After the lassi, metro trails, paranthas and parties, I can safely assume, I have soaked in some Delhi sentiment. Some feedbacks that poured in; “Mukul, you were right about gold. It did go up”. Another was “Mukul, you were wrong about the re-entry in gold in June 2010. It never came down.” Foregone profit causes pain.
I did not get many forecasts from Delhi this time. But I got a call from an acquaintance outside Delhi. This person told me how she was making money flipping real estate and how real estate was ‘the business’. Inside Delhi it was more about regret, “only if I had held that plot of land, or only if I would have waited a few years more”. The regret connected with lack of ownership (land) coloured Delhi. A section of Delhi feels the pain for missed opportunities (on real estate deals). While another section, the young dynamic educated Delhi, struggles with rent and rental costs.
So, on the one side we have gold, which we will consume anytime and every time. And on the other, we have a dying urge to get back to the good old days before we were foolish to sell that real estate away. Ok! This feeling is not total. There is a part of Delhi, which is still stuck with unscrupulous incomplete real estate projects. We can understand it as karmic punishment or classic intra sector divergence.
Another divergence aka “consumption” is thriving in Delhi. I heard that CCD (Coffee Cafe Day) plans 80 outlets, just in Connaught Place. I won’t be surprised, if it’s a fact. In this brand fancy world there is no place for the passive. Competition has almost killed the good old Nirula’s (sold for Rs 100 crore). And if you tell me this demand is going to take a V-shape nose-dive before 2015, I will bet against it (The Crazy Consumption May 4, 2012).
So, where does this bring us? It brings us to the basic question, what will prevail, consumption or negative market sentiment? Ralph N Elliott was a forecaster born on July 28. He made a forecast at the bottom of the great depression in 1935 that markets are in a multi-decade bull market. He wrote the Elliott wave theory, which is one of the most intuitive and visual trend identification theory. Elliott lived till 1948, but he left behind a generation of practicing Elliotticians. Some of them claim that the multi-decade bull market is over and the mother of all bear markets is round the corner, which will lead to another 1932. I agree about the depression, but I disagree on the timing. What makes us so sure that the depression is round the corner and not after another five years when the insanity develops wings and becomes more colourful and manic? Why can’t Nifty go to 10,000 and Dow to 20,000 before we see the implosion?
Technically speaking, Dow’s monthly momentum has reached extreme oversold three times since the 1929 top; first in 1932; then in 1975 and recently in 2009 lows. This means that for the market, the depression was already here (oversold status). If it was already here, don’t we get a reprieve, a surprise, a breather from the chaos ahead? Are we not fooling ourselves again living a convenient conflict? Sentimentally speaking, one can say that fear might have got into our long-term memory, but on the other hand we are fearlessly paying $100 (Rs 5,500) for a pair of Levis.
I don’t know how different it is in Mumbai. This is why we have decided to set sail for Mumbai to celebrate Ralph N Elliott’s 141st anniversary on July 28. Talking about mentors, A C Reddy used to tell me, “Never fall in love with a forecasting technique; none is perfect”. One could extend that thought, “Never fall in love with an asset, be it gold, real estate or coffee, they are all going to surprise and sink”. The question is “when?” We are in a 150-year inflation cycle and even if gold remains the global currency for 150 years, you might be paying by gold to buy lassi.
The author is CMT, and Co-Founder, Orpheus CAPITALS, a global alternative research firm