Omicron: An opportunity to buy low or Sell high AND More....

1. The new virus scare has pushed the yields lower but the overall trajectory looks to be hitting the 180 bp mark by Dec end. This makes the outlook for bonds challenging and for equities a bit more promising.

2. Bonds have been neglected as a hedge because they aren't offering very good counter hedges at such low yields. So even when investors reposition for new sell off yields are falling to the extent they should have from prior instances.

3. Though we have the new virus variant, as per experts, such variants would continue to emerge and covid would settle out by mid 2022. ; the Federal Reserve (Fed) will tighten; bottlenecks are expected to unwind.

4. It has been manna from the heavens, in terms of what the Fed’s policies have done for companies that feed on investors’ hunger for junk-rated debt and high-risk bets. Private-equity firms have announced $944 billion in buyouts in the US so far this year, by far the highest ever for any full year, and up by 86% from the prior record in 2015.

5. The amount of leveraged loans issued to fund buyouts soared to $305 billion in 2021 through November 12, easily beating the full-year record of 2018 ($275 billion), according to S&P Global. Of that $305 billion, a record $224 billion was borrowed by the acquired companies themselves to fund their own leveraged buyout.

6. The Indian property market is unable to service the surging demand for real estate. New project launches are reducing every month and inventories are shrinking to 7 year low now.

7. The RBI has started reversing its stance and has now started to pull back on its OMO purchases. Since the last 3 months RBI has sold bonds worth 20 bn. This makes Indian markets very sensitive to the forthcoming tightening. Any correction should still be seen as a chance to enter cheap and enter the next set of cyclicals.

8. The 2021 to 2022 will be a great transition year, as we will see 4 major shifts in the underlying themes, namely: Pandemic to Endemic, Transitory Inflation to Tapering, Supply bottlenecks to de-bottlenecks, Blue Wave to Red Wave in government spending.

9. Though the world is converging on net zero emissions and carbon neutrality, coal still continues to be the harbinger of energy production even in the most technologically developed nations. Escalating energy demand, soaring natural gas prices, and infrastructure problems have made thermal energy one of the best and cheapest forms of energy and as will be the case for this decade.

10. The US has the highest profit margins ever, and they are comfortably able to pass on the higher material cost to the buyers and this makes us believe that the inflation isn't going to stop anytime in the near future. Till consumers are okay with buying commodities for higher prices and companies expanding their margins, markets are poised to grow astronomically beyond benchmarks.

11. Interesting Charts: