Do it yourself

  The Federal Open Market Committee (FOMC) of the US Federal Reserve lowered its benchmark overnight borrowing rate by 25bps to 3.75%-4%. The decision was taken by 10-2 vote, with one member voting for a 50bps cut and another voting against the cut. The Fed also announced that it would terminate the current process of the reduction of its asset purchases (quantitative tightening or QT) on 1 st December 2025. The Fed chairman, Jerome Powell, however, cautioned the market against expectations that the December rate cut was a “foregone conclusion,” saying that it is “far from it.” He cited that there is a “a growing chorus” among the Fed officials to “at least wait a cycle” before cutting again. Notably, after the September FOMC meeting, the Fed officials had indicated the probability of three cuts, including the one in December. Job risks prompt the cut, tariff inflation seen as one=time increase The FOMC decision to cut rate was primarily driven by the cooling job market. T...

Several readers have commented on my yesterday’s post (“USD, Gold, Crypto and a mountain of $38trn debt”). Some agree that the “debt manipulation” theory was far-fetched, others argued that I was underplaying the seriousness of America’s fiscal overhang. Both reactions are valid. My intent, however, was not to trivialize the US debt issue, but to put it in its proper context — and to focus attention on the much larger transitions now underway in the global financial order. I would like to elaborate to convey my point in the right perspective. The Debt Problem Is Real — but Not New The US federal debt now stands around $38 trillion, or roughly 120% of GDP. That sounds alarming, but the ratio has hovered near that level for over a decade. The composition, though, has changed dramatically. After the dotcom bust, debt piled up in corporate and household balance sheets. After Lehman, it migrated to banks. Post-Covid, it has firmly shifted to the sovereign. In essence, the debt hasn’t disapp...

  The Federal Open Market Committee (FOMC) of the US Federal Reserve (Fed) maintained its policy rates at 4.25% to 4.5% range, by a majority vote. It was the first occasion since 1993 when two Fed governors voted against the majority decision. Fed governors, Michelle Bowman and Christopher Waller, wanted a 25bps rate cut at the meeting, concluded on Wednesday. The majority decision of the Fed to not cut rates is apparently against the wishes and open demand for a rather drastic cut in the Fed policy rates by the US administration, especially President Trump. Strong April-June quarter GDP data and July private payroll data perhaps weighed on the Fed decision. The Commerce Department’s advance gross domestic product (GDP) report on Wednesday showed growth of 3.0% for the April to June period, above the 2.5% growth expected. US GDP shrank by 0.5% in the January-March 2025 quarter. U.S. private payrolls also increased more than expected July, rising by 104,000 jobs in July 2025 af...

  Trump: Hey Susie, you’re looking absolutely fantastic, nobody does it better! How’s the morning going? Did my posts on Truth Social and that failing platform “X” – terrible name, by the way – absolutely ROCK the world last night? Total game-changers! Susie Wiles: Sir, you’re the greatest President in history, nobody even comes close! The entire planet is glued to your accounts. Your posts are sending shockwaves across the universe – markets trembling, governments in a frenzy. We’re doing phenomenal, the best any administration has EVER done! Trump: Fantastic, just fantastic. I knew it! Show me the posts we’re dropping today – we’re gonna dominate! Susie Wiles: Right here, Sir, the absolute best ammo for today’s battle! Trump: Susie, you’re a genius, just brilliant. I love you, you’re tremendous. Fire off a post every 10 minutes, keep ‘em shook! Oh, and send Little Marco in, pronto. Marco Rubio: Good morning, President. How’s the greatest leader in the world doing today?...

After several years of corporate & bank balance sheet repair and fiscal correction, the contours of India's next economic growth cycle are beginning to emerge. With the Reserve Bank of India (RBI) maintaining a growth-supportive stance; union government showing strong commitment to fiscal consolidation, easing financing pressures for the private sector; and global markets showing signs of stabilization as geopolitical confrontations ease and trade disputes settled; the stage is set for a potential economic upswing. The spotlight is now on three competing themes — corporate consolidation, private capex, and household consumption — each pulling investor attention in different directions. Corporate begin to re-leverage After many years of deleveraging, corporate debt in India appears to have bottomed out and is now beginning to rise. This shift in trajectory marks a significant departure from the post-2016 era, where Indian companies focused on strengthening balance sheets followi...

Continuing from yesterday… Mr. Bond no longer a superstar Given my view that the yield curve is no longer a strong leading indicator, I prefer to use a mix of indicators to assess the likely direction of the markets. Mortgage rates, credit growth, credit terms, repo outstandings and the size of the central bank’s balance sheet are the most prominent ingredients in the mix I like to use. For example, in the context of the US, Mortgage rates are a close pulse on borrowing costs, consumer behavior, and economic health, less abstracted than the yield curve. In the U.S., the 30-year fixed mortgage rate tracks loosely with the 10-year Treasury yield—historically about 1.5 to 2 percentage points higher—but it’s more than just a derivative. It folds in lender risk appetite, housing market dynamics, and Fed policy fallout in a way that hits Main Street directly. Presently, mortgage rates are climbing—30-year fixed is around 6.8%, up from 6.4% in late March, shadowing that recent 10-year ...

The conventional market wisdom suggests that the bonds usually lead the change in market cycles. Traditionally traders have closely followed the yield curve shape, benchmark (10 year) yields and high yield credit spreads to speculate the near term moves in equity, currency and commodity markets. Two simple reasons for this traditional practice are – (i)     Bond markets are usually more correlated with the economy. (ii)    Size of bond markets is materially larger than the equity, currency and commodity markets. It has the largest number of leveraged positions at any given point in time; and most of the large and influential market participants are more active in bond markets as compared to the other markets. I am however inclined to disregard this piece of conventional wisdom. In my view, it would make sense only if the markets are operating in a free and fair manner. In cases where the central bankers and governments (through Sovereign Wealth Funds and o...

A friend recently remarked, “I don’t want to be young for the first time in my life”. He was alluding to the challenges Gen Z (born between 1997-2012) and Generation Alpha (born after 2012) children are likely to face in the coming years. I fully agree with him. The silver on my scalp gives me comfort that a relatively well lived life may end as comfortably for me, and many people my age. But young people in their 20s have no such comfort. The people in their late twenties have already stood witness to three massive economic/market crises (dotcom burst, subprime burst and Covid-19 pandemic) that (i) were not caused by a war or natural disaster; (ii) did not cause human suffering which was anywhere closer to the crises witnessed during 19 th  and 20 th  centuries; and (iii) were brought under control through monetary and fiscal stimuli within a short period of time. In the past twenty-five years, the governments across the world have increasingly become more socialist. While se...

It was summer of 2013. The mood on the street was gloomy. The stock markets had not given any return for almost three years. USDINR had crashed 28% (from 53 to 68) in a matter of four months. GDP was on course to drop to 5.5% after growing at a rate of over 8% CAGR for almost a decade. Current account deficit had worsened to more than 6% of nominal GDP (the worst in decades). The Fx reserves of the country were down to US$277bn, sufficient to meet just 5 months of net imports. The confidence in the incumbent government had completely depleted. The people were on the street protesting against ‘corruption’ and ‘policy paralysis’. The global economy had still not recovered from the shock of the global financial crisis (GFC). The thought of unwinding of monetary and fiscal stimulus provided in the wake of being unwound was unnerving most emerging markets ((Taper Tantrums), including India. India, which was touted as TINA (There is no alternative) by the global investors just five years bac...

Continuing from my previous post ( Bull fatigue or bear charge ), I would like to share some of the important things I am presently watching closely to assess whether we are passing through a bull market correction or a proper bear market cycle is underway. Rural income:   The recent corporate commentary has highlighted green shoots seen in the rural demand recovery; while the urban demand continues to remain under pressure. For meeting the latest earnings estimates, continued recovery in the rural demand is, therefore, important. Earnings growth of some sectors like consumers, automobile, textile agri inputs & equipment, etc. materially depend on the continued rural demand recovery. I note that there are some worrisome signs for the rural economy. First, the 2024-25 winter has been unusually warm and dry. Several states have witnessed drought-like situations and warm weather. Reportedly, Wheat farmers in the northern regions could be staring at a sharp decline in rabi producti...