The session commenced with an unexpected proclamation from the guest Mr Rama Variankaval,
“I’m not here to give a lecture, I’m here to answer questions.”
Hence, he set in motion a highly interactive session, beginning with breaking down the world of finance into Trading & Sales, and Investment Banking. He briefly discussed about his work in the making of mathematical pricing models for stocks and bonds.
He went on to answer questions about the crisis of 2008, the main cause behind it; a certain concept called ‘CDO tranches’ which is basically a credit product in asset backed securities, created to ensure proper, tiered cash flow between mortgages and other debt obligations. Further, he discussed the possibility of another recession happening in the coming financial year, where Mr. Variankaval explained how the expansion cycles generally last for 5 to 6 years, and recalled that it has been 9 years since the last recession.
He also remarked that the evidence for predicting a recession is mixed and involves the contribution of several factors, one being the ongoing US-China trade war, with a warning that when it happens, it’ll happen quick. Further, he discussed the role of immigration in the growth of a nation.
Upon being confronted with the question of the influence that other fields have on finance and vice-versa, he replied that healthcare is currently an emerging field, but is thought by many to be inefficient. He remarked that the Information Technology sector is not of much use henceforth, as only a few concepts like cloud computing would be useful in finance.
He then expressed his opinions on the reforms that the banking sector in India needs and then moved to the stock market, where he explained the concept of long and short stocks and how no matter what happens, it is the speculators i.e. the traders that are gaining or losing money, sharing his contempt as he cashed his stocks expecting a recession. He shed light on how taking up a certain course does not matter for a career in finance.
Mr Rama went on to answer questions regarding the JPM coin and how it is not a cryptocurrency, yet is a tool for money transfer across borders.
“A tricky subject,” he remarked, when asked about ethics and banking. He delved into the various committees within JP Morgan Chase. Mr Variankaval also discussed extensively about the influence of politics, or as he called it – political noise – in the finance sector, rating agencies and their relationship with banks and establishments such as JPM. The recent rating of India by Fitch ratings as a BBB-, i.e. the lowest in investment grade for the 13th year in a row was also discussed as an issue of credibility and how we were immature in handling issues with the recent problem with Vodafone as an example. Emphasizing on the importance of middlemen and the various roles they play, he answered questions regarding hedge funds and their basic functioning.
On a final note, he said that the tech companies will be hit majorly, if another recession were to happen.