To tame or cane the dragon, is the question!!

Now that it is anything but secret that the destroyer in chief of the old normal sprang from the wet market of Wuhan or from a lab therein, the indignation of the world is all over China. Be that as it may, what do we Indians do? Join the party, spoil the party or for a change use the famed Indian brain?



Even while I write this a bunch of us would have uninstalled Chinese Apps and retweeted “Boycott China”. Believe me that would be water off the ducks back for China. First of all, India has a unique geo-political standing with China as against the world. While a distant country can cancel flights and do eyeball to eyeball confrontation with China and play the waiting game, India hath not an easy option for the maker did not give us a choice of neighborhood.



Let’s wink a while and bend a little to understand a little bit more about this chalk and cheese combination of Asia. To begin with India, China and history are incomplete without one another. We share not only a 1700 km long border with China but also a minimum of 2500 years of history.



Many official communications from China refer to Indian aspects as Yìn dù jiào. It’s no coincidence that the phonetic is loaded with the character of the land and if that hits the raw nerves of communists and secular worrywarts, I would tell them “verily ask thy master, why did you make us sing knowing it was farce”



In all those thousands of years not a sword crossed between the two countries while Europe kept burning year after year, remember Winter War, Ottaman wars, et el.

Indo-Chinese relations on the other hand had become so deific that we had started exchanging Gods and Godmen. Few of my Tamil chums would know that a certain Boyang from China is a household seer held in high esteem. Or was I expecting a little too much from my fellow domiciles?? Anyway, I am not giving away the suspense here. You know where to reach!!



Beginning 1959, tensions between the two countries kept escalating and culminated in the rather gruesome 1962 war over a disputed Himalayan border, inter alia. Shock and Awe? No. Certainly not in the fact that the Chinese are cold blooded, inscrutable and expansionist. The designs were in plain sight. Not for the then PM and Defense Minister, V.K Krishna Menon.



The incredible foreign policy in vogue said peaceful co-existence and non-intervention with affairs of other countries. Trusting that the neighbors would translate this into Urdu, Chinese, Burmese, Russian etc and proclaim the same. Travesty of politics also known as Panchsheel.



The calamity didn’t stop there either. A foreign policy as catastrophic as this led to a defense policy of disarmament and many ordnance factories converting into cottage industries.



The Shanti Parva in Mahabharata has that King Yudhistra proclaimed the same foreign policy but sent the strongest of his brothers Bhima and Arjuna to safeguard the borders as his defense policy after his coronation. Difference between a PM, Indian by birth and foreign by thought vs a king who was Indian in sum and substance



By the time the writing became clear on the wall, the then PM went on AIR bidding goodbye to his brethren in Assam and started writing letters to USA, USSR and “to whomsoever it may concern”

Now these are lessons on how not to deal with China. The Chinese are masters in treachery and our fait accompli next door. Their supremacy in this region is going to stand for time to come, unfettered, unaltered and without a rival.



Anybody with dreams of the USA pulling back from China can go back to sleep. While investing in China, the USA had grand plans of making an ingress into accessing the cheap labor there but did not plan an egress on need and squarely failed in it.



Much of the US economy runs on the semi processed goods that gets further processed and completed in China before being shipped back. If the “much” lacked the punch, here it is, $560 billion worth of goods as of 2018. That’s a whooping 21% of all imports. How on earth is the US going to replace this and with which country?

For all that I wish, the bravado of substituting with India is not realism given the inferior infrastructure and a bureaucracy as unpalatable as it can get.



Howsoever baffling the quagmire might look, it is not without a solution.



To begin with, India must match China missile for missile, arsenal for arsenal and submarine for submarine in her weaponry. National Security can reckon no compromise and only the mighty are called for the negotiation table, others become menu on the same table.



The foreign policy can be turned to assuage China that India would not side with an adversary of China and partake in an attack on her soil unless there arises a need to protect the sovereign interests of India. In other words, we care a damn what you do with Taiwan and you stay off our borders but yes in whereby thereby diplomatic language.



This will more or less keep China away from Pakistan and if required the Vietnam card can always be played against them saying, if you can groom a bunch of hooligans to hurt us imagine what damage can we cause turning the Vietnamese against you. Surreal it may sound, but possible all the same, if we straighten our backbones and get the ilk of Panchsheel out of our minds.



Transparency, firmness and a neutral posture during their adversity will tame this dragon!!

Mutual Funds-The more we know the less we want!!

A magician’s wand brings out a rabbit from a hat and makes it disappear. The spectator knows for sure something appeared in front of him but knows not where it came from and where it went to. This was a description of not a magic show, but the grand Mutual Fund show in India.

The hayloft of knowledge on mutual funds are that, “it is subject to market risk”. Everything else is known by the fund manager and believed by the investor.

Till 1963, when Mutual Funds were launched in India, investment in India was personal expertise since savings, the source of it, stemmed from therein. An attempt to try a concept launched in USA a good four decades back. A mimic as befitting as a tiger stripe on a cat.

Unit Trust of India floated as an Act of Parliament had a monopolistic rule for about two and half decades till players such as SBI joined the game in 1987. The rich amasses by then under the management was Rs. 6700 crores. I hear the grumble, not even 10% of what Mr. Brewery owes to the country.

Come 1993 and in marched the private players. By then RBI had begun distancing itself and sooner than later Murphy’s law had to be seen around the corner.

The argument for Mutual Funds were almost the same each time and was always “in the long run it is beneficial”.

Irresistible being John Keynes’ rant “in the long run we are all dead”. Now you know why Mr. Murphy had a role to play here.

Ever since the turn of the new millennia, the CEO in the Mutual Fund business, the fund manager, has been under some sort of a duress to venture into unchartered areas and hob knob with grey personalities. A stark example being an ever-increasing presence in Investment Banking.

Now, apart from subject to market risk slogan did we know that MFs are not investment options per se but investment vehicle only. One man’s ignorance is another man’s room for vice. The euphemistic vehicle has been exploited fully to square deals between companies and huge investors at the expense of the gullible middleclass investor.

Take this example- A, with surplus money and not so surplus of a knowhow, invests his money with a fund manager. This manager gets a quirky deal to float money at his disposal to smoothen a syndicate project and in return is able to return a good yield to A. All that A knows of is, he invested in something and it got him something good. What transpired in between did not strike his dreams even.

His compeer B gets inspired and treads the same path but to his misfortune the fund manager’s tryst with luck is well past behind. The result being B gets a sub-prime yield and he is told “in the long run….”. Keynes turns in his grave. A’s success story reaches the media and B either waits for turn of fortune or writes a blog!!! Sorry, this is no confession statement!!

Remember all this is under the garb of transparency, effective regulations and fair play.

MFs have been seen grappling with commodity market and forex market oblivious to the unwarranted risk coefficient and driven by the race to increase the yield, now and here.

Nothing covers up the crevices in the system like good times. Success has many commentaries and failures have no soothsayers. To believe global depression is the villain is plain imbecile.

Global depression did not demand MFs to fund the real estate mafia in India, whose character is unbeknownst to none. Regulators, with all due respect, are only half awake to the misappropriation of assets complimented by violation of related party guidelines.

Before we know, MFs are reducing themselves to a mere vehicle for corporate money laundering. Come a panic situation such as this, the same corporate money exits at the best possible NAV and the retail investor is left high and dry.

Think of this, what are banks doing in MF business? Were they not meant to accept deposits and give credit? In numerous such cases there will be a private label route taken

Franklin Templeton was probably the last in the tribe which has also closed quite a few schemes.

Following suit to this was RBI’s move of opening a liquidity tap of Rs.50000 crore for MFs to alleviate redemption pressure on fund houses.

That this happened within 2 months of the COVID crisis speaks volumes of how the MFs were being managed, if at all they were. Caveat emptor never sounded more relevant isn’t it?

It finally boils down to the point that beyond the tax arbitrage between MFs and Fixed Deposit interests what did the retail investor gain and at what risk? Remember a collapsing giant does not collapse alone and no prizes to guess where the next crash is going to be. Certainly, a price to pay if the guess was not correct.