Times like these can make or break a person. Times like these are times to introspect and stay humble and true to yourself.
“Today is 18th of June, 2022 and the Nasdaq Composite is down 33% from its peak on the 19th of Nov 2021 and the Fed is still looking for a soft landing. Bitcoin is down from 64Kish in Nov to less than 20K as of this article, a 69% drop from the ATH (All time high). Most of the crypto coins have seen a decline of 85% to 90% while some of the tech stocks which were flying high last year are down by 60%”
State of the Market teaches you every step of the way; those who are humble and learn from it are the eventual winners. I have learnt a lot just in the last 8 months or so and felt it would be good to touch on some of these learnings and use it as the basis for creating the foundation for your and our success in the long run.
No One for sure knows what the future holds
The above has shown to be so true especially in the last couple of years. Not even in our wildest imagination had most of us thought that something like COVID would hit and take the world by storm.
COVID took the world by storm with death and destruction everywhere. Families lost their loved ones and COVID as a pandemic caused destruction at a scale never seen before. With 0.5 billion total cases and counting, it has questioned everyone’s sense of normalcy.
Who would have thought people will be seen with masks around them? And be scared to be with each other?
When COVID hit, the stock market did a V-shaped recovery which gave sense to the fact that sharp turnarounds are possible even in a situation when things look dire.
President of United States at that time, Donald Trump said “We’ve been talking about the ‘V’ — this is better than a ‘V.’ This is a rocket ship.”
This was driven by QE (quantitative easing) and the policy intervention to support economies by printing money. Almost fifths of all US dollars were printed in 2020 alone.
This was done by the US Federal Reserve, the Fed to support the economy during the COVID crisis. Similar measures were taken by many economies in the world.
The increase in Money Supply (M2) increased asset prices across the globe and the start market went on a tear. Money Supply rose sharply from around $15 trillion at the start of 2020 to $21 trillion as of today.
While there was free money and low interest rates, markets were on a tear despite challenges in the global world and a period of 2 years of literal shutdown of economies and countries.
While the influencers and general public were in euphoria calling like 200K BTC and 20K Nasdaq, Fed was busy making plans for tightening in November 21. They were unaware of what was about to come at the end of pandemic with tightening of money supply. There was signal and still most of us have been caught unawares.
When things go wrong even cats can dance. While the Fed was talking about the plans to increase Treasury Rates by increasing the interest rates, Russia initiated its special military operation (or war, depending on which side of the fence you are) in Ukraine ( I, for sure, never expected this) and the dominoes started to fall.
The markets have since then crashed and we are now calling for recession with interest rates rising rapidly and crypto currency players are at each other’s throat trying to bring the cards down.
Amidst, all this what we have seen is news following the markets as if the market was discounting the news in advance. So much for prediction and knowing what the future holds. News and even twitter feeds have been either trailing the news or causing the news with market manipulation. When tides were turning last Nov (2021), influencers were calling for being “irresponsibly long”
and today, today there is panic all around.
Lessons learnt:
- Don’t follow others, learn from them
- Use due diligence and a balanced approach being open minded to all scenarios
- Do your own research
- Own up to your decisions
Markets don’t go up always
Bull markets create complacency and hides weakness. I have found this the hard way as have so many people out there in todays markets and in 2008-09 and in 2000-2003. What goes up has to come down at some point of time? It’s only a question of time. Most companies disappear quickly without a trace and to assume everything will go up and be rosy all the time is a complete misnomer.
While most others go through the growth and bust cycles. No company is immune and all companies in the past and in the future will have to go through these cycle.
To be contd..
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