Ketan Shaah

BEWARE OF markets ...Markets will surprise us all...

[BALA @erbmjha]

“Pulwama terrorist attack was our tactical brilliance:” Admits Pakistan

A chilling admission linking Pakistan’s military leadership directly to the planning and execution of the 2019 Pulwama terror attack that killed 40 Indian CRPF personnel. @HMOIndia @PMOIndia

[RedboxGlobal India @REDBOXINDIA]

MORGAN STANLEY CUTS BSE SENSEX TARGET TO 82000 FROM 93000

[arin @ArinVerma1910]

When you hit “buy” or “sell,” you’re not trading against your friend

You’re trading against HFTs—teams of brilliant minds, PhDs in math, physics and economics writing code all day, backed by insane tech and real-time data

This is their full-time job

You don't stand a chance

[Abhijit Chokshi | Investors का दोस्त @stockifiabhijit]

Jains have India's highest literacy rate at 94.1%.

70% of Jains live in the top wealth quintile (Source: NFHS-4, 2018)

Jains, less than 0.5 % of India’s population, contribute ~20% of income tax, the highest per capita income tax.

Let's discover what makes this community home to the most Indian billionaires.

Consider a bookmark or a re-tweet to revisit later.

[Sahil Sharma @sahil_vi]

Tariffs are not the end game. We are entering a long drawn trade war which is meant to re-engineer the global economic order
I have spent the last 3 months doing nothing but studying what is happening around us. I finally am starting to understand what is happening & why is it happening the way that it is.
1# First some light maths

Trade account: balance of exports & imports.

Trade deficit = Imports > Exports.
Trade surplus = Exports > Imports.
America is Trade Deficit
China is Trade surplus
Capital account = balance of capital investments (into factories, FII, FDI, FPI etc).
Capital Deficit = I am exporting capital account investments into other nations, investing in them
Capital Surplus = I am importing capital account investments from other nations, they are investing in me.
For any country, its trade/current and capital accounts have to balance.

So for any country

BoP (balance of payment) identity
Capital Account + Trade Account = 0

This is true for any country & any reserve currency.

Look at in another way, whatever $ China earns by exporting good & services need to be recycled into American investments which typically ends up being US treasuries & US equity stocks.
Relationship bw Savings, Investment & trade balance.
Savings−Investment=Trade Balance

Savings = GDP - PrivateConsumption - GovernmentSpending

Investment (I) is spending on capital goods such as factories, machinery, and equipment.

So this means that a country with high Trade surplus keeps savings higher than investments which means it keeps both private & Govt consumption low.

#2 Some important History
The current economic order was engineered at Bretton Woods agreement.

1. It made dollar the reserve currency of the world. Meaning everyone saves in dollars, typically US treasuries.

2. It established America as the consumer of last resort & thus the savings destination of last resort. They are one & the same thing since the BoP
3. As a consequence, if the world at large is net trade surplus , by identity, America has to be large trade deficit & also capital account surplus. This means that this means they inevitably need to keep fiscal deficit high & run large debt & deficit since they are where the world saves their monies.
4. How does CHina or Japan Or Germany run a large trade surplus? They do this by ensuring that their savings are high. How do they do this? By financial repression of labor (lower wages compared to their productivity). By financial repression of savers by keeping rates low. When interest rates are low it favors producers like manufacturing companies over savers since the savers make less money.

America expected that when China, Japan earned trade dollars, those would be recycled into american exports. And so china would not maintain large persistent surpluses.

We know this because in 1985 when they saw $ strengthen 2x in 5 years & american exports became uncompetitive, they Engineered the Plaza accords primarily with Japan, Europe, South Korea which led to an orderly depreciation of $ by 2x & made American exports net competitive though in 6 years not immediately. This was like a walk in park compared to what they need to engineer now. Why? Because these were all allies inside the American security umbrella. Just the threat of tarriffs by Uncle Sam was enough to bring everyone to the table & hash out an orderly $ depreciation.

As you can imagine, this worked well for a few years. But you know $ depreciation is like a 1 time trick. The imbalance is cased by differential savings trade.

For any country:

Savings - Investment = Trade balance

Since dharti is a closed trading system this means summed over all countries.

Savings_china - Investment_china + Savings_india - Investment_india + … + Savings_usa - Investments_usa = 0

This means that any domestic policies which impact consumption, savings, investment all affect other nations of dharti.

Since the underlying causal factors which is high savings rate in Japan, germany (caused by repression of investors & labor) was not addressed & since nations can make other reciprocal policies which might not seem like trade policies but are in fact trade policies, so america ended up being a trade deficit nation again in a few short years. This has been continuing in the same way until 2024 when Trump decided to reset the Global economic order.

Why is Trump doing this & why now?

Many people try to paint him as a madman. He isnt. If you just see his economic & executive cabinet/team this is clear. Scott bessant. Howard lutnik. Elon Musk. Stephen Miran. These are not madmen. Trump is doing this due to a few reasons:

1. It became clear in last several decades that America is able to start wars but not finish them. Free trade has effectively hollowed out the american military industrial complex. This is why trade has become a national security issue. Despite throwing kitchen sink at the problem Russia has convincingly outlasted outproduced & outsmarted American war machine in Ukraine. Similar outcomes in Iraq, Afghanistan & other wars have now convinced the national security establishment that they need to produce in America. But the thing about production is that you cannot just produce a few things in isolation. THis is why the emphasis on Autos. Auto producers are the ones who produce ships (notice how often JD vance references Ship building in his speeches), tanks , missiles & arms & ammunition. America understands that as things stand today it would lose in a kinetic war with China so it has a very short window of 2-5 years to rearm itself if it is to stand a chance in a future kinetic war with China (if war with china seems like a distant possibility check out Andreesen horowitz website They are a VC firm who is acting with white house to bring military production back to america).

2. decades of neoliberal consensus on shifting production to China. Hence, America runs consistent trade deficits. These need to be financed by Fiscal deficits financed by US treasuries which is debt. THis has created this massive debt bubble in America. The official debt they have already taken is close to 37T$ but if you include non funded liabilities which are to come in the future (social security promises they have made which they would fund in the future) then the debt is closer to 160-180T$. This is an insane amount of debt!! Never before has america run a debt of 120% of GDP in a non war environment.

3. Never before in history of all empires has an empire turned from "late-stage empire" indicator or imperial overstretch which is when its interest expenses for debt are greater than defence spending. Last year America’s interest expense was ~900 billion$ and is crossing 1T$ & possibly 1.4T$ despite their every action. This is why scott bessant (USA finance minister/treasury secretary) says his only focus is the 10Y Treasury yield. He dismissed the wall street sell-off as “This is a Mag7 problem not a MAGA problem”. This is why DOGE. This is why now.

What is Trump doing?

Tariffs are not the end game. We are entering a long drawn trade war which is meant to re-engineer the global economic order.
Tariffs are the headline catcher, they are the act before the act. They are the misdirection of a magician as he performs his trick.

1. Tariffs actually hurt their objectives since it strengthens $ & also pushes partly burden on american consumers. Tariffs also unfairly penalize even net trade deficit countries like india. Or countries which whom USA runs trade surplus like UK.

2. Tariffs are a negotiation tactic. A way to bring china & everyone else on the table. Negotiation can only be conducted if the other person wants it more badly than you do. This is the thinking. Make them bleed before you implement the actual actions.

3. The real game is capital controls. This is clearly outlined in writings of @michaelxpettis @michaeljmcnair @SteveMiran. America needs to stop the world from buying american financial instruments. In order of priority they want the world to do the following :

1. Save less. Dont run trade surpluses. Specially with America. Michael pettis’s “can trade interventions lead to freer trade” is a must read: https://t.co/bCpqWGIshm
2. If you must save. Dont save in $. When you save in $ then it forces america to create fiscal deficit & debt to accommodate that net global savings. So america is willingly encouraging the world to dedollarize by which we mean save in other neutral reserve assets like Gold, Silver.
3. In fact the sovereign wealth fund is another way of achieving same objective. America buys up assets in the rest of the world. This reverse or inverts the capital flows & forces the trade account flows to reverse by weakening the $ strengthening the other currencies.
4. If the world must save in $ then america wants them to invest in their factories & create real jobs for americans. The class imbalance in america is unbelievable. The top 1% can buy 99% of all homes in america if they wanted to. The top 10% consume 50% of all consumption in America. Two thirds of america couldnt come up with 2000$ in a crisis if they had one. The average life expectancy of a non college grad in America is 7 years, seven whole years less than college grads. This is due to the hollowing out of american industrial might over the last few years. Few economists assume that being developed automatically means less manufacturing. This is not so. Look at Germany or Japan as an example.
5. What is the end game? It is a mar-a-lago accord which would be another global economic system reordering event. I expect following features in this system:

1. Countries are prevented from running persistent large trade surpluses with penalties for doing so.
2. Dollar depreciation vs other currencies to make american manufacturing more competitive
3. Reversal of tariffs.
4. Potentially, some backing of the new $ system with gold, silver, other commodities.
5. I also expect america to be quite happy with stagflation since this sort of financial repression was common post WW2 in 1940s & helped them inflate away their debt from 120% to 50% of GDP. This means they want to let inflation run higher for longer which is a repression of bond holders by making real interest rates negative. This might be coupled with some form of capital controls seen post WW2.

What is going to happen now?

I think of this as a game theoretic setup. The world case scenario for china is mar-a-lago accord since it results in Japanification of china. Which is what plaza accord caused to Japan.
1. Japan depended on Exports. America depreciated $ to make exports competitive. This hurt japanese economy & exports so japan started cutting interest rates. This led to a massive asset bubble (stock markets, real estate everything). At the peak of the bubble (around 1989), the grounds of Tokyo's Imperial Palace—covering about 1.15 square kilometers (approx. 280 acres)—were famously reported to be valued at more than all of the real estate in the entire state of California

2. China is hyper aware about this & really really doesnt want to turn into a japan. I expect china to respond not only with tariffs which wont hurt america a lot but in every n-th order consequence ways it can. Open source software to break the monopoly of US tech. Deep seek. Qwen. Alibaba models. More such open source models to compete away the profit pools of MAG7

3. China will weaponize the supply chain. Rare earth minerals. Semiconductor (i expect china to take Taiwan in next 2-3 years). Anything & everything else that it can, will be weaponized.
4. China may attempt to establish manufacturing bases in strategic locations to ensure american goods cant compete there. Eg: Chinese BYD, CATL factories in Hungary to open up Europe markets to them
5. People expect the tariffs to be good for Bharat since we are towards end of the tariff range at 26%. Nothing could be further than the truth. There are two big problems. No supply chains have the elasticity to absorb 26% price increases. countries will enter into a competitive devaluation of Currencies. Central bank of tariffed nations will cut interest rates. But every element of supply chain, Every manufacturer, exporter, importer, retailer, distributor & customer will need to shrink their savings rate. The tarrifs should also be seen as a way to shrink the savings of surplus countries. The tariff rates confirm this. Countries with the largest trade surplus have highest tariff rates. This shows us what its about. It is about reversing capital flows & balancing trade. The only problem is that tarrifs hurt american businesses & consumers as well. For this reason they are only a temporary negotiation tactic for bringing everyone on the table.
6. The world is demand deficient ex America. Since America is walling itself off, this means that the world needs to absorb all the excess capacities which were sold into China. this means that 2nd order 3rd order consequences will be china dumping into india what it had planned to export to America & so forth. So all industries will suffer. If you own a manufacturer who is domestic focussed then even he will suffer if chinese used to export it to usa but now export it to india just to keep capacity utilization high.
7. Japan & china do not allow foreigners to buy their treasuries. Similarly bharat also has highest taxation on FII ownership. Why?? Because capital flows cause trade flows. If we allowed a large amount of capital $ flows into bharat, this further appreciate rupee & make our exports uncompetitive. When America tries to use Sovereign wealth fund to try & balance the capital account & other nations try to block these attempts, then it will provide even more legitimacy to america to place multiple capital controls in place. @michaelmcnair ‘s article on this subject is a must read. https://t.co/GM3RObfTyV
8. I expect Gold to do really well for next 3-5 years. After all gold is real money. Everything else is a promise of money. AMerican $ is worth less if america cannot produce enough goods for you to buy and/or if america prints too many $ to devalue the $ that you hold. And you know that they need to print at least 160 trillion $ in next many decades at least (this number grows every year). Some people believe bitcoin will do well. I dont know. It has to register itself as sound money in order to be 'digital gold' as of now it is more like a 'nasdaq clone'. I am also not 100% sure that push comes to shove can American security establishement get a back door entry into bitcoin? Id rather own gold. The money of last 5,000 years. Individual companies will continue to do well if entrepreneur is hungry & hard working. Defence as a theme should do best in bharat since europe is arming itself. they need the weapons. Can we produce & supply them?
9. Many people believe bottom might be in place for many individual stocks. This is just a fallacy of short term horizon thinking. Consider an EPC company which is at single digit multiple & i expect 100% EPS growth. It is clearly undervalued. But its order might be in Middle east. That project could be funded by chinese govt. Their trade surplus goes down, funding dries up, order never materializes or worse, project stops in the middle. It is impossible to predict how things will turn out but companies which are domestic focussed will do better than others.
10. I expect out GDP growth to go down from 6.5-7% to 5.5-6% if the trade war plays out with high intensity. This will impact domestic facing companies as well. if we previously assumed that they will grow at 50% now they might grow at 30%.
11. Right now pharma & semiconductor are excluded from Tariffs. Why? In fact if you read Stephen miran's paper it will become clear that pharma & semicon are most strategically important. They are excluded because they dont have the domestic capacity to produce these right now. But these are most important for America to produce domestically. I expect Pharma & semicon tarrifs to come into place in next 12-24 months whenever they feel they have critical mass of production capacities. Reason for not tarrifing now is that it is also politically sensitive given the widespread applications. The terminal value of these companies is impacted even today, market wont wait for actual tariffs to be announced when the direction is clear.

Predicting the end game here is equivalent to to visualize the outcome of a multi variate multi player game outcome which is as complex as world itself. Maybe the rishi of ancient Bharat could have done it. I cannot. I just know that we are in a regime where we need to very carefully watch actions of all nations & be prepared for a very difficult next 3-5 years.

I owe a massive intellectual debt to many great thinkers who have openly shared their working & reasoning which have allowed me to clearly see the world for what it is. In no particular order, if one wants to understand what is coming better, please follow & read everything written by & all videos of :

1. @michaelxpettis who i call the bheeshma pitama of the upcoming economic reset. He has been writing about it for last decade or more. His book "The great rebalance" is a must read.
2. @SteveMiran whos paper on restructuring trade systems outlines these many capital control policy actions america can undertake including taxing YST interest, swaping existing bonds with 0 interest century bonds
3. @michaeljmcnair whos articles like the sovreign wealth fund helped me connect the dots profoundly between capital & trade flows
4. @LukeGromen who's videos got me started thinking about what is Trump doing & why
5. @ankitatIIMA guruji who's videos got me started thinking about what is happening in the world & what is our place in it
6. @sanjeevsanyal sir who is follow very closely to understand how bharat is navigating these waters
7. @neelkanthmishra sir who i listen to every single week to understand how the world is shaping up & what is bharat's role in it

Non exhaustive set of Sources:
1. https://t.co/ZCKp4gnrpR
2. https://t.co/yESeIA6bbx
3. https://t.co/bCpqWGIshm
4. https://t.co/rlV76Md9jx
5. https://t.co/41jZ0jv5j7
6. https://t.co/geOXjqojiW
7. https://t.co/VwVtTrcqrk
8. https://t.co/zsJlnvPh7g
9. https://t.co/iOPnc7iA11
10. https://t.co/Ht21rb3hF2

[Ritesh Jain @riteshmjn]

Everybody and I mean everybody should read this long article

If you don’t have time just go to the bottom and read

“Where it”s all going -AI predictions for 2025-2026 AI of the Storm https://t.co/5zEoiCnFFO

[Adi Narayana @GangaPita]

@RenukaJain6 @nsitharamanoffc @narendramodi Only Tax that Indians should be paying is GST.
Income Tax ,STT, Taxes on LTGC, STGC, all kinds of property tax, vehicle tax etc etc are extortions ! They are already taxing us on the things we purchased after paying out taxes ! Indian Tax system is highly unfair #TaxTerrorism

[KEDIANOMICS @kedianomics]

#Nifty goes to 30000 Plus wrote @sushilkedia
to our Susbcribers on a detailed analysis video.

Normally such research would cost upwards of 1000 INR, but with #RepublicDay available free for 72 hours. To get it:
a) Retweet
b) Follow us [We can DM you]
c) Nice replies Help

[Ketan Shaah @ShaahKetan]

Crude, gold n electronics biggest imports for india...plus 700bln borrowing .... RBI say on reer basis inr parity overvalued ..86..88 nx yr.

Inr will be hit..@latha_venkatesh @PrakashKotak14 for inflation..

[Prakash Kotak @PrakashKotak14]

@latha_venkatesh Weak currency for a country like India is not good at all as we are a Net Importing country.

Also crude outlook for next 3 months is + ve so it will be double whammy for our economy.

weak rupee is beneficial only for export oriented countries. It will be inflationary for India

[Abhijit Majumder @abhijitmajumder]

Sydney Schanberg, who covered 1971 Bangladesh 🇧🇩 Liberation War for The New York Times, wrote this about the Indian Army:
“I don’t like sitting around praising armies. I don’t like armies because armies mean wars. But this (Indian) army was something. They were great all the way. 1/3 🧵

[Vijay Kedia @VijayKedia1]

" FM ji , FM ji , ab zinda mein kaise rahu." My song to beloved hon'ble finance minister smt @nsitharaman ji. @nsitharamanoffc

[Shankar Sharma @1shankarsharma]

Whole country has been doing dandiya+ bhangra, media has been doing " Barking News": " F2 broker says Buy India"!!

Par ee sasura to Cheeni- owned Trojan Horse nikla!!

Ab yehi din dekhna baaki reh gaya tha 😭, ki desh ki janata ne Chinese F minus 20 broker ko F2 bana diya

[Shankar Sharma @1shankarsharma]

@mkn2811 I am convinced that the report of " Buy India" was a trap set by the Cheeni Gormint via their Cheeni broker ( in mask of being F2) , to trap foolish Indian retail and DIIs. Humko chhadha diya.
F2s continued selling, and pehnaoed us their unwanted Desi maal.

[Dr Poornima 🇮🇳 @PoornimaNimo]

Dear Mr Modi, @narendramodi

You want to include Kashmir in India. Kashmiris do not want it.

You want to remove separatist organisation from Punjab. Punjabis have voted for them and made them MP's.

You want to offer development and infrastructure to Karnataka. KA people do not want development but want North Indians out. Get the North Indians out, ban Hindi in south states.

You want restoration of the glory of Sanatan Dharma in UP, AP, HP. Hindus just want freebies in these states.

You want a drug free progressive Manipur, where tourism flourishes. The people of Manipur want to deal in drugs.

You want a corruption free, evenly taxed country with ease of doing business, Indians WANT to hoard black money, roam in BMWs and not pay taxes. They are used to dirt and squalor, potholes, corrupt politicians, rapes and crimes.

They least care about their Dharma, or temples. Just give them some freebies Rs 2000 monthly in their bank accounts, means to evade taxes, 5 years to cry and blame the ruling government and they are happy.

Appease muslims. Sing their praises. Wear a white topi and hold iftar parties. They are loyal and a grateful Kaum. They will vote en masse for BJP once you do that. All the other parties are doing just that. 🙏

Why are you bothered about India ?? Nobody cares !!

[Ketan Shaah @ShaahKetan]

@Iamsamirarora

Hw r u sirji..

Similar article on 8sept on BofA
https://t.co/wXXHYIR6eo

[Samir Arora @Iamsamirarora]

From Financial Times:

BofA suspends bankers following probe into Asian stock offerings
An internal investigation is examining whether executives tipped off certain investors of upcoming secondary offerings
Bank of America has placed two bankers in India on administrative leave as part of an investigation into allegations of wrongdoing in the US financial giant’s Asian investment bank, according to two sources familiar with the matter.

We should know who these investors were

[Ketan Shaah @ShaahKetan]

Jai jinendra

[Dharmachakra @JinDharmaChakra]

How Jains saved animals of Namibia that inspired the Govt. of India as well. #Jainism

[Ketan Shaah @ShaahKetan]

Hhhmm

Monday 30sept.. SEBI BOARD MTG?????
serious agenda...

https://t.co/PejAWt1mOM

[Ketan Shaah @ShaahKetan]

@ashumadan4 ji
Considering the treacherous trdg on rebal days..plus FR or Warehousing,
Sebi may well consider putting all such rebal trades in
seperate blk window &
Allocate fixed time.. possibly not coinciding with last hr or 30min expiry vwap trdg : to avoid major wild moves.

[Ashu Madan @ashumadan4]

Dear All
These wild movements in INDEX is a new normal and will be a new normal and one should accept it embrace and align with this reality.
Don’t keep searching for the answers and don’t try to blame anyone or exchange or regulator or Jane street.
The level of volume and participation is so huge in options trading that there will never be any credible reason to identify as why this happened.
These expiry days will be a bigger event for us, much bigger than even any global event.
Bigger the participation bigger will be the event and bigger will be the swing.

Options trading is the most difficult way to make most easy money.

Play safe!!

[Ketan Shaah @ShaahKetan]

Considering the treacherous trdg on rebal days..which is hapng..n FR or Warehousing...

Sebi may well consider putting all such trades on : seperate blocks windows ..&
keep fixed timings... not coinciding with last hour or 30min expiry vwap trdg...
..to avoid major wild moves

[Ashu Madan @ashumadan4]

Dear All
These wild movements in INDEX is a new normal and will be a new normal and one should accept it embrace and align with this reality.
Don’t keep searching for the answers and don’t try to blame anyone or exchange or regulator or Jane street.
The level of volume and participation is so huge in options trading that there will never be any credible reason to identify as why this happened.
These expiry days will be a bigger event for us, much bigger than even any global event.
Bigger the participation bigger will be the event and bigger will be the swing.

Options trading is the most difficult way to make most easy money.

Play safe!!

[Ketan Shaah @ShaahKetan]

@narendramodi
PM Modiji Janm diwas ki khuub shubhkaamna.🇮🇳
May Prabhuji grant you good health,happiness n strength to overcome all challenges.
https://t.co/R3i7KLh9UV
PM Modi turns 74; BJP call him 'visionary leader'Read more At: https://t.co/cKYwjb9Ymv