BC GENERICLEARNINGS
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It's the weekend!

Grab a cup of coffee, in this thread I will explain

1. What is a Yield Curve?
2. Why is it an important indicator of Recession?
3. Is an Economic Recession around the corner?

Lets dive right in!

 Before we understand a Yield Curve, lets get some of the basic terminology out of the way
1. What is a Bond?

A bond is a fixed income financial instrument which represents a loan made by an investor to a borrower

The investor typically receives payment in the form of interest and a lumpsum (principal) on maturity

The interest rate on a bond is known as coupon rate.
There are many types of bonds like

1. Zero Coupon : Pays both interest and principal at maturity
2. Sovereign Bonds : Issued by a Government or a Quasi Government Institution
3. Corporate Bonds : Issued by corporate like banks, established companies etc.
Coupon (Interest Rates) on a bond are decided based on the issuer's credit rating

The higher the credit worthiness of the issuer, the lower the coupon rate

Credit Rating on a Bond is usually assigned by credit rating agencies like Moody's or Standard & Poor's (S&P)
US Treasury Bonds are always assigned a rating of AAA (Triple A) as they are backed by the Government and are considered default free

Anything with a credit rating of BBB (Triple B) or lower is considered as 'junk bond' or a 'high yield bond' as they have high risk of default
2. What is Yield?

Yield is simply the return an investor of a bond realizes over the course of the bond holding period
Formula for calculation of a Bond Yield

Bond Yield = Interest Payments / Bond Price

Since, coupon (interest) payments on a bond along with tenure of a bond is fixed

your yield on a bond simply depends on the change in its price
Let me explain this concept with an example of a Dividend Yield (easier to relate to)

The logic and concept followed for calculation and estimating a Dividend Yield can be directly applied to a bond yield as well.
Take for example, Dividend Yield calculation of ITC

ITC as per its policy issues out 85% of its profits as Dividends to its Shareholders, this comes to around ~Rs 10/share

When ITC was trading
at 180/share, the Div. Yield was 5.5%
at 254/share, Div. Yield is 3.93%
In the above calculation, the dividend didn't change but because the price in denominator of our formula changed, it led to a change in Dividend Yield
If Bond Prices go up, the Yield on the bond will decrease
If Bond Price come down, the Yield on the bond will increase
Just like stock prices, bond prices keep on changing depending on economy, Central Bank interest rates, demand + supply etc.
3. What is a Yield to Maturity?

Suppose if you buy a 10 year Govt Bond that pays 5% interest yearly for Rs 1000

If instead of selling the bond when bond price rises to Rs 1100, you held on to your bond until its maturity date till end of 10 years
The present value of all the coupon (interest) payments that you will receive on the bond along with the principal repayment at the end of 10 years, is called Yield to Maturity.
You can learn more about the concept of present value at the below link https://t.co/G8TvhDjKDh
4. What is Yield Curve?

A Yield Curve is just a graphical representation of Yields of various bonds with similar credit rating but differing maturities
When the media talks about a Yield Curve, they are primarily talking about the US Treasury Yield Curve

which depicts the Bond Yields on US Treasury Bonds for varying maturity dates ranging from 1 Month to 30 Years
So now that you have understood the basics, lets try and answer a burning question

Why is Yield Curve used to predict a Recession?
Yield Curve are typically of three types:

a. Upwards Sloping (Most of the Time)
b. Flat (Rare)
c. Inverted Yield Curve (Very Rare)
The shape of the Yield Curve is dependent on a simple logic

Yields on longer term bonds should be much higher compared to Yields on shorter term bonds

as

with longer term bonds you are taking more risk and hence need more interest as return
As such in a normal economic environment, we have upwards sloping Yield Curves like shown below
Inverted Yield Curves happen when yields on short term bonds rise above Yields on Long Term Bonds

implying that near term risk in the economy is higher compared to long term
Because near term economy is considered risky

Bond Investors start dumping their short term bonds in favour for longer duration bonds
As such

Demand for Short Term Bonds decreases, causing Bond Prices to collapse and Yields to Increase

While

Demand for Longer Term Bonds Increases, causing Bond Prices to rise and Yields to Decrease

Thus, creating the inverted Yield Curve.
Inverted Yield Curves are an excellent tool to predict upcoming Recessions as per US Federal Reserve

Here are some of their publications on this subject

https://t.co/exRUKrkeYi

https://t.co/7dvY2PQOwE

https://t.co/iqxbeaqJg4
An Inverted Yield Curve has successfully predicted every recession since 1957

It even inverted right before the pandemic!
Typically an economic recession follows after 7 to 24 months since the Yield Curve Inversion

Most recently the US Treasury 2 and 10 yr Yield Curve Inverted on 29th March 2022

imply the onset of a recession anytime between end of 2022 to 2024.
This brings me to the last Question of this thread

IS AN ECONOMIC RECSSION AROUND THE CORNER?
Short Answer : Nobody knows
All Economies, work on a Peak to Trough cycle and as much as Expansions are part of the Economic Cycle, so are Recessions

Without Recessions, we wouldn't have the opportunity to reset and economy would overheat and turn into a bubble which when popped could bring depression.
For a Recession to happen, you need several ingredients

1. Slowing Economic Growth
2. High Unemployment Rate
3. High to Medium Fed Interest Rates
None of the characteristics today satisfy the onset of a Recession
For example,

US last week reported the lowest joblessness since 1969!
World Economic Growth isn't slowing down
And Fed Interest Rates are at the bottom they have ever been with the only option for Fed to Increase them and not decrease them as they would to prevent a recession
Inflation is rampant throughout the world today but that inflation is not caused by lack or overdemand in the economy (as it would during a peak of an economic cycle)

The inflation today is purely a result of supply side shortages cause by the onset of the pandemic
Considering all of the above, will we face a recession as predicted by the Yield Curve?

I don't know and I am not sure if anybody does.
Thank you for reading!

I hope you've found this thread helpful. Follow me @itsTarH for more.

Please Like/Retweet the first tweet below if you can: https://t.co/2zDVPC7lus
I write a new thread every weekend simplifying investing concepts.

All my previous work, can be found here

https://t.co/LV5EyiqlCw
I also write occasional deep dives and long form articles on stocks and emerging investing trends, you can subscribe to them for free here

https://t.co/3OwTRkY8BZ
Occasionally, conduct webinars that deep dive into a sector in its true sense

Here is a 5 hour long webinar on Green and Renewable Energy ☀️

Lots of India, Chinese and US companies covered along with Global Demand and Supply scenario

https://t.co/rkiK2iHlS0
Thank you for reading, see you in the next thread 🧵
You can read the unrolled version of this thread here: https://t.co/MCbGPgov3S

More from Tar ⚡

Tar \u26a1
Tar ⚡
@itsTarH
Guess the Sector, that this company operates in.

ROCE 1 Yr: 32.7%
ROCE 3 Yr: 24.8%
ROE: 27.4%
ROE 3 Yr: 19%
Op Margin: 28.4%
Reserves: 32% of Current Market Cap
Debt: Nil
Profit CAGR 3Yrs: 54%
Debtor Days: 15
Inventory Turnover > 5
CFO YoY Increase : 160%

Some of you got it correct. Its Anjali Portland.
The company just acquired another cement company that will double the total sales immediately.
https://t.co/2xVnpJapPy

The acquisition was financed by adding debt, so interest costs from next quarter will go up but still great!

For a company that operates in a cyclical sector like cement!

What I liked is that the company was able to maintain the balance sheet and margins even in a down cycle.

With real estate sector reviving, this can be a great bet from here.

No recommendations, just an observation.

Market started re-rating the stock as soon as they announced acquisition.


Someone did some work on details of acquisition, sharing the thread
ALL , ANJALIPORTLAND , ANJANI PORTLAND
Tar \u26a1
Tar ⚡
@itsTarH
It's the weekend!

Grab a cup of coffee, in this thread I will explain

1. Peter Lynch's Six Categories of Stocks
2. How to identify the type of stock you own?
3. How to think and decide about the runway for growth of a company?

Lets dive right in.


For those who do not know (I doubt there will be many), Peter Lynch is one of the most successful fund managers of all time.

He managed a fund called Magellan at US Investment Giant Fidelity Investments and during his 13 yr tenure, he delivered an average CAGR of 29.2%.


Sadly the fund couldn't keep up post Lynch's retirement and his successors weren't able to keep up with his returns.

That's how good Lynch was!


In 1989, a year before retirement, Lynch wrote and published a book called 'One Up on Wall Street'.

Almost 32 years later, the teachings of the book remain relevant.

(Highly recommended read)


Chapter 7 of the Book Titled
"I've Got It, I've Got It - What is It?"

talks about the need to classify stocks.

Peter's argument is that you need to know what kind of stock you hold in your portfolio.

Not all stocks are the same - and he is right!
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Tar \u26a1
Tar ⚡
@itsTarH
#IEX

At 32% CAGR, Revenue doubles every 2.25 years.
All this while margins keep increasing.


"IEX is just an exchange and will lose its share once happens. It is not a technology company"

Meanwhile 👇🏼
IEX
Tar \u26a1
Tar ⚡
@itsTarH
Case Study: Bharat Electronics Ltd

OPM: 23%
Free Float: <5%
QoQ continuous increase in ownership by institutions
ROE: ~20%
ROCE: ~28%
EV by EBITDA: 15

Leading developer of Indigenous Military Drones
Exports are prime focus for the company

D: Invested, not a recommendation
BELLONGTERM
Tar \u26a1
Tar ⚡
@itsTarH
Its the weekend!

Grab a cup of coffee, today I will tell you about all the tools and services I use in my investing journey

Some are free, some are paid but all of them are guaranteed to deliver value

Lets dive right in!


Service # 1

Name: @Regulation30
Type: Paid

Regulation30 is my go to source to hunt for exchange filings that are worth studying further

This is also the source where I get lot of special situation ideas that aren't that widely known


Every day thousands of filings are made over the exchange, among them only a handful are worth studying

Regulation 30 filters out the noise and sends me a daily email of every exchange filing that is worth reading

Here is a snapshot of the email they sent me yesterday


Apart from the newsletter, there is a Slack community where founders of Regulation30 routinely share great insights into less known companies


Service # 2

Name: CapTwist
Type: Free

Wouldn't it be cool if you could search across all exchange filings of all companies via keywords or phrases and join them together as a theme?

Well, CapTwist does just that!
https://t.co/9mwFRPZkws
SCREENERS

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Meet Shah
Meet Shah
@ms89_meet
Strong Monopolies:

IRCTC 100% Market share in Rail Network.

IEX >90% market share in power trading.

Zydus wellness >90% market share in sugar free product.

Eicher motors >85% market share in 250cc bikes category.

MCX >85% market share in commodity trading.

Coal India >80% market share in coal production in India.

ITC >75% market share in cigarettes.

Honda Siel >75% in portable power generators.

Hindustan Zinc >75% market share in primary zinc industry.

Asahi India Glass >70% market share in automotive glass.

NRB Bearings >70% market share in needle roller bearings.

Pidilite >65% market share in adhesives.

CAMS >65% market share in RTA within mutual fund industry.

Time Technoplast >65% market share in polymer based industrial packaging.

Concor >65% market share in domestic container cargo transport.

Exide >60% market share in lead batteries.

Naukri >60% market share in the Indian job market space.

Praj >60% market share in ethanol plant installing.

Indiamart Intermesh >55% market share in the online B2B Classified space.

Borosil Renewables >55% market share in Lab glass.

Vst Tillers >50% market share in
Power tillers.

Delta corp >50% in online poker games.

Vinati Organics >50% market share in IBB.
GENERICLEARNINGS , GENERAL TWEER , INTRESTING TOPIC
Kirtan A Shah
Kirtan A Shah
@KirtanShahCFP
Personal Finance 101 – My learning’s about investing

This topic is for everyone, whether you manage your money yourself or through your advisor, it will go a long way in managing your finances.

Do re-tweet & help us educate retail investors (1/n)


Subscribe to our YouTube for some interesting educational content around Personal Finance - https://t.co/jvgNEDWiAZ

And you can also join our Telegram channel for regular updates – https://t.co/Ekz6I8pDGt (2/n)

(1) Lets start with Life Insurance

Term Insurance is the best way to take an insurance cover & probably the only product to buy in life insurance. Make sure u disclose all the necessary information before taking the insurance. Smoking, Alcohol, any pre-existing deceases etc(3/n)

Have atleast 10-15 times of your annual income as insurance cover

But there are variants of term insurance that you should avoid (4/n)

(A) Term plan with return of premium

For a non-smoker born on the 1st Jan 1985 & policy term 39 years (till age 75), the regular premium for a 1-cr term insurance is 22,157 (inclusive of GST) but with returns of premium is 42670 (inclusive of GST). An increase of 20,513 (5/n)
GENERICLEARNINGS
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Rahul Valand
Rahul Valand
@RahulTheVoyager
Thread :

#asianpaints (Weekly)

- A stock moving with a healthy momentum and reasonably good trajectory.

- I assume that It may come down to touch it's primary support trend line as it did in the past.

-If it do so, It will be a "must buy" opportunity.


Tip:
a) 30°-45° inclined trend line is considered sustainable.
b) Steeper trend line angle can not sustain for a long period of time.
c) Exceptions are always there.
d) To beginners : Explore more related to trend line inclination angle and relate this with above chart.
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Kunal Bothra
Kunal Bothra
@kbbothra
For all TA lovers..
A basic and compressed learning on Fibonacci Ratios
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Killer Trader \U0001f4c9\U0001f4c8
Killer Trader 📉📈...
@KillerTrader_
Common price action trading mistakes that cost me lakhs of rupees:

A thread 🧵

1. Front running the market based on my analysis:

Any analysis we do should be proved by market as correct before we jump into a trade.

How?

(1/n)

Example:

Mr. X marked 1500 as a strong support in HDFC Bank. Next day, stock opened at 1510, came down and hit 1500.

ABC went long in the stock. A few minutes later, stop got triggered. What went wrong here?

(2/n)

1500 is support for HDFC bank as per Mr. X but he did not wait to check if market validated his opinion.

At supports and resistances marked by a trader (you), wait for market to show the stock is actually taking support/resistance at those levels.

(3/n)

For your analysis to be correct, market buying>selling at support, market selling>buying at resistance.

Essentially, on a lower TF, check for bullish price action at support, bearish price action at resistance before you enter the trade.

(4/n)

Remember that no support is too low to be broken and no resistance is too high to be broken.

(5/n)
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as Emerald has scientific property of its molecules getting disturbed when exposed to light/water/sound.This is an ancient Shiva temple considered to be 3000 years old -believed to be where Bhagwan Shiva gave Veda gyaana to Parvati Devi.This temple has some stunning sculptures.
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