Flows before Pros
Neither a bull nor a bear be
Behold the tides of liquidity!
Over the last 3 years, we’ve seen money rushing out in Feb-2020, causing the COVID crash, only to come rushing back in, causing a ‘V’-shaped recovery. And when US rates started rising, foreign capital started leaving again. FIIs became net sellers from Sept-2021 through July-2022. The outflows mark the drawdowns of our indices.
As the US markets picked up in July and August, capital started trickling back in and our indices are almost back at their peaks.
During all this time, investment pros have been bemoaning the absurd valuations of Indian stocks and intellectualizing currency fluctuations while marveling at the surprising resilience of our indices.
When you compare the INDA ETF with SPY (S&P 500), SCHF (DM ex-US) and FRDM (EM ex-autocracies) over the same timeframe, Indian indices have kept pace with S&P 500 and have out-performed the others.
Could the recent weakness in US equities trigger another FII outflow? It could. But, having dumped $33.5 billion, how much more is left to sell? Meanwhile, retail SIPs have not seen nearly the number of cancellations that used to happen in previous downtrends (2018, for example).
It is often said that you can only trade the market that is in front of you, not the one you wished you had. Flows are a real-time sentiment check on the collective wisdom of the markets. Makes sense to put flows before pros.
Markets this Week
US markets got smashed post-Jackson Hole. Apparently, the Fed that believes in trickle-down wealth-effects also believes in trickle-down privation-effects.
Meanwhile, Adani Enterprises became the second stock from the Adani stable to enter the NIFTY 50. Some say Adani stocks are getting Tesla’d — meme’d to a market-cap big enough to get included in major indices and attract passive flows.
Noteworthy: over the last 5-years, USDINR is no long the worst performing currency pair! Looks like Japan is finally getting what it always wanted: high inflation and a weak currency.
Links
G7 ministers forge ahead with Russian oil price cap. (reuters)
This is a big deal: Non-compliance would involve taking on big risks and paying more for unproven insurance, shipping, and other services. (tra)
This will never work: Why would refiners give up cheap oil when the alternative is likely $30 to $40 above the price cap? Why would they not be willing to pay $10 or $20 more than the price cap to still receive what would be cheap oil? (tra)
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US import demand is dropping off a cliff. Inbound container volumes to the US are reverting to pre-pandemic levels. Consumer buying patterns are rapidly normalizing to pre-COVID levels, and U.S. retailers are stuck with too much inventory. (freightwaves)
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To nobody’s surprise: Almost half of humanities and arts majors regret their choice. (WaPo)
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Different narratives are always in competition with each other. Very few can consistently predict which one will end up winning.
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Blac Chyna Reportedly Made $240 Million on OnlyFans in 2021, Cardi B Earned Over $108 Million. (complex)
