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Saved by @Alex1Powell

Here’s me trying to make sense of the unprecedented 2020 bull rally of stock markets.

(A thread)

 1/ The simple answer to why stock markets are up is always that there’s more demand for stocks than supply.

So the real question is: why is there more demand for stocks?
2/ Actually, what’s happening is what should happen.

Central banks across the world, especially the fed in the US, are providing cheap liquidity across the board to institutions.

With interest rates falling to 0% and below, bonds are no longer attractive.
3/ The central banks are injecting this extra liquidity to stimulate economic activity.

They’ve made risk-free investments such as bonds so unattractive that the only place for money to go is towards relatively risky investments which are stocks.
4/ More than anything else, what central banks want is inflation.

They want things to become pricey so wages grow, profits grow and people’s perception of recession goes away because you’re getting more money than last year.
5/ Of course, it doesn’t work this simply.

Instead of inflation of wages and consumer products, we are seeing inflation of stock prices.

We are not seeing inflation of employee wages and consumer products because supply of these is more than demand.
6/ Instead what’s scarce by definition - stocks - is going up in price.

Central banks are underestimating how many people are needed to run economies these days.

It’s tech and tech causes decrease in prices for consumers.
7/ So no matter how much liquidity you pump, prices will not go up.

What will go up is stocks.
8/ But in a way, economy is doing what central banks want it to do: chasing riskier projects which hopefully will create more jobs in future.
9/ So when investors ditch the sureshot 0% return by a bank (that further invests in sureshot projects) to chase high-risk, high-returns gambles like Tesla, that’s exactly what central banks want.
10/ So when investors ditch the sureshot 0% return by a bank (that further invests in sureshot projects) to chase high-risk, high-returns gambles like Tesla, that’s exactly what central banks want.
11/ What’s most fascinating to me about the whole game is that it’s the *loss* making companies that’s getting their shares touch the moon.

Why?

https://t.co/xE9j8G2oQB
12/ I think the answer to it is beautifully put by this Redditor

https://t.co/7RTCJXaWlL
13/ Think about it: when interest rates are low, and the money you’re investing is something you *dont* want to consume today: you prefer future profits than today’s profits.
14/ You start preferring companies that reinvest all their profits at a >0% return vs returning you profits as dividends and you not knowing what to do with that money.
15/ This is why loss making companies are having sky-high valuations.

Nobody wants their money back at 0% interest regime.
16/ In that sense, “safe stocks” that return a healthy profit/dividend are more like 0% interest bonds.

You don’t want a dollar today. You want five tomorrow, even if that comes with a risk.
17/ I feel there may be a certain natural bias towards growth-oriented companies like Tesla.

When you invest in stock market, you really dont want to consume that money and hence naturally seek future growth over today’s growth.
18/ In nutshell: when there’s excess money in circulation, it seeks risk.

That’s what’s happening today (including bitcoin price rise IMO).

This looks like a long term trend. No central bank is willing to risk not risk taking.
19/ That’s it.

Hopefully that made sense.

If you have any other perspective or have read an interesting article on this, let me know.

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@paraschopra
Difference between wealth and money.

(a short 🧵 thread)

1/ As the oxygen crisis during 2nd covid wave in India has reiterated,

wealth = *stuff* we want
money = *numbers* in our bank

2/ Being wealthy is a matter of priorities, while being rich is a matter of luck and hard work.

3/ Our happiness and well being depends on the wealth we have, not the money.

One can have all the money in the world and still be miserable.

However if one has sufficient wealth, happiness is guaranteed (partly because that’s how wealth is defined).

4/ Here’s how to be wealthy without spending a dime:

- Exercise regularly
- Develop deep relationships
- Help other people
- Eat healthy
- Meditate
- Learn and develop skills
- Laugh
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Paras Chopra
Paras Chopra
@paraschopra
1/ Here are my notes from @robertwrighter's book - Nonzero: the logic of human destiny. I enjoyed the book very much.

The basic premise of the book is that history has a direction which favors co-operation and non-zero sum games, and that causes an increase in complexity.


2/ Starting from the first replicating molecule which co-operated with an outer layer to form first proto-cell, evolutionary and cultural history is full of examples where two entities come together to survive and progress a lot more than they would have done individually.

3/ This co-operative entity fares much better than two individual entities because of specialization. If two entities are in the same boat - that they win together or lose together - then trust is implicit.

4/ In a non-zero sum game, trust causes entities to focus on what they do best.

For example, eukaryotic cells - the ones animals and plants have - emerged when two proto-cells merged, and one took the role of energy generator (mitochondria), the other specialized in protection.

5/ Some scientists believe that even nucleus in a cell is a result of an early cell merging with another cell.

So M&A is not a recent phenomena, entities have been merging because of common interests ever since life started.
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Paras Chopra
@paraschopra
Sugar was once promoted in newspaper ads as a healthy snack that helps save calories and prevents obesity.

Oh, how the tables turn.
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Paras Chopra
Paras Chopra
@paraschopra
We may be alone in the 🌌 ENTIRE UNIVERSE.

(a thread on this bold conjecture)

🎉 It's also my 1st podcast episode https://t.co/7u2FskrhHi


1/ For my inaugural podcast episode, I interviewed @anderssandberg who is a senior research fellow at the @fhioxford.

I highly recommend listening to the entire episode. It's full of gems and insights.

But if you want key ideas, keep reading this

2/ Before we get to that, here's what we talk about in the hour-long conversation.


3/ Both history and science fiction shows us how the world can be dramatically different than what it is today.

4/ But exponential curves (like Moore's law) make it hard to predict the future because early on they look like linear
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Paras Chopra
Paras Chopra
@paraschopra
Only two types of startups exist: technology-led and culture-led

(a short thread on this mental model)

🔥 It's also the 7th chapter of my book https://t.co/iLfMb0xhnD


1/ There are two ways an entrepreneur can fail:

a) launch a product that nobody desires;

b) launch a product that people desire but with no significant advantage over established competitors (hence give no strong reason for a customer to switch away).

2/ These two failure modes have their analogous success modes:

a) culture-led startup success where a new desire is discovered and fulfilled;

b) technology-led startup success where new technology is used to fulfill an existing desire.

3/ Let’s explore culture-led startups first.

They are the ones in which the entrepreneur is able to observe a pattern of new derivative desires that didn’t exist before.

Such trends are very hard to spot because initially they can be mistaken either as fads or insignificant.

4/ However, an entrepreneur who has good observation skills is able to connect the dots from diverse sources to grow his conviction about a cultural shift just when the market is
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Thread on "The Final Checklist"
by Peter Lynch.

~ Ideas can come from anywhere - Peter Lynch.


~ If you can't find any companies that you think are attractive, put your money in the bank until you discover some - Peter Lynch.


~ All you need for a lifetime of successful investing is a few big winners, and the pluses from those will overwhelm the minuses from the stocks that don’t work out - Peter Lynch.


~ Time is on your side when you own shares of superior companies - Peter Lynch.
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12 TRADING SETUPS used by professional traders:🧵

Collaborated with @niki_poojary

Here's what you'll learn in this thread:

1. Capture Overnight Theta Decay
2. Trading Opening Range Breakouts
3. Reversal Trading Setups
4. Selling strangles and straddles in Bank Nifty
6. NR4 + IB
7. NR 21-Vwap Strategy

Let's dive in ↓

1/ STBT option Selling (Positional Setup):

The setup uses price action to sell options for overnight theta decay.

Check Bank Nifty at 3:15 everyday.

Sell directional credit spreads with capped


@jigspatel1988 2/ Selling Strangles in Bank Nifty based on Open Interest Data

Don't trade till 9:45 Am.

Identify the highest OI on puts and calls.

Check combined premium and put a stop on individual


@jigspatel1988 3/ Open Drive (Intraday)

This is an opening range breakout setup with a few conditions.

To be used when the market opens above yesterday's day high

or Below yesterday's day's
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Sarang Sood
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@SarangSood
FINDING EDGE IN OPTIONS

24/08/15: Nifty gap down 250 points & another 250 after that. Previous few months return gone, but since I'm quick to take my losses, was saved from ruin. Before that my only edge in option selling was adjustments & my forever edge of following PA. (1/n)

I soon realised that theta decay with sound adjustments is not an edge, which i earlier thought was & which gave me good returns over the years. After that i went deeper in understanding volatility behaviour, how/where it manifests & all the discrepancies in option chain. (2/n)

With finding edge in logistics i mean how to keep the greeks in check, SL in place & optimum ways of adjustments with minimum slippages. So the main aim here is to write theta without following vol behaviour & having any actual knowledge of what's going on in the markets. (3/n)

A dedicated trader can learn all this in few years & it is something which is 'obvious' to become successful. But majority can't reach this level, as this also requires consistent hustle in live markets. All the seminar/webinar business teaches you till this level only.(4/n)

If you get passed this level though, the real work starts, when you have to find your real edge. This can't be taught in a webinar. It needs serious introspection of your trading skills, psychology & strategies in use, which ultimately allow you to book excellent profits. (5/n)
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Richard Chu
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@richard_chu97
1/ I used to think that the biggest gains had to come from stocks that no one knew about

One of the harder lessons for me to internalize has been that oftentimes, unknown stocks stay unknown for a reason and you can still earn attractive returns from stocks everyone's bullish on

2/ While I’m not contrarian just for the sake of being contrarian, I do think it’s important to question everything.

When I started out, I would buy "quality" stocks like FB or TSLA without doing much research.

But an opinion being consensus doesn’t make it the truth.

3/ So owning the most popular stocks made me nervous. If a winner is so obvious then either it's priced in or maybe I'm missing something?

I preferred owning stocks that others weren’t aware of or were bearish on for the wrong reasons (more room for upside surprises).

4/ But there are degrees

Despite being widely popular, stocks like SHOP have been some of the best performers because they exceeded even the most bullish projections

And some stocks like TSLA are partly popular because they are great consumer products which is an important sign

5/ On the other hand, while the biggest winners can be found in micro-caps, many of which started out very undervalued with no analyst coverage, on average, they tend to underperform larger caps

Picking out the big winners earlier on is very difficult and there is no set formula
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