We're On Fire ! - (15 August 2021)

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Our Burning Planet



The UN Secretary General called the IPCC report a “code red for humanity".

Why the sudden alarm? We are the only species on earth which have now changed Earth’s climate “irreversibly” for many centuries ahead. The threshold of a 1.5 degrees increase in temperature is now around the corner. The impact is already visible, whether we recognize it or not. Poorer crop yields, flooding, impact on fisheries are all visible as we speak. 

For India, it means bad agricultural loans besides the immense damages for our agrarian economy. The resulting impact on the financial sector and on the Government finances has also been seen. In fact, India has the highest social cost (USD 86 per carbon ton) of pollution. 

 

OUR TAKE

Corporations need to develop climate solutions to access cheaper capital. This is where investors can vote with their money, and move mountains. As companies move towards carbon efficiency and better environmental practices, we will see improvement in pollution levels. If not us, our children will experience the freedom to prosper in a cleaner world.

 

USA Lights Up Infra


The US Congress passed the landmark USD 1 trillion infrastructure bill. With this, the USA begins it’s transition from a consumption-led to an investment-led growth model, similar to China's. Currently, investment contributes ~21% to USA's GDP while for China it is twice at 42%.

Governments world-wide have a choice to focus on either of the two approaches. If disposable income increases, it does help the economy. However, better lifestyles have shown a rapid increase in household debt as well. For India, household debt has jumped from 30% of GDP in FY18 to a massive 37% in FY21.

Building better transport, broadband connectivity, environment friendly infrastructure - directs investments which increase the productivity of individuals, corporates and hence the economy. For India, a capital expenditure of Rs. 100 adds Rs. 225 to the economy in that year and Rs. 480 over the duration of capital expenditure.

 

OUR TAKE

We estimate that some developed countries may start focusing on infrastructure upgrades. Politically, it may not always be easy: impact is not seen immediately, and elections have to be won today. Massive technological developments have rendered current infrastructure redundant in some cases. Investors would do well to consider this opportunity as they design their portfolios.

 

Don't Burn That Money

 

The natural barriers that used to exist between you and spending your money are gone, and if you don't intentionally add back friction points, retailers and marketers will take your money.

- Ryan Sterling (Founder- Future You Wealth)

 

The Best of What You Thought

 

The "correct" outcome is for Wyden-Lummis-Toomey to pass & Portman-Warner to fail, assuming the Senators care about good policy & promoting US interests through innovation. I'm still very bullish on crypto long term. This seems like a key moment that will define the future of cryptocurrencies (at least in the US). 

- Ashish Thadani  on Embracing Crypto in 8th Aug edition

  

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