Akshat Shrivastava

Akshat Shrivastava

17-11-2022

10:42

An ideal financial system was one: where to produce 1 unit of currency, you had to keep an equivalent in reserves This resulted in 0 fake growth. But, with time the world became leveraged. And, the common people got screwed. Here is a no-bullshit thread...

Our parents (previous generation) would generally NOT invest in the stock markets. Why? [1] 1992 Harshad Mehta scam (4000 Crore). This tanked the Indian stock markets by more than 50%. Post this scam, the Securities Laws (Amendments) Act was passed in 1995.

It allowed SEBI to regulate depositories, FIIs, venture capital funds, and credit rating agencies. Problem: Harshad was able to trade borrowed funds i.e high leverage.

[2] 2008 Crisis tanked the stock markets by roughly 65% globally. This was caused because some private banks invested their customer's money in CDOs (bad debts). And, had to be bailed out with public money.

Post this, Frank Dodd Act was passed in 2010, which in simple words ensured that banks would have to curb their risky lending practices. Problem: Investment Banks traded (borrowed funds) i.e high leverage.

[3] Today, one of the top India IPO's has gotten crushed by 70% (from its peak). Seems like even the primary investors are taking an exit now. Regulators are now speaking about tightening the IPO listing norms.

Problem: Startups created an overinflated valuations. Why? High leverage. All the above things are regulated.

[4] Here is the biggest kicker: The biggest Ponzi scheme that has been ever been run in the history of financial markets is the Bernie Madoff scam (64.8Bn$). And Bernie was the Ex-Chairman of NASDAQ itself. And, SEC did not act on him despite having all the info.

1. There are bad actors everywhere. 2. There is a difference between legitimate and illegitimate business 3. If you start tagging everything as a scam: there will be no stock market, IPO market, bond market, even regulators or humans. 4. Every asset class improves with time.

Several financial geniuses are telling you Cryptos are dead. They are right and they are wrong. The high leverage in the Crypto market is likely dead. Like it is dead in the stock market. Good Cryptos (eg. BTC) has been pronounced dead at least 5 times

It is sad to see the finance world turning on each other, trying to prove the purity of "Asset classes". Revise this thread. And, google. You will see how shady the entire financial system is. Why? because the world is deeply leveraged.

Lack of trust on humans, is one of the prime reasons why I am a diversified investor. And, invest across multiple asset classes. And, you should be too.

[5] You say: great I will stop investing. Check Argentina, where the inflation is 83%. For context: 83% of their money will die and never come back. Pakistan, Sri Lanka, Lebanon and a bunch of countries are in the same boat. Who is responsible? Leverage.

"Investing" is risky. "Not investing" is riskier. Like it or not: we live in a world, where you have to take risks in order to "keep" the money that you have earned through your hard-work.

Simple solution? Turn down the leverage. And, stop the fake growth. The world would be much better. But, hey who would listen. Expanding numbers (even when artificially created) is the modern day representation of human greed.



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