IIP measurement

The apparent decline in IIP after 2007 is partly owing to the end of the CMIE involvement in IIP measurement. CMIE is now back to doing data collection for the Index of Industrial Production.

Market reaction to Barack Obama

On 3rd November, the S&P 500 closed at 965. Now it's at 912.

On 3rd November, the VIX closed at 55. I would have normally expected that the outcome of the US presidential election should yield a reduction in uncertainty. But the VIX is now at 64.

A coincidence? I am reminded of the article in the Financial Times by John Tamny and Rob Arnott, that I had blogged about on 4th November, which pointed out that the market is pretty uncomfortable with an Obama presidency which might shape up as a left-of-centre administration.

The market is doing well, as always, in being a canary in the coal mine. The 5% decline in the S&P 500, and the 9 point rise in the VIX, would exert pressure on Obama's staffing decisions. We're perhaps more likely to get well respected names such as Larry Summers in economic policy roles as a consequence. I am reminded of 17 May 2004, where the stock market registered a massive vote of no confidence in the UPA. I feel this helped increase the quality of Sonia Gandhi's decisions on putting together her cabinet.

Credit default swaps on Indian firms

Jayanth Varma has spotted some fascinating new data.

Statement on MNS

The undersigned are Maharashtrians who have lived and worked in different parts of India and the world without any let or hindrance. We are, therefore, appalled and anguished by the recent attacks on North Indians in Mumbai and elsewhere in Maharashtra . These illegal and unconstitutional actions are an affront to our heritage and the traditions of tolerance that Marathi saint-poets, social reformers and intellectuals have cultivated over many centuries.

The perpetrators of the violence have defied the rule of law and challenged the fundamental right of our citizens to travel, study, reside or earn livelihood anywhere in India . What is more, their cause- the interest of the 'Marathi manoos' - smacks of regional chauvinism.

Regional chauvinism jeopardizes the very future of Maharashtrian youth in whose name the chauvinists are agitating. The Maharashtrian youth, like the youth all over India have legitimate aspirations to acquire education, develop skills and successfully compete in the market place to get better jobs and higher incomes. These are indeed legitimate aspirations and can be met by a dynamic and united India . However, if these chauvinists forces remain unchecked and unpunished, it will be detrimental to vital interests of the State of Maharashtra and bound to subvert unity of the nation as well; the unity for which scores of Maharashtrians have rendered supreme sacrifice by laying their lives.

We urge our fellow Maharashtrians to reject out of hand the regional chauvinists who are engaged in dangerous games for electoral gains and call on the authorities to thwart their designs with vim and vigour.

Air Chief Marshal (Retd) Anil Tipnis, Anuradha Kunte, Bhalchandra Mungekar, Dileep Padgaonkar, Harish Salve, Rajdeep Sardesai, Air Marshal(Retd.) Satish Inamdar, Ambassador Sudhir Devare, Suresh Tendulkar, Tasnim Mehta, Vijay Kelkar

Crisis watch, 5 November

TED spread	2.23
S&P 500 returns	+4.08%
VIX	47.73
Nikkei 225 (11:10 AM IST)	+3.56%
US Financials index	+5.17%
ICICI Bank ADR	+7.28%
Call rate on 4th	7.43
Currency futures (11:10 AM IST)	47.05

• I wrote an article Will the money market go into Crisis #3? in Financial Express today.
• Ila Patnaik in Indian Express on monetary policy.
• Gautam Chikermane on mindless bailouts.
• See this editorial in Financial Express and this one in Indian Express.
• Christopher Cox on reforming the US SEC. When they merge the US SEC and the US CFTC, I hope the merged entity looks more like today's CFTC and less like today's SEC.
• Stephen Schwarzman of Blackstone Group, in Wall Street Journal on key principles that financial sector reform must emphasise.
• The economic slowdown in China, by Ariana Eunjung Cha in Washington Post. The Shanghai Composite index has yielded nominal returns of 0% over the last 8.7 years. Things worked out slightly better in India. 8.7 years ago, Nifty was at 1722, which yields average annual returns of 7.15% over that period.

Crisis watch, 4 November

TED spread	2.37
S&P 500 returns	-0.25%
VIX	53.68
Nikkei 225 (11:10 AM IST)	+5.72%
US Financials index	-0.14
ICICI Bank ADR	+4.73%
Call rate on 4th	7.47%
Currency futures (11:10 AM IST)	49.125

• The RBI statement is unusually well written.
• Satish John and Nesil Staney try to track down the dollar shortage being faced by Indian firms. Also see Shalini Dagar in Business Today.
• Arun Kumar has an article in Business Standard with data about companies where bonds are being traded abroad at very high yields. As with the offshore CDS market, this is an interesting measure of which firms are in distress, that we don't get in India owing to the lack of these markets.
• Rajesh Gajra on short selling. SEBI has started started moving on making SLBM work. But they're still in the micro-management mode of specifying details - e.g. the time of day for which the mechanism should work.
• Percy Mistry on what India should be doing.
• Nirvikar Singh on what next for India.
• Jamal Mecklai is long rupee.
• Shruthi Jayaram in Financial Express has written up Gary Gorton's NBER paper on the subprime crisis of 2007.
• John Tamny and Rob Arnott say that one factor that is spooking the equity market is: an Obama presidency.
• Why was Lehman allowed to die? by Lorenzo Bini Smaghi.

An arbitrage

Wouldn't it be amazing if John Q. Walker's strategy could be applied to Julius Block's data?