A note from the founder - Jan 22

2022 may play to these to tunes:

Omicron variant and the virus that refuses to go away!

2021 was the second full year of impact of Covid-19 virus. To think that the virus appeared in Nov 2019 in China and is still with us tells us a lot about “black swan” events. 2022 will continue to be a year where virus affects the way we work, travel and live. It also establishes a principle that in a complex world, no one really knows everything and even experts struggle with predictions. Omicron variant will ensure that there is uncertainty related to work, travel, economy, and therefore, the markets. We expect this uncertainty till June.

In this situation, we have two principles to apply:

- We must learn to be “anti-fragile” (a term popularized by Nassim Taleb). It means to thrive in condition of volatility, shocks, or uncertainty. Some of the actions to be ‘anti-fragile’ are - covering our risks adequately, having higher level of funds for contingency, less debt and other obligations, a frugal lifestyle relative to income, having multiple income streams, a suitable asset allocation and diversification within portfolio.

- We must also take the opportunity that this uncertainty and volatility may bring. There may be buying opportunities, possibility of booking profits (for some), opportunities in property.

Interest Rate movement

As I have informed in many of my earlier notes, we live in an era of unprecedented printing of money by central banks around the world (led by USA) and low interest rates everywhere. 2022 may be the year when we may see signs that this may change a little. The Indian Government borrowing rate (G-sec rates on 10- year bond) has increased from 6.0% to 6.4% on 08Dec21. This is significant in its upward movement and the quantum of increase. We have also seen some news that the Federal Reserve (Central bank in USA) may increase the interest rates in the USA. When, and by how much, is speculation. Just the news that this may happened, caused US markets to fall by 3% in one day on 05Jan22.

Interest rate movements affect all of us in two major ways:

- Those of us seeking fixed income cashflow will benefit with better return%

- Stock markets typically will fall when rates go upwards, as more money will chase bonds when rates on bonds rise.

All in all, we must embrace uncertainty and watch our money matters with alertness this year.