Low-Interest Rate and Teji in Market

 

22^nd November 2020

Low-Interest Rate and Teji in Market

Dear Fellow Travelers,

Namaste! Thanks a ton for appreciating our last post on the year 2021. If you have not read the same – read it and get prepared for the coming year. It is our new year gift to our readers. Just see the accuracy of our understanding from day one. You can visualize the coming year with the events post-Diwali.

Covid -19 is resurrecting and many of our states are starting with Night Curfew. Ultimately, it may turn out to be a new lockdown, if the situations do not come under control. Looking at my stand on COVID-19 in July 2020, many YouTube followers get puzzled as most of YouTube self-proclaimed astrologers were predicting COVID will go in April / August / September / November. It has not gone but resurrected now!! This is our accuracy.  

If you are a die-hard follower of YouTube guys – then let me give you the good news – Astrology is a Science but Predictions are 100% art. I feel that I am blessed by my Guru and HIS blessings are guiding me to predict accurately time and again.

Low-Interest Rates: -

Market experts are unanimous about TEJI thanks to Lower Interest rates. They are saying thanks to lower interest rates – people will borrow more and invest more. Businessmen will invest more in their business. Industrialists will take cheap credit and expand their industries. This is so logical that my MBA friends would like to kill me for my opposite take on the expert’s view. Let me share my views.

Have you gone for a Buffett Lunch or Dinner?

I am sure you must have had a Buffett lunch or dinner many times in your life. In a decent Buffett – you will find a spread of 50-100 items. Many items will be available live also.

Now, looking at the spread – you might have thought to have them all or taste all the items at least. Many food lovers will start with appetizers – have as much food as they can have and have you seen their position post lunch or dinner. They will have lethargy in the body, gas, or acidity post-lunch/dinner. They will lose their energy in digesting this food. They will end up taking ENO or Soda or some GAS relaxing tablets to feel relax with their burden in the stomach.

The problem of GAS is not due to FOOD. It was due to low digestive power and overeating.

How does the low-interest rate is related to the Buffett Lunch?

Like Food – Low-interest rate is a supply-side tool by the central bank to revive the economy. Their logic is simple as shared by experts during Diwali shows on TV.

The current problem in the economy is never related to a lack of credit. Taking a loan at 7% or 12% is not the main issue for Businessmen. The main issue is able to service the debt and still make a profit. The same way in the stock market also – getting a cheap credit to buy a stock is one thing and buying a proper stock which will generate that much profit that you pay the interest and also make some money after that is a challenge.

Lower interest rates will lead to loss of capital and invite poverty for Masses

Banks FD rates are now 4-5% per annum and this will make the life of Senior citizens difficult who are dependent on interest income. They will be approached by smart people giving them a promise of earning higher returns if they invest in the stock market. Now, the masses are not trained to deal in stocks. I see they end up losing their capital in the greed of earning that extra 5% over FD returns. With the lower interest rates, they have to withdraw part of their capital and if they losses them in the stock market – they will become dependent on their kids or society.

Another challenge is from Young Guys. Most are not educated to trade in Stocks. They will be lured to take a loan and invest in stocks. They will also lose their shirt in their GREED as they lack the skillsets and mindsets.

What has been the Worldwide experience of Lower interest rates?

Look at Japan and the USA. Japan is following the same from 1990. The USA has joined the game from 2001 on words. Look at their GDP growth. Japan’s GDP is growing below 1% and the USA GDP is growing below 3%. You can see European countries also.

My reading of the FACTS says – the lower interest rate is one of the ingredients for the success of business or investments. Ultimately, the success depends on various factors like skillsets of the person taking a loan/market potential / product life cycle/technology/government policy and many other things.  

What has been Warren Buffett’s practice?

He could generate money at almost negligible rates from the banks or markets. But in the last 50 years – he has never taken a loan to invest in shares. He is a super stock picker and with the expert’s logic – he could have become a billionaire at a faster speed – if he has used other people’s money. But he has not used and he is asking budding investors not to take loans for stock investing or trading.

What NEXT?

Everything FREE or CHEAP is not always good for your financial and physical health. Take a note of this.

Have a happy week ahead.

Follow me on Twitter @hiteshmparikh /  WhatsApp - +91-9869425399.

 

Live With Passion…Invest With Passion.

 

Hitesh Parikh