The Reckoning

The purpose of the financial system is to support the ‘real’ economy by facilitating transactions, majorly through credit and money supply. But on certain occasions, the financial system would dissociate from its principal purpose and start functioning for its own sake – its expansion and survival. Unfortunately, the financial system gets seized by many ill effects if dissociated from its primary purpose. Precariously high asset prices, credit booms, capital misallocation, and financial fraud are a few of the ill effects.

Distortions and Imbalances: The Insidious Nature of Low Interest Rates

The low rates prevailed from 2008 until 2022 were a result of central bank interventions in response to the financial crisis. However, these interventions deviated from the prudent path, fostering economic distortions and financial imbalances. Modern central bankers' adherence to price stability and inflation targeting, driven by a flawed understanding of history, has contributed to these issues. The repercussions of this flawed monetary policy are soon to be felt as the economy transitions to a more normal monetary condition. This transition is expected to bring about necessary corrections, albeit painful in the short term, and lead to positive long-term consequences.

Implications of Leaving Ultra-low Interest Rates

"Interest rates play a crucial role in shaping economic and financial conditions, influencing spending, saving, and investment behaviour. As we transition from ultra-low interest rate environments, it's crucial to consider the long-term consequences of these changes on asset prices and the overall economic prosperity."

Intellectual Malleability

"Investors must embrace intellectual malleability to navigate the changing investment landscape. Holding onto outdated beliefs can hinder success. Recognizing and adjusting counterproductive behaviours is essential for productive investing."

Choosing the Right Stock for Your Portfolio

Investing based on recent stock performance is ineffective. Instead, focus on a stock's expected profitability and earnings power. This method may increase your odds of achieving superior returns. Read on to Know More...

How to Beat the Market

Identify High-Risk Stocks That Are More Likely to Get Re-Rated, and for that, Focus on Core Fundamentals. “In the short run, the market is a voting machine. In the long run, it is a weighing machine.” Benjamin Graham “Beating the Market”: earning an investment return greater than the return of benchmark indices such as Sensex, … Continue reading How to Beat the Market →

Asset Bubbles: How to Recognize One?

Recognizing Asset Bubbles – preferably before they burst – from Economic Behavioural Changes They Breed. Asset bubbles are formed by the rapid rise in asset prices, far outrunning the asset's fundamentals. Sudden wealth gained through such rapid rise in asset prices initiates marked changes in the economic behaviour of its acquirer: those who were active … Continue reading Asset Bubbles: How to Recognize One? →

Significance of Interpreting Market Price Action

For successful investing… the market price movement should be given the most consideration… often greater than fundamentals and valuation… The phrase ‘market prices reflect everything’ means that, at any moment, a stock’s price reflects all information concerning its business prospect – and every price change then on reflects a change in those prospects. However, this … Continue reading Significance of Interpreting Market Price Action →

Gold Prices: An Ominous Aura

Stubborn resistance to oxidation, unusual density, and ready malleability – these simple natural attributes explain all there is to the romance of gold. Peter L. Bernstein, The Power of Gold: The History of an Obsession Gold Prices and Market Foreknowing Analysing the Implications of Recent Gold Price Spikes and What They Could Mean for Investors. … Continue reading Gold Prices: An Ominous Aura →

The Crossover: When Manias Peak and Distress Follow

An understanding of how manias develop and later devolve into panics helps navigate them with minimal damage. Financial Manias occur when the initial optimism among investors and firms produced by an external event, which promised significant productivity gains and large profit opportunities, escalates into euphoria and widespread speculation. The escalation is propelled by the optimistic … Continue reading The Crossover: When Manias Peak and Distress Follow →