Thread by @srinicaps

#investing during volatile times are challenging
You have to invest in cheap and what has relative value and if you can manage Geo political environment, you have a winner in your hand
The last 20 years especially since 2009 was all about growth stocks and not about value buys

The #Fed , the #ECB, and all central banks were slowly destroying the cost of capital and people were being pushed more towards risk assets , these accelerated tremendously in 2020
Growth was nearly a passive investment, all money managers were pushed into the corner of ..

.. investing room , to give an example consider ETF, the more capital that goes into it, it triggers all of the algorithms to say, stock sector is above its 52-day moving average, and by default it will allocate another one percent

Even Gold is getting allocation in the same way , the higher it goes and more the allocation
Algorithms are really pushing the prices higher of Growth stocks , Gold and ETF’s in this era of cheap money supply

Coming back to buying cheap and selling higher , investing is a matter of probabilities and what is the payout on those probabilities ?
Right now we are factoring it’s all about only profits and no losses

The mechanism to revive #inflation is helping the risk assets to just go up and investors are literally believing inflation will never be seen again
But what #investors are missing is the shortages which will be experienced during the unwinding of #globalisation

All those goods and services that were experienced and enjoyed , they won’t be cheap anymore, if available at all. This is quite simply inflation
Going forward we’re going to have extraordinary chaos. We’re going to probably have a destruction of supplies...

... which would probably lead to cost push inflation , this cost push inflation will again need to be combated by the governments with effective use of long term policies which will be useful for a better solution

Central Banks may tolerate a higher inflation rate if it is caused by cost push factors. But there is also evidence that temporary cost push inflation fed into permanently higher inflation

Policies to reduce cost push inflation are essentially the same as policies to reduce demand pull inflation
The government could pursue deflationary fiscal policy (higher taxes, lower spending) or monetary authorities could increase interest rates.

The problem with using higher interest rates is that although it will reduce inflation it could lead to a big fall in #GDP
So finally rates has to go up irrespective of what central bankers and investors think and once it starts happening , asset prices has to correct

Credits

#ChrisMacIntosh

@threadreaderapp
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