In this week’s edition
- 2 TLDR – where we quickly simplify the “too long” arduous stories that you “didn’t read”
- 3 latest articles & a podcast from the Capitalmind research desk
- 5 conversations from the slack community
- 5 interesting reads from across the internet
The Fed Reverses its Stance, and Tapers, or Something💥
The Fed, in their meeting, decided that things have gone too far in terms of trying to rescue the economy by printing gazillion sums of money. Because (Source):
- Inflation is no longer “transitory”, meaning it could be sticky and permanent. This is a problem, but this was also their goal.
- The economy is doing well, and unemployment will fall to 4.3% which is hardly any unemployment, really.
They decided to stop the game right now, call all the money back, and go back to the old times. This is where you get to laugh your head off because they did nothing of the sort. What they did was:
- They will still print money like crazy. They will print $60 billion a month from January and buy Government bonds and mortgage-based securities.
- $60 billion is still a lot of money no?
- But not as much as $90 billion earlier.
- Therefore, it’s a bad thing.
Also note: When the government bonds mature or the MBS pays back, the Fed uses that money to buy EVEN MORE such bonds. That is separate from the $60 billion they will freshly buy. You may think this is a small amount. Ha, we say.
The Fed owns $2.6 trillion of MBS and $5.6 trillion of Treasury securities. (Source) In the next 16-90 days, over $360 billion will mature – which will be reinvested.
So yes, there’s a taper in that: They will not print as insanely as earlier, but they will continue to print eccentrically. But the world markets are unhappy because how dare you. That climate, it seems, has changed.
Amazon gets dinged by the Competition Commission, fined 202 crores🏛
The fine is pocket change. But the competition commission in a long order (source) says that:
- Amazon said it wanted to buy Future Coupons because look what a nice company it is, and yes incidentally it also owns a stake in Future Retail (FRL) which is a nice thing but no we don’t control FRL in any manner, and we cannot by FDI rules.
- But it went to the arbitrator in Singapore and said, oh come on, that FRL thing was central to the whole deal. We knew we had control and we wanted to control.
- If Amazon had revealed it wanted control of FRL, CCI wouldn’t have approved the deal
- And now that it knows the real story, Amazon’s purchase of Future Coupons (49%) is now invalid.
- And yeah, pay 202 crores as a fine.
This is going to get ugly. For one, the higher courts in India (Supreme court to be precise) will take this up on appeal, and eventually a more long-drawn case will happen. If Amazon isn’t allowed to own the stake in Future Coupons, it will have to be given back the money it invested, a few thousand crores, which again isn’t a big deal here (except Biyani probably will have to get it from a third party). But the non-ownership still could stay under arbitration in Singapore, and courts will fight all around for the power to rule this case. It’s not over till it’s over, of course. This is just another roll of the dice, and this one is unfavorable for Amazon.
(Disclosure: Capitalmind has some ownership in all companies directly or indirectly, including Amazon)
Capitalmind Research 💡
- How can you buy government bonds? Why should you buy them? Do you bond with the government? So many questions, so little time. So we’ll try and answer all — but the last question. Read – Buying Government Bonds Directly From RBI
- Medplus is the first IPO of a pure-play pharmacy retailer. It is looking to raise close to ₹ 1,400 crores from the primary market. Apart from pharma-product manufacturers and the healthcare-delivery segment like hospitals and diagnostic firms, investors will now get access to companies in the distribution business. Still – Is Medplus worth the bet?
- Investing is an interesting field. Not only because you make money out of it, and that money can do great things, from buying big shiny objects to let you go on that holiday that always seemed too expensive. That’s also true about gambling. Let’s bust The Five Myths about Investing
- With technology comes great responsibility, says SEBI, as it attempts to regulate the algorithmic trading markets that have just started to evolve in India. In this episode, we discuss SEBI’s recent consultation paper on algorithmic trading and how it impacts you. Listen in – Why SEBI doesn’t want you getting advice from unregulated algos (EP43)
[Premium] School of Slack 😎
Putting together the best conversations from our slack community
- Deepak Shenoy shares his thoughts on inflation through the charts. [link]
- Thursday Uncle Theta trade update [Wednesday Trade] [Thursday Trade]
- Anoop Vijaykumar passes verdict on a mutual fund NFO in classic “to the point” style [link]
- Where to park cash in this low-interest rate market. [link]
- Don’t fall into the trap of complicated insurance policies. [link]
Links we Like✨
In this section, we bring you curated articles from across the internet that we found interesting. Today’s links are curated exclusively from our slack community:
- Rajiv Jain, Founder, and CIO of Florida-based investment boutique GQG Partners is worried that rising interest rates could hit quality growth stocks hard. Read full interview
- Credit is built on trust which can be validated via networks, and markets are built on information that is transmitted via networks. To see how deeply networks permeate finance, let’s look at five case studies. Read – Networks in Finance
- What kind of company would Jeff Bezos start if he were 30 years old today? Read – Crypto Bezos
- The new year is around the corner and we will all need to take up resolutions. Here’s something to help you with your reading list. Check out 20 Timeless Books Every Trader Should Read
- There’s an old saying that, “A lie travels around the globe while the truth is putting on its shoes”. Pondering more on this point – The Age of Financial Misinformation
That’s all, folks. Have a great weekend!
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