Financial themes that will dominate 2023

8th Jan, 2023

Issue #77

Welcome to this week’s edition of Three Point Five. In this edition, I have shared 4 interesting perspectives and opinions that I came across over the past week. Through these curated shares, you can glimpse into different perspectives and happenings in the world of finance and my takeaways from them.

1. What Can We Expect In The World Of Financial Crime In 2023?

Why should you read this?

2023 is touted to be the year of the metaverse and web3. But with technological developments, the risks to businesses also increase. I found this article interesting as it explains why businesses must be better prepared against financial frauds and money launderers.

My key takeaways from this article:

1. Money laundering will be easy in the metaverse

2. Money launderers will exploit web3 as it develops

3. The real estate sector will remain a hub for money laundering

4. Technology will continue to make anti-money laundering processes quicker and more efficient

5. Businesses have the opportunity to use compliance as a competitive advantage to prevent financial fraud

My thoughts :

With technology evolving faster than ever, the technological threats businesses face have also increased. Businesses must stay ahead of the curve in order to protect their bottom line and avoid costly fines.

While recession could increase money laundering, companies are less likely to scrutinise transactions and more likely to prioritise compliance staff. But this can be a costly mistake.

Organisations can stay ahead of the curve by proactively following Anti Money Laundering processes and developments in the cyber security space.  

2. We Will See the Return of Capital Investment on a Massive Scale

Why should you read this?

When an economist makes a strong statement – “What you have learned in market economics in the past forty years will be useless in the new world. For the next twenty years, you need to get familiar with the concepts of political economy”, then it deserves our attention.

I came across this interview where market strategist and historian Russell Napier warns of a 15- 20 year phase of structurally elevated inflation and financial repression. He shares his views on how investors should prepare for this new world.

My key takeaways from this interview :

1. We are transitioning from a market-driven economy to a government controlled economy

2. Governments will play a significant role in capital allocation to control the creation of money and reduce debt levels

3. We can expect to see consumer price inflation settling into a range between 4 - 6%

4. The significant problems we have – energy, climate change, defence, inequality, and our dependence on production from China – will all be solved by massive investment. This capex boom could last for a long time

5. Gold as an asset class stands poised to reap the rewards as people recognise inflation won't come down

My thoughts :

As most developed economies are undergoing a fundamental shift, it's essential for investors to understand what is happening on a macroeconomic level.

It’s essential for us to realise that the economic and financial environment we are accustomed to is no longer valid.

Booming inflation, governments taking control of the money supply and a looming climate crisis are not usual investment times. But, investors can adapt their investment strategies by being aware of the risks and potential opportunities.  

3. Rise of the Finfluencers: Who Are They and Why Are They Under SEBI’s Lens?

Why should you read this?

Do you follow finfluencers on social media and take financial decisions based on the content you watch? This article dives into the world of finfluencers, why they are becoming popular and the need for regulating them.

"Because of a lack of regulatory oversight in the internet and social media world, anybody can give advice, which makes the world of finfluencers a mixed bag, ranging from the unqualified to the super experienced, but consumers are left to figure out for themselves which is which" — I think this is an accurate summary of why we need to be wary of taking investment advice from social media.

My key takeaways:

1. Finfluencers need to be regulated to protect the interests of consumers

2. The Securities and Exchange Board of India (SEBI) is concerned about the increasing number of unregistered investment advisors, known as "finfluencers”

3. Finfluencers are gaining popularity due to their ability to explain complex financial concepts in an easily understandable way

4. Finfluencers now give investment advice, stock tips and personal finance through various platforms

5. Financial literacy in India is abysmally low at 27%.

6. Countries like Australia, Singapore and China already have regulations for finfluencers

My thoughts :

With the unchecked rise of India's ‘finfluencers’, investors are at risk of receiving financial advice that may not be in their best interests. As per a recent survey, nearly 60% of the respondents said they took financial advice from social media.

It is alarming that finfluencers do not need any certification to give investment advice on social media. As SEBI works on guidelines for finfluencers, the real regulation starts with us: users and the industry.

Filter the noise — most advice has no bearing on your portfolio. Don’t believe every source of financial advice.  

4. Goldman Sachs CEO on 2023’s Global Financial Outlook

Why should you watch this video?

“Times are tough, and they’re getting tougher” – That’s the clear message from Goldman Sachs.

To get some insight into what tough times could mean for individuals and companies alike, watch Goldman Sachs’ CEO David Solomon discuss his thoughts on potential global financial risks.

My key takeaways from this video:

1. Goldman Sachs will be trimming its operations due to a slowing global economy

2. The banking industry has hired aggressively during the pandemic deal-making boom

3. The war in Ukraine and the Federal Reserves’ rate hikes have pushed many corporate chieftains to the sidelines this year.

4. Deal-making and trading will be less reliant on the businesses of deal-making and trading

5. There is a possibility of recession due to the growth in government debt around the world

My thoughts :

Goldman Sachs' cutting down on operations is an undeniable indication of a global economic slowdown. International equity markets underperformed in 2022, and the impact was felt by Indian investors who had international exposure.

Expectations have been reset already, and it’s crucial to return to the first principles of healthy investment management so that investors are not caught off-guard.