馃攳
Very SLOW growth ahead? | Stagflation concerns - YouTube
Channel: unknown
[0]
hi everyone welcome to today's video so
[2]
let me show you a very quick chart which
[3]
is a very very interesting chart about
[5]
japanese nikki which is the index for
[7]
japan stock market and if you check the
[10]
date that on 4th january 1991 this index
[13]
was trading at roughly 24 000.
[15]
over a span of 30 years this index has
[18]
given three percent return three percent
[21]
that's it so now the obvious question is
[23]
that okay akshat why did this happen
[25]
that japan gave such poor returns number
[27]
two can such situation play out now
[29]
especially when the world is going
[31]
through so much trauma everyone is
[33]
talking about limited growth so much
[35]
negativity is there so much volatility
[37]
is there
[38]
super important super critical video
[40]
because if you do not understand things
[41]
fundamentally you will just simply go on
[44]
youtube look at random videos one day
[45]
people will be telling you bull run is
[47]
there you will invest money next day
[49]
market falls by 10 percent you will
[50]
start panicking so extremely important
[52]
for you to understand what exactly
[54]
happened in japan and is that situation
[57]
going to play out now
[58]
and will it impact your portfolio i will
[60]
give a super simple explanation about
[62]
this entire complex topic i had to study
[64]
a lot so please give a thumbs up and
[66]
also a very quick shout out to our
[68]
sponsors for today which is cuckoo fm
[70]
i'm currently listening to a show called
[71]
as one upon wall street it's an
[73]
adaptation of the book by peter lynch if
[76]
you study such useful material you will
[78]
become sharper in your knowledge and it
[80]
will become easier for you to navigate
[81]
the stock market and anything else that
[83]
you are doing so consume knowledge
[85]
selectively consume knowledge
[86]
intelligently so i am putting the link
[88]
in the description box go check out coco
[90]
fm let's get the video started first and
[92]
foremost let me take you to my twitter
[94]
timeline and explain what exactly
[96]
happened in japan okay so this is a very
[98]
important chart that you need to
[100]
understand very very quickly so you will
[102]
see that this blue line represents the
[104]
gdp right and if you check this
[107]
particular range you will see that in
[109]
the 80s the gdp of japan was going up it
[111]
was not as if that japan was having any
[113]
specific issue per se in fact things
[115]
were so good that japan in the 80s was
[118]
growing at 3.89 percent and us on the
[120]
other hand was only growing at 3.07
[123]
percent now these are very good growth
[125]
rates for developed economies like japan
[127]
and the us so everything was going well
[129]
and in fact things were going so well so
[132]
well that the japanese government
[133]
started fretting a little bit because
[135]
they were seeing the bloating of the
[137]
stock market the bloating of the housing
[139]
market is that something that you're
[140]
seeing now comment below let me know but
[142]
yes this was somewhat triggering the
[144]
government that you know what our
[145]
economy is probably overheating because
[147]
the prices of all the assets is going up
[149]
including the stock market and the
[151]
housing market so what did they do next
[153]
the central bank which is the bank of
[154]
japan it decided to decrease the money
[157]
supply nowadays you're saying post 2008
[160]
post 2020 the governments or central
[162]
banks are increasing the money supply
[163]
but back in the late 80s the bank of
[166]
japan decided to decrease the money
[168]
supply and what that led to was less
[171]
liquidities there was less availability
[173]
of the money and as a result the
[174]
valuations of equity and real estate
[177]
market it started to come down to
[179]
sensible levels there was no problem up
[181]
until now but what precisely ended up
[183]
happening in this particular game was
[185]
that when bank of japan decided to
[187]
decrease the liquidity in the market the
[189]
equities market fell first
[191]
so when equities market started to fall
[193]
people thought that you know what we
[195]
have to put our money in other asset
[196]
classes so they started to move towards
[198]
the housing market so the housing market
[201]
did not fail and in fact it kept on
[202]
going up for a little while and again
[204]
the bank of japan thought that you know
[205]
what fine our actions helped bring down
[208]
the equity levels to a sensible level so
[211]
let's decrease and withdraw even more
[212]
liquidity from the market that will
[214]
bring the housing market also back to
[216]
its senses so they did more of this
[218]
quantitative tightening so to say as we
[220]
understand today now due to this
[222]
excessive quantitative tightening what
[223]
ended up happening was that the equities
[225]
market went through a dramatic crash
[227]
there was just too much liquidity that
[229]
was withdrawn at a very brisk pace the
[231]
equity market also fell and the real
[233]
estate market also started falling in
[236]
fact at one point things became so bad
[238]
that as much as 70 percent of the value
[241]
of housing market in some areas went
[243]
away so from a situation where
[245]
everything was going great due to excess
[247]
liquidity withdrawal from the market the
[249]
entire economy of japan started to face
[252]
something called as deflation so i will
[254]
explain that in a minute there is a very
[255]
important term that you need to
[256]
understand first because this will help
[258]
you make sense of the current situation
[260]
also this term is called as liquidity
[263]
trap now this is a very very important
[264]
term basically what it means is that
[266]
people or investors are very smart
[269]
if they feel that you know what tomorrow
[270]
i am going to get things for cheap what
[272]
will they do they will just sit on cash
[274]
they will not do anything for example if
[276]
you are sure that tomorrow the inflation
[278]
is not going to be there inflation is
[280]
going to 100 come down and prices of
[282]
everything is going to fall what are you
[284]
going to do today you will cut down your
[286]
consumption as much as possible and you
[287]
will wait for tomorrow so that situation
[289]
in economic terms is called as liquidity
[291]
trap it's a situation where people
[293]
assume that prices of everything will
[295]
come down now why would they believe it
[296]
in japan simply because of the fact that
[298]
the equities market crashed all of a
[300]
sudden housing market crashed all of a
[302]
sudden so people started expecting that
[304]
everything will fall and let us just
[306]
wait and hold cash that's it so that's
[308]
what people started doing and that is
[310]
what led to a situation called as
[311]
liquidity crunch now under such
[313]
circumstances the roadmap is very clear
[315]
from the government what they simply do
[317]
is that they inject liquidity into the
[319]
market so they undertake bond operations
[321]
or they print more money put it in the
[323]
economy people take up that money and
[325]
they go and spend so that is the usual
[327]
road map but how does the government do
[329]
so in india what happens is that rbi for
[331]
example will print more money now this
[334]
money will reach commercial banks like
[336]
hdfc icici now hdfc and all these
[339]
commercial banks will give loans to
[340]
people and when these people get loans
[342]
they will go and spend that money in the
[344]
economy so this entire chain needs to be
[346]
completed but in japan there was another
[349]
situation that played out and that
[350]
situation was called as credit crunch
[353]
now credit crunch simply means that a
[355]
bank like rbi is printing a lot of money
[357]
it is giving it to commercial banks but
[358]
commercial banks do not want to lend to
[360]
the public because why if you have to
[362]
take a lot of money from your central
[364]
bank then you have to open your accounts
[366]
and show all the losses that you have
[367]
temporarily undergone
[369]
and all the long concealed losses will
[371]
get uncovered so this was problem number
[373]
one that the commercial banks in japan
[376]
they had to show all their losses and
[378]
they had undergone dramatic changes over
[380]
the last few months due to equity and
[382]
housing market exposure moreover it's
[384]
not as if rbi or bank of japan can
[386]
really nearly print whatever they like
[388]
they are in fact taking external debt
[390]
also to print this money so you have to
[393]
open up your country to foreign
[394]
investors in a way so the commercial
[396]
banks in japan did not want to do this
[399]
they were okay not lending more money to
[401]
people and this created a credit crunch
[403]
problem so in short we reached a
[405]
situation where there was credit crunch
[406]
banks were not lending and people
[408]
whatever money they were getting they
[410]
were not spending so this entire
[411]
situation led to a term called as
[413]
deflation in the japanese economy it
[416]
simply means that the prices in the
[418]
japanese economy did not rise at all for
[420]
decades the period 1991 to 2000 is
[423]
called as the lost decade for japan
[425]
because no growth took place deflation
[428]
is a situation where the prices of
[430]
anything does not rise and low growth
[432]
happens super super important term but i
[434]
hope that through this very brief thread
[436]
and very brief conversation you
[437]
understood a lot of complex
[439]
macroeconomic terms please press the
[440]
like button in case you liked it it will
[442]
help this video reach out to more people
[444]
now let's talk about part two which is
[446]
that okay fine japan this happened what
[448]
are the parallels today and what are
[450]
some of the key things that are
[451]
different about the current ongoing
[453]
crisis vis-a-vis japan and are we going
[455]
to witness a similar situation that
[457]
japan is facing so 20 years 30 years
[460]
down the line are we only going to make
[462]
3 nifty returns let's start having that
[464]
conversation in a few bulleted points so
[466]
the first key point that you need to
[468]
understand is that you need to take a
[469]
look at this particular chart and look
[471]
at the inflation this pink line is the
[473]
inflation line so here you can see that
[475]
towards the late 80s there was high
[477]
inflation in the japanese economy so
[480]
currently point number one is that high
[482]
inflation is happening in our economies
[484]
also the entire world's economy in fact
[486]
it is estimated that in india going
[488]
forward the rate of inflation will be
[490]
close to 10
[492]
10 so which simply means that hey go
[494]
deposit your money in hdfc bank get two
[497]
percent return on it and lose eight
[499]
percent money because the real rate of
[500]
inflation is ten percent so 100 rupees
[503]
kept in hdfc bank becomes 92 by next
[505]
year in case you want me to talk about
[507]
how you can avoid that situation i'll
[508]
make a separate video just comment below
[510]
but
[511]
first point or first similarity between
[513]
the japanese 85 to 90 economy and
[516]
today's economy is that rate of
[517]
inflation went high it is going high
[519]
today also a related point is that asset
[521]
bubble is forming so from the japanese
[523]
story it was very clear that equities
[525]
market were going up housing market was
[528]
going up what is the situation now stock
[530]
markets went up quite a lot crypto
[532]
market went up quite a lot housing
[534]
market you let me know whether it went
[535]
up or not but generally it stayed
[537]
somewhat similar but the point is there
[539]
was a lot of asset inflation that
[541]
happened in the current world order as
[542]
well now that is not the worrying sign
[544]
the worrying sign is that take a look at
[546]
this particular chart the current russia
[548]
ukraine crisis that is undergoing it is
[550]
going to create even higher inflation
[552]
that is almost guaranteed why is that
[554]
the case because from this chart you can
[556]
clearly see that russia is one of the
[557]
largest oil producers of the world it
[560]
has direct correlation to the india's
[562]
inflation rate in the sense that our 20
[564]
2-0 20 import bill whatever we are
[567]
importing 20 of that money goes into
[570]
importing oil that is how much india
[572]
depends on oil so as the oil prices are
[574]
skyrocketing it is leading to
[576]
sustainable high inflation in a country
[578]
like india so that is the inflation
[580]
issue a related issue is the supply
[582]
chain disruption issue so due to the war
[584]
a lot of ships cannot move from point a
[586]
to point b lot of disruption is
[588]
happening lot of businesses are not able
[590]
to produce extract raw materials etc etc
[593]
and as a result businesses in india are
[595]
getting strained now as per a report
[597]
there are 375 000 businesses that rely
[600]
on russian supplies now all these
[602]
businesses are going to face what they
[604]
are going to face supply chain
[605]
disruption that will further escalate
[607]
the inflation issue so that inflation
[610]
problem is very real i have been talking
[611]
about on this channel that inflation is
[613]
going to be super high i've been saying
[615]
this for several months now and now it
[617]
looks like that we are finally hitting
[619]
that point when inflation will just
[620]
skyrocket from this point so this is the
[622]
worrying sign that in japan inflation
[624]
was very high some kind of supply chain
[626]
disruption also happened same thing
[628]
exactly the same thing is happening in
[629]
the world right now this brings us to
[631]
second but a little positive point that
[633]
back in japan it was a deflation problem
[636]
deflation means what that the inflation
[638]
is not rising here right now in the
[640]
world we are facing something called a
[641]
stag inflation problem so what is this
[643]
stagflation
[645]
so stagflation simply means that it's a
[647]
combination of slow growth this was in
[649]
japan also but high inflation this
[652]
combination is called as stagflation now
[654]
let me just break up at this point and
[656]
do like a very quick commentary here why
[658]
slow growth will happen because there
[659]
are both supply side issues and demand
[661]
side issues for example there are
[663]
companies that want to produce a lot of
[665]
stuff but they are not able to produce
[666]
it because they are not able to get raw
[668]
material like semiconductors etc to make
[671]
their finished product so that leads to
[673]
supply side issues demand side issue
[675]
means that because of very high
[677]
inflation very high inflation that is
[679]
the general increase in price rises
[681]
people want to buy but they can't buy
[683]
because they don't have much money left
[685]
a classic case in point is that
[686]
companies like hul asian paints they
[688]
have increased their product prices by
[690]
15 to 20 percent so with a 15 20
[694]
jack up in prices are you continue a
[696]
large section of people would not be
[698]
able to afford those products at least
[700]
in the short term so what this situation
[702]
will lead to is slow growth first and
[703]
foremost because companies can't produce
[705]
and people can't consume because of high
[707]
inflation so this is leading to a stag
[709]
inflation problem in japan what problem
[712]
did we have we had a deflation problem
[714]
deflation simply means that the prices
[715]
of everything was just spiraling
[717]
downwards which brings me to a little
[719]
bit better news which will hopefully
[721]
calm your nerves a little bit that right
[723]
now there is no credit crunch problem
[725]
with the banks yes banks are strained
[727]
but think about it this way that when
[729]
2020 covet situation happened all across
[732]
the globe the government sprinted a lot
[734]
of money they gave it to commercial
[735]
banks and commercial banks lended it to
[737]
a lot of people how do i know that
[739]
lending took place because the asset
[741]
prices across the board inflated that
[743]
was one of the reasons why after 2020
[745]
coved crisis prices of everything
[747]
including stocks started going up why
[750]
because commercial banks were willing to
[751]
lend and they were able to successfully
[753]
lend so the road map is very clear that
[755]
in case government starts printing more
[757]
money or increase more liquidity which
[759]
they will commercial banks are
[761]
definitely going to lend it out there is
[762]
no credit crunch problem that is there
[764]
currently so this is a good news for us
[766]
now comes the fourth point and now here
[768]
is a brief snippet from kathy wood
[770]
please listen to this very brief
[771]
commentary then i will give you my
[772]
inputs i want to ask you about some of
[774]
the other markers in the market right
[776]
now particularly as it relates to the
[778]
war in ukraine have we seen peak market
[780]
impact yet and what should investors be
[782]
focusing on here
[784]
it's very hard to say if we've seen peak
[787]
market impact i know the markets are
[789]
getting hit today
[790]
um
[791]
typically
[793]
the way we see the peak
[796]
is through the vix the volatility index
[799]
and it has moved up it's in the mid-30s
[803]
i'm not sure what this morning is
[805]
and
[807]
the shock in 2018 and
[810]
and the one before that got us into the
[812]
low 40s of course the coronavirus got us
[815]
to 80.
[816]
but we're getting close to those
[818]
cathartic moments in the past
[822]
i would be surprised if we do go to the
[824]
coronavirus because remember
[826]
levels because remember people were
[829]
expecting a depression
[831]
the whole world shut down this is not
[834]
that this is going to cause a lot of
[836]
problems from a purchasing power point
[839]
to view i think the risk of recession
[842]
has gone up dramatically
[844]
as purchasing power is dropping
[847]
dramatically
[849]
in the u.s the consumer saving rate
[851]
already is
[852]
down to levels we have not seen since
[855]
so that buffer that the stimulus
[858]
payments created during the crisis
[860]
that's gone
[861]
and so consumers are probably going to
[864]
pull back sentiments suggest they will
[867]
and in some ways they already have if
[869]
you average over the last three months
[871]
this is u.s uh consumption in real terms
[874]
has been pretty flat so as kathy wood
[875]
rightly pointed out that we will have
[877]
slow growth no doubt about that we might
[879]
move to recession but that does not mean
[881]
that we are having a liquidity crunch
[883]
problem
[884]
as was the case in japan they had money
[886]
but they were just not willing to spend
[888]
it that is not the situation now it is
[890]
much much more complicated to change the
[892]
psychology of people if people just do
[895]
not want to spend no matter what the
[896]
central bank does it's a bad situation
[898]
for the economy and that is precisely
[900]
what is happening even now in japan you
[903]
just can't change the psychology of
[904]
people about this it is very very
[906]
complicated to do it yes right now we
[909]
are having a lot of growth challenges no
[911]
doubt about that but the psychology of
[913]
people is still to spend money so
[915]
whenever the situation improves we are
[917]
going to be fine so you should not get
[919]
super stressed about these slowing
[920]
growth yes we will move towards the
[922]
sideways market as i have been saying
[924]
again for several months now it looks
[926]
very very certain that this will be a
[928]
very elongated sideways market but
[930]
fundamentally growth will come back at
[933]
some stage the psychology of people has
[935]
not been messed up with so to say
[937]
whenever the salaries rise whenever the
[939]
employment cycle goes back to full
[941]
whenever people have money in hand to
[943]
spend they will start spending and that
[945]
will revive the economies all across the
[946]
globe now comes the fifth and the most
[948]
important point which outlines the
[950]
difference between the japanese
[951]
situation and what is happening
[952]
currently in the world and that is the
[954]
concept of road map so road map simply
[957]
means and you can understand it through
[958]
a sports analogy that when usain bolt
[961]
ran the 100 meter sprint in less than 10
[963]
seconds it was believed that humans just
[965]
can't do it it was very very difficult
[967]
to run at such a fast pace it was
[969]
possibly humanly impossible but a lot of
[972]
athletes started doing it now we have
[974]
usain bolt who has broken all the
[975]
records and he has run that race in a
[977]
crazy time so i hope you get the idea
[978]
that when someone shows a path it
[980]
becomes very easy for humans to follow
[982]
that path so japan has already created a
[984]
case study by messing up its own economy
[987]
and has given the world numerous lessons
[989]
that central bankers economists now can
[991]
pick and revive and cultivate their own
[993]
systems to come out of this mess that
[995]
the entire world has created so what is
[997]
my final advice and this brings us to
[999]
the final section that what is it that
[1000]
you should be doing in case you're an
[1002]
investor now i can't give you
[1003]
recommendations but this is what i'm
[1005]
doing number one i am buying the dips
[1007]
because i truly understand the
[1008]
difference between why the japan economy
[1010]
crashed visa is what is happening now it
[1013]
is short-term pain and we will see a lot
[1014]
of volatility along the way but i am
[1017]
going to continue to buy the dips number
[1019]
two in this environment please do not
[1021]
panic do not panic buy or do not panic
[1023]
sell why because whenever new numbers
[1025]
are released for example inflation data
[1027]
is released the stock market will react
[1029]
very very violently to it for example if
[1031]
the expectation of inflation is 10 in
[1034]
india and if it comes out to be 12 stock
[1036]
market will crash like anything so it's
[1038]
very important to be sensible and
[1039]
understand what is going on
[1040]
macroeconomically that is the only
[1042]
friend that can help you please do not
[1044]
use technical indicators that will not
[1046]
work in such a market third and finally
[1047]
please invest across asset classes i
[1050]
have been saying it at the top of my
[1051]
voice for the last one and a half years
[1053]
please be diversified please be
[1054]
diversified please do not go and invest
[1056]
in one single asset please be
[1058]
diversified across asset classes this
[1060]
includes cryptocurrencies also so i am
[1062]
purchasing cryptos i am purchasing
[1064]
equities i have started to take little
[1066]
bit of positions even in the bond market
[1068]
now so i am diversifying and i'm hedging
[1070]
my portfolio i'll make a separate video
[1072]
on how to hedge your portfolio in easy
[1074]
to understand language but i hope that
[1076]
this video allowed you to understand and
[1077]
cultivate a fundamental knowledge of
[1079]
what is happening in the stock market
[1081]
and hopefully it will help you navigate
[1083]
the situation more confidently please
[1085]
give it a thumbs up and also check goku
[1086]
fm for a special link and a discount and
[1088]
i will see you the next time
[1096]
you
Most Recent Videos:
You can go back to the homepage right here: Homepage