Do it yourself

Financial Year 2024-25 (FY25), may be recorded in the annals of history as a watershed year for global politics, geopolitics, markets and the financial system. The events that occurred during the past twelve months have opened up significant possibilities for emergence of a new global order. Although the contours of the likely new global order are yet to begin taking a shape, it appears that fight for dominance over technology; endeavor to gain fiscal strength; interventionist democracy where the state exercises intensive control over citizens; and top priority to energy security would be four key characteristics of the new order. The markets began to take cognizance of the broader developments and oscillated wildly between the extremes of greed and fear during the year. However, thankfully, markets managed to close the year on a rather satisfactory note. Most asset classes – equity, bonds, precious metals, base metals and real estate yielded decent returns for the year. Moreover, as...

With the conclusion of the US elections, most of the noteworthy events for the current year 2024 are over. Though some traders may be looking forward to 23 rd November (Assembly election results), 6 th December (RBI’s MPC policy statement) and 18 th December (FOMC policy statement), these events are not expected to make any material change in the market sentiments. ·          In the absence of any foreseeable major event, the markets are in maintenance mode for the past couple of weeks. ·          Benchmark indices are consolidating in a narrow range, just keeping the day traders busy. ·          Broader markets are carrying out the process of clearance: the stocks that crossed the red line and strayed into bubble territory are being punished and dragged back to their right place. ·          The stocks that have been u...

In the past couple of weeks, I have heard more market participants talking about alternative assets like precious metals, cryptocurrencies, and bonds as compared to equities and equity derivatives. The trend has been more conspicuous, particularly after the first phase of voting for the 18 th Lok Sabha. The participants who were confident about an overwhelming majority for the incumbent government and strong equity rally post declaration of final results on 4 th June are now finding a need to hedge their exposure to equities. Surprisingly, none of the non-institutional investors/traders mentioned using equity derivatives to hedge their investment portfolios or trading positions. I would like to share some of my impressions gathered from my numerous interactions with a variety of investors and traders - from very small ones to ultra-high networth; from frequent and short-term traders to long-only investors; from highly educated to less educated; professionals, businessmen to salarie...

In the pre-finfluencer era, we used to have gods in the financial markets. Those gods would make an occasional public appearance and talk about their views on markets and investment strategies. The market participant would listen to these gods with rapt attention and follow them religiously. All those Buffets, Mungers, Rogers, Finks, Woods, Jhunjhunwalas, Damanis, et. al. were revered names. Then TikTok, Instagram, and X (formerly Twitter) happened. Financial experts, economists, monetary theorists, and technical gurus mushroomed at the rate of 100 per hour. Everyone who has traded stocks or crypto for three months is now an expert. They not only try to influence other investors/traders by giving unsolicited advice and recommendations; but also get influenced by the advice/recommendations of others who may not be any better than them. Sometimes it appears that there are more experts in the market than the actual number of investors and traders. Unfortunately, this is the situation wo...

  The issue of high and rising US public debt is a subject matter of public discussion in Indian streets. Using a common Dalal Street phrase I can say that every paanwalla, taxi driver, and barber is now discussing how unsustainable US public debt is. For example, listen to this boy . From top economists, analysts, and global strategists to a common man on the street, all are worried about an imminent US default and its impact on the global financial system, especially the developing and underdeveloped countries. Currently, the US public debt is close to US$35trn (Appx 125% of annual GDP) and is projected to double in the next eight years. The current US government's annual interest payments are more than US$1trn (Appx 20% of annual federal revenue; 14% of annual federal spending and 4% of GDP). The average interest rate on the entire debt is less than 3% p.a. As of June 2023, 43% of this debt was owned by the Federal Reserve System and State and Local Governments. 32% of the debt...

For many weeks, global markets have been behaving in a very desynchronized manner. Non-congruence is conspicuous even in the behavior of the same investor/trader operating in different market segments, e.g., equities, bonds, commodities, currencies, cryptocurrencies, etc. For example, until a month ago an investor with a balanced 50:50 debt-equity asset allocation invested in bonds as if a soft landing was imminent leading to a series of policy rate cuts over the 12-15 months. The same investor invested in equities believing that earnings growth would surpass the estimates and stocks of top technology companies would continue with their dream run. The investor was content investing in USD assets assuming green greenback would strengthen and at the same time he was buying bitcoins expecting the demise of the extant monetary system by independent crypto or digital currencies. Last week in the US, equities reached their all-time high levels as if all is well in political, geopolitical, cl...

Continuing from yesterday ( see here ) Many readers have asked a very pertinent question, viz., "why the stock prices are not reflecting the economic reality?" It is a common knowledge that the outbreak of COVID-19 pandemic and consequent socio-economic shutdown has caused extensive damage to After pondering over this question for many days, I have reached the following conclusions: All financial assets (Bonds, Equity, MF Units, Derivatives etc.) have two clear manifestations - (i) Interest in some underlying business(es) or loan to some underlying business with or without a charge on the assets; and (ii) independent commodity without any regard to the any underlying business or asset. When someone buys equity shares of a company with the intent of acquiring an interest in the underlying business of that company, he is considered an investor in that underlying business. He may use the services of stock broker or may buy directly from the company ...