Tiger tiger burning bright

It is ironic that a recent issue of the economist depicted a sprinting tiger, to indicate that India is soon going to out-pace China. Cut to 1972: the total tiger population in India was dwindling, and alarm bells finally began to ring when the tiger census reported the existence of only 1800 tigers in the wild. Project Tiger, a last ditch attempt to save the remaining severely endangered population began at the behest of then Prime Minister Indira Gandhi. In 2010, the tiger population has been reported at 1400 left in the wild; an optimistic number in my view. The way that Project Tiger has been administered (with 75 million dollars per annum as a budget) is indicative of a greater systemic governance problem that is characteristic of the way things operate in India, the way things are prioritized. The website for Project Tiger seems to be perennially 'under construction'.

To ask what is wrong with a country that cannot get itself to save the animal that has come to symbolize it (along with the elephant, which is not doing too well either!), and yet beats its chest in the power and glory of being one of the emerging superpowers of the new world order, requires deep introspection. One does not need to read Arundhati Roy's expositions against the Indian State to get a sense of the numbers at play, and for some reason, maybe alluding to tigers may make the sense of failure more painful than thinking of the 60 million kids that are malnourished. After a while big numbers such as that are incomprehensible and abstract! 

The Sensex closed on a very healthy 20,000+ this week boosted by the risk appetite shown by foreign investors and the Coal India IPO. The market in India seems to be riding a wave of irrational exuberance.

The only time a truly malicious bubble forms, is when it cannot be seen by everybody. The asset bubble was definitely visible in the States, but only to a chosen few. Applying the same logic to gold prices; everybody knows that gold is overvalued and so I declare that it is not a bubble. There will be a correction in gold prices, but thats about it. According to the FT; "Indian and Indonesian stock markets are trading at earnings ratios of over 40 times, based on ten-year average earnings".  The fact that nobody on Dalal Street seems to give a hoot, signifies a bubble. A bubble that is not just a one of exuberance, but one that has drawn a select population of the country into strict isolation from the fundamentally distorted realities that are present in it. Furthermore, and perhaps more importantly in the spirit of this blog, it keeps people from seeing that the going is good only till so long as investor confidence in the US is on shaky grounds (refer to currency wars article). 

Word has come out from the Fed that the most likely form of QE2 is going to be the purchase of 100 billion dollars worth of assets every month starting November, until the there are improvements in the employment situation. In my opinion, if this happens, it will be a smart move, and one which will give a slow and manageable boost to equities which have already rallied and priced in large asset purchases to a big extent since September. It will also lead to increased investor confidence, and the steady outflow of capital from countries like India and Indonesia. Rest assured that the Sensex will revisit some of those apocalyptic 2008 numbers. The Javan and Sumatran tigers have been extinct for some time now and the Asian Financial Crisis has probably left a deep enough imprint in the Indonesian psyche. Unfortunately for India, there is nothing that seems to  signal impending gloom clearly enough to even encourage concerned dinner table discussions.

Here's my two pence: start with the tiger.