X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Bubbly crude, boiling rice & more - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • May 27, 2008

    Bubbly crude, boiling rice & more

    Soros says crude's a bubble
    As crude oil prices rise above the US$ 130 per barrel mark (currently above US$ 133), voices have been raised citing the sharp rise in prices as a 'bubble'. "Rocketing oil price is a bubble", says George Soros and reports The Telegraph of the UK. The billionaire investor, famously known for breaking* the Bank of England in 1992, has a view that speculators are responsible for driving oil prices to their peaks in recent weeks and that it now looks as a bubble waiting to burst.

  • Days of 'cheap' oil are gone

    Mr. Soros has said that "although the weak dollar, ebbing Middle Eastern supply and record Chinese demand could explain some of the increase in energy prices, the crude oil market had been significantly affected by speculation." Soros, however, goes on to warn that this bubble will not burst until both the US and the UK were in recession, which could lead to a sharp fall in oil prices.

    As for the rising crude's impact on India is concerned, a surging oil import bill, continued strength in domestic demand and expectations of moderating export growth suggest that the current account deficit will worsen this fiscal, probably to slightly more than 2% of GDP. That's bad news for the government's finances as also those of the oil marketing companies that have not been allowed to pass on the crude price hike to consumers.

    * On Black Wednesday (September 16, 1992), Soros became immediately famous when he sold short more than $10 billion worth of pounds, profiting from the Bank of England's reluctance to either raise its interest rates to levels comparable to those of other European Exchange Rate Mechanism countries or to float its currency. Finally, the Bank of England was forced to withdraw the currency out of the European Exchange Rate Mechanism and to devalue the pound sterling, and Soros earned an estimated US$ 1.1 bn in the process. (Source: Wikipedia)

    India's textile concerns
    Rising cotton prices, currency volatility and fuel supply issues have plagued the textile industry in the country. And companies across the board, especially the smaller ones are facing risk of extinction. However, what the larger companies - those with relatively deeper pockets - are doing is to diversify into newer markets like retailing, where they are setting up retail outlets of varying sizes to sell their brands ass also of competitors.

    Another area where these companies are betting big is the work and performance wear market - specifically, clothing for sportsmen and employees of hospitality, retailing and healthcare companies. This is what Arvind Mills, one of the largest textile companies in India, has indicated to us in today's research meeting. While the opportunity seems large and has been successful in the developed markets of the US and Europe, the fact that the company has studied this opportunity for a period of just one year makes us wonder whether enough research has gone into ascertaining the future market potential. This is specially considering the fact that some of the domestic textile mills have faced pressure recently on account of aggressive inorganic growth activities and poor performance of their organic operations.

  • Will Arvind Mills' value added products yield desired results?

    Rice on the boil
    Well, cotton is not the only agricultural commodity that is witnessing price rise. Rice, which along with lentils comprises the staple diet for many Indians, has seen its price boiling over in recent times. Visit any supermarket and you will notice that a kilo of rice, which would have cost you less than Rs 20 last year, now puts you out of pocket by about Rs 35 to even Rs 40! And despite these high prices, considering the fact that the demand for this staple food far outweighs the level of production globally, economists are of the view that the commodity will continue to see its price rise even more as the year progresses. Rice, as a matter of fact, is a staple food for over 3 bn people (half the world population).

  • What's worrying India's economy?

    Now, what is compounding this issue of inflation in rice's price is that Thailand, the world's biggest rice exporter, has already banned exports, causing countries all over the world to spend top dollar to grab up some of the limited rice which is available for sale. To add to the misery, the recent natural disasters in China (the world's largest rice grower and consumer) and Myanmar (the sixth largest rice producer in the world) have further fueled the price rise. These really are taxing times for the world's poor as food forms a major portion of their measly incomes. And especially for a poor Indian, given his low purchasing power, even a small increase in food prices contributes to s sharp fall in his real income.

    And what's hurting India's agriculture?
    Several factors, actually! But the most prominent of them are low rise in farm productivity, unremunerative prices for farmers and poor food storage facilities resulting in high levels of wastage (courtesy the Food Corporation of India's transportation and storage facilities).

    While the central government, in its Union Budget for 2008-09, announced a Rs 720 bn waiver of farmer loans and extended a jobs scheme (ensuring 100 days of work in a year entailing manual labour to every family demanding such work at the official minimum wage), we believe that none of these populist initiatives will really work until India's policymakers begin giving its ignored farms the importance they deserve.

    Today's Investing Mantra
    "Take a simple idea and take it seriously." - Charlie Munger, Co-chairman, Berkshire Hathaway

  • Some lessons from Munger's colleague, Warren Buffett

     

     

    Equitymaster requests your view! Post a comment on "Bubbly crude, boiling rice & more". Click here!

      
     

    More Views on News

    How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

    Jun 10, 2017

    Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.

    This Small Cap Can Drive Chinese Players Out of India (and Make a Fortune in the Process) (The 5 Minute Wrapup)

    Aug 17, 2017

    A small-cap Indian company with high-return potential and blue-chip-like stability is set to supplant the Chinese players in this niche segment.

    Which Gods Will Bring Down the US Empire? (Vivek Kaul's Diary)

    Aug 17, 2017

    Mr Trump is in the White House and the gods are in their heavens; what's not to like?

    Will They Haul Off Trump's Statue, Too? (Vivek Kaul's Diary)

    Aug 16, 2017

    All across the country, the old gods become devils. New, gluten-free gods take their places...

    This Company Beat the Business World's 'Three Killer Cs' (The 5 Minute Wrapup)

    Aug 16, 2017

    And what it has in common with beating the stock market too.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
  •  

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    S&P BSE SENSEX


    Aug 17, 2017 03:37 PM

    MARKET STATS