Author: Ritesh Jain

1.India’s list of millionaires has more than doubled in the last 10 years. But there’s still no stopping Indians.
The country will have 950,000 millionaires by 2027, up almost 190% from 330,000 last year, a recent report by Johannesburg-based market research group New World Wealth predicts.There are lot of business which get excited at size of our population but in reality these millionaires are the only ones with big bucks to spend and Invest

2.Populists and authoritarians now oversee the biggest chunk of G20. President Donald Trump in the US is one prominent example.Italy is another. What does the populist drive mean for the global economy? India is no doubt an established democracy but spilling towards populist

3.No Not again…. but this time some historical perspective of what happens in a crisis.

Victor has a very unique understanding of current investment cycle derived from income inequalities and thats why his investment recommendation is to be with just top 5% frontier companies.

He writes ……..The middle is eroding as asset-based finance drives inequality…
While it is accepted that we are in an era of some of the highest ever inequalities, there is a persistent belief that the right remedy is to generate faster growth rates. While true, it ignores the importance of asset classes in driving both growth & inequalities. In other words, financialized economies require constant flow of new debt to support asset values, which in turn make room for more debt to enable asset prices to rise even further. Over the last three decades asset prices have morphed into a lubricant, determining consumption & investment choices. Unfortunately, the same processes that drive values & growth are also responsible for inequalities. By stitching together historical data with the Fed’s recent surveys of consumer finances, authors confirmed what Saez, Piketty etc have already illustrated, i.e. financialization waves aggravate inequalities.
Top 10% have a much higher weighting in financial assets (~50%) and carry low leverage (4%), while the bottom 50% have the highest weighting in houses (~62%) & heavy debt burden (~75%). Inference from the above is that to avoid the pyramid toppling over, cost of capital must be kept very low & asset volatilities must be contained. There are no other choices. This is true not only for developed economies  but the same is also seen across Emerging economies .

I would argue that India is also reaching that level of disparity otherwise how do you justify having 40% of your equity benchmarks represented by BFSI sector.

This has serious investment implications … sadly the omelette cannot be unscrambled; all solutions are tough
While there is a vibrant debate as to what can be done to relieve what are clearly severe social & political pressures, there is no consensus, other than blaming multinationals and foreigners. As convenient scapegoats, these would continue to be the prime targets. The most rational corporate response is to hide and prepare (‘going to the mattresses’ in ‘The Godfather’ terminology) and try to localize while reducing costs by aggressive use of technology. Societal responses are likely to include income transfer policies and wealth re-distribution strategies. None are likely to be easy and all would be controversial, thus further inflaming passions & solidifying extreme left and right, while the centre disintegrates.
Victor closes out by recommending  staying with top 5% frontier firms… basically industry leaders.
The need to financialize implies further widening of inequalities and persistent social & political dislocations. From a corporate perspective, cost controls & innovation would be the only answers.

There would be few ‘Hail Mary passes’; we avoid purely cyclical stories, unless heavily discounted. The centre cannot hold.

The trade deficit widened to US$18 bn in July 2018, up from a revised US$17.1 bn in the previous month and came in above expectations. The widening of the trade deficit was on account of slower export growth, and higher non-oil non gold imports. Exports slowed a shocking  14.3%YoY in July 2018, down from 18% in the previous month. NONGI grew 18.4%YoY, up from 12.3% in June 2018. Crude oil imports were up over 57% YoY, but slowed from the previous month as crude oil prices
moderated. 

The trade deficit is coinciding with a sudden dip in export orders globally, brought about by an escalating trade war between the two largest economies – the US and China, and has led to the World Trade Organization (WTO) dimming its prospects for trade growth in the third quarter of 2018 calendar year.
The Geneva-based body brings out its quarterly forecast of global trade growth through the World Trade Outlook Indicator (WTOI) index which on Thursday showed a sudden slowdown in global export orders, stemming from slow growth in crucial sectors.
GlobalExport volume actually picked up ahead of implementation of trade and tariff barriers and will slow down dramatically over next few months. This will  add further pressure on our trade deficit unless oil prices moderate sharply from current levels.

Given a strong dollar bias , I expect the INR to trade with a depreciation bias on the back of a strong dollar , tightening global liquidity, and widening trade deficit .

1.When you have 1.3 billion people with huge under penetration, then any chart can be made to look Bullish . What analysts need to look at is Per capita GDP because that will determine the extent of growth. India’s per capita GDP today is less than that of Phillipines and Morrocco and just ahead of Dijibouti. 2012-17 in India , online Ecommerce started alongwith explosion in Mobile phones and aggresion in consumption financing by banks and NBFC’s. It would be foolish to extrapolate this growth into future.

So hold your horses, if we cant grow incomes than consumption will also not grow.

2. IF we take the US monetary base, and add to it the reserves deposited by foreign central banks at the Fed, we get figure for the World Monetary Base. From this aggregate, we can get a rough idea of the pace of base money creation around the world, either through direct intervention by the Fed in the US banking system, or indirectly through US dollar accumulation by foreign central banks. When the WMB is growing,we can be relatively confident about the future nominal growth of the global economy. And when it’s contracting, it makes very good sense to worry about a recession.As the chart above shows, it is contracting now. So, based on the experience of the past 45 years, it seems likely that the world is entering its seventh international dollar liquidity crisis since 1973.

3.Given softening in housing, and need for lower mortgage rates to help restore affordability and positive housing momentum, BOFA thinks the chances are good that this is a “3 strikes you’re out” situation and that rates now have decent downside potential in months ahead but it seems everybody is bearish on US bonds.

4.All Parabolic rise fail without exception and this one will also fail. The chart is stock prices of Amazon and HDFC Bank. Amazon is already among top 5 holding in almost all US diversified Mutual Funds and ETF. HDFC Bank is also in top 5 among most diversified and large cap mutual fund. That means you as an investor is alredy betting on 5-10% of your investment (depending upon the weight your portfolios are holding) invested in these stocks and hoping that this will continue into future

Vijay Mantri explains in simple term about how best to combine SIP and Home loan payment with an illustration. Lets say you have taken last 20 years’ average home loan rate which is close to 10.5 percent. Currently, home loan interest is 8.6-9 percent. For Rs 60 lakh housing loan, you pay close to Rs 60,000 EMI (equated monthly installment) per month and over a 20-year period you pay Rs 84 lakh interest. So, you took Rs 60 lakh housing loan but through EMI you are paying Rs 60,000 per month. So, over a 20-year period, you pay Rs 60 lakh plus Rs 84 lakh, which is Rs 1.44 crore you will pay to the housing finance company.

You have Rs 60,000 EMI. So, start Rs 20,000 SIP. For the sake of avoiding any complications, take only Nifty, but you can take any other scheme. So, you have started Rs 20,000 SIP in Nifty. You are paying Rs 60,000 EMI and you have also started Rs 20,000 SIP. Don’t touch this for the first three years—continue to pay Rs 60,000 as EMI and Rs 20,000 SIP for the first three years.

After 3 years, you look at how your SIP has done. For the sake of convenience,if the IRR of SIP goes beyond 15 percent, then it means markets are doing very well .You take all your money out, except the last 12 months’. Don’t touch the amount for the last 12 months because there could be exit load and tax complications.
So, suppose you are doing review of 48 months, then you take out money from 1-36 months. Take that money out because you have hit the 15 percent target. It is not necessary that you will hit 15 percent target in 36 months. Sometimes, it takes 48-60 months. Whenever you hit the 15 percent, the target you have in mind, you take out that money except the last 12 installments of SIP and to that extent you pre-pay your housing loan. Lot of customers believe that advisors don’t tell when to take the money out. So, this is a simple strategy.
It helps you to sell in the rising market. While selling in the rising market, you are also paying your liability. So, you get a lot of mental comfort that I am knocking off my liability.

On an average, you will be able to repay your 20-year housing loan in 10-11 years. The market goes through the bull cycle of every 8-10 years. So, when you hit 15 percent, the next 15 percent will come in the fag-end. So, maximum you end up doing this exercise twice but it will have huge benefits.

The above illustration is too simplistic but it allows you to get away from noise and strengthen your household balancesheet

More from the article below

https://www.bloombergquint.com/mutual-funds/2018/08/11/the-mutual-fund-show-this-strategy-not-only-helps-you-to-prepay-a-home-loan-but-create-wealth#gs.hdGKVZo

 

Start with  Asia which traded heavy given ongoing uncertainty surrounding US/China trade talks, but it was Japan turn to take a knock today. The Yen continues to find a safe-haven bid even as the Nikkei lost 1.35%. Money is being taken off the table as concerns grew and economic activity begins to be questioned.

Pimco added the icing on cake today

 

The Yen was bid as emerging market currencies suffer with the core. Hang Seng lost -0.85% whilst Shanghai actually closed small positive having spent much of the day in negative territory,monetary easing is really helping china and no negative headline for the day for YUAN,SENSEX closed on the days lows as the INR narrowly rejected the early 69 although it traded upto 69.25 in offshore market.The hot talking point for most of the day, has been Turkey. The Turkish Lira lost an additional 15% today, taking losses over the past two days, to near 25%. A headline from the ECB expressing concerns of European bank exposure took its toll on its currency also.

Yes, Guys it is European banks which are on hook and not American Banks

as a result  Euro lost 1.25% today, having broken the early support it was just a one-way street. The headline did not help European stocks and there were just losses across the board. The DAX, FTSE MIB, IBEX and CAC all lost around 2% today, with bank stocks, energy and real-estate all leading the charge.
US stock indices were dragged lower as the negative global sentiment worked its way west. An impressive US CPI print, did not help confidence even though the USD was well bid.

Inspite of US Dollar at year high GOLD prices continued to hold ground

Trump rubbed into Erdogen by raising tariff against Turkey by 15% to compensate for the depreciation of LIRA. Guys this is known as weaponising DOLLAR.
“I have just authorized a doubling of Tariffs on Steel and Aluminum with respect to Turkey as their currency, the Turkish Lira, slides rapidly downward against our very strong Dollar! Aluminum will now be 20% and Steel 50%. Our relations with Turkey are not good at this time!”

The DOW ended the day off 196 points.The smallcap index dipped in and out of negative territory, but eventually finished down marginallyThe nerves around the globe is evident and money leaving emerging markets is running to the USD.

In any war, periphery (rest of the world) will always get into trouble first, and smart money always run towards core (US) and that is exactly what is unfolding in markets.