What’s Happening in the Markets?

We are going through very exciting times in the world markets. Just to give you a glimpse, 30 day volatility of Dow Jones Industrial Average was on a decline since the beginning of this year and saw a low of 3.383% on 18th March 2010. Since then it has only soared and now it stands at whopping 29.66%. Between 18th March and today (8th June 2010), the market volatility has increased nearly 9 times!.

As far as our own Sensex is concerned, the 30 day volatility was at 6.95% on 18th January 2010 and now it is at 24.37%. It was at a high of 28.87% on 31st May 2010.

Is this increased volatility a friend or a foe? A trader would definitely welcome such volatility as it will offer many money making opportunities (and if he is not careful, many losing opportunities as well). But for an investor, volatility is challenge. Asset classes, therefore, become speculative or safe depending on their volatility and also returns. Let us have a look at various asset classes and how they have fared since the beginning of this year. The following data gives information on the return one would have gained has he invested 100 units of the respective currency in the given asset class on 1st January 2010:
(Name and Return since 1st Jan 2010)

Losers:
CAC 40 -14.18%
Crude Oil in US$ -10.40%
Nikkei 225 -9.56%
Commodities (S&P GSCI Index) in US$ -9.20%
FTSE 100 Index -7.28%
Dow Jones Industrials Average -5.86%
S & P 500 -5.80%
Sensex -4.85%
Nasdaq Composite -4.20%
Dax Index -1.93%

Gainers:
Gold (Per Troy Ounce) in US$ 8.34%
Bank Deposits (INR) @ 6% p.a. 2.61%
Real Estate (BBG REIT Index) in USD$ 2.90%

Clearly, it is safer to invest in Gold, Bank Deposits and Real Estate during the volatile times. However, volatile asset classes do provide higher returns when times are good. However, one has to take a considered view as to how to allocate his savings between volatile and safe asset classes. Age does play an important part in such decisions with younger generation preferring higher volatility assets (Rule of the thumb, as many would put it, is to deduct your age from (number) 100 and allocate that percentage of your savings to volatile assets)

Pizza with Daal

After the movie, we all came to the food court. We got ourselves some biriyani, Indian curries and also a pizza from Pizza Hut. From the spread in front of me, I thought why can’t I try Pizza with Daal? I did try and the experience was not very different from the experience of seeing Rajaneeti.

The story-line of Rajaneeti reminds one of Mahabharath, Godfather and leading political families. The movie could have been titled “Seven Murders and an Election” which would have been more apt. There is an abandoned illegitimate child thrown in for good effect – and a potentially dramatic encounter between the son and his biological mother that, in the film is unbelievably bland – principally because the mother seems horribly out of place and out of her depth.

In the second half, it becomes a Godfather clone, almost. The equation between brothers Arjun Rampal and Ranbir echoes constantly of the Sonny-Michael relationship, In the final minutes, all pretensions of being a politicakl thriller is thrown to the winds in the gunbattle. The murderers go scot free. The Police get the wrong end of the stick.

This Saturday, I had really two options – either watch India – Sri Lanka One dayer or watch Rajaneeti. Both were disasters. I should have opted for a third option – helping my wife in the kitchen.