Note 2: US-China trade war:: (explained in simple terms)

1. US has USD 24 trillion dollars in debt. Out of this 1.09 trillion dollars is held by China (1.27 trillion USD is held by Japan). So essentially, these countries are acting as a bank that are giving out loans to the US.

2. Why does US take this loan (debt)? The answer is no different from why you and I take loans: to invest for the future/meet current expenses. The more parties (US, Japan etc) are willing to lend to the US, the better interest rates US can avail (which will in-turn keep their domestic prices low).

3. Why would a country like China want to lend? In addition to several reasons, countries like China want to keep their exchange rate low, as this move helps them increase their exports. If the renminbi is weak compared to the US dollar, people paying in dollars can buy more things from China. This helps China to increase its exports.

4. What if China wants to collect its debt? In order to do so China can sell the debt certificates (proof that US has taken a loan from them) in the open market. This is equivalent to selling dollars in the open market. Now, if 1.09 trillion US dollars are sold in the US market, there will be large SUPPLY of the US$ in the open market, which can weaken the US$.

To understand this better, say that you are a potato farmer, who is just about to sell his 1000 kg of potato in the market. But, if the Indian government suddenly imports 50000kgs of potato, it would destabilise the price of your potatoes, right?

Now with all these theatrics of the US-China trade war, this trade war is a lose-lose for both parties.

Aplogies for being MIA. We have been trying to come up with new and interesting content for the group :)

Hopefully, you will like it.

Structured Thinking Mindmap

Here is an interesting graph (credit: Vivek Dhawan) indicating the capital outflows from Emerging Markets (red line).

This trend might look innocuous, but if you understand this from an Economics point of view, the implications can be grave.

1. During any panic situation, the money flees from "risky" markets (Emerging Markets) to Stable Markets (US, Europe etc).

2. Alternatively, in the growth phase - since folks are looking to grow money- they make risky investments (therefore, they pour money in Emerging Markets)

3. The quantum of the capital outflow post COVID-19 (as indicated by the graph) has been very high (unlike that in any other crisis in the past). This is a very worrying sign for a developing economy like India.

A direct implication for you and me would be the weak job market for several years to come. Startup jobs would suffer first, followed by a slowdown on corporate hiring.

Swift action by the policy makers to revive investor confidence would hold the key.

[Akshat's Book Club]

It was a pleasure interacting with all of you today. Appreciate all the support.

Our next meeting [Meeting 2] will be on 26th June, 2021, Saturday, 6pm IST.

We will be covering: The Psychology of Money

You can use the link: https://amzn.to/3vi8sxh

As promised- whatever money we make via the affiliates for this book, we can support folks, who can't buy the books. These affiliate links do not increase the cost at your end in any way.

Happy reading :)

PS: We will cover Deep Work post Psychology of Money.

Hello everyone, since all of us are reading The Psychology of Money, I wrote some addiional points on this topic. Might be a useful read:

______

5 simple, yet powerful lessons in personal finance:

(1) Save more.

To paraphrase Morgan Housel: Your savings is the difference between your earnings and ego.

So the next time, you are itching to buy a new phone, ask yourself: do you really need it?

(2) Live frugally (by cutting down EXPENSES, not INVESTMENTS)

These days I buy clothes from Decathlon. The reason is very simple: they manufacture some of the best products at the lowest available prices.

While I am not a staunch practitioner of minimalism, I would advocate that spending money of commodities like cars, clothes, grocery buying should be kept at the minimum.

(3) If you don't invest, you will lose money (100% guaranteed)

If there is 1 thing, just 1 thing that you should do as a side gig-- it should be to learn how to invest.

Depending on the economic cycle, you will lose money if you are putting in bank deposits.

If you bank could tell you how much money you lose each year, you would be terrified.

(4) Eat more home cooked and heathy food.

If you delete food apps from your phone. You will save 10 years of your life. And, add 10 years worth of energy.

The chain of logic is very simple: poor eating -- poor health -- less effective you become both personally and professionally.

Food apps are the worst invention of our generation.

(5) Spend money on experiences and (wise) investments.

Back in 2014, I invested in INSEAD. The best investment of my life.

This decision has paid me more than any other stock, bond, FD.

I look forward to seeing all of you on 26th 🙂

The EV Sector is growing massively in India and presents a great investment opportunity.

As per my analysis, there is a massive investment opportunity in the Electric Vehicle Industry in India.

I am making (and will be making) big bets in this industry. 

However, before you sink in a lot of money making investments, it might be useful to get an overview on how the EV Industry might shape up in India. 
This video is a must watch if like me, you too are bullish on this industry 🙂 

https://youtu.be/cGNTVozi6Ns

Just a quick reminder: YouTube LIVE of Akshat's Book Club is today (26th June, 2021) (Saturday) at 6PM IST.

We are going to discuss The Psychology of Money by Morgan Housel.

I will like these concepts to the current trends of stock markets.

Summary of The Psychology of Money (+ my personal notes)

1. How do you define money?
- Means to buy more stuff (commodity)
- Freedom?
- How do I define money? I define it in terms of freedom and choices

2. Getting Rich vs Building wealth?

- Rich vs Wealth: difference
- Money is more important about Psychology than your money making skills.
- Ronald Reed: 8mn$ portfolio

3. Wonders of compounding
- $81.5 billion of Warren Buffett’s $84.5 billion net worth came after his 65th birthday
- It is not just related to money, it also relates to other things.
- #1 thing Warren Buffet is known for is? What is that #2 thing it is known for?

4. Each of us have our own investment philosophy and none of us are wrong.
- Eg. Parents FD
- Why? we have grown up in different times

5. Now don't go around investing like a crazy person: (Reasonable vs rational)
- You can't be hard core rational: eg. buying a house -- is an emotional decision
- But, your decision should still be reasonable (now don't go buy a palace)
- Similarly, Iphone-- if you are making not a very high salary

6. Volatility is the price you pay by staying in the market:
- Market will always be volatile.

7. Tail events are major drivers

8. You are in for a surprise with your investments:
- Every thought about why does the stock market crash ~10 YEARS?
- 90s Dot Com Crash, 2000s Financial Market Crash, 2020, Corona crash
- Reason is different every year.

So what can be done?

9. Diversification is the key:
- Eg. Invest in Debt vs Equity

10. Save every penny you can
- Understand the definition of investments vs expenditures
- Identify what you need vs what you want

11. Create room for error:
- Don't do FnO
- Don't Option buyers (risk is unlimited)
- These things can wipe you out.

12. Greed is not always good, we each have our own definition of enough:
- The hardest financial skill is getting the goalpost to stop moving
- Social comparison is the problem
- Lead to dire results: eg Rajat Gupta

13. Personal finance is 'personal' for a reason:
- You need to define HOW much you want
- Which assets work best for you
- What return are you hunting?

14. How do I invest?
- I am a risky investor.
- I aim for 15-30% return in a year.
- Stock market is not my full time job, so I don't have to sell stuff to manage my cash flows.

Also DO WATCH this video, it will add a lot to your financial acumen: https://youtu.be/U5CYdmsR9Sw

Hello Everyone,

Just a quick reminder, we will be meeting next Saturday (10th July 6pm IST) to discuss DEEP WORK BY CAL NEWPORT.

Happy reading and stay safe 🙂

Hello Everyone:

We are meeting for Akshat's Book Club session-3 (we will discuss Deep Work). The session starts at 6pm IST today.

Several folks ask me, how do I undertake business analysis to invest in stocks & businesses.

So, today's video that I had posted on Youtube is a good case study on how you should think about competition, core business models and future trends.

Do watch it, it might be a great value add: https://youtu.be/tKm0eTQ8iDw

There is a lot of buzz around Cryptos. Whether we like it or hate it, we can't ignore Cryptos. It would be a good idea to learn about this reveoluntionaly investment instrument.

Every Sunday, I will release 1 video on this topic. The first video is: https://youtu.be/PHxVp0eEfPs

While everyone would like to create the next Amazon, to live a good life, creating a small business could be a great option.

Having created multiple small businesses in my life, I could personally relate to every word that was written in the book Zero to One.

At Akshat's Book Club [ABC] today, I will help you understand better the power of small businesses by sharing lessons from my own journey.

We will cover:

- Key points from Zero to One.
- My journey of how I have built small businesses.
- How you can do the same.

Our meeting will take place via INSTA LIVE at 6pm IST today (24th July 2021).

My Instagram handle is: https://www.instagram.com/akshat.world/

PS: I am in the process of creating a separate Youtube channel for our book club, therefore, not doing a YT live today 🙂

Here is part-2 of the Crypto course that I am running: this video will help you understand the difference between Crypto Market vs Stock Market:

https://youtu.be/ByVCe0BmcMQ

Do you know the term: diversification has roots in Literature, not in Finance.

There is a wonderful quote from Don Quixote by Miguel de Cervantes, where the phrase is used. It reads:

[…] ’is the part of a wise man to keep himself today for tomorrow, and not venture all his eggs in one basket.

This novel was published in 1615.

Diversification is one of the key concepts in Finance. Any person investing any money should know about this. I just released a video on this: https://youtu.be/1ktVglH2xk4