If you do not like to read about Macro risks, I agree with you, you can skip this post. The micro risk of wrong asset allocation and financial mistakes have already been covered earlier..here is the macro. India and the world.

Specific to India:

  1. Good in the long run is Raghuram Rajan’s speed of NPA recognition, however in the short run the psu banks will show weaker balance sheets and lesser profits. This could mean that bank shares will not do well in terms of earnings. However this could increase the respect that the share holding community has for them and it could increase the price earning ratio at which it quotes. So based on this do not take a position!
  2. Modi will not be able to clear all the bottlenecks, and this will mean that people will lose patience.
  3. The massive infra push will be slowed by the  non passing of the GST, but it may not matter in the immediate short run.
  4. Environment abuse – as tom tomed by Green Peace and Ford Foundation may cause some hiccups in FDI.

At the macro level:

  1. The Fed may realise that the interest rates cannot be kept negative for too long
  2. The Fed may realize that its role in the US economy is just marginal, in the world economy, negligible.
  3. Environment issues could be center stage
  4. US will have to dramatically pare down war costs and try better peace initiatives
  5. The world banking system may be a safer place (Post Lehman) but the Derivative market, Hedge fund or Student Loans Market – one of them can give way and trigger another crisis.
  6. Banks, Fed, RBI, etc. have not got smarter, but some smart bloggers may be able to spot problems earlier than the regulators.
  7. Thanks to zero interest rates, asset balloons have happened all over the world, surprisingly, not in commodities.
  8. Expect commodity prices to go up AFTER the Chinese stop this mad production – being used as a stimulant.
  9. Some commodities may go through worse times…but over all commodities could be now waiting to recover..
  10. How much of a risk is terrorism is just a guess. Yours is as good as mine.

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