Sri Ram.

The megalomaniac’s journey from the regional, through the national and international, to the cosmic and divine would then be complete.”

Categories: Uncategorized

Restricted Access Model of Corruption:

April 23, 2019 Leave a comment

These are basically my tweets on the issue of some innovations that have surfaced in the sphere of corruption of our political economy that I made some time back.  People have been asking me to consolidate my tweets at one place on some topics.  So this represents the first of such consolidations.

 

I am a rather poor writer with little patience for the art. Will try & blog some ideas and see how it goes.

 

Thank you for reading.

 

Innovations in corruption.

There has been a lot of talk about ushering in a corruption mukt Bharat. The truth is that there has been some fresh thinking about corruption under the new Government & I would like to share my thoughts on the same with you.

So here goes. 1/n
The first is that the earlier regime was riddled with hypocrisy. The fact is running a party machine, fighting elections, and motivating & rewarding political workers is an expensive business. It requires funds that only the wealthy can provide & so there is the inevitable deal.

Under the Congress, prior to 90/91, a combination of the license/permit raj and patronage to those who could pay rents, provided the key funding for Congress. Which is not to say the opposition was chaste. Their chastity was mere lack of opportunity. Model was the same.

The Congress system was “free-for-all”; anybody who could pay was welcome. Everybody had equal access. The highest bidder won. Second, when the people at lower echelons saw this game, the replicated it at their level. Corruption ballooned. Politics became business.

90/91 changed the game by ushering in economic reforms destroying the old rent seeking model by abolishing the central licensing. This had an unintended consequence. As the Central Govt. shed its control over levers of patronage, the action shifted to the States.

Although no license required, entrepreneurs had 2 still line up before state Govts 4 allotment of land, water, electricity, labour permits & a host of other things. So rent extraction shifted from Centre to states & regional leaders gained power of patronage from the centre.

As power of patronage shifted to States, the Congress leadership in Delhi grew weak and the regional leaders far stronger. So much so that by the end of PVNR Govt., Congress party itself began to unravel as regional leaders revolted or struck out on their own.

As U can see, corruption at all level except Delhi multiplied. It was in the milieu that BJP stepped in. ABV followed the Congress model. Paid the price. When Congress returned to power, it had learned nothing from experience. The old State level rent extraction continued.

The present Govt. did learn important lessons from BJP experience. You cannot decentralize power of patronage & still control a pan-India political party. That’s was the Gandhi family’s political blunder. Modi ji therefore concentrated all such power in himself.

But if money is generated by state level leaders, how do you centralize power of patronage. Hence anonymous electoral bonds. Those seeking patronage go to the top, make the deal, contribute anonymously to the party kitty. Regional leaders are not involved. U control the treasury.

That is why Congress also supports anonymous electoral bonds. If & when it returns to power, it will help the Gandhi family to reestablish central control over the party as it was before 90/91. So they make noises but favor electoral bonds. Now 2 the 2nd innovation.

Recall I said the Congress system was free-for-all & widely emulated at lower levels by those controlling patronage. This model is terribly flawed in game theory terms.

2 simplify, if everybody can corrupt [free access] and everybody can accept bribes, the earnings of all fall.
As usual economics tends to be counter-intuitive but bear with me. First the demand side from tycoons. If tycoons have to compete 4 patronage, they will bid the highest bribe they can afford. Competition puts costs up. Where will they recover these costs from? Obviously you.

So if rents that can be extracted from you consumers are R and the bribe paid is B, [R -B] is the profit to the tycoon. As many tycoons are competing & its is competitive bidding, the [R-B] over time falls to 0. So the tycoons gain nothing from corruption.

On the other side bribes are the total rent that can be extracted. More people you share it with, the per capital share falls. So the free-for-all corruption under the Congress model is very inefficient. Not only that, it is also very noisy b/c prices must be disclosed 2 bidders.

The present Govt. has wisely moved to eliminate the free-for-all model and replace it with a restricted access model. Now everybody cannot bid 4 patronage. Only a selected few crony tycoons may bid. And secondly, the bids are tightly controlled at the highest level.

What the Restricted Access model does to increase both tycoon level & party level yields from rent seeking. Since competition is restricted to few cronies they need not make competitive bids. So B is smaller, [R-B] is bigger, they are happy. And B is not shared. Happiness.

Not only is the Restricted Access model more profitable 4 tycoons & politicians it is also not noisy as before. Since bidding is not competitive, there is no need to disclose price. Lower level corruption is not allowed but actually punished. So corruption visibly decreases.

That then is magic of the Restricted Access Model. You can reduce visible corruption, you can prosecute corrupt people lower down 2 discourage competition, be a corruption fighter & still maximize rent yield to your party. What could be better?

Now you will better understand why even BJP has copied the Congress model of appointing CMs from the central level. U can’t let state level people compete with you for share of rents.

That’s where we are. BMKJ.

 

Some additional notes to above tweets for further study & research:

  1.  The idea of restricting access to rents from corruption to a selected few is not new.  It is based on the ideas of Nobel Laureate Gary Becker who first showed that it makes great sense for the corruptors [rent seekers] & the corrupted [the politicians who create rents] to restrict competition for rents by restricting access to them through creating barriers to entry.  This prevents dissipation of rents through competition thus ensuring the maximum returns to both groups.

 

Screenshot 2019-04-23 at 8.06.10 AM.png

 

2.  The RAM of corruption has the added advantage of reducing visibility of corruption that accompanies wider participation in rent seeking.  Secondly, it allows the elite rent creators [politicians] to claim the hallo of corruption fighters by being seen as keeping out those rent seekers who are in any case to be denied the benefit of rents.  In fact the more you eliminate corruption at lower echelons of Govt. the higher the rents for sharing available to favoured rent seekers & politicians.

 

 

Screenshot 2019-04-23 at 8.45.12 AM.png

The excerpts from the book “Political Capitalism” by Randall G. Holcombe.

 

 

Categories: Uncategorized

GUEST POST by @ArguingIndian : Profound Simplicity to Confused Complexity: Modi’s journey from Hope to Fear

March 23, 2016 Leave a comment

When the current Prime Minister of India Mr Narendra D. Modi started his campaign in 2014 for the Prime Minister post, He builds all his campaign around the word “HOPE”, A hope of brining “Acche Din”, Is he able to fulfil his promise ? If we go by the events since he took the oath and analyse it from the socio-political prospective, the result looks quite disappointing. While selling his product ( Acche Din) to his customers, i.e. voters the value proposition Mr. Modi has offered is not yet delivered. What could have been the implication if you put this in the professional scenario, of course you would have been fired. Critics could say democracy work in a different way and he would be judged after five years. Agreed, so how the relation of voters and Government does works; let’s go to the very basic of government role defined by Social Contract Theory1. In the trade-off of surrendering natural rights, Individuals in return are guaranteed civil liberty, freedom, rights, and equality by the govt. And, “Will” not the “Force” could be the basis of enforcement of social contract.
What forced Modi to adopt the divisive agenda or it is the natural outcome when you identify yourself as a Hindu Nationalist? BJP and its followers since beginning have focused on exclusion of minorities and opposition. They don’t see them as the actors of democratic society. In the last two years many incidents took placed; Dadri incident when Akhlaq was killed by the religious fanatics, exclusion and target of minorities over the issues of love Jihad and beef ban, JNU incident where civil liberty has been put under the lock. And it’s not only the socio structure which is under the pressure, Economy is in doldrums and the failure to revive economy has squelched the hope. Current govt has failed to implement the social contract. And his silence has been amplified by his supports by going berserk. Modi and his followers have tried to shut every legitimate voice of criticism by labelling it Anti- National. Hounding one community has become the hallmark of BJP followers, while doing so, they forget that in comparison to the west, Indians believes in collective identity. Therefore, when you are offending a person’s belief you are not offending a single person, it’s the whole group which get offended.
We all have witnessed how Modi’s campaign of hope has been turned into a fear. Why Hope always worked in the case of mobilising people and not fears? For an individual hope’s cognitive process releases an endorphin like emotion. Hope creates resilience and requires lots of resources and broad focus to fulfil that desire. In contrast to hope, fear operates in primitive areas of a brain. Fear trigger anger and frustration and operates with a very a narrow focus. Modi and his followers while playing with these emotions should realise that over using both, hope and fear can lead to distractions. Has the all Hope is lost or Mr. Modi has lost the focus? How he could revive the Hope and get away with the atmosphere of fear. For that he needs to show the attribute of a leader where a leader change his roles form autocratic to democratic as the time demands. While his silent node on all the incidents has been amplified by the supporters, as a PM of the country he should address the concern of minorities. To get the economy back on the track reconcile the differences with opposition on the crucial bills. And lastly, should avoid useless confrontation of interfering in educational institutions and rewriting the history. All can be achieved if Modi and his supporters adopt the policy of inclusiveness instead of divisiveness, though it is not the forte of Modi supporters but desperate times demand desperate measures therefore instead of pandering to his core base the time demand to rise above to the party politics and lead the India.

 

Mr Modi role in the new govt was to convert the Hope into the reality instead what we see all around is fear. In a society every role has fixed part to play with the predefined rules. When the role system2 collapsed, it leads to panic. “If a role system collapses among people for whom trust, honesty, and self-respect are underdeveloped, then they are on their own. And fear often swamps their resourcefulness. If, however, a role system collapses among people where trust, honesty, and self-respect are more fully developed, then new options, such as mutual adaptation, blind imitation of creative solutions, and trusting compliance, are created. When a formal structure collapses, there is no leader, no roles, no routines, no sense.”2 if we look closely we could see that currently India is going through the same phenomena.

 

References:
1 Rousseau, Jean-Jacques (1762) “Du Contrat Social”
2 Weick, Karl E. (1993) “The Collapse of Sensemaking in Organizations: The Mann Gulch Disaster” Administrative Science Quarterly GUEST

Categories: Uncategorized

Guest Post: Thoughts on Polygamy by Shealja Sharma

For long tweeple are debating on Polygamy and Monogamy, some are in favour of Polygamy while others opposes it. While they have their own reasons to support or oppose, I tried to search and read on the topic of Polygamy and monogamy And why Modern states are more inclined in the favour of Monogamy.
Lots of data and research suggest that all most all the societies have progressed from Polygamy to monogamy because the social problem it has created . How ? let’ see point by point

In 2012 University of British Columbia-led study that explores the global rise of monogamous marriage as a dominant cultural institution. And study finds that “significantly higher levels rape, kidnapping, murder, assault, robbery and fraud in polygynous cultures”

1) Problems for young man : It has been seen and proved that wealthy male of the society prove to be a stasher of wives. It increase the competition for partner and low status males had high chances of not getting any partner. According to Study

“ A little chances of obtaining even one long term mate, unmarried , low status men heavily discount future and risk taking, resulting in more socially undesirable behavior. Like higher rates of murder, theft, rape, social disruption, kidnapping, sexual slavery and prostitution”

2) Problems for Women : Polygamy reduces woman freedom, increase gender inequality and domestic violence. As in polygynous market men remain on the marriage market for longer term, it reduces the age of first marriage for females, increase the spousal age gap. Due to competition men uses all type of influences, connection and power to obtain wives. Also strike financial deal with their fathers and brothers. According to study:

“ More competition motivates men to seek to control their female relative, suppressing women’s freedoms”

3) Problems for Children’s : Monogamous marriage also results in significant improvements in child welfare, including lower rates of child neglect, abuse, accidental death, homicide and intra-household conflict, the study finds. These benefits result from greater levels of parental investment, smaller households and increased direct “blood relatedness” in monogamous family households, says Henrich

Refrence :
http://news.ubc.ca/2012/01/23/monogamy-reduces-major-social-problems-of-polygamist-cultures/

Categories: Uncategorized

MARKET NOTES: 29.03.2014. The bear market in Copper & Crude may be done.

March 30, 2014 Leave a comment

MARKET NOTES: 29.03.2014.  The bear market in Copper & Crude may be done.

 

The US Dollar [DXY] may have topped out at 80.50 and may be headed down towards a retest 78.50.  But the more significant news is from Copper and Crude. The charts indicate that the bear market in industrial commodities [& agricultural commodities not discussed here] may finally be over.

 

Bear rallies currently underway in Gold and Silver may have been interrupted by corrections but are far from over. I expect sharp uptrend in prices of precious metals to resume shortly, although the long-term picture in them remains pretty bearish.  That said, the bear-rallies, [with sharp corrections] have months to run.  Position traders should avoid the short side of the trade for now.

 

 

 

Gold:

290314_Gold_weekly.

 

 

 

Gold is currently positioned at $1294.30, a bit below its 50 & 200 DMAs even as the 50 DMA has pierced through the 200 DMA from below after a long time.  Is the rally in Gold from the low of $1202 on 12/31/2013 over?

 

By my reckoning, the long-term down draft in Gold that began from a high of $1923.70 in September 2011 has completed its first half of the journey at the low $1202.30 on 12/31/2013.  The rally from that point is one of a corrective nature and should run over many months with a target of $1550 or so.  What we have seen so far in 2014 is just the first leg of the corrective bear rally that topped out at $1392.60 on 3/17/2014.

 

A 50% retracement of the rally from the low of 1202.30 to the high of 1392.60 reveals a likely target for this rally at $1180, a price point fairly close by.  A much more robust floor is also close at hand at $1260 which also happens to be the 61.8% retracement level.

 

My sense is that gold will pivot sharply from one of these either of these two price point, most likely $1260, to rally sharply higher. The weekly chart appended above shows the first half of the long-term downdraft & the subsequent corrective bear rally underway in the larger technical backdrop.

 

While the long-term correction is gold is by no means over, the bear rally underway has a long time to run ahead and the retracement completed so far is but a fraction of the likely target. It is dangerous to be on the short side of Gold despite indications of a rally in $DXY which would normally serve to tamp down precious metal prices.

 

 

 

Silver:

 

290314_Silver_weekly

 

 

 

Silver has much in common with Gold in terms of the long-term correction underway in the metal but there are significant differences in price behavior.

 

Silver, much like Gold, has completed the first half of the long-term correction on hitting a price of $18.335 on 6/27/2013. It subsequently rallied to $25.126 in a sharp bear rally and has been correcting from there towards $18 level ever since. Silver failed to make a new low in December 2013.

 

My sense is that Silver too is likely to rally upwards from the $19 price region and the ensuing bear rally could take the price higher that $25 that we have seen in the first pullback.

 

Silver has seen $19 has seen very strong support at $19 a number of times in the recent past.  The current price at $19.79 leaves very little on the table for bears and is a perfect opportunity for bulls.  So like Gold, while I am not bullish in the long-term, I would touch the short side of the trade & would be comfortable going long with a stop just under $18.5.

 

 

 

HG Copper:

 

290314_HG_Copper_Weekly

 

 

Industrial & agricultural commodities, unlike precious metals, present a very bullish picture at the end of their long 6-year bear market.  Copper may have put at end to its bear market correction with the low of 2.9145 hit on 3/13/2014.

 

 

Copper began the latest leg of its bear move from a high of 4.58 on 2/03/2011.  It has seen a classic 5-wave  [with an extension of wave3] wave down to 2.923 on 3/13/2014.  To my mind that completes the bear market correction for Copper and we may into a new bull cycle for the metal.

 

Copper is currently positioned at 3.0315, off its recent lows but well below its 50 and 200 DMAs in the 3.20 price region. Copper is a buy for position trade for a target of 3.40 with a stop just under 2.90.

 

 

 

 

WTI Crude:

290314_WTI_Crude

 

 

 

 

WTI Crude has been in a long-term correction ever since the high of $147.27 on 7/11/2008.  I reckon, the C leg of the multi-year bear market in crude, may have ended with the low of $91.24 on 1/09/2014.  It is worth noting that the 5-wave C leg of the correction began with a high of $114.18 on 4/29/2011.  It’s been a flat but well defined 5-wave, flat with a gently upward sloping upward bias, correction which betrays a strong bullish bias to the commodity in the long term.

 

 

Crude has rallied from a low of $91.2 to a high of $105 and retraced 50% of the rise in the following correction. Crude may see another brief correction on rallying back to $105 from the current level of $101.67.

 

Crude is currently above both its 50 and 200 DMAs. Oscillators are in neutral zone, while the 50 DMA is about to trigger a bullish penetration of the 200 DMA. Crude appears headed for a first target of $105, and following a correction from there, a higher target of $110. I think a confirmed break above $105 will see huge accumulation in crude commence.

 

 

 

$DXY:

 

290314_DXY_Weekly

 

 

 

There is nothing like a long-term weekly currency chart for perspective.  Given the end of the bear market in commodities [except precious metals] it is interesting to see how  $DXY is positioned on long-tem charts.

 

 

DXY made a low of 72.86 on 5/04/2011 and rallied to a top of 84.485 on 7/09/2013.  The rally up traced a classic A-B-C wave up.  DXY has been correcting ever since but has always found support at 78.80 that happens to be 50% of the rise recorded in the last bullish leg up.

 

My sense is that the correction in DXY from its recent bull high continues and we may be in the last leg of the ongoing correction.

 

DXY made its last low of 79.438 on 3/14/2014 and has since rallied to a high of 80.5050 on 3/202014.  It is currently positioned at 80.335, a notch below its 50 DMA and well below its 200 DMA.  My sense is that DXY will drift down to retest 78.50 level by end of May, 2014 before it makes up its mind to rally from there.

 

 

 

 

 

 

Categories: Uncategorized

Why #Aadhar was spiked: DCT as a disruptive innovation

March 27, 2014 Leave a comment

This was written in November, 2012 but got spiked.

 

 

DCT as a disruptive innovation

Imagine yourself as a 20s something, male or female, who has graduated out of the local college in a northern cowbelt town of some 2 to 5 lac inhabitants, with a degree in arts, science or commerce. How do you find a job?

A lot of people will at this point cite competitive exams for entry into some kind of government service. These jobs, much preferred for their cradle to grave job security with no professional risks, account for barely 3 to 4% of all jobs available. Assume our lad or lass is a median student and hasn’t had much luck with such exams. What then? How are 96% of the jobs that our economy creates parceled out to the youth? What is the recruitment process here? How does our young 20s something himself or herself a job in real life under such a setting?

Barring a handful of private sector jobs in the top 1000 or so corporations in the country, that account perhaps for another 5% of the total jobs apart from government, we have no formal process of recruitment for the balance 90% of jobs open to a young person starting out in life. Our employment exchanges are in shambles and of little use here; most don’t exist in small towns. There is perhaps a rice processing mill or two in the town I have in mind as I write this, a soybean processing plant that’s doing very well, 20 odd small scale industries that make equipment for farming, dozens of motor bike & truck repair shops, kirana shops, mandis, half a dozen hotels catering to tourists, bus & truck operators, a stone processing quarry and an army of babus that “runs” the district. How do you find a career in this small world, especially as the 4 colleges churn out some 3000 students like you every year looking for the same jobs?

Apply, apply and wait for reply? It doesn’t work. In such a setting the only way to get a job, admit it or not, is to work through the family network. Word goes out that you are looking for a job. Your dad will be very grateful to who-so-ever in his circle of relatives, friends, associates can offer one or route you to one. These networks of contacts work within a community of contacts. They may spill across caste, religion, income and other dividers but, by and large, they are local, community based and closely observes the general “biradri” barriers. As shorthand, you may call these the patronage networks, and these are pervasive. They help organize your social, economic, and political life. They broadly determine where you will work, what you will earn and whom you will marry. The only way to escape the clutches of this system is to either drop out of society or to excel at school & find a job via a competitive exam. Barely 10% of the young can do so. The rest have no option but to opt in – willy-nilly.

You just cannot overstate the power of these local patronage networks. They aren’t monolithic. In fact many compete with each other. Most, if not all, are organized around a caste, or an alliance of castes. Each has community leaders, usually established businessmen in various trades; wealth & income marks out the true leaders. Members are expected to observe the unwritten rules, be it priority in hiring members or marrying members. There is considerable leeway in specifics but broadly the discipline is enforced through the threat of social ostracization. Sure you can hire somebody from another caste but if there is an objection you may have difficulty finding the right groom for your daughter years later. It is not easy to break ranks, which is why we outsiders in metros fail to appreciate the strong ties of caste groupings that bind small town communities. We are lucky to have escaped them.

Throw in the subsidies by Direct Cash Transfers into this milieu and you disrupt an age-old system that ruled life howsoever iniquitously. The social and political power of the leaders of this parsonage system is grounded in economics. They own the most valuable income generating assets; they control access to jobs and your share in that income and you cannot survive for very long if you are cutoff from that income. DCT gives the poor breathing space independent of the patronage network. That is critical to the bargaining power of job seekers because you don’t have to jump at the first job available or sell yourself cheap. It is this loss of power over the young, and through them over the poor, which will begin the end of these caste based patronage networks even more quickly than the spread of education has so far.

DCT subsides should not be in perpetuity. These should have a time limit – say 2 years per family after which they should be discontinued to avoid permanent dependence on dole. Subsidies to the poor are necessary for two reasons. Firstly, subsidies to the utterly poor rekindle hope and initiative in them. A man scrounging for food cannot lift his head to upgrade his skills or even look for a job. Subsidies give him or her the luxury of time to find an income-generating slot in the ecosystem. Such people do exist but are very few in number.

The second, and more pervasive, effect of subsidies to raise wages for all, not just those targeted for subsidies. Now I am not aware of any study that has examined the impact of this aspect in the Indian milieu. To the extent government thinks wages at the bottom of the pyramid are too low, DCT subsidies will help raise the wage levels for all of labor at the lower rungs of the social ladder. But a bout of wage inflation is inevitable and the government must have a strategy in place to counter that deleterious side effect.

The big untested assumption here is that wages at the bottom of the pyramid are too low. To the best of my knowledge, this assumption hasn’t been validated and we have admixture of two things here. One very poor people unable or incapable of participating in a market economy without help and people who need support during a bad period in order to find a job or other source of income. Government will have to segregate the two groups and devise measures to deal with them separately.

The other group of very powerful people who will keenly feel the disruption in established power structures is the local bureaucracy. This class is pretty used to intercepting a portion of any subsidy aimed at the poor. Not only will they be disintermediated but will also lose their hold on the patronage system. Babudom in general works very closely with the trader or merchant class in small towns and these very people are generally the community leaders of their caste groups. The potential for active collaboration between lower reaches of the bureaucracy and the patronage network leaders is pretty high and the government will have to work out counter strategies.

All in all, subsidies by DCT will alter the power equations in villages and small towns significantly. If the effect of such disruption is benign and benefits the poor, the Congress can expect a rich harvest of votes. But the potential and incentive for sabotaging the new system is very high. Efficacy in local implementation will make or mar this disruptive innovation. If the Congress plans to make it the game-changer for 2014, it will need a highly effective political campaign at the local level to ensure implementation is fair, inclusive and effective without intermediation by the very people who seek to defeat it.

Categories: Uncategorized

MARKET NOTES: Commodities likely to turn up. $GLD & $XAD

January 8, 2014 Leave a comment

MARKET NOTES:  Commodities likely to turn up.  $GLD & $XAD

 

 

Commodity markets in general are in the very early stages of recovery but all of them aren’t likely to move in tandem.  Below I take look at the CRB Index for 17 commodities, the Aussie Dollar vs. US dollar and the price trends in Gold, Silver, Copper and WTI Crude.

 

This post should be read together with the earlier post on Global currency markets.  A further post on equity markets follows.

 

 

 

 

CRB Index:

 

 

050114 $CRB Index

 

 

 

I have shown the weekly chart of $CRB commodity Index to get a good fix of where we stand in the ongoing commodity correction cycle after the great crash in 2008.

 

My sense is that we have seen the second leg of the correction in commodities commence from 370.88 on 4/29/2011 play out in two halves and end in the bottom on 11/19/2013 at a low of 272.9.  Note the low of November 2013 was marginally higher than the low formed in June 2012 at 267.40.

 

We should therefore now expect the Index to bid higher and try for the region between 325 and 335 over the next 12 to 18 months.  The probability of a lurch below 270 is extremely low.

 

That said, the Index moved to a high of 285.3 from the low 272.9 in November, which to my mind represents the first of many legs of a move to the upside. The sharp sell off from there is simply a correction to the first leg up.  The Index closed at 277.12 on Friday showing a retracement of 66% from the top.  While not ruling out a 100% retracement my sense is that Index will turn up come Monday and after a short consolidation, keep moving up towards 325.  The move up is also corrective.  We aren’t done with commodity correction as yet.

 

 

 

Gold:

 

050114 Gold

 

 

 

I had expected Gold to at least try and breach the low of $1179 formed on 6/28/2013.  In the event, Gold got close to that level making a low of $1181.40 on 12/31/2013.

 

Gold closed last Friday at $1238.60.  Barring the usual short-term corrections, I don’t think we will see another attempt to take out $1180 in this leg of the correction.

 

On the other hand, Gold is now set on a corrective move upwards and could move to $1450 to $1500 range by mid-April.  The long-term prognosis for the metal continues to be bearish.  However, don’t short gold till you see the highs of mid-April.

 

Silver:

 

050114 Silver

 

 

 

 

I have been expecting a divergence between Gold & Silver prices but there simply hasn’t been a spectacular one of the sort I thought should happen.  There are significant differences in the pattern of correction underway in both metals though.

 

Silver could show a muted uptrend in prices in sympathy with Gold over the next few weeks & move up to $22-$25 range.  However, I continue to expect a price breakdown in Silver by June end 2014.  To my mind there is no tradable opportunity in the metal to the upside until we see capitulation below $18.

 

 

 

HG Copper:

 

 

050114 HG Copper

 

 

 

Copper remains the most “bullish” of metals in the CRB Index.  It made a low of 2.9875 on 6/24/2013 and then tested its 200 DMA repeatedly before making a higher low of 3.1240 on 11/19/2013.  Thereafter, the metal took out the top of its 6-month trading ranging range by breaking convincingly atop 3.35, putting up a bullish flag to make a high of 3.4245 on 1/02/2014.

 

Meanwhile, the metal’s 50 DMA has pierced through its 200 DMA from below in the region of 3.26 well below the current price of 3.35 signaling a golden cross.

 

My sense is the metal will move up a bit, to perhaps 3.50 or so and do a flattish correction that tests the previous trading range top a few times before breaking away upwards.  Position traders could long the metal at dips with a stop-loss a notch below 3.25.

 

 

 

 

WTI Crude:

050114 WTI Crude

 

 

 

WTI Crude has been in a corrective uptrend from the low of $77.50 made on 6/22/2012 to the high of $109.22 made on 8/28/2013.  It has been correcting from that high and made a low of $92.30 on 11/27/2013.  In the process, Crude generated a sell signal with the 50 DMA piercing through the 200 DMA to the downside at $98.47.  Crude rallied from the low of $92.30 to nick the 200 DMA and turned down again from there taking out both the 200 & 50 DMAs in the process.  All told that’s a sharply bearish picture but its very sharpness suggests that it might just be the usual bullish correction in an uptrend.

 

That said, first support for WTI crude lies at $92.30 and I would be surprised to see a significant breach of $92 given that the commodity is already oversold.  A more robust support follows at $87.  While Crude could bounce along above $92 till mid-March, 2014, I would look to accumulate the lows around $90-92.  There isn’t much downside to WTI crude below $92 because it’s pretty much done with its long-term cyclical correction from the top of $147.27 in July 2008.

 

 

 

AUDUSD:

 

050114 $XAD

 

 

 

 

Am unable to show the spectacular textbook bullish run up in the Aussie Dollar vs. US Dollar here.  But in many ways the story of $XAD from the low of 0.47730 in April 2001 to high of 1.1080 on 7/27/2011 is the story of the Chinese demand for Aussie commodities.  It is therefore interesting to see what $XAD is doing at the moment.

 

$XAD went into a sharp correction from the level of 1.108 and is currently placed at 0.8943, showing a retracement of 34% from the bottom to the top.  My sense is we could see a retracement to 0.80, which is top of the previous long term trading range for the $XAD from 1985 to 2007.

 

The other interesting thing about the $XAD is the timing.  According to one wave count, the earliest end to $XAD’s correction would be around mid-March and if so, the target could be 0.85.  By another count, which I favor, the correction in $XAD could extend to early 2015 and the target could be 0.80.  The latter scenario points to delayed recovery in the Chinese economy.  In either case $XAD would give early clues to renewed Chinese buying in commodity markets.

 

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January 4, 2014 Leave a comment

MARKET NOTES:  Currencies & US interest rates

 

 

 

The story of currency markets since July 2012 to December 2013 can be explained by the depreciation of the Yen.  In the 17-month period from July end 2012 to December end 2013, the Yen depreciated by roughly 55% against the Euro and 35% against the US Dollar.  In the same period, the Euro appreciated by about 16% against the US Dollar.  Yen weakness rather than anything else has been driving currency markets. This may continue for a while longer as Abenomics plays out fully in Japan & China.

 

The second thing to note is that 10-year yields on US Treasury notes are about to break above 300 bps and head towards 380 bps over the next 6 months.  Some of this may already be priced into the equity markets but we can be sure not all of it is in the price.  On the other hand, equity markets may actually view an increase in long-term interest rates as confirmation of growth at least to begin with.  The impact of rising interest rates on the US Dollar may also be muted to begin with since other rates too are likely to rise with the exception of Japan.

 

Back in India, the attention will remain focused on the US Dollar which is likely to weaken modestly against the Euro but strengthen against the Yen over the next few months i.e. till mid-April, 2014.  However, the USDINR charts show that the first leg of the correction to the run up to 69 may be over, and the Dollar could move in the next few weeks to test the overhead resistance at 64 albeit gradually.  A vault over 64 may take a while though as the second leg of the correction kicks in.

 

A lot will depend on how the equity markets in the US play out in April/May this year.  A correction there, long overdue, could change all the variables in the current equations.  I shall have more on that in the second half of the week.

 

 

Happy New Year to all.

 

 

YIELD ON 10 YEAR TREASURY NOTES:

040114 $TNX

 

I have put up the long-term weekly chart of yields on 10 year Treasury Notes [$TNX] in order to show where we are headed in terms of interest rates on US Treasuries.  Note the current yield on 10 year Treasuries is exactly 300 bps.

 

On a weekly basis, the yield has breached the previous top at 295 bps and has fallen back a bit to test it as support.  The yield has more robust support at 285 bps.  My sense is that after a few days of consolidation, we are likely to see yields move up 320 bps or higher.  On the price charts the price of treasuries could fall 118 from the current level of 123.50.

 

Though significant by itself, as it confirms a long-term upward shift in interest rates, the move may not impact equity and currency markets all that much since it is widely expected.  Nevertheless, the market’s reaction to a move above 300 bps in yields would be fraught with interest.

 

 

 

 

DXY:

040114 $USD

 

 

The US Dollar is placed in a zone from where it can shoot for $DXY 90 or dive for $DXY 70 with equal range and more or less equal probability.  The Index closed at 80.9550 on 01/03/2014 and is one of the most difficult currencies to call at this point.

 

The Index’s 200 DMA lies above at 81.65 while the 50 DMA lies at 80.52 below.  I would be reluctant to call the currency either way until it decisively breaks below 79 or above 82.  That said my sense of the long-term trend in the Dollar is that [a] it bottomed out at 71.88 on 4/21/2008 and [b] that it is correcting down in an orderly impulse wave starting from the top of 88.46 made on 06/07/2010.

 

With that larger picture in mind, a correction is under way from the top of 84.78 made on 07/09/2013 mid-April, 2014.  For the near term, $DXY can shoot for 81.68, its 200 DMA but is unlikely to sustain above it.  My sense is the Index will nick the average and head down again for a retest of 79 before it makes up its mind on the direction in which to head.  I am bearish on $DXY till Mid-April. A word of caution is in order.  $DXY can compress going forward or show extreme volatility.  Compression would be a bullish indicator, while extreme volatility with a mean of 80 would be bearish.  That is best that I can do at this point.

 

 

EURUSD:

040114 EURUSD

 

 

EURUSD is an uptrend from a low of 1.20 made in August 2012.  The uptrend has a target of 1.4250 ending mid-April 2014.  The pair’s 200 DMA lies well below the current level of 1.35870 at 1.33.  The 50 DMA is currently placed at 1.36, just a bit above Friday’s close.  The current correction from the top of 1.3892 made on 12/27/13 in no way threatens the long-term uptrend.

 

That said, EURUSD is likely to find support at 1.3550 and that support is followed by more robust support at 1.3450, which is unlikely to be breached.  I expect EURUSD TO turn up again from 1.3450 or above and head right back up to challenge 1.40 again.  1.40 is an important overhead resistance that may take more than 3 or 4 attempts to take out.  But that’s the direction in which EURUSD is headed as soon as the current short correction ends.

 

 

USDJPY:

 

040114 USDJPY

 

 

 

The Dollar has been in a major uptrend against the Yen from a low of 75.6 made on 10/28/2011 and that uptrend has a target of 110 Yen and is intact.  The 200 DMA of USDJPY is placed at 99.45 Yen while the 50 DMA is currently at 101.7.  Both the averages are well below Friday’s close of the Dollar at 104.82.

 

USDJPY took out the previous top of 103.70 made on 5/22/2013 in the current rally making a top of 105.440 on 1/02/2014.  The current correction is little more than one intended to test the last top as the new support.

 

With that in view, first support from the current level lies at 103.50 followed by a more robust support at 101.50.  My sense is the Dollar might take a breather around 103 for 2 to 3 weeks before heading right back to 105 and above.  “Abenomics” is determined to run the full course and it’s probably the right thing to do for Japan at this point.

 

EURJPY:

 

040114 EURJPY

 

 

 

As the Euro is strengthening against the US Dollar, and the Yen is weakening against the US Dollar, we take a look at the EURJPY, the price of Euro in Yen, to check if the trends in place bear out the prognosis for the US Dollar.

 

The Euro has been on uptrend against the Yen since the last week of July 2012 from a level of 94 Yen.  It topped out recently at Yen 145.67 in last week of December 2013, showing an appreciation of 55% over 17 months.

 

During the same period, the US Dollar appreciated against the Yen going from 78 Yen in End July 2012 to 105.25 in December 2013 showing an appreciation of 34.94%.

 

Meanwhile, the Euro appreciated against the US Dollar during the same 17-month period going from 1.20 to 1.390 showing an appreciation of 15.83%.

 

Putting it another way, it would appear that it is the deliberate weakening of the Yen that is driving the markets over the last 17 months & not Fed actions such as they are. Policy action in Yen explains most of the moves in both Euro & the US Dollar.  A word of caution is due though.  The 110 Yen to the US Dollar is a formidable overhead resistance and the wave counts favor a consolidation over the weeks ahead.  But such consolidation is likely to be well above 100 Yen to the US Dollar.

 

 

USDINR:

 

040114 USDINR

 

 

After topping at INR 68.80 on 8/28/2013, the Dollar has been correcting and has twice successfully bounced off the bottom at INR 61.  I think the correction was completed at a low of INR 60.83 on 12/09/2013 and since then the Dollar is an uptrend with a target of INR 64.

 

Within the uptrend to INR 64, my sense is that Dollar completed wave [a] at INR 62.48 and wave [b] at INR 61.71 and on topping 62.50 over the next few days, will head for 64 or slightly higher.

 

Over a longer-term horizon, I think the long-term uptrend in the USDINR remains firmly in place.  The pair’s 200 DMA lies well below at INR 60 while, the 50 DMA is at 62.12 and the Dollar closed Friday at INR 62.18, just a touch above the 50 DMA.

 

The Dollar may well turn down in world currency markets, especially against currencies such as the Euro and Yuan.  But as far as the USDINR market is concerned, it is decidedly in a long-term uptrend.  Don’t shade the Dollar using INR.

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It would be a disaster if Shri Modi becomes the PM, says the PM

January 3, 2014 Leave a comment

The Prime Minister in his presser categorically & forcefully made two points with regard to Shri Modi.

 

Firstly, that it would be a disaster if Shri Modi were to become the PM.

 

Secondly that Shri Modi presided over a massacre in the streets of Ahmedabad in 2002.

 

These were not remarks made lightly.  Through out his presser, the PM chose his words carefully, and was most animated when responding to the question on Modi.  As such, the PM’s assertion that Shri Modi presided over a massacre in Ahmedabad must be taken in all seriousness.

 

Serious questions hang over Shri Modi’s candidature as BJP’s nominee for the PM’s post.  Here is an incumbent Prime Minister who took office in 2004, about 2 years after the 2002 riots, and one who had every reason to familiarize himself with the circumstances surrounding those riots.  His remarks thus assume special significance; more so since he feels electing Shri Modi would be a disaster.  He has every obligation, as the incumbent PM, to prevent such a disaster and not preside over one himself.

 

The State should have prosecuted Shri Modi.  Instead, private citizens like the widowed Smt. Zalkia Jafri pursued cases against Shri Modi. That in itself was a monumental failure of the State.  Worse, the Gujarat government took every opportunity to obstruct justice and destroy evidence as reported in the press.  There is a widespread perception that Shri Modi was able to use the lengthy, torturous criminal justice procedures to frustrate prosecution.

 

We now have a statement from the Prime Minster himself, no less, that in substance supports Zaklia Jafri’s plea that Shri Modi was complicit in conniving at the massacre that took her husband’s life.  Under the circumstances, it would be in the fitness of things for Zakia Jafri to request the PM to stand witness in the Supreme Court, where she has the right to appeal, and reveal the basis for the assertion he made in his presser today.

 

Furthermore, the SC itself has gone to considerable length to assist Smt Zakia Jafri in having her husband’s murder investigated into.  Would it not be befitting if the Court were take suo moto notice of the PM’s assertion and invite him to explain himself in the court?

 

Shri Modi’s election is of great importance to the future of this country.  Shri Modi stands accused of a serious misdemeanor by the Prime Minister himself.  Would he not like to clear his name before he bids for the highest executive post in the land?  Would we not like that he so clear the miasma of doubt & suspicion that still dogs him?

 

Eminent lawyers should volunteer to help Smt Zakia Jafri draft her appeal to the Supreme Court and request the Prime Minister to stand witness to his statement so that justice is not only done but also seen to be done.

 

This is perhaps one way our system can redeem itself in the eyes of citizens who have reason to believe that the powerful are able to escape justice or frustrate it to the point of exhaustion.

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MARKET NOTES: 15th December 2013. $GLD Waiting for Capitulation.

December 15, 2013 Leave a comment

MARKET NOTES: 15th December 2013.

 

 

We are into weakly trending markets.  Commodities are approaching the end of a multi-year long drawn correction from the 2007/8 tops, and as is typical, we are seeing a great deal of short-term swings in trend that have more to do with technical positions rather than price discovery per se.  Put simply, at this stage we know where the prices are or should be but capitulation is lacking.

 

Once the US Dollar launches into its final bull leg from the 79 region towards 84, the appreciating currency should put a lot of pressure on commodities that will perhaps trigger the capitulation that the market needs in commodities liker gold, silver and WTI crude.

 

On a more personal note, I will put up the complete blog coverage in parts from next week.  This is the first part covering US Dollar & commodities.  The second part will cover equities and $INR.

 

 

HAPPY TRADING.

 

 

 

 

 

GOLD:

 

151213 Gold

 

 

Clearly, Gold appears to be heading for a retest of $1180 last made on 6/28/13.

 

Long term support for the metal running up from the year 2001, lies in the $1200 area, and we can expect gold to thoroughly test that support and possibly violate it.

 

What is the probability of the 1180-1200 support being taken out is a question that needs to be addressed.  Gold hasn’t really tested this support line in the previous bull market since 7/20/2005!  What I can say is that Gold has plenty of time to test the 1180-1200 support before it rebounds towards $1400.  So the probability of a break below support at 1180-1200 is fairly high.

 

I would not long gold.  And it makes little sense to short it so close to a support.

 

Silver:

 

151213 Silver

 

 

Silver chart is analogous to that of Gold as the metal heads to retest the lows at $18 last recorded at the end of June, 2013.  A simple wave count indicates the metal has both time and space to take out the support at $18.

 

First support below $18 lies at $14.  I wouldn’t look at Silver as bull until the charts show that the metal’s price has been completely broken down.  The metal’s chart may hide a long sting in its tail.

 

 

 

HG Copper:

 

151213 Copper

 

 

Copper among the metals has held up well so far.  My sense is that Copper has been moving in a relatively shallow correction from 2007 onwards after breaking into new price territory above 3.0.

 

 

That long drawn out correction could be ending over the next few months but not before Copper dips 2.80 to 3.0 area to establish the previous resistance as the new long-term floor.

 

 

Copper is in a classic terminating wave v of C.  Could have a sharp sting in the tail that takes the price below 2.80 for a short while.  I would wait patiently to long the metal.  Not much sense in playing short from current levels.

 

 

 

WTI Crude:

151213 WTI Crude

 

 

Crude is one hell of a chart to read.  So I am not going to try and read it for the long term as I usually do with other charts.  This one is best read as a open two-part auction.  The first part is an auction in a rising market and the second auction is set in a declining market though the price range for both auctions is more or less the same.  It is pattern or fractal that tries to discover price in a very weakly trending undecided market.

 

 

With that in mind, you have the classic A-B-C run up from 12/10/2012 to 7/22/2013 with crude running up from $86 to $108.  From there you have a corrective A-B-C down with the B ending at $98.62 on 12/12/2013.  With that simple logic, we can expect crude to test the lows at $90 to $92 area over the next few months.  What is clear is that [a] the short-term rally in crude is over and [b] we are going to trend lower towards $90.  That the trend is in line with other industrial commodities lends this interpretation some additional weight.

 

 

 

US Dollar:

 

151213 $USD

 

Using the Auction process logic for crude you can dissect the above DXY chary in fairly straightforward manner.  My read is that the correction to DXY from the top of 84.20 in July 2012 was completed on 10/23/2013 at 79.20. 

 

Since the DXY has launched into a new uptrend, the 1st minor wave of which went up from 79.20 to 81.60 in early November and we have been correcting down for this move up since then with DXY currently placed at 80.21.

 

I don’t think the correction is over although a good part of it has been done.  There could be a dip down to 79 region again after a day or two of rallying.  As a position trader I would accumulate the Dollar nearer to 79.50 level.  In my view the uptrend in the DXY that started on 10/25/13 from 79.2460 is very much intact and even a 100% retracement from 81.5800 made on 11/08/13 would not negate that uptrend.

 

 

 

 

 

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