There are trends all around us - Some dying, some thriving, some busy being born. It could be macro trends, price trends, culture trends or just fundamental shifts in thoughts and ways of life.
For Eg.
Macro Trends
Globalisation - Pharma & IT Outsourcing, Chinese Manufacturing
Interest rate trajectory
Price Trends
Commodity price trends - The recent Carbon products - CTP, CPC, Graphite Electrodes, Paper, Sugar cycles
Crude oil
Basmati rice
Renewable Power - Per Unit cost
Culture Trends
Netflix watching middle-class
More Air-conditioners in middle-income households as Per-capita nears $10k USD
Frequency of families eating out
Content consumption on mobile devices
Pre-school education
How often did you eat Biryani a decade ago vs now?
Fundamental Shifts
Blockchain and the shift from central ledgers to distributed ones - Distrust & difficulty in watching the watchers.
Offline to Online commerce
Electric Vehicles
Protein vs Carb consumption as economy grows
I might be a bit all over the place here so please excuse me. The idea is to capture trends - short/med/long and ideas to see what markets are expanding, what new markets are being born and which ones are contracting beyond repair.
I couldn’t find another thread generic enough to capture trends although such discussions happen in the Commodity & Cyclical plays and sometimes in the Nifty P/E and the recent LTCG threads and some just are non-existent. It may not be a bad idea to have one thats a container for trend ideas and related discussions. I have started off with some which were swimming in my head.
Here’s one which I penned today for my blog that sort of triggered the idea for this thread.
Is it just me or have the protests/riots of late declined/declining YoY? I expected stone-throwing/bus-burning after the cauvery verdict. Now that 48 hours have passed, I guess the critical time for leverage has passed and the amount of money that went into the protest/riot business has come down. It is understandable because the same money is now powering online protests/riots. If Social media was blamed for Muzaffarnagar riots - it was a sort of an online business aiding an offline business. Now the entire business has moved online. Call it the uber-isation of riots.
See it from an investment standpoint - People who would hesitate to throw a stone at a riot can post memes with unverified facts, sometimes hiding behind anonymity from the comfort of their living room without downside risk (you could get arrested in a riot). People participation is higher and there is a significant network effect. More influence in thought per rupee spent.
I don’t think, the protest/riots are declining in India or anywhere, only the triggers are changing.
It is also depends on education level and culture of the receiving end of the effect of particular event or verdict.
So we must take that into consideration while predicting events.
A politician will spend his money, if he knows he can benefit from the rioit. If he thinks he will not get desired result he doesn’t spend.
Good points. Just wanted to mention that Amazon Prime’s proliferation within middle class India would appear more relevant than Netflix considering a greater proportion of regional and local programs content. I saw some market share data recently which showed that Prime has overtaken Netflix on the market share front.
Regarding EVs there are challenges galore in a country like India as firstly the EV stations need to be backedup with power and if you are going to continue to use fossil fuel based inputs to power these EV stations what does that do to already precarious environmental standards? Alternatively some might pitch solar power as a fast emerging prospect but then again volumes tend to be highest during the mid point of the day and then tail off towards the end of the day (as you would expect) so it isn’t really a sustainable 24/7 option to power these stations. Be interested to see how things change for the better on the EV front.
@phreakv6
I came across this discussion today. And, I genuinely appreciate the quality of the thoughts penned by you. India is, without an iota of doubt changing, some changes are for the better, some for the worse. India’s growing economy has led to the improvement in the lives of millions of people. But, societies on the whole are becoming unequal.
Unequal societies lead to poor health and an overall state of negativity.
The major reason being the psychosocial element. An unequal society leads to a lower social capital. By social capital I mean the collection of trust, cooperation, reciprocity. And a reduced social capital leads to stress. Increased stress levels are known to cause various problems which don’t warrant elucidation. And, high stress levels lead to stress induced aggression displacement. Also, increased inequality leads to secession of the wealthy from the average person. Secession of the wealthy will lead to tax avoidance. The reason being that government spending for the average person won’t benefit the rich. They wouldn’t want to participate in any action that doesn’t benefit them. Hence, they’ll look for ways to avoid taxes.
So, basically, prosperity will bring with itself stress and increased violence in the not so prosperous sections of society.
I was watching the video above and it reminded me of my short trip to the middle east early this year. I was surprised when I found that the locals preferred to dine at McD, KFC, Hardees, Pizza Hut and Dominos more than their local cuisines. No matter where you are in the city, you couldn’t be more than a 5 kms from a McDonalds. It is amazing how these American business which don’t really have a strong cuisine of their own like the Italians and French do, could do so well in the food business. But then this is not restricted to just the food business, they are the same way in pretty much every business they are in, be it tech, food or clothing.
Take Apple since 2003, Facebook since 2008, Google Since 2000, Amazon since about 2010 and the most recent in Netflix from about 2015. Its very, very apparent when Netflix entered India in 2016 that they are set for the same trajectory as a Coca Cola, Amazon or McDonalds. They had a bit of a sedate start but last year when the billboards for Stranger Things started going up all over Bangalore, it was even more apparent this company is all set for some phenomenal growth thanks to the 4G penetration, smartphones and disillusioned youth. What makes these businesses special?
Desirable Products engineered to satisfy the senses, Brands to hook, create and sustain habits, Network Effects to spread far and wide like flu within the society, Moats to protect the products, Expansion to make the whole world your market and over time the pricing power would follow as well. With US growth having matured and at steady state and US having the power to create money out of thin air (thanks to their Military) ever since the Gold standard was removed in the 70s, these businesses are able to borrow and expand as they wish, exporting their inflation outside their borders in return of returns. Most times they don’t even have to spend on advertising! The Hollywood films US has been exporting have familiarised us with most of these brands already. I still remember the mile long queues outside McDonalds when they first came to India. What more can a business ask for?
Why am I posting this here? This trend of American businesses taking over the world is compounding year on year steadily and is at a stage where the visibility of growth is very apparent in day to day life in the last 20 years - which is a small number of years when compared to where we are since the industrial revolution, and is nothing when compared to when civilisation dawned on the planet or when life itself began. Seen from that perspective, this is very much an emerging and evolving trend that can play out in many ways. Will the US continue to get a free rein on markets worldwide which has been crucial for their companies to expand or will other countries wall themselves like China and emphasise their own cultures (which makes it hard for businesses from outside the borders to thrive) and create their own businesses that imitate and compete? This is where business and trade meets geopolitics and the outcomes could greatly influence which businesses would be winners in the future.
In my opinion, the success of American brands begins with people’s aspirations. Life in America, a land of opportunities, is considered ideal by most people around the globe. In societies other than North America and Europe, those who’ve achieved success and reached the zenith of socioeconomic status, utilise American products and services to strengthen, reify the heairarchy in their native societies. Consumption of American products begins as a status symbol and later, thanks to a decent quality, becomes a necessity.
What I’m sharing is strictly anecdotal. No study corroborates my observation.
In the case of Starbucks, when it was initially launched in India, people flocked to Starbucks, clicked photographs, posted it on social media and relished the attention it garnered.
Eventually, a Starbucks coffee become a need.
So, graduated from a status symbol to a need.
And, this is a moat that’s hard to fight.
In this case people don’t care if they’re paying 3x as much for the coffee cup. It has occupied mind share that’s next to impossible to erase.
Thank you @phreakv6 for starting many valuable threads on this forum! learning a lot
here are my 2 cents
Digital Trends:
Thanks to Jio, India’s data consumption habits are developing rapidly, and India emerged 2nd highest data consumer in the world after China, although per capita consumption is still low as almost 60-70% of the population still don’t have access to 4G Mobiles(High-speed data), but 4G phones costs are falling fast & cheap phone are available, and left out population will also come online quickly.
Hence there is a huge runway ahead & trend is sustainable for few years(minimum 5-7 years), and to my understanding, digital consumption trends look recession-proof and political uncertainty proof.
Below are the companies which are part of my Digital basket.
Disc: Invested in all of the above-mentioned co’s, I intend to stay invested as long as the trend remains strong + companies remain profitable, it’s not a recommendation.
I came across this nice webinar by CARE Ratings on Aggregate Corporate / Industry Performance trend YoY… Thought will share here: https://www.youtube.com/watch?v=pa7aobPRxD4
Bold move by RBI as Brent Johnson’s Dollar Milkshake Theory appears to be playing out. Dollar holding strong against all other currencies. 1 Dollar = 1 Euro.
If you raise interest rates that would attract investments in the US making the currency too strong now, countries who have borrowed in USD, or import or Peg their currency would want to sell US bonds and raise dollars and buy their own currency to maintain exchange rates. This would lead to bond sell off raising yields and hurting the US.
If you cut interest rates that would accelerate inflation and higher inflation leads to demand for higher interest rates in bonds hence that would again lead to selling of bonds. (if Inflation rises and I get a fixed interest rate the value of that decreases) . Hence have to get the dollar down
Once the 10yrs yield hits 5% or 5.25% that’s when a reset would require and all assets would fall (higher discount rate reduces valuation)
Foreigners are short $13 trillion in U.S. dollar-denominated debt in the euro-dollar market (total debt people own to the US. Many global borrowers have taken on debt in U.S. dollars because of lower interest rates compared to their local currencies) if dollar strengthens this debt becomes expensive
Foreigners own 8.5$ trillion of US debt (bonds) if dollar keeps strengthening I will have to sell this and maintain my currency or repay my debt this leads to bond price further falling
Foreigners own 57$ trillion of US asset gross and 22$ trillion of net asset
There is a theory the reason US dollar is strong is because their economy is doing very well, consumption, employment, investments but US economy can not do good if the stocks are falling (why this might fall already explained if yield cross 5%) so kind of interlinked
If dollar keeps stranghtening there might be tipping point of foreigners selling treasury bonds which will rise yield which will make borrowing for US fed more expensive especially them having 7-8$ trillion of bonds maturing this year and this is when they have about 7% of fiscal deficit
Personal Consumption Expenditures (PCE) make up two-thirds of the U.S. economy and this is doing better than the rest of the world. This means consumer spending is the biggest driver of U.S. economic growth. Now 100% of the growth in PCE is form net capital gains taxable IRA withdrawals, so 10% of california budget is coming from stock market gain form 4 companies
Now if we continue with the above thesis and US stock falling ⅔ of US economy fueled by stock gains take a big loss
US cannot afford a recission, historically recession has spiked defecit by 6-12% so that would take the deficit to 13-20%, world war 2 levels at this same time if foreigners sell 8$ trillion of bonds that would take the deficit to 20-30% (I hope now we can connect that why they want to cut ⅓ of the US spending) (I think once the sell of starts this can lead to dollar depreciating as people pull out money back to their own country this is my guess)
5% of the taxpayers pay 62% of the individual income taxes 31% of the total government income is also a function of the capital gains they have earned form top 4 US companies so stock gains funding US budget
U.S. buys foreign goods → Foreigners get dollars → They invest in U.S. assets → U.S. asset prices rise → More global demand for U.S. assets. Foreign entities have borrowed $13 trillion in dollar-denominated debt because it was cheaper than borrowing in their local currency. A stronger dollar means it now costs more in local currency to repay that debt so they sell treasury to raise cash quickly
Price insensitive buyers (these are the buyers who buy regardless of interest rates for political reason to maintain relationship like Japan, China) the foreign official accounts have not bought an incremental treasury bond on net over the last 10 yrs
Federal reserves and US commercial banks are among the biggest holder of US debt
The Trump administration has been a critic of issuing a lot of treasury bill which Janet Yellen (78th United States secretary of the treasury) and Mnuchin (77th secretary) has also done. Janet Yellen issued more short-term debt (Treasury bills) instead of long-term debt (Treasury bonds). Ideally, locking in long term rates are good but Yellen issued more short-term debt even though rates were higher at short end. 2 possibilities
a. Market could not absorb it without bond market crashing and yield rising uncontrollably (this would happen when they sell bonds)
b. The unlikely scenario that Yellen simply made a bad decision
The conclusion is there is not much demand for the long-term debt as seen in the graphs above as well. Now if the US has to issue extra-long term bonds of 50yrs to allies (like Japan, Europe, etc.) In exchange for military protection and trade benefits this strategy might require a much higher price of gold as part of a broader financial reset, hinting at potential moves toward a gold-backed or partially gold-backed financial system. HENCE A POSSIBILITY OF GOLD REVALUATION AS WELL
If we recollect this U.S. buys foreign goods → Foreigners get dollars → They invest in U.S. assets → U.S. asset prices rise → More global demand for U.S. assets now placing tariff would disturb this free flow
34$ trillion of US debt if yield rises too much borrowing would become expensive. The Fed would print unlimited money to buy Treasuries and cap yields at a set level (like 5.25%). front-end (short-term rates) might be kept lower (e.g., 2.5%) to stimulate lending. Fed’s balance sheet could explode to $40T, $50T, or even $100T as it absorbs massive debt. Investors might flee the dollar and move into gold, Bitcoin, real assets. This would lead to a currency crisis, forcing a financial reset (possibly a shift toward a commodity-backed system).
US would manufacturer and loose the reserve status this might lead to devaluation of dollar in longer term like 1$ to 30-40 rs to make their exports competitive
Given the way Trump is hobbling around tariffs, I seriously doubt the US will be able to re-industrialize or become self sufficient in manufacturing. A stronger dollar boosts imports, which makes imposing tariffs beneficial. US will be selective with its tariffs, using it more as a geopolitical weapon on countries that try to substitute the dollar unlike how India uses it to protect local industries.
Tariffs will be inflationary, American consumer is gonna be taken for a ride. While it’s true that cutting rates can fuel inflation, it’s not a guaranteed outcome.
US Treasury bonds are still considered a safe haven asset. Many central banks and sovereign wealth funds need to hold dollars and US debt for reserve purposes. A gradual sell-off is more likely than a sudden panic.
Brent Johnson’s Dollar Milkshake theory offers a more plausible explanation of the current situation. Here’s how it plays out:
-The dollar becomes overvalued, making it expensive for other countries to repay their dollar-denominated debts.
-The excessively strong dollar creates a strain on the global financial system, potentially leading to a sovereign debt crisis.
-Countries struggle to service their dollar debts, potentially defaulting and causing widespread economic repercussions.
-This could trigger a sharp decline in the dollar’s value as confidence in the US economy wanes.
The dollar’s fall could lead to a reassessment of its role as the world’s reserve currency.
-This shift could lead to a restructuring of the global financial system, with a move towards more diversified reserve assets.
Disc: none of this is happening tomorrow, the timeline is uncertain.
