Sougat Chatterjee

Breaking news: the stock market indices (plural of index is indices, not indexes) have all turned negative after lunch today. There is a lot of hang over after a large correction, and, the market is finding its' footing around the SP500 @ 5250 level, which I have held as the year end 2024 "fair value" level since Dec 2023. It will take some time to build a new base and rise above this 5250 level. We could trade sideways here through the election, in fact. Also, we still don't know who is left holding the bag with the unravel of the carry trade, and recession fears, war fear, and election fear continue unabated so that can play on market psychology. If you are a long term investor, just know that if you are buying the dip, you are likely buying at fair value here -- not at bargain basement prices. But, if you're set to hold stocks for 10+ years, it's almost always better to buy sooner vs later... Get your cash working for you. Truth is, we never know when the next rally could come

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I am a big fan of AQR and their research. "Investing Amid Low Expected Returns" is Antti Ilmanen's second book, which no doubt leverages a lot of the firm's work over the years. Given that all asset classes appear expensive relative to their own histories and subsequently, low expected returns are ahead, Ilmanen raises the question - "should investors take more or less risk amid low expected returns?". The book contains lots of historical context and in-depth and thought-provoking points of view (along with far too many footnotes). To spoil the ending, he offers one answer to his question. "[F]or investors to hold a broadly similar portfolio as in normal times: to stick with their long-run strategies and beliefs, serenely accepting that markets now offer less." Specifically, he suggests selecting return sources based on realistic investment beliefs that you can stick with, like historically rewarded asset class and style premia. Size them based on risk-adjusted expected returns, invest strategically and patiently with potentially some tactical timing, construct portfolios that will survive most scenarios, and execute cost-effectively. Perhaps slightly disappointing in that there is nothing revolutionary here, but all very sound advice. One strategy that comes up not only in his book but across many other commentaries is managed futures/trend following, which has quietly had multi-decades of success, and one that might be extremely prudent in these times. Onto my next research project!

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2024 Federal Budget deficit expected to rise USD 1.9 Trillions from USD 1.6 Trillions US Debt expected to touch USD 56 T by 2034 Int cost alone might touch USD 1.7 T by 2034 double from USD 872 Billion from present level. China reduced their investment in US treasuries and so as some big countries. India reduced. 275 companies declared bankruptcy second highest till May 2024 US Economic surprise index is now below at -40 down from 100 a year ago Card delinquencies rates of above 90 days rose sharply US household expectations about real income growth over the next 1-2 year have dropped to their lowest in 10 years #markets seems to have unfettered mainly due to foreign holdings of US stocks rose all time high of 60%. Interesting days ahead for global markets #Economy

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I believe, any negative impact in stock market, due to Iran-Israel conflict will be an opportunity. Let me put this very simply. First, why there can be a correction ? ✴ Increase in Crude Oil prices is going to have a direct impact on inflation. ✴ Central banks globally will further find it difficult to cut the already peaked out interest rates ✴ GDP growth rate will stay further impacted due to high interest rates ✴ Markets will be reactive to the above news along some level of irrationality due to fear not known enough ✴ Mid and Small caps can see a higher correction primarily due to their vulnerability of negative news ✴ Operators and Traders will find a good opportunity to exit overvalued stock in bulk leaving heavy correction and losses for retailers. So why an opportunity ? 🎯 US interference will be primary here as they do not want any high level escalation. 🎯 Inflation and High interest rates is creating severe havoc in the GDP growth in US. Oil price rise and tensions are further going to dampen US FEDs aim of reducing interest rates if inflation does not come in control 🎯 US is undergoing elections in 2024. The Biden Administration will be in no mood to go into escalation with a messed up economic scenario 🎯 India’s macro indicators inspite of high interest rates haven’t really shown any significant negative signs in overall growth. Correction thus if any, might turn out to be momentary for a few weeks or so. Markets will be bounce back on account of the growth factors again and reasonable valuation. So keep the dry powder ready if you see Nifty 50 correcting 3-5% from here. #Inflation #Iran #Israel #War #Equity #Debt #Markets

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Perhaps it is beginning. Slowly but surely over the last few weeks some deterioration is being seen in multiple data points. The Citi Economic Surprise Index has moved to -18.5. ISMs were soft. Regional Fed surveys weaker than thought. JOLTs and NFP showed moderation without strong wage pressures. Claims jumped Thursday, alot of that attributed to NYS data likely impacted by school holidays. We’ll find out next week. Consumer Confidence and University of Michigan Sentiment regressed significantly. Higher gasoline prices and more embedded necessity inflation, measures of inflation expectations have nudged higher. There has been a steady drumbeat on corporate earnings calls of lower end consumers pulling back on activity and middle class shoppers seeking cheaper alternatives. McDonald’s, Starbucks, Coca Cola, and Tyson Chicken all acknowledged these developments. With asset prices holding gains, it’s not yet manifested in higher end spending. The Fed is attempting its own high wire act. Failing with transitory and incorrectly messaging markets back in December, thinking that the easing cycle was around the corner. That has all been pushed back by them as inflation has not cooperated. It’s not moved higher but stalled out. A constant inefficient ability to understand the shifting dynamics of the post-pandemic/war world. Chair Powell leaned on the dual mandate a bit more at the last Fed presser and the data has corroborated. Next week this thesis gets its biggest test with PPI on Tuesday and CPI Wednesday. NFIB Small Business Optimism and Retail Sales are also due out as well as an appearance by Powell Tuesday. Over the last 4 years broad price increases of around 15-20% have been felt with wages firmer but unable to keep up with that pace. Hence the predicament today on inflation remaining stickier with the 2% target unattainable. Last year the disinflation process was aided by supply regulating. This year consumers are contending with higher persistence of service costs such as insurance premiums,healthcare, and structural housing forces. As a result the Fed is backed into a corner. The longer rates remain more elevated, more cracks are likely to appear. That’s possibly what we are seeing recently. I’d like to see a bit more data to confirm this. But it’s likely that the current signs are a harbinger for what’s ahead. Ultimately the Fed gets its chance to fine tune policy and ease later this year. Next weeks data will be critical to keep the current price action in asset classes in place as we head to a presidential election. Worsening economic conditions would be the death blow for the current administration and tensions remain with voters as a result. Currently OIS markets lean towards 2 cuts this year. The USD has softened a tad and 10-year yields back to 4.5%. The Dow has rallied 8 straight sessions as stocks try to anticipate a softer outlook for the economy. #election #economy #inflation #cpi #fx #macro #trading #fed #bonds

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Dubai now has over 40 multi-billion dollar hedge funds. Since 2021, Dubai has seen a continuous surge in its multi-billion dollar hedge fund club. There are now more than 40 hedge funds in Dubai with at least $1 billion in assets under management. Dubai's hedge fund ecosystem includes some of the world's largest multi-strategy and quantitative firms. Here are a few names: 💰 Millennium Management: The $68 billion hedge fund has 80 employees in Dubai. 💰 Point72: Steve Cohen's $35 billion hedge fund has over 20 people in its DIFC-based office. 💰 Schonfeld: The New York-headquartered hedge fund has a team of 30 people in Dubai. 💰 Balyasny Asset Management: Dmitry Balyasny's hedge fund opened its office in Dubai last year and has some senior portfolio managers and traders in the emirate. 💰 Verition Fund Management: The US-headquartered hedge fund has more than 20 employees in Dubai including portfolio managers and quantitative traders. Some of the other hedge funds with a strong presence in Dubai include Qube Research, Hudson Bay, ExodusPoint, and LMR Partners. Source: With Intelligence, DIFC Research #hedgefunds #dubai

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Macro Views - 24th July US interest rates markets, having settled near the recent lows, await the release of GDP data tomorrow and the Fed's preferred inflation PCE numbers on Friday. US 10yr treasury is at 4.25% (+5bps over last week) and 2yr is at 4.45% (+1bp). Expectations of September and December rate cuts are built in, notwithstanding the presidential election during last quarter. To my mind, the election event poses reasonable risk of Fed deciding to wait till December for the cut. USD is a bit stronger with DXY at 104.40. The risk-on sentiment has taken a hit with US tech earnings way below expectations, e.g., Tesla and Alphabet. Indian markets took the union budget in their stride and recovered swiftly even after an increase in capital gains structure. A 2.5% increase in LTCG for equities is not much but the government looks set on a path for Direct Tax Code and LTCG may increase further in next few years. Even then the retail investor may believe that equity is the better asset class. This step plus the taxation on F&O segment coupled with muted earnings so far may instill some sanity in equities. We may see a time correction over next year as we saw after Nov '21 peak. USDINR touched all time high at 83.70 where it is being "held". The anchoring to CNY may continue in near future. The FPI inflow in equities (+5bn YTD) and in bonds (+10bn YTD) remains steady with the bond inflows assured on back of the bond index inclusion. The prudent fiscal deficit gave comfort to bond markets and 10yr Gsec is slightly soft at 6.96%. Next, the market will watch out for inflation, especially food and services inflation. The budget hit the Indian gold bulls as the import duties were slashed and the prices immediately corrected by 5-6%. In my opinion, the step was taken not to encourage investment in gold but in view of an increase in gold smuggling and the duty's failure to decrease gold demand meaningfully, causing a higher load on the forex outflow. Its even better now for Indians to buy gold now as the further room to cut duties is very limited and the global uptrend in gold prices may continue USDJPY touched a low of 154.60 on back of expectations of rate hike of 10bps by the BOJ and also a display of firm commitment to prevent JPY weakness beyond 160. This time the intervention was more effective as it was timed with data release favouring dollar weakness (CPI release two weeks back). Coupled with lower dollar rates expectation and a surge in JGB yields, some unwinding of the carry trade has taken place.    China failed again to provide any meaningful stimulus as the Third Plenum ended. Only a 10bps cut in rates was delivered by PBoC. This was not taken well by commodities markets. Iron ore fell to $100 (recent bottom), base metals also fell with Aluminum at $2295(-17% from May-end), Zinc at $2688 (-14%) and Copper at $9166 (-17%). The base metals are now coming into buying zone while iron ore may fall further on back of Chinese slowdown.

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🚨BREAKING **SOFR Surge - July 2, 2024** - **Current Rate**: SOFR jumped to 5.4%, highest EVER •A rise in SOFR typically signals 📉 liquidity in the market 2. When SOFR rises, it can indicate: - Strain on bank balance sheets, often due to factors like heavy Treasury debt supply or settlement of Treasury auctions - Scarcity of cash in crucial funding markets. - Reduced overall market liquidity, especially near the end of quarters. - **Implications**: - Potential for Fed Not QE

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Where upside lies: Fund managers still see growth pockets in industrials 🛠️Most capital goods stocks, or industrials, are hovering near their 52-week highs. Still, they witnessed the greatest traction among all sectors in May. MFs flocked to the industrials, investing the most in the sector during the month while FIIs too, funnelled the highest capital into the sector. 🛠️The BSE Capital Goods index currently trades at a price to earnings (P/E) multiple of 58.5 times, significantly above its five-year average P/E of 37.92 times, Bloomberg data showed. In fact, several index constituents are tad shy of hitting fresh 52-week highs. 🛠️As long as order inflow visibility remains strong, there will be sustained earnings delivery and hence relatively strong valuations, said Priyankar Biswas, CFA of BNP Paribas. “Given the multiple sector growth outlook, we may not expect near-term moderation of investor appetite for the space despite the valuations,” he said, adding that considering the visibility of order inflows till FY30, there is still headroom to be constructive on the space. 🛠️“We think the sector valuation may adjust overtime and there may be some time correction,” said Saion Mukherjee of Nomura. Given the strong narrative, he believes a deep correction is unlikely. 🛠️“The sector's rapid re-rating has outpaced earnings upgrades, with valuations soaring,” said Nitin Arora of Axis Mutual Fund. If the earnings growth continues, one might look at increasing exposure to the capital goods sector, he added. 🛠️The only indicators that might prompt a reduction in exposure to this sector would be risks to revenue and earnings growth for the companies within it, highlighted Sorbh Gupta of Bajaj Finserv Asset Management Ltd. 🛠️ Deepak Shenoy of Capitalmind finds industrial companies in the manufacturing space particularly attractive. He prefers firms with strong momentum, low debt, and significant expansion potential. With that in mind, he likes sectors such as defence, railways, shipbuilding, transformers, and power transmission lines and equipment. Read here the complete article here: https://lnkd.in/d7ENs9rG

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Hypothecation Vs Rehypothecation in Global Stock Broking 📌 Requires a margin account. (Refer to previous post for details on margin accounts.) Hypothecation: Also known as a pledge agreement, where the customer pledges securities to the broker as collateral for a loan. 🤝🔒 Rehypothecation: The broker can then use these pledged securities to secure a loan from a bank. 🏦💵 👉 Example: Suppose a customer holds securities worth $10,000 and withdraws $5,000 (50% of the value) against them. The broker can then pledge the client's securities to the bank to secure a loan of up to $5,000. 💰 Note: Regulations prohibit the broker from borrowing more than the amount loaned to the customer. 🚫💸 💡 This arrangement benefits the client with access to loans, enables the broker to utilize bank funds for other activities, and helps the bank lend idle cash effectively. Questions? Let me know in the comments below. Follow Adrian Da Cunha 🌟 for more such #finance-related content.

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Investment portfolio Rebalancing. In finance and investing, rebalancing of investments (or constant mix) is a strategy of bringing a portfolio that has deviated away from one's target asset allocation back into line. Types of rebalancing. ✓Rebalancing every year: Rebalancing at exactly the same time each year is easy to remember. ✓Rebalancing when current allocation is 5% off from target asset allocation: Touch nothing except when allocation is off noticeably. ✓Rebalance using contributions or withdrawals: Buy underweighted assets when contributing and sell overweighted assets when withdrawing. This minimizes transaction costs. The contributed or withdrawn amount can be divided across assets in an optimal way that avoids overshooting and minimizes deviation from the target allocation. Benefits. ✓Reduce the downward impact from overweight stock. ✓Takes advantage of stocks that are yet to perform. C portfolio example. In C portfolio,Zambia National Commercial Bank (Zanaco) PLC and Absa Bank Botswana are above the portfolio weight of 16.7% of each stock. K8556.13 and K122.13 respectively should be redistributed to underweighted stocks. The other strategy is use future investments or dividend reinvestment to buy underweighted stocks. Note: It's is not ways that Stock portfolio should be equally distributed but some stocks may have larger weights due to their fundamentals. You can start investing on Lusaka Securities Exchange Plc and Botswana Stock Exchange Limited by using listed brokers like Stockbrokers Botswana and Stockbrokers Zambia Limited. Consult a financial advisor or wealth advisor for portfolio Rebalancing strategies that can meet your financial goals. keep learning keep investing #financialliterancy #Financialadvisor #wealthadvisor #Rebalancing

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Not surprised by this take. This trend will accelerate as AI tools such as Qdeck.ai gain traction. Their platform is basically a CFA in a box, but for $50/month!

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The Shiller CAPE Ratio is out of date. The reason for the bubble-like value it currently has is a result of 6 stocks causing the P/E-10 (the moving average of the past 10 year's EPS) to be much higher than normal. These 6 stocks are AAPL, AMZN, GOOGL, NVDA, META, and TSLA. You should use my formula to calculate the forward P/E adjustment due to the much higher growth rates of these stocks. #CAPEratio #ShillerCAPE #ShillerPEratio #PE10ratio #valueinvesting #growthinvesting https://lnkd.in/ghYgXAQY

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Above all, I think every investor should know the purpose of why futures and options were launched in markets . They were purely launched with the purpose of hedge against the stocks in terms of unexpected events and market crash . Furthermore , futures behave differently while options move in a different way . Futures price doesn’t depend on time to expiry but options prices react strongly to that . Therefore even if an investor wants to enter derivatives, he should start either nifty or index futures first . A client can turn to options once they are fully aware that can use options as a hedge to protect their trading position in case the market goes against them .

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Macro Views - 19 Aug The panic created by the rise in the US unemployment was well contained over last couple of weeks with higher US retail sales (+1% vs 0.3% exp) and better consumer confidence. The continued fall in inflation (with CPI and PPI both coming off nicely) and the y-o-y CPI below 3% seem to show perfect soft landing scenario. To give credit where it's due - Fed did well to keep the rates steady at recent record highs for all of 2024 and also didn't do anything foolish like an inter-meeting cut under market's pressure earlier in August. The September 25bps cut remains on cards with more guidance coming out from the Jackson Hole meet of central bankers this week. 2yr UST at 4.04% and 10 yr at 3.88% are well above the lows seen post employment data but still much lower than the peaks. The rate cut cycle cannot be extended much into the future as the inflation fears are still very much alive due to geo-political situation and the US elections outcome. Dollar index at 102.11 is nearing Jan lows as the risk-on sentiment takes over. Equities have rallied in US, Japan and India as the last week's fears of imminent action by Iran against Israel receded. And Brent Crude oil fell below $80 again. Euro, JPY and Gold were the beneficiaries of USD weakness with Euro above 1.1040 in spite of looming cuts by the ECB. The move higher in USDJPY seen last week was a relief rally after the BOJ comments showed that they didn't want very strong JPY either. But the market is in no hurry to put on the carry trade again after burning its fingers. The good part of this risk rally is that it's not driven by the JPY carry trade as evident in price action. Gold has very much behaved like a risk asset in the short term, falling with the equities due to margin calls and liquidity tightening but then rising with equities above $2500 mark. With US fiscal issues and global inflation, Gold is likely to gain further as inflation hedge as well as safe haven in the long run. USDINR traded in a tight range of 83.85-95 defying global volatility. We are not seeing pressure on either side from flows perspective. INR rates are trending lower in line with the bond inflows and US rates coming off. Any more meaningful fall in INR rates may come only after Fed cuts, leading to RBI cutting the rates with a lag of 1-2 meetings. Negative press on the pressure caused on global steel prices by China continued and led to Iron Ore prices capitulating last week with near futures falling below $93. The scenario for Iron Ore and Coking coal will emerge according to policy steps in China - to reduce or maintain Steel production and to provide any meaningful stimulus to the battered property market. For now, we may see the prices take a pause or rise a bit furhter from here on profit taking by short traders. Base metals on the other hand have seen good support due to a reasonable outlook on global manufacturing sectors driven by upbeat consumption in the large economies.

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