The Ghost and The Darkness

The movie, “The Ghost and The Darkness” is a true story of two man-eating lions in Kenya who terrorised the railroad project for nearly nine months.

As the story goes, the lions hunted humans not for food but as a sport. The lions were more than 9 feet long, they constantly kept increasing their land reach, and with every attack, they became more confident and ferocious. Finally, the killing of one of them leads to the second one making a revengeful attack and losing his life. The man who finally ended the terror of the lions, John Henry Patterson played by Val Kilmer, has written a book named “The man eaters of Tsavo” which talks about this whole episode.

So, where does this fit in the current context? We are facing two difficult, constantly expanding issues that are getting ferocious by the day: inflation and interest rates. The enormity of the problem is huge and with each new data point, the impact is rising. Just like the work stopped at the railroad bridge, for us growth has eased off. The workers out there were terrorised and we are facing the terror of sharp volatility in prices, earning numbers and multiples. The uncertainty is inching higher and with each passing day, the worries around bad news are increasing.

High inflation and rising interest rates create a difficult by-product “volatility”. While the general argument is that traders love volatility. The volatility here is not restricted to price, it expands to business stability, earnings visibility, consistency of margins and impact on returns ratio. All this put together impacts the multiples. A blur vision of future growth coupled with macro headwinds (contractionary policies and possible corporate routes) makes it difficult for participants to make decisions for any time horizon.

Coming back to the story, to get rid of the two lions, they took help from tribes that stayed around, kept strategizing and used different mechanisms (but none of them helped make things worse) until finally one of the plans worked out. Similarly, we are now seeing fiscal and monetary measures used, many of the tools used are not reaping adequate results or worsening the situation at times but eventually one of them will work out.

Finally, success was achieved because of patience, focus and teamwork. Their initial success came because the two lions split and they had to deal with one at a time. This is probably the way out; we keep singling out the issues and addressing them (surely easier said than done).

However, for now, it seems that there is still quite a bit of pain left as we address the elephant in the room (or in this case the lions in our economic jungle).