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Srinivasan G

11 Sep, 11 tweets, 6 min read

What’s happening to #Tech stocks and the markets in September 2020 and what is #FED really worried about - is the #Equities or #Bonds ?

Markets never work in a straight line up or straight line down , every market has to go through a period of correction/consolidation to resume

its journey

NASDAQ was a overbought market in June to August 2020 , but we are not in any serious trouble to disturb the long term bullish trend and why ?

Because Credit Market hasn’t broken down yet , while the media and investors are focused in the Equity markets ,

it’s the BOND MARKET WHICH FED IS MORE WORRIED about

The QE program was more about buying

1) US Sovereign bonds, called Treasuries

2) US Municipal Bonds

3) US Corporate Bonds

The Junk Bonds are not reacting to this September correction in the Equity Markets as I go writing this letter

From March 2020 The Fed began directly purchasing debt of creditworthy companies from the open market, on top of indirect investments in other firms whose more risky

bonds are rated below investment grade or “junk.” This bolstered the psychological effect of its presence in the bond markets, which keeps interest rates low

According to an analysis by Swiss bank UBS, markets in late March 2020 expected that corporations would default on up to

35 % of debt rated as junk; that number had dropped to about 12 % last week.

The dollar which is indicator of a key portion of the US government bond market having retreated in the last week is flashing inflation warning signs

With the Fed having unleashed stimulus measures to shore up the economy, some investors are now worried about inflation running too hot in the future which is a perennial risk to long-term investors in bonds and other assets such as dividend paying stocks because it eats away at

their returns.

However, with interest rates at historic lows, it takes only a modest rise in prices to wipe out a significant portion of bond returns.

From what we saw in the US markets on 10th September, there was no real buying coming in any of the quarters and also the fraud

@HindenburgRes

report which came out by @HindenburgRes about #Nikola , which will surely impact its recent deal with @GM and unwinding of call options by @SoftBank

Tech Stocks are still impacted by the selling

Gold is still holding up without any signs of liquidation

THE EQUITY MARKET IS REALLY WORRIED ABOUT THE BOND YILEDS AND HENCE TRADERS, INVESTORS ARE REACTING BY UNWINDING SHORT TERM POSITIONS

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More from @srinicaps

Srinivasan G

@srinicaps

11 Sep

@SEBI_India

@SEBI_India latest move to ask multi caps funds to invest mandatory 25 % of allocation to Small caps has been receiving lots of praise and criticism
But investors need to remember Small caps have their own significance with associated risks

Small caps generally offer higher growth potential , but these stocks also experience volatility and are prone to more risks in terms of management and are vulnerable as compared to Large caps or Mid caps

Small cap stocks often trade in tandem with the rest of the market, but on certain days and over the course of economic cycles they may behave differently, offering clues about market sentiment and trends

This include a potentially higher chance for a credit downgrade,

Read 8 tweets

Srinivasan G

@srinicaps

6 Sep

#Google #QuantumComputing #sycamore #supercomputers #classicalcomputer
#JohnMartinis #UCSB

What is Quantum Computer ?
It performs calculations based on the probability of an object's state before it is measured - instead of just 1s or 0s - which means they have the potential

to process exponentially more data compared to classical computers

Classical computers carry out logical operations using the definite position of a physical state. These are usually binary, meaning its operations are based on one of two positions.

A single state such as on or off, up or down, 1 or 0 -is called a bit

In what Google says has achieved “quantum superiority” a point at which a quantum computer can perform a task beyond the reach of regular computers

Read 9 tweets

Srinivasan G

@srinicaps

5 Sep

The #FED and all major Central Bankers in the world believe that relentless credit expansion fosters greater economic growth and full employment

The fact is Lower interest rates fosters more debt issuance

What #FED , #SNB , #Euro and #BOJ are been doing is that when economic growth falters for any reason the first action is to push rates lower

But the fact is that there is a limit to how much debt the household, business, and government sectors of the economy can tolerate

To give an example the national #GDP of USA has grown 21X since 1969 and the total Debt including households, businesses, governments, and financials is up by 51X

Also remember aggregate economic growth comes from the sum of labour hours employed and productivity improvements

Read 6 tweets

Srinivasan G

@srinicaps

3 Sep

#Cashflow is a very important for anyone’s life
Cashflow means passive income that comes through business or investments
Cashflow is the money you don’t have to work for by trading your time. Cash flow is not a salary

Cash flow is money that flows into your pocket, automatically, on a regular basis

Today, many people are in financial trouble because they have too much cash flowing out of their pockets and not enough money flowing into their pockets

The working middle class also often live paycheck to paycheck, but for different reasons and in a different way. The people who have this pattern probably have high-paying jobs, nice homes, cars, and credit cards

After putting aside some money into a Employer sponsored

Read 7 tweets

Srinivasan G

@srinicaps

2 Sep

Negative Interest Rates #NIRP do more harm to #Centralbanks than they do good

Times are changing with hard cash to online digital payments
The world has been forced to adapt to new methods of online payment like #Debitcards , #creditcard and #mobilewallet payments

Few use cash and the global elites are using negative interest rates to do the same thing as inflation make money disappear
The U.S. discontinued the use of large-denomination bills in the late 1960s. Until 1969, $500, $1,000, $5,000 and even $10,000 bills were issued and today

the largest bill is a $100 bill, but it has lost 80% of its purchasing power since 1968

Europe has ended the 500 euro note and today the largest note in euros is 200 euros. Existing 500 euro notes will still be legal tender, but new ones will not be produced.

Read 12 tweets

Srinivasan G

@srinicaps

1 Sep

Since the start of the worldwide #pandemic the U.S. government has poured trillions of dollars into the battered economy, hoping to avoid another #depression , While this has kept many businesses across the country alive, it has sparked on what the impact would be on the world’s

financial markets. For years, bankers and #hedgefund managers had been piling on more increasingly risky financial products that the markets were deeming as #safehavens
On a level of the entire U.S. equities market, the sustained lowering of the risk-free interest rate brings

about an inevitable rise in the price of asset classes, as we have seen over the past 12 years.
Having kept interest rates at historically low levels since the aftermath of the financial crisis, the Federal Reserve had very little room to move rates lower when the pandemic

Read 9 tweets

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