Crytocurrencies were all the rage in past few years on account of rising asset prices and volatility. Now, they are going through a bear market that has witnessed some popular currencies going totally bust. This pehnomemnon of an "asset class" going from hot to untouchable is not new. We've seen this again and again in different forms and proportions.

The current bear market in cryptos certainly impacts the investors, start-ups, promoters, and VCs who are directly involved in the crypto business. But, this bear market has second-order effects that may impact you as well. Listen in, as Deepak and Shray discuss the nuances of how the crpto bear market inpacts you.

Show notes & references:

01:40 -How does the crypto bear market have an impact on stock markets & economy?

08:30 - The indirect knockdown effects of crypto bear markets

10:00 - Digging deeper which other segments of the economy will face a slowdown due to crypto?

15:30 - The trickling effect of hot money going away from crypto startups

16:30 - Misunderstanding of risk by crypto investors

20:30 - The debacle of fancy virtual assets - Luna & Terra

Refer: Terra's stablecoin UST collapses, LUNA falls 99%

24:50 - Learnings from Zee TV & Dish TV saga of taking loans from Mutual Funds via bonds

Refer - Capitalmind post on Zee FMP Saga

34:00 - New investors moving to crypto with leverage and family savings basis TV marketing

39:00 - Why VCs don't let failed crypto companies die? - No, it's not for the right reasons.

48:00 - By Now Pay Later - bad small loans of small ticket size are a similar problem.

50:00 - Promotor fraud is now called Rug Pull.

Refer - What is a rug pull?

51:30 - The case for printing more money

54:30 - The commingling problem that stock exchanges have already solved. Crypto exchanges still fight that problem.

Refer: Deepak Shenoy tweets about these issues in Dec 2021

56:40 - Will Deepak one day invest in crypto someday in the future?

58:30 - One great thing that has come out of crypto markets

If you loved listening to Deepak talk about money and finance. You'll also find his book quite interesting - You can buy the book here – Money Wise.

In this episode, Deepak and Shray unravel different aspects related to investing in gold.

Gold has been around as a store of value for a couple of millennia, probably longer, because of how little there is and how difficult it is to get out of the earth.

Now get this - all the Gold mined would fit in a crate with sides of 21 meters. That's roughly the length of three and a half standard containers.

Yet, in the last decade, this scarce and loved asset class has done just enough to match inflation. This means, adjusted for inflation, gold has returned nothing!

Now, after putting returns of gold into perspective, we get on to the theme of our podcast - Does it make sense to invest in Gold?

We look at gold from different lenses while we determine -

• If gold is a hedge against inflation?
• Can gold protect you in a crisis like war?
• Is gold investment to create long-term wealth?
• Is there an efficient way to invest in gold?

Show notes and references:

01:30 - Is gold the safe heaven when everything else falters? 05:00 - Today all assets classes act alike and correlated

Refer - How Gold has performed over years?

08:00 - Gold hasn't outperformed inflation in 2011! 12:30 - Times when gold did outperform the Nifty 15:30 - The second-order effects of gold smuggling 17:30 - Buying gold for emotional and goal-based reasons 20:00 - Should you buy gold to hedge against a crisis like war? 23:55 - Is buying digital better than physical gold?

Refer - What is digital gold?

36:30 - Is gold as an ETF a good option?

Refer - What are Gold ETFs?

38:30 - Sovereign gold bonds as an avenue for investing in Gold?

Refer - What is the Sovereign Gold Bonds (SGB) scheme by Govt of India?

43:00 - What is the best way to buy gold?

If you loved listening to Deepak talk about money and finance. You'll also find his book quite interesting - You can buy the book here – Money Wise.

Our food expert is Krish Ashok. Ashok is Global Head, Digital Workplace at TCS. He is a techie, a musician and an author. He talks about the science behind food, the history of food and offers a lot of food for thought for us to explore further. If you are interested, a good starting point is his famous book - Masala Lab.

Our money expert is Deepak Shenoy. Deepak talks about the importance of managing your finances, the myths about investing, the fallacies that investors should avoid, and his take on cryptocurrencies. It is quite a treat to listen when he shares food metaphors to explain financial concepts. So listen in!

Topics & References:

02:00 - Science of Indian food & cooking Refer - The parable of turkey and how things are done13:30 - Do modern food habits cause lifestyle diseases? 21:45 - Wait, it's the opposite? Butter is ok but the Naan is not? 25:30 - Basics of food everyone should follow Refer: Michael Pollan: Three Simple Rules for Eating37:00 - The play of sugar & salt 40:00 - People hate changing food habits 45:00 - Each of us processes the same flavor differently 49:00 - We don't like something because its unfamiliar, not necessarily bad 52:00 - Misconceptions about Food Refer: Why the Tomato Was Feared in Europe for More Than 200 Years56:00 - The myths of Genetic Modification Refer - The Story of Norman Borlaug, the American Scientist Who Helped Engineer India's Green Revolution01:01:00 - How do we make more people cook? (especially, the men) Refer - Apple Cider Vinegar Rasam01:07:00 - Does the online food delivery phenomenon change things for food and our food habits? 01:11:00 - Switching roles - Ashok Asks Deepak about Money 01:13:00 - Building a relationship with money Refer: Book: The Lexus and the Olive Tree01:17:30 - What money can do for you? 01:23:00 - How an adult should learn the basics of Finance? Refer: Book: An Economist Gets Lunch01:43:00 - How should salaried professionals think about Income Tax? 01:50:00 - Working as an employee Vs working as a businesses 01:54:00 - Understanding Inflation first before learning about investment returns Refer: What you know about inflation might be wrong02:01:00 - How do you make money work for you? 02:09:00 - How to allocate between Equity & Fixed Income? 02:11:00 - Ways for your money to make more money? 02:16:00 - Importance of diversification in Finance & Food 02:19:00 - How should one think about their own risk appetite? Refer: Harry Markowitz and Modern Portfolio TheoryRefer: How Not to Be Wrong: The Power of Mathematical Thinking02:28:00 - Is there a tool that helps track personal financial growth? 02:37:00 - Deepak's thoughts on cryptocurrencies Refer: Blockchains Are a Bad Idea (James Mickens)Refer: Selling Shovels in the New Startup Gold Rush

You can buy Krish Ashok's book on the science of Food - Masala lab. You can buy Deepak Shenoy's book on investing - Money Wise.

Check out our wealth management service - Capitalmind Wealth (PMS)

What happens when a company goes bankrupt? Why do investors buy their stocks that are headed to zero? In this episode, we explore how the Insolvency and Bankruptcy Code (IBC) has changed the game. Deepak explains the many nuances of current regulations and how they've evolved. We dive into examples such as Bhushan Steel, Sintex and Ruchi Soya - which we hope will give you clarity. Listen in and decide. Would you stay the hell away from such stocks, or start hunting for bargains?

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Understanding Bankruptcy

Businesses are tough and the best ones survive. There are ample failure points for a business that can drive it to bankruptcy. One or a combination of factors such as economical, social, regulatory, political, geographical, etc can drive a business suddenly to the ground or induce a slow death. Such companies eventually stare at bankruptcy. We discuss -

- What is bankruptcy?

- Does everyone lose money when companies go bankrupt?

- Who gets what when the company is sold for parts?

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Learnings from the Sintex saga

Sintex Industries, the Ahmedabad-based company, that boasts of tanks covering the skyline of most cities of India, was dragged to bankruptcy courts after it defaulted on a meager payment of ~15.4 crores towards principal and interest on its NCDs. This was the final nail in the coffin for the firm that had mismanaged its finances for too long. We discuss -

- What Sintex does as a business

- How the company was re-structured (through demerger)

- How its issues snowballed to lead the company into IBC

Eventually, the IBC ( Insolvency and Bankruptcy Code) tribunal was able to keep the company running and also got a successful bidder to buy out the stressed company. That's good news for almost all of its stakeholders. Except for its shareholders who will lose all of their equity in the company. So they get nothing. Zero.

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So How does IBC work? Why do existing shareholders lose everything?

The short answer: Because existing shareholders contribute nothing to the upcoming growth of the company, they get nothing. The company that these existing shareholders bought into eventually went bankrupt. So the story for existing shareholders ends here with a big zero in their hands. Sounds unfair but that's how it is. We discuss -

- How does the IBC process work?

- Every existing stakeholder (debtors, employees, vendors) gets some part of the new entity. The current shareholders should also get a piece no?

- What actually happened to Sintex shares?

- How did things use to happen before the IBC?

There are a lot of examples discussed in this section that explain different aspects of the bankruptcy process and also highlight how each bankruptcy case is different.

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But, existing shares of Ruchi Soya went up "to the moon" while it was going through bankruptcy

All bankruptcies are different and unique. Ruchi Soya was trending on social media recently because the company came back strongly from bankruptcy and its investor (Patanjali) seems to have made a killing on its investment. There's lots more to the whole revival story. Deepak explains -

- How regulatory rules change impacted the Ruchi Soya bankruptcy process

- The bidding by Adani and Patanjali

- Interestingly, they kept 1% of the company listed. Why?

- How does Patanjali make Ruchi Soya operating cash flow positive?

- The positive impact of Covid

- Why is a company that makes only 800 Crores has a market cap of 31000 crores?

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Does investing in distressed companies work?

We all love investing at its theoretical best - buy extremely low and sell high. We also keep repeating Buffett's quotes like "Buy when there is blood on the street". Distressed companies feel like a value buy all time but they are almost always value traps or falling knives or whatever. We briefly touch upon this before we wind up the podcast -

- A quick reference to Buffett's investing in the Salomon brothers

- Brookfield & Hotel Leela deal - distress investing

Let us know if you enjoyed our podcasts on Twitter or write to us at premium [at] capitalmind [dot] in!

There is a lot to unpack about this new digital currency RBI is talking about. Deepak and Shray built up the discussion by pondering over successive questions. Deepak takes us through how cryptocurrencies currently work. This sets up the context to the current ways of handling digital currencies and we move on to discuss the RBI-backed digital currency - Central Bank Digital Currency (CBDC).

Key Points

• How CBDCs are not cryptocurrencies? And how are they different?
• Is CBDCs actually required or is it a response to the popularity of cryptocurrency? So basically, why now?
• Is the CBDC likely to be anonymous like cryptocurrencies?
• Can CBDCs be an alternative to the SWIFT system given how Russia has been isolated by the world right now?
• Impact of CBDC on Monetary and Fiscal policies?

As Indians, we discuss Inflation only during elections which makes it less of transient and more of seasonal!

But, as investors, we discuss inflation a little more. The latest reason for it is the hammering of growth stocks across markets which is blamed squarely on inflation.

In this podcast, we understand the practical concept of Inflation with examples, its impact on your investments, its impact on our daily lives, and how it impacts different people differently.

We promise, thinking of inflation in this podcast will be much more interesting than what you experienced in your economics class.

How do High Net Worth Investors invest SO much in IPOs? Nykaa's IPO saw Rs. 1,00,000 crores invested by the well heeled Indian investors. But not much of it is their own money - they borrow it. In this episode, Deepak and Shray unravel the dynamics of an IPO application for HNIs. From the rules of allocation, the big business of IPO funding, how HNIs can borrow 100X their money, systemic risks, how grey market premium (GMP) works, the role of regulators and the road ahead. Read more here

On today's show, Shray asks Deepak about how to make sense of the past two years in the markets, macroeconomics, and the seeming irrationality of it all. They also talk about how to look at the year ahead.

Highlights

• 2021 bad year with all the lives lost, but it happened to be good for markets with the number of IPOs at an all-time high
• NIFTY returned approximately 23% and has been positive for the 6th consecutive year
• India being top-heavy, from the income distribution standpoint caused the kid of market outcomes we saw
• Small firms got hit the most, and that may not be sustainable in the long run
• Markets don't care about death and destruction for sure. But what moves the market?
• We've normalized, letting go of our freedoms, and irrationality could be the new normal.
• Inflation could actually be a function of supply than demand
• If the market didn't go down in these pandemic years. How can we make any event-based predictions?
• The boom in startup funding. Has equity become cheaper than debt?

Read more at https://capitalmind.in

With technology comes great responsibility, says SEBI, as it attempts to regulate the algorithmic trading markets that have just started to evolve in India. The concept of "API" trading, through Application Programming Interfaces is the standard in the web and app-based world, but SEBI doesn't want you to manage your own money programmatically. Or, worse, to give it to someone else who is "unregulated" to manage your money through an algorithm either.

In this episode we discuss SEBI's recent consultation paper on algorithmic trading and how it impacts you. What roles do algorithms play in managing your money and will a program be investing on your behalf in the near future.

1. SEBI published a consultation paper on algorithmic trading by retail investors on Thu Dec 9 2021
2. The paper impacts any form of "automated" trading: through a broker provided API in general as well as Algo Trading
3. An example of an Algorithm that already exists - Good Till Traded orders offered by your broker. They place an order automatically every single day through a program.
4. Algorithms that would help retail investors- "Buy/Sell this stock if it falls 10%", or manage the extreme risk on my portfolio (insurance, of sorts).
5. The motivation for this paper is the emergence of 3rd Party platforms that make use of APIs through algorithms, where you share your API keys etc and they automatically trade on your account.
6. The Algorithm behaves like a proxy fund manager or money manager. They can trade your account whenever they want.
7. Concern: What if they make big losses and you have no idea of how much they can hurt you?
8. Concern: Can't these platforms get a lot of customers and then auto-manipulate a stock, in the name of algo trading?
9. Concern: APIs + Algorithms could be used to overwhelm/stuff the exchange or be used to manipulate a security's price. Rate limiting and cool off periods could help address this.
10. Consultation paper currently bans all APIs and places onus on brokers to regulate them and suggests that brokers take responsibility to run the algorithms on their system
11. The paper would enable the Broker to empanel someone (and do the checks/risk assessment/quality control) but would prevent an individual from setting up something themselves - but this seems unenforceable.
12. Stopping APIs altogether is like using a sledgehammer to kill a mosquito. We could achieve many of the objectives by having the algorithm pop up an approve/reject screen that the user has to click on. If you have say more than 50 lakhs or something in your account then you could potentially have fully automatic execution. This would be a useful middle ground to protect the smaller retail customers.
13. When I click a buy button on Zerodha Kite it triggers an API, when you click a buy button on Smallcase to buy on say zerodha it also triggers a bunch of API, when you place an order through a program that also triggers an API - how do you differentiate between the three? And you can't build an app without APIs
14. Even fund managers are found guilty of say front running or offloading - SEBI can come after them since they are regulated. If you're trading other people's money and earning from it - you have to be treated with the same level of compliance as a fund manager (PMS/AIF etc)
15. There aren't any fund manager rules that allow you to run strategies with the kind of leverage that these algorithms allow you to.
16. According to Nithin's twitter space only 0.5% of zerodha users use algos.If you're running your own algorithm that really should be allowed
17. Future of fund management (especially at scale) will require some levels of automation and APIs so we can't take a regressive or overly harsh stand.

Read more at https://capitalmind.in!