Finance

Are we heading towards recession?  

Inflation. This one word has created a state of panic in almost every sector. Provided it is been the highest recorded inflation rate in 40 Years. To fight inflation, the Federal Reserve is hiking interest rates, and when the Fed starts pumping the brake to fight the inflation. As history has taught us Several times but we humans are doomed to repeat the history


Factors leading into recession

Russian Invasion of Ukraine, ongoing supply-chain disruption due to China’s covid-19 zero-tolerance policy and the end of $ 5 trillion in federal pandemic aid proved to be a catalyst in the already worsening economic crisis.

SLEEPY JOE

Is recession inevitable

Deutsche Bank shared its concern earlier this month by becoming the first major bank to speak about forecasting, albeit a “mild” one. Now, it’s warning of a deeper downturn caused by the Federal Reserve’s quest to battle high inflation

.”We will get a major recession,” Deutsche Bank economists wrote in a report to clients on Tuesday.

Bueno Returns stance on the current crisis across every spectrum possible

We have been criticizing the fed’s policy from the day they doubled down on a hike in the interest rate and increased it twice in such a short span. Jerome Powell is chair of the federal bank might not be a fit person to lead the fed during the times we haven’t witnessed in many decades. We have already witnessed Fed increasing interest by half a percentage point which is the highest increase in interest rate in last the 18 years. Now many big players in the town are calling the federal bank for the same as we did in our recent articles.


 Volatile gold prices and fear of 4th wave

To understand the correlation between USD and Gold prices. first, we have to understand what drives the value of the US dollar 

Factors that Impact currency value 

1.  Falling crude prices

2.  Positive reports on job numbers

3.  Rise in Real state prices 

These are the major factors that determine the strength of dollar value. All the factors mentioned above have a proportional relation with the dollar value’s strength. There are other factors too but we only mentioned the one with the most impact on a currency mainly the USD


Although there is a direct correlation between gold prices and the value of a currency such as the US Dollar, it is not always an inverse relationship as assumed by the general public. Gold as a commodity can act as a substitute for fiat currencies Hedge funds often use gold to tackle inflation.

The real question is why gold prices are falling despite very high volatility in the equity market. As we witnessed when the pandemic hit in the year 2020 we witnessed a rise in the gold price even crossing over 2000 dollars per ounce so why did this time gold mcx fell almost by 8%in last 30 days, dwindling to 1811$. 

THIS CHART  BELOW DEMONSTRATES HOW AFTER THE RUSSIAN INVASION OF A SOVEREIGN COUNTRY UKRAINE HAS CAUSED A DECLINE IN INTERNATIONAL GOLD PRICE  

Image

(image-courtesy of goldprice.org)

image
 Volatile gold prices and fear of 4th wave 5


It is evident in the chart that after Russia’s war on Ukraine coupled with the strengthening of the US dollar, and high inflation rate, The dollar index as of the 13th of may edge higher to 104.47, making gold less attractive

COVID 4TH WAVE?

Global equity markets and commodities like oil and gas were under pressure at the peak of China’s  Covid outbreak when daily cases topped around 33 thousand in a week contributing to fear of a bigger slowdown in the world’s second-largest economy. Recently there has been a sharp decline in the infection rate as the 7-day average infection rate has come down to 9000 covid cases.  As Shanghai comes closer to the end of the lockdown for a very short period of one week as an experiment to see how it plays out. China has a zero-tolerance policy for covid cases and a history of using draconian laws since the outbreak of covid 19

Conclusion

Russia’s illegal invasion of Ukraine has Inflated oil and gas prices At the moment there seems to be no solutIon to this conflict. It will impact inflation even worse as some European countries specifically Germany is looking for an alternative oil supplier, as Germany should have realised by now that depending on the Russian regime for energy import to the extent of 60% was an extremely bad policy. There are several factors affecting the equity market. There are talks that the fed is considering an additional hike in interest rate. It’s a risky move as The fed has to keep interest rate in balance. Fed has already increased interest rate thrice. The future of the economy is very uncertain as it depends upon domestic and international outcomes


Elon musk acquires Twitter

Image

Recent development ,3rd of may 2.15 pm IST

Elon Musk Lately has been in news, magazine, articles, and newspaper. You name it. Musk decision to buy all the shares of  Twitter. According to Musk, he has been witnessing the suppression of free speech, something on social networks a new phenomenon called cancer culture.it has poisoned the Internet,

Elon Musk has said Twitter may charge a “slight” fee for commercial and government users

“Twitter will always be free for casual users, but maybe a slight cost for commercial/government users,” Musk said in a tweet. In another tweet, he added: “Some revenue is better than none!”



 

 

 

RECENT DEVELOPMENT-30th of April

Elon musk has been advocating for free speech on social media platforms. In a filing to the security exchange board (SEC), Musk wrote, “I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy,” further adding to his filing to SEC, “Twitter has extraordinary potential. I will unlock it.”

In a press statement posted by Musk on his Twitter account, Musk tweeted “Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated. I also want to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spambots, and authenticating all humans. Twitter has tremendous potential – I look forward to working with the company and the community of users to unlock it,”

After weeks of hustle between Twitter’s board of directors, Elon musk finally bought Twitter for a whopping 44 Billion USD. Elon Musk has previously indicated that he wants to take Twitter private. Reportedly there have been conflicting feelings among Twitter employees.

Tesla CEO in his latest public statement said “Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated ”. Musk assured the giant social media platform’s users to add new features and bring leniency to content moderation for the Platform users.



PARTISAN BETWEEN REPUBLICANS AND DEMOCRATS OVER TWITTER BUYOUT

Republican lawmakers who have criticized the company over Its content moderation policy lauded  Elon Musk’s buyout of Twitter, while many Democrats shared their concern over the acquisition of Twitter.

 

Senator  Marsha Blackburn (Re: Tennessee.). tweeted “This is a great day to be conservative on Twitter,”. While on the other spectrum, Elizabeth Warren who has been a long time critique billionaire over taxes paid by the billionaires tweeted “it is a danger to democracy”.

  Elon musk tussle with Twitter.

ELON MUSK’S ANOTHER UNPRECEDENTED MOVE

es 052418 elon musk is on twitter 1527189506

Update- Friday ,22 April

 

In a new filing with the SEC, Musk said he has procured USD 46 billion to endow his offer of $54.20 a share.

Morgan Stanley, Bank of America, and several other banks have promised to lend Musk an additional $25.5 billion, against in part by some of Musk’s Tesla shares, according to the filing to SEC.

Musk averred in his filing that Twitter has not yet officially responded to his gratuitous offer. He “is seeking to negotiate a definitive agreement for the acquisition of Twitter,” stated in the filing, “and is prepared to begin such negotiations immediately.”





Elon musk CEO of Tesla Motors,  Chief of space x and the boring company  recently announced that he has bought a 9.2 per cent stake in Twitter, making him the 2nd  largest shareholder in the Company. Paras Aggarwal CEO of Twitter offered musk a seat on the board of directors but musk declined the offer. Elon musk according to his recent statements want to buy 100% of the outstanding shares of the company.

Elon musk’s take over of the company is not sitting well with the board of directors. Musk has offered to acquire Twitter for roughly 43 billion dollars which amounts to 54.20 USD per share .currently Twitter share is trading at around  45 USD. This bid has prompted Twitter to adopt

‘poison pill’ (officially known as shareholders rights plan) to prevent “hostile bid” from musk. A poison pill means when a company issues new additional stock to dilute the ownership of shareholders. Musk may also be willing to pledge his current stake if necessary, a move that could raise several billion additional dollars, according to the New York Post report. The announcement of the poison pill has been approved by the board last Friday while the stock market was closed, Twitter on Monday provided more details in a regulatory filing that no doubt it’s trying to fend off Musk’s $43 billion takeover bid.

When a poison pill is approved by the board of directors Any investor that builds up a stake up to 15 per cent without the board’s approval. If Musk were to increase his stake to the 15% threshold, then The board can grant shareholders as of April 25 the right to buy one-thousandth of a share of preferred stock for each common share they own, for $210, which will make it virtually impossible to acquire total outstanding no of shares of Twitter. Adoption of the poison pill often results in lawsuits against companies accusing that the board is acting against the interest of shareholders to keep their position.

Other private-equity firms have also expressed their interest in participating in a deal for Twitter, people familiar with the matter told Reuters on Monday without naming the firm.


Goldman Sachs, the prestigious investment bank has advised twitter to not approve the musk’s offer. The board has retained Goldman Sachs to advise in its tussle with Musk.  Musk has retained Morgan Stanley, a rival of Goldman Sachs, as his advisory bank.

Musk tweeted “If the current Twitter board takes actions contrary to shareholder interests, they would be breaching their fiduciary duty,” the billionaire reacted to the press articles on Twitter. “The liability they would thereby assume would be titanic in scale.”

Image

In a recent interview with Ted talks musk stated that twitter’s algorithm must be open source as it allows transparency between the Platform and the users. He also stated in the same interview that free speech must be allowed on Twitter but hate speeches and other forms of provoking tweets that might result in violence must be moderated the real question is can we rely on AI to determine the nature of tweets.

Lately, musk seems to be very angry at the board of directors, adding to his previous statements “It would be utterly indefensible not to put this offer to a shareholder vote. They own the company, not the board of directors”


SO WHAT ELON MUSK’S NEXT MOVE WOULD BE?

This all now has become a game of high stakes between the world’s richest man and Twitter, with this upcoming week might be an eventful one as we expect to formally hear from both the parties on their next move, With the poison pill making it harder for musk’s takeover of Twitter. It will be challenging for Musk, he may decide to withdraw his bid or make changes to his bid and exercise the still-significant influence he would have on the company as one.

ELON MUASK

es 052418 elon musk is on twitter 1527189506

 

Central bank raises interest rates for the first time since 2018  

Jerome Powell . Chair of central bank of USA

Image

Equity market is the money, each step taken on wall street is to make a profit. The USA recorded the highest inflation hike at 8.5 per cent. Highest recorded in last 4 decades. The inflation rate is not necessarily bad.it depends on a balance between inflation and a rise in income. if the income is rising shoulder to shoulder with inflation or even higher than the inflation is good for The economy and vice-versa. As we commonly know inflation means a rise in goods prices or services etc. It is important to have a general understanding of inflation. The factor that is causing inflation. . The consumer price index increased by  1.2% YOY taking the inflation rate to the highest levels from a year earlier following a 7.9% annual gain in February. This is the level of inflation highest levels from a year earlier following a 7.9% annual gain in February. Labor Department Made public on Tuesday. This inflation gauge is the biggest gain since 2005  according  to the Latest  numbers from the White House Revealed on Tuesday.

Image

Inflation is just the decline in the purchasing power of an individual or to be technical inflation is a rise in the consumer price index. What needs to be looked at is how inflation causes a decline in one’s purchasing power but  most  often it results in worsening financial conditions . For example , Say there is a  house listed at 100 dollars but if the inflation rate is at over 15 per cent now the house will cost the individual 115 dollars To purchase the same house provided the individual buys that house when the Housing market inflation is at per cent 15 per cent but the individual income rose by 18 per cent .It indicates that buying power increased and vice Versa (if the income hike rate is way below relative to the inflation rate hike its results in paying more for the same house or any product, services etc .The individual’s income remains the same but the value of his wealth or cash decreases.

OPINION

The whole market depends on demand and supply .supply and demand can be manipulated such as shorting etc. Which has it advantageous  even for Retail investors but with high risk. But the collateral damage is usually  paid by retail investors .We guide you you in investing, managing your portfolio. As managed portfolio by experts have been proven to increase in realised gains


This is why I urge people to to sign up so we can inform you through our sources whats going on in Dalal street behind the closed doors

By the time you read it on Economic times ,business standard etc or business TV channel .ITS AlREADY TOO LATE

US central bank hikes interest rates by 25 basis points for the first time since 2018

Chair of bank America  Jerome Powell hiked inflation by 0.25 per cent (25 basis points) to control the skyrocketing inflation. YTD (Year to date) interest rate has been increased by .75%

HERE IS HOW IT WORKS. HOW CENTRAL BANKS DEAL WITH INFLATION

The central bank decides the inflation rate to maintain the balance between debt and income and to keep an eye on which way its tilting. They are supposed to make sure our economy keeps doing well 

Central Bank OF  USA or the Reserve Bank in India  apart from sole Government policies differences  but more or less  national banks work rather in a similar way

RBI is just one authority right ?i do not agree,Their policies effects from rich to the poorest .Think more of RBI as lender and banks as borrower. Reserve bank of India(RBI) lends money to bank and also facilitates overnight borrowing.Banks lend and borrow money from each other on regular basis overlooked by RBI

This chart illustrates the USA national debt vs GDP

Image

As inflation rate has been rising for at last two years. Indians companies that earn in dollars might be the one to benefit from inflation and subsequent increase in dollar value.

Russian Ukraine conflict pushes gold prices to 16-month highs-sectors most likely to benefit

As of 13th March, gold mcx was trading at 1987$. As the Russia-Ukraine Conflict escalates gold prices are expected to make an all-time

Charlie Munger on Getting Rich, Wisdom, Focus, Fake Knowledge and More

“In the chronicles of American financial history,” writes David Clark in The Tao of Charlie Munger: A Compilation of Quotes from…

Wipro Q3 PAT almost flat at Rs 2,969 cr; to continue WFH globally for next 4 weeks amid Omicron wave

IT services major Wipro Ltd on Wednesday posted a consolidated net profit of Rs 2,969 crore for the December 2021 quarter, almost flat…

Nifty Bank & Financial Services stocks rally amid weak markets; Axis Bank, HDFC Bank emerge top gain

Nifty Banking and Financial Services reversed yesterday’s trend to trade higher despite weak markets on Tuesday. PSU Bank stocks that…

Scroll to top