gauravk_in @gauravk_in: "𝐏𝐞𝐫𝐟𝐞𝐜𝐭 𝐒𝐭𝐨𝐫𝐦 𝐁𝐫𝐞𝐰𝐢𝐧𝐠? 𝐂𝐚𝐮𝐭𝐢𝐨𝐮𝐬 𝐎𝐩𝐭𝐢𝐦𝐢𝐬𝐦 Read this..."

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Edited

𝐏𝐞𝐫𝐟𝐞𝐜𝐭 𝐒𝐭𝐨𝐫𝐦 𝐁𝐫𝐞𝐰𝐢𝐧𝐠? 𝐂𝐚𝐮𝐭𝐢𝐨𝐮𝐬 𝐎𝐩𝐭𝐢𝐦𝐢𝐬𝐦 Read this post on my substack for free. www.gauravk.in/p/6fa We need to invest with 𝐂𝐚𝐮𝐭𝐢𝐨𝐮𝐬 𝐎𝐩𝐭𝐢𝐦𝐢𝐬𝐦. Optimism about the human ingenuity and resilience, that things eventually get better and prosperity grows. But also caution because of human greed that leads to excesses that need to be corrected periodically. Corrections like these happen very often in the stock markets, but in some cases these corrections lead to wide-spread recession and economic depression. 𝐖𝐡𝐞𝐧 𝐜𝐨𝐫𝐫𝐞𝐜𝐭𝐢𝐨𝐧 𝐭𝐮𝐫𝐧𝐬 𝐢𝐧𝐭𝐨 𝐚 𝐝𝐞𝐩𝐫𝐞𝐬𝐬𝐢𝐨𝐧? One common theme when a market correction grows into a recession is when the banks start to fail. The 2008 crisis began with housing bubble bursting, but even those who weren’t exposed to the risks in the housing bubble suffered, because the banks started to fail and that affected everyone from large to small companies and even common people who were unable to access their savings. It is very hard to predict this with precision, even legends like Ray Dalio and Michael Burry who predicted the housing bubble burst in 2008, have since predicted more crashes that didn't occur. That doesn’t mean the crisis won’t come however. 𝗧𝗵𝗲 𝗽𝗲𝗿𝗳𝗲𝗰𝘁 𝘀𝘁𝗼𝗿𝗺 A perfect storm may be brewing currently, that can threaten the stability of banks. The US has been the largest trade consumer of the world, and as such holds a lot of sway in setting the rules for global trade. The $USDOLLAR (US Dollar Index (Non Expiry)) (US Dollar Index (Non Expiry)) is the currency used for global trade. This means countries must hold a reserve of $USDOLLAR (US Dollar Index (Non Expiry)) (US Dollar Index (Non Expiry)) in their treasury. Instead of holding actual USD, the countries hold US Treasury Bonds which are considered low risk and highly liquid. However, Trump’s tariffs are sowing distrust among trade partners. It looks like Trump is not playing bluff, or at least his bluff has been called and he has driven himself into a corner from which he cannot escape. Already, countries like China and Japan that hold a lot of treasuries have started selling these. This has led to a spike in bond yields. While Trump is trying to reduce budget deficit by reducing waste and cutting spending, the US is still going to have to borrow money by selling bonds. This will create further supply in the markets. Moreover, the tariffs are expected to cause inflation in the US, which will make it harder for the Federal Reserve to reduce interest rates, rather they may have to increase interest rates. This could further lead to crash in the value of the US bonds. The banks in US and around the world are also among the largest buyers of US Treasury Bonds and if the bond values fall, these banks will suffer losses. This could create panic among the people and lead to a bank run. We have already seen a glimpse of this happening in 2023 in the failure of the Silicon Valley Bank. This could be the perfect storm that will spread very quickly to countries beyond the US. 𝐖𝐡𝐚𝐭 𝐝𝐨𝐞𝐬 𝐢𝐭 𝐦𝐞𝐚𝐧 𝐟𝐨𝐫 𝐨𝐮𝐫 𝐩𝐨𝐫𝐭𝐟𝐨𝐥𝐢𝐨? I was hoping market forces will reign Trump in. However, it looks like he has dug himself into a hole that he is having trouble climbing out of. China is calling his bluff and he is not getting obedience from allies either. He should have waited for elections in Canada, France and UK, but his actions have weakened the oppositions in these countries and strengthened the governments, including that from Germany. This just makes it harder for him to save face and back down. I have been buying the dip in the last weeks with optimism, and I don’t want to scare you out of the markets, but I want to also make the case for caution here. 𝐓𝐡𝐞𝐫𝐞 𝐢𝐬 𝐚 𝐥𝐨𝐭 𝐨𝐟 𝐝𝐢𝐟𝐟𝐞𝐫𝐞𝐧𝐜𝐞 𝐛𝐞𝐭𝐰𝐞𝐞𝐧 𝐡𝐚𝐯𝐢𝐧𝐠 𝐜𝐨𝐧𝐯𝐢𝐜𝐭𝐢𝐨𝐧 𝐚𝐧𝐝 𝐛𝐞𝐢𝐧𝐠 𝐬𝐭𝐮𝐛𝐛𝐨𝐫𝐧. The world is changing very fast all around us. This is a very risky experiment with our economy and I am sure even those in control will be feeling anxious. At times like these, it is important to stay nimble and adapt. I am confident that my common sense strategy to dollar cost average will weather through any storm, but it can only keep going if I have the cash to buy the dips and if I can hold my investments for the long term. So while I am going to continue buying the dips, I will be a bit more cautious going forward. I will also start secure profits and cutting losses to reduce risk exposure. 𝐒𝐭𝐚𝐲 𝐒𝐚𝐟𝐞 It is crucial at every time to ensure that you have enough savings to cover your families needs through long periods of recession, and this is more important now than ever. In buying the dips, please do not lose sight of this. Moreover, your savings should be spread out in separate bank accounts too. — Some level of anxiety is healthy. If you don’t feel anxious, you may be over-confident. If you are feeling restless though, feel free to reach out to me using chat in substack (www.gauravk.in). $NVDA (NVIDIA Corporation) $NSDQ100 (NASDAQ100 Index (Non Expiry)) $AMD (Advanced Micro Devices Inc) $TSM (Taiwan Semiconductor Manufacturing Co Ltd - ADR) $ASML (ASML Holding NV - ADR)