@kb_snn Pausing has always been bad for equity markets and rate cuts have resulted in significant drawdowns, since the rate cuts always happen when something has broken in the system.
What are your thoughts about this one?
US Household Networth has also significantly come down which indicates the brutality of this bear market.
The graph is self explanatory and points to conclusion you have already stated in your post
But the point to note is this time market has been running ahead → anticipating action - > turbocharged by social media …
@kb_snn Just a quick question about the mental models you have, I thoroughly enjoyed reading this thread from the start till date and found your journey fascinating. Sometimes, we know that we are ‘right’ by reading the data but want it to be validated by someone. How do you handle this? Tell me an instance when you want your conclusion to be validated though deep down you know that you are heading into the right away (asking this from a investment thesis perspective or a macro call).
I am very conservative . I try any new thing with small bets and slowly increase my stakes .
I worked in multiple sectors to gain hands on hands-on experience
It took me 18 -20 years of corporate life to understand different sectors and their impact on economy I did it hard way . By the way till 40 I was not sure I would make investing my Career . I was only doing all this because I loved to learn about new industry and I was lucky that companies gave me this opportunity
Even in Investing esp any new sector or macros , I start small and learn through concalls and annual report , follow experts on twitter and other places . learn and slowly develop my own risk / return models and update it in SCODE logic
Thats a very diverse industry experience!
Curious how you managed to keep yourself away from new sectors like New age companies as their narratives were very strong and some of them even boasted of profits with surging revenues at time of IPO and thereafter like Nykaa etc.
Introducing computer or internet or any technology in banking or Retail or any traditional business does not change basic business model & economics . The real gain happens when that technology is used for
Most new age companies started with this theme , but they lost the way in between when capital became cheap . They focussed on capturing revenues by buying out customer through discounts and freebies .
It will take a while to change the culture and focus back on basic . When that happen I will be interested in so called new age companies
Usage of technology could be to establish a connection directly with the customers, cutting out the middle men, eliminating certain costs, bottle necks, thereby making more profit which did not exist as much before.
After establishing brands, even with discounts and freebies, as they know what the end users want, they know what moves and concentrate on new products which are sold, not spending on products that are failed, and they grow big, and maybe become household names in a couple of decades.
Online reviews are one of the best things, for the most part, that have happened for customers regarding certain services.
Can you give an example for your view?
Attaching weekly chart of prince pipe. The stock price has withsttod considerably well all the negative downcycle which started around early 2022. then from dismal results which included both margin as well as sales growth hit, the price has only taken 30 % hit. Now this quarter results hint at things going back to normalcy and future growth might only add to the bullish price action.
Disc: invested from lower levels
made a premptive entry so lost out on other oppurtunities
this might touch 4 figures if business remains good from here on.
Best
Divyansh
Thanks for mentioning, however this is very well understood and known now in hindsight and even before we all knew of all this but still many invested. My query was not to know the good or bad of such companies but more on what framework of your strategy prevented you from falling for these type of companies. Thanks
Manufacturing spend Boom happening across world : US , India , Vietnam , South east Asia etc
What does it mean for the world ??
Which sector will see Boom and which sector will lose out …
The answers lies in past cycles …
What happened post 2007-2010 capex boom ??
@kb_snn In India, Gross Fixed Capital Formation seem to be mean reverting. Now that rates have gone up, demand destruction is not far away right?
In India rates have not incresed as high as inflation has increased. I don’t think demand destruction is going to take place.
USA increased rates by more than our rates and we are claiming inflation has been controlled.
My 2 cents, not an expert in this.
Fed rates do impact the capacity utilization. If history holds, this time is no different. When the FEDs pause, there is a high likelihood the capacity utilization will take a beating.
Fed Rates Vs Bankruptcies in the US
Gross FCF as % GDP … This graph is till 2020 … You need to look at latest data .
There is global rush to add manufacturing assets . Esp when China is already over invested in MFG asset , this add on capacity in world where population is declining and people moving away from Goods to services ( experience) consumption … This all may not end well
Hasn’t J Pow already paused the rate hikes?
The pause followed 10 straight hikes in 15 months — the fastest series of increases in four decades. By leaving rates alone, at least for now, Powell and other top Fed officials hope to use the extra time to more fully assess how higher borrowing rates have affected inflation and the economy.14-Jun-2023
My view for 2024
2023 was a surprise year . In line with my view that market is overvalued esp in context of higher interest rate , I kept shifting my asset allocation from equity ( 90% to 80%) to debt …
But Crazy market movement meant I had sell lot more equity than I had planned in absolute term . Overall PF return was 50%+ inspite of huge shift to debt and movement from midcap to large cap. That indicates level of craziness that markets is in .
Last 4 year CAGR of 40% even on my conservative PF which is high on large caps / passive ETF and debt scares me esp when geopolitics risk are high and interest rate are higher in decade . Global liquidity index and domestic investor SIP is driving market valuation beyond my comprehension .
So what happened …
Oil / Gas Magic
Contrary to expectation of OPEC inspite of oil production cuts … Oil prices reduced … America increase in oil production that compensated Saudi reduction was big surprise of 2023…
Add to that … now on LNG
Low energy prices meant lot of Risk related to Indian market reduced and also gave flip to equity earnings .
US and India GDP Gr continue to surpass expectation
US at 5% and India at 7% are excellent Gr nos and will increase overall optimism esp to invest in capacity expansion .
Global Liquidity continues to grow
Against view of FED balance sheet tightening has been countered by US and other Government fiscal loosening esp inn areas of infra spends and war has lead to global liquidity remain favourable .
So what is my action plan 2024 …
I think we have pulled in lot of future returns and GOVT investment spending will reduce as we come closer to near and post election
So I have decided to
Reduce asset allocation of equity to 70% in case market continues to rally like it has done in 2023 and increased allocation to long term debt or arbitrage funds
If market remains stagnant and declines not more than 10% . No change in asset allocation
If market declines > 20% < 40% increase equity allocation to 85%
If market declines > 40% increase equity allocation to 90%
What has been your experience with arbitrage funds? How have these performed for your investing period? Who would you suggest or not suggest these funds to?
Arbitrage Funds is relevant for people in highest tax bracket (( esp post Feb 2023 budget )
Rest can invest in liquid funds … Not much difference in performance for last so many years …
Long term Gilt are play on interest rate … That is different game …
