Uncle Scrooge's Economics

Which type of market comes to your mind when I say that it has the largest turnover in the world? Equity markets, derivatives, bond? Nope. In general, the bond market is the biggest in terms of securities issued. But "the biggest markets on daily turnover basis''  award goes to Forex markets. Forex is an abbreviation for foreign exchange market. On a daily basis, almost $7 trillion worth of turnover takes place, basically net amount of all buys and sells. That's 2 times the size of India's GDP and 3 times the size of Indian derivative market, traded daily.    They are the biggest markets because they provide some of the biggest advantages. Let's go through them, one by one.  1. Flexibility -  Forex exchange markets provide traders with a lot of flexibility . This is because there is no restriction on the amount of money that can be used for trading. Also, there is almost no regulation of the markets. This combined with the fact that the market operates on a 24...

  Imagine a bright Monday morning accompanied by some cool breeze and a delightful breakfast post-golf session, with a computer making decisions on your behalf and earning 40+% every year. Sounds unrealistic, right? Well, this dream pipe has been a reality for some time. Remember these names: Mayron Scholes, Robert Merton, and John Meriwether . I bet you've heard at least one of these names before. If not, then let me make you all familiar with who these three financial polymaths were and the empire they created, which was successful in drilling a giant hole in the American financial system in the late 1990s. The organisation was Long Term Capital Management (LTCM). Starting with Mayron Scholes, a Canadian economist who is famous for his options valuation formula, the Black Scoles formula, for which he received a Noble Prize. He was the principal and limited partner at LTCM L.P. Also, he was a millionaire. The second person on the list is Robert Merton, another millionaire economi...

Value investing can be someone's cup of tea but, contrarian investing requires balls of steel. Contrarian investing is an investment style in which investors purposefully go against prevailing market trends by selling when others are buying and buying when others are selling, based on intuition and supporting data. Berkshire Hathaway Chair and CEO Warren Buffett is famous for his contrarian bets but, the "Father of all contrarian bets" title goes to none other than, Sir John Templeton.  Contrarian investors believe that people who say the market is going up do so only when they are fully invested and have no further purchasing power. At this point, the market is at a peak. So, when people predict a downturn, they have already sold out, and the market can only go up at this point. As the name implies, contrarian investing is an investing strategy that involves going against the grain of investors sentiment. The principle behind contrarian investing can be applied to indivi...

  Capitalism is brutal. To stay competitive in the long term, a company needs to have an enduring competitive advantage, or an economic advantage. The term "economic moat," popularised by Warren Buffett, refers to the ability to maintain a competitive advantage over its competitors in order to protect its long-term profits and market share. Just like a mediaeval castle, the moat serves to protect those fortresses and their riches from outsiders. Remember, competitive advantage is essentially any factor that allows a company to provide a good or service that is similar to those offered by its competitors and, at the same time, outperform those competitors in profits. A good example of a competitive advantage would be a low-cost advantage, such as cheap access to raw materials. Very successful investors such as Mr. Buffett have been adept at finding companies with solid economic moats but relatively low share prices. For us investors to find a company with an enduring competit...

                                                                                                                                                                                                        We have heard the phrase "too few hands chasing too few goods" before. Finally, I found out that those "too few" hands were of this gentleman. Wearing a tailor-made Armani suit and smiling like a 6-yea...

      "It is often said that what you take from the Ganga, you must return to the Ganga," says the billionaire boss of Vedanta Resources. Dressed in a sober blue suit and rectangular-framed glasses, Agarwal is a towering figure in India. Not just because he is 6 feet tall, but also because the self-made billionaire's London-listed natural resources conglomerate, which turned over $11.5 billion last fiscal, is the sixth biggest in the world (by EBITDA). And with a personal fortune of $3.2 billion, he is ranked 97 on India's richest list in FY 2022.   He has pledged most of his billions for philanthropic causes and hence refrains from being called a billionaire. He has promised to give away 75% of his fortune, a decision he took with his family in 2014. He says,"Money is important. It gives you confidence. But I never came from that background, so it makes me uncomfortable".  In his early years growing up in the constricted lanes of Goria Toli in Patna, Bihar...

                                                 THE STORY OF CHARLES.T. MUNGER  Charlie Munger has a net worth of over $2 billion as of May 2023. He is famously called as a ''book with legs" and the "fastest brain out there" by his closed ones. He is 99 years old and has seen pretty much everything under the sun. He has a brain power of a 30-year-old, endurance of a 25-year-old, smile of a 10-year-old, and eating habits of a 6-year-old. His life story, if transformed into a movie form would fetch millions, if not billions in revenues. His story depicts how being emotionally distant can help you achieve whatever you want out of life, no matter how abysmal the situations are. Till date, I have scripted some 40 blogs but this one would always be closest to my heart, no matter how much views I get. Just reading his autobiography would be worth a few MBAs. Trust ...