With India-Pak war going on, first-order thinking would have you go long volatility. Typically, buying straddles/strangles and delta hedging them would allow you to harvest the vega. However, Man proposes, Market God disposes.
The P&L of such a long-vol strategy was actually negative the last couple of weeks. Counter-intuitively, short-vol made money.
NIFTY Short-Volatility:
NIFTY long-volatility:
These numbers are after considering transaction costs so its understandable if you wonder if these strategies are actually worth the operational risks involved. However, it highlights the pitfalls of using intuition while selecting either of these strategies. Equity markets were under pressure, realized volatility was rising but short-vol options made money.
Markets this Week
Rupee weak..
… but FII’s kept the faith…
… gold & crude were rupee depreciation stories…
… bitcoin broke through $100k, again…
Links
Research
The Macroeconomics of Tariff Shocks (NBER)
We find that temporary tariffs cause a recession.
The Political Economy of Protective Labor Laws for Women (NBER)
During the first half of the twentieth century, many US states enacted laws restricting women's labor market opportunities, including maximum hours restrictions, minimum wage laws, and night-shift bans. The era of so-called protective labor laws came to an end in the 1960s as a result of civil rights reforms. In this paper, we investigate the political economy behind the rise and fall of these laws. We argue that the main driver behind protective labor laws was men's desire to shield themselves from labor market competition.
“Beauty” premium for social scientists but “unattractiveness” premium for natural scientists in the public speaking market (nature)
We find that in terms of speaking fees, social scientists benefit substantially from being more attractive, whereas unattractiveness is a comparative advantage for natural scientists. This market premium for unattractiveness conforms not only to the common stereotype of the natural scientist but also to a belief that the more unattractive of these researchers engage in higher quality work. Overall, the findings indicate that facial appearance is important in the public perception of academics and, to some extent, their dissemination of knowledge.
Investing Amid Trade Wars (sparklinecapital)
We develop a framework to measure firms’ global trade exposure based on their reliance on foreign revenues, supply chains, and employees. While global firms are vulnerable to trade shocks, they have greatly outperformed their domestic peers in recent decades. Rather than abandon global firms, we argue that investors should maintain exposure while tilting toward those best positioned to navigate trade disruption – firms with (1) low China reliance, (2) resilient supply chains, (3) significant intangible assets, and (4) non-U.S. domiciles.
Tariffs
Tariffs Are About To Hit The US Consumer And No One Sees Them Yet (housingnotes)
American consumers are not yet seeing much evidence of the drastic changes President Trump has made on trade. But they are on their way (nytimes).
Trump trade tariffs slump widens to ‘nearly all U.S. exports’ (cnbc)
The trucking industry hits the brakes with tariffs set to dent imports (nbcnews)
‘Crony capitalism’: GOP megadonor Griffin slams Trump trade war (politico)
Trump considering 100% tariffs on movies not made in the US (bbc)
Trump, Starmer announce limited US-UK trade deal (indiatoday). But the deal punted on some of US businesses’ biggest concerns in the trading relationship (bloomberg).
India has offered to slash its tariff gap with the U.S. to less than 4% from nearly 13% now, in exchange for an exemption from President Donald Trump's "current and potential" tariff hikes (reuters).
India
Satellite internet services providers such as Starlink, Amazon's Kuiper, Eutelsat OneWeb, and Jio will have to submit a yearly plan to the government showing how they will gradually increase local manufacturing of ground segments of their satellite network in the country (livemint).
Japanese lender Sumitomo Mitsui Banking Corporation (SMBC) has signed a definitive agreement to take a 20% stake in Indian private lender Yes Bank (reuters).
Forensic review found India's IndusInd Bank executives traded shares before accounting disclosure (reuters).
Competition Commission issues norms to assess predatory pricing practices (economictimes).
India and the United Kingdom have successfully concluded negotiations for a landmark free trade agreement (cnbctv18). What's in the UK-India trade deal? (reuters)
Samsung has asked an Indian tribunal to quash a $520 million tax demand for allegedly misclassifying imports of networking gear, arguing officials were aware of the practice as India's Reliance imported the same component in a similar manner for years (reuters).
India has begun work to boost reservoir holding capacity at two hydroelectric projects in the Himalayan region of Kashmir after fresh tension with Pakistan led it to suspend a water-sharing pact (reuters).
row
Global BYD (phenomenalworld)
Huawei the Hydra (high-capacity)
DeepSeek. Temu. TikTok. China Tech Is Starting to Pull Ahead. (nytimes)
Facebook Allegedly Detected When Teen Girls Deleted Selfies So It Could Serve Them Beauty Ads (futurism)
How the FDA Helped Ignite, and Then Worsened, the Opioid Crisis (bloomberg)
The CCP is orchestrating a widespread intelligence-gathering campaign at Stanford (stanfordreview).
China’s Migrant Worker Population Is Aging, With Almost One Third Older Than 50 (yicaiglobal)
For years, North Korea has been secretly placing young IT workers inside Western companies (wired).
Private credit fund investors are offloading stakes at significant discounts ahead of more potential pain for the US economy (bloomberg).
WeightWatchers files for bankruptcy as fat-loss jabs boom (bbc).
Globalisation has shattered. What next? (prospectmagazine)
More than half of the top holders of President Donald Trump’s memecoin — who are jockeying for dinner with the president — have used foreign exchanges that say they ban US users, suggesting that many of the purchasers are based outside the US (bloomberg).
350,000 chickens euthanized in South Africa after they were left starving and eating each other (arabnews).
Warren Buffett, 94, stepping down as Berkshire Hathaway CEO (bbc)
Odds & Ends
Progress is something that is made rather than predetermined—and thinking that you are on the winner’s side too early often puts you at a disadvantage. Events only move in your direction if you put in the hard work to steer them that way (livemint).
Meme of the Week
