BC WOULDUSDEFAULT
Saved by @sidonkar

Is US going to default on its debt?

This 🧵 will surely help you understand. Do ‘re-tweet’ & help us educated investors (1/13)

 How does a country run?

Assume a country to be like a company, which has income & expenses. Income source can be tax collections & expense can be government employee salaries, defence sending’s, social security schemes etc. (2/13)
Generally, most economies are running a deficit; their income is less than expense. So if your income is 100 and expense is 105, where do you get the 5? You borrow!

Similarly US has been borrowing & the total debt today roughly stands at a whooping $28.5T. (3/13)
Deficit in the last 2 years has gone up significantly because of COVID + the government wants to spend more; a $3.5T spending package is what they are trying to get an approval for + older debt is coming up for maturity (4/13)
Okay, so I am saying they will raise more debt for the deficit of COVID, the new package & paying older debt off?

Ideally a yes but they are not allowed to borrow more! (5/13)
Why can’t they take more debt?

During the 1st world war, US understood if they keep spending money on the war, the debt will be a big liability 4 the future generation & hence they introduced a ceiling on the maximum debt US could take. In 1917, this was capped at $1 Billion
What happened when the $1B debt was reached?

Political parties would pass a legislation to increase the debt limits. From $1B in 1917, the debt ceiling has been moved up multiple times to the current $28.5T (https://t.co/XaLWSSGxN5), which is about to get reached now (7/13)
So what happens now?

Political parties (Like India has BJP & congress, US has Democrats & Republicans) need to agree on either suspending the debt ceiling all together or increasing the limit of borrowing by passing legislation like they have been doing in the past (8/13)
So that’s easy right?

May be, but republicans r nt in favor of suspension or ⬆️ in the debt ceiling. But this is common, has happened multiple times in the past. Till the legislation is passed, the government shuts down for few days & is back in action as soon as it is passed
What happens if Republicans don’t agree?

A suspension or rise in the debt ceiling can be passed through a process known as budget reconciliation, due to Democrat's majority in the Senate. But some conservative democrats may not support ⬆️in spending so this may face challenges
What is the impact if at all nothing works?
Doomsday! US can't borrow more & can default eventually!

-US will not be able to pay salaries to government employees, will not be able to release social security payments, will not be able to pay other liabilities (11/13)
- US interest rates will go up (you want more returns if the risk increases)
- $ will crash
- Both of the above to have a massive impact on world trade & markets as still 84% of the world trade happens in $ & other countries have huge investments in US treasuries (12/13)
Consensus view - We might see some delay but US will not let its debt default! (13/13)
This is my 43rd thread, 'do re-tweet'

Have earlier written on,
-Sector Analysis - Banking, Paints, Logistic, REIT, InvIT, Sugar, Steel
- Macro
- Debt Markets
- Equity
- Gold
- Personal Finance etc.

You can find them all in the link below https://t.co/UrRt87xaU7 (END)

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Should you add more in Equity or redeem right now?

A thread 🧵to guide retail on why & what should they do at these historic market highs.

Do ‘re-tweet’ and help us educate more retail investors (1/n)

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Some investors feel that markets are trading at a PE of 27 vs 10 years historical average of 20 and a market-cap to GDP of 105 vs historical average of 79 and hence markets look expensive (2/n)


But, in such crazy liquidity driven markets, prices can move much ahead of the fundamentals & suddenly we start hearing commentaries of how the market is pricing in the earnings of FY 22 & 23 to justify the rally

If you r new to fundamentals, 👇 can help


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Over the last many years, markets have corrected 10-15% each calendar year. Can it happen this year as well? Can very much and that can be a great entry point. Why? (4/n)


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Learn about the STEEL SECTOR in this thread

The demand for steel is generally only 1.2 times the GDP & there is no significant growth in our GDP but still the sector has rallied relentlessly, lets try & understand

Do ‘re-tweet’ & help us educate more investors (1/22)
#Investing

The metal sector is broadly divided into 2,
-Ferrous is a category of metal that has Iron in it, Steel as an example
-Non-Ferrous is a metal, which does not have Iron content, Aluminum, copper, lead, nickel, Zinc etc.
This thread focuses on Ferrous & hence Steel (2/22)

To start, lets understand with how steel is made (its important).
Iron ore is mined, it is then first converted to Iron & Iron is then converted to Steel. There are 3 processes of making steel
-Blast Furnace
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A basic primer on the Indian Paint sector

With the listing of Indigo paints, JSW entering the paint sector & now Grasim announcing to invest 5,000 cr in the sector, lets explore,
-Products
-Industry
-Company

Do hit the ‘re-tweet’ and help us educate more investors (1/n)

Lets start with PRODUCTS

India paint industry is broadly divided into two,
(1) Decorative Paints (used mainly in residential & office infrastructure)–75% of the total paints market
(2) Industrial Paints (used in Auto & other industrial uses)-25% of the total paints market (2/n)

Decorative Paints is further classified as
a. Primer & Putty–They r applied 2 the wall 2 fill the cracks in the wall & make it smooth b4 painting. It also gives a lasting effect to the paint
b. Thinner–Its mixed with the paint 2 reduce the viscosity,applying becomes easy (3/n)

c. Emulsion Paint – Water based premium range paint mainly used in metros & large cities
d. Enamel Paint- Oil based medium range paint for smaller cities
e. Distemper–Water based paint mainly for the rural area as it can be used on the wall directly without using the primer(4/n)

(f) Wood Coating – Used to protect furniture against moisture (5/n)
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A basic premier on the banking sector, demystifying commonly used terms,
CASA
Wholesale Banking
Net Interest Income (NII)
Cost of Liability
Advances Growth
Gross v/s Net NPA
Provisions
SLR/CRR
Capital Adequacy Ratio
Net Interest Margin (NIM)

Do hit the 're-tweet' (1/n)

Banking, as a business is simple to understand, you borrow money (liability for the bank as the bank needs to pay back) and lend (asset for the bank as the bank is expected to receive it bank), the difference between the borrowings & lending is banks income (2/n)

Where all can they borrow from?

(a) Savings Account (SA)
(b) Current Account (CA)
(c) Fixed Deposit (FD)
(d) Recurring Deposit (RD)
(e) Certificate of Deposits (CD)
(f) Bonds etc. (3/n)

Whom do they lend?
(a) Retail - Housing loan, auto loan, personal loan etc.
(b) Wholesale (Institutional Lending) – Commercial Papers (CP) & other Corporate Loans

P.S. – “HDFC Bank is now increasing focus on wholesale lending”, hope you now understand what that means (4/n)

How does the bank profit?

So lets say the average borrowing cost of the bank (also know as the cost of liabilities) is 4.54% & average lending cost is 8.54%, the difference 8.54% - 4.54% = 4% is called the Net Interest Income (NII). HDFC Banks Cost of Liability is 4.54% (5/n)
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💹Chart with upwards trend Since IPO
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❣️Great management
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A depository is a big business and will grow continuously, Its a sustainable business
cause "Market hai toh CDSL bhi hai or rahega"


2- #Dixon

High Management Efficiency with a high ROE of 19.30%
Healthy long-term growth as Net Sales has grown by an annual rate of more than 30%
High Institutional Holdings
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