Julian Robertson needs no introduction in the US financial world. He is perhaps not that well known in India. The man, nicknamed the Tiger, is one of the legends of the US hedge fund industry. He has amongst the best long term track records in generating returns for his investors. Now retired, the Tiger spoke to a leading business channel on the problems facing the US economy. Obviously, we were all ears.
Robertson believes that the recession may look like it is temporarily over. But he adds further that the US has still to solve many of its problems. The chief being the debt that the Government is issuing left, right and center. He reasons that there will be a huge disaster if the Japanese and the Chinese stop buying US treasuries. The only viable solution is for the US to increase its savings rate so that it can lessen some of the pain from excessive debt and reduced dependence on the two Asian nations. But he fears that there isn't any political consensus just yet and the Government is still continuing to encourage speculative activities. He has rightly pointed out that unless there are sacrifices in the short-term, the US long term future looks bleak.
Textile cos. must wait for better days
It has been more than 4 years that textile companies have been getting cheap loans for capacity expansion. Domestic demand for textiles has remained resilient. And exports have shown signs of uptick of late. But there is little that a majority of Indian textile players can take solace from.
With the exception of the market leaders, smaller textile companies have plenty of woes. Neither do they have brand power nor do they have bargaining strength against input suppliers. Everything from a rise in cotton cost to power cost hurts their wafer thin margins beyond repair. A sharply appreciating rupee against the US dollar can only make matters worse.
Unfortunately both of these have struck the sector in this fiscal. International cotton prices have increased by about 67% YoY. In comparison companies, have very marginal ability of passing on input costs to consumers. More so in the case of exports. In the absence of a broad-based consolidation in the sector, we see one of the largest employers of unskilled labour in the country burning out under competitive pressure.