When would the market crash

2020 was a terrible year for the economy but markets still have touched historical high.

Am I going mad seeing this or would I have the last laugh! Only God knows.

When would recession come!

It is 31st December 2019 and I still remember the day 10 years back that interest rates are going to be low till 2015! It seems now that they would remain low forever.

It has been more than 6 years that I strongly feel that markets would crash. However I have looked as the most foolish person in my prediction. My thesis has two counterpoints

1) All this regulation would save the world.
I am very firm on this that these regulations have been gamed by the companies as always is the case.


2) Last decade, machine learning has increased the productivity of the world significantly.
I am not completely sure about this but it seems very clear that ML is a bubble.

Lets see if I have the last laugh. 

10 years and counting

It has been 10 years since the day Lehman filed for bankruptcy. And it seems that we haven't learnt the lessons.

Last crisis was caused by debt and we have solved it by creating more debt. There can only be two reasons which can justify the current thinking that this time is different.

1) Regulations: For five years, I am in a role which helps me to closely understand the efficacy of regulations. While things definitely seem much better than the last time, it seems that market has found ways to game the regulations. Actually this would always be the case as the role of regulators should be to align the incentives rather than create distortions and then expect markets not to get tempted by creating barriers. This has never worked and this would never work.

Nice video explaining why barriers generally don't work. :)

https://www.youtube.com/watch?v=DZt4n3lh8lQ


2) Artificial Intelligence: This is something difficult to evaluate as it can potentially change the world. I am no expert in machine learning to tell how advanced we have become and I don't see any reason why eventually machine would not become as smart as humans. My suspicion is that market has overpriced the progress we have made on this avenue. Something similar happened before great depression and I don't think people who are betting their money on technology have much idea on technology itself. Although unlike the first point, this remains an 'if' and as a possible reason why my hypothesis could go wrong (as it has been for almost 7 years. :) )

So the Wall Street now thinks that Trump rally is based on Fundamentals. And what are these fundamentals...that yields are too low to invest anywhere except equities.
I have been waiting for almost 4 years now in 'hope' that market crashes and becomes rational...And this idea of increase real growth by decreasing nominal rates is thrown in the dustbin forever.


https://www.nytimes.com/2017/08/02/business/economy/stock-market-trump-economy.html?_r=0

But a market surge based on political hopes has been replaced by one more firmly grounded in the financial realm.

Besides steady economic growth or less regulation, investors also have been encouraged by the loose reins of central banks like the Federal Reserve, which have helped keep interest rates not far above their historic lows. Inflation, too, remains tame, with price increases in recent months actually falling short of the Fed’s targets.

At the same time, with yields on safe assets like government bonds so minuscule, there are few appealing alternatives to stocks for investors, according to Torsten Slok, chief international economist at Deutsche Bank.

“No matter how you look at valuations, they are high,” he said. “But as money flows into pension funds every month and needs to be invested, why would I put it in bonds?

Article 377 and Minimum Wage Law

Recently there has been a huge controversy on the remarks of former finance minister Yashwant Sinha that if US has arrested an Indian consulate on the pretext of violating Minimum Wage Law, India should reciprocate by arresting US diplomats for breaking Article 377. (Homosexuality Law)

To this many liberal commentators have severely criticized the move as they think that Minimum Wage Law is pro human rights while Article 377 is anti human rights law.

It surprises me that the liberal commentators are so ignorant that they are unable to see the obvious. Both the laws are anti-libertarian though they differ somewhat in degree. Does it require a rocket scientist to understand that they both are unsolicited intrusion of state in the private decision of two individuals. The only justification of Minimum Wage Law is that in its absence, one can misuse the other in the pretext of consent. Supreme Court also justifies the stupid 377 on the ground that historically it has only been used to prevent one from forcing on the other. Either liberals don't have eyes to see this or brains to comprehend what they see.

People who are shouting that the Indian counsulate has committed a huge crime don't realize that this kind of Visa fraud is rampantly prevelant. As despite Article 377, Indian police does not send two consenting homesexuals to jail, similarly despite Minimum Wage Law US authorities don't send the Goldmans Sachs and TCS of the world for breaking it regularly.

I believe many of the readers are software engineers who would have gone to US/UK on the pretext of training/knowledge transfer etc.

1) Isn't it true that almost all actually go to co-ordinate on the work which has been outsourced to India. This means they are working in US/UK as any of the domestic citizen.
2) Isn't it true that despite working in US/UK, people get per day as low as $40 + house ($80 without house) and separately get a paltry amount credited as your Indian salary in your Indian account.
3) Isn't it much less than the minimum wage law which US guarantees. So by the same logic all such Indian IT professionals should be jailed in US.
4) Isn't it true that despite this 'anti-human' treatment meted out to these professionals, they all long to go on this on site.
5) If the US company is better off in calling someone and an individual is better off in going there, who is the state to come in between.

So by the same logic, if the maid thought that she is better off going to US at a 'low' salary, and the Indian diplomat thought she is better off calling her. Why is this act being called anti human. Of course it is illegal as per the US laws. (as is homosexuality per the Indian laws).
Just to clarify I am not equating the two laws but comparing them. Personally speaking, I don't absolutely object to state intruding into the personal space but only when it is absolutely necessary. The problem is that the condition of 'absolutely necessary' is subjective which changes with societies, times and the order we are trying to establish. As a rule, state should do away with such duties and laws like these should be exception rather than the rule. Even if state feels necessary to interfere in such cases, criminalizing private mutual decisions by punishment upto 10 years should be condemned by everyone. (both Minimum Wage Law and Article 377)

Apart from the philosophical view point, economically too Minimum Wage Law has done a lot of damage to the world. Consider a scenario when a poor does not have money even to buy his/her bread. While a moderately rich person can employ him/her but can only pay an amount which is less than the minimum legal wage. This transaction would have made both the sides better off, increased the GDP and reduced unemployment but thanks to this stupid law none of the above would happen.
In fact one of the reason US economy is in such a sad state (low growth, high unemployment) is due to socialistic laws like these. In the pursuit of defining the end, when we compromise the means, we end up comprising the end itself. Hope liberals understand this!

The end is inherent in the means. - Gandhi (1869 - 1948)

 

I thought Devegowda was the worst PM.

there are somethings which have the strength of making you come out of the blogging slumber!

http://www.ndtv.com/video/player/news/advani-believes-being-pm-is-his-birthright-prime-minister/194457g

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