A list to close the year

It is nearly impossible to end the year without a mandatory list. A list is subjective. And like all lists, mine reflects my bias in interpreting events and possible near-sightedness in evaluating the true impact of the said events. In no particular order:

1. Central Banks of major economies started cutting interest rates in an attempt to boost the economy. In 2024, the only exceptions were Brazil (100 bps), Russia (200 bps) and Japan (15 bps) which went contrary to trend and raised interest rates. 

a. India, Poland, Norway and Australia held steady raising hopes for a much-needed rate-cut in 2025.

b. Japan created history raising rates from -0.10% to 0.10% for the first time in 8 years. Japan was the last hold-out for negative interest rate.  

c. Turkey went from 42.5% in Dec 2023 to 50% in 4 months before ending the year at 47.5%   Inflation started going out of hand in 2022 and despite few wins, continues to remain around 48%

2. It was the year of elections. Almost 25% of the world’s 8.2 billion people voted. Though not all countries would be considered holding “free and fair” elections. Few regime changes happened without elections – Syria, Bangladesh headlining the events. Across the pond, South Koreas showed they had no patience for martial law. Economically, democratic countries have consistently delivered better quality of life for their citizens.

3. Elon Musk and a $56 billion pay package – Earlier this month a judge in the Delaware Court of Chancery yet again turned down Musk’s pay package approved by shareholders of Tesla. The legal fight, in its 8th year now, started with shareholders approving the compensation package designed for the CEO. However, some shareholders including one Richard Tornetta objected and filed a lawsuit in 2018. Based on the plan (compensation linked to market cap of Tesla and revenue and EBITDA targets), Mr. Musk would be eligible for a $56 billion pay, with Tesla’s market cap zooming to over a trillion dollars in 2024. In January this year, the Delaware judge ruled against the pay package. The board of Tesla took the proposal back to the shareholders in June this year and they again approved. The judge wasn’t impressed and passed the ruling earlier this month striking down the pay package. The judge had earlier expressed concern about Mr. Musk’s control and influence over the company, including on its board. Both the company and the CEO expressed displeasure at the ruling.

There may be concerns about the independence of the Board – it has the CEO’s brother Kimbal Musk, his friend James Murdoch,  former CTO of Tesla Mr. Straubel, and Mr. Ehrenpreis who designed the CEO compensation package in 2018 and is reportedly close to the CEO for years.

4. Warren Buffets exits a position within a quarter. Warren Buffet’s Berkshire Hathaway bought more than $266 million of Ulta Beauty stock in mid-August 2024 and in just 3 months sold more than 95% of the shares. Long-term followers of the investment guru were caught by surprise. The value-investor who’s “Our favorite holding period is forever” is visible in his American Express and Coca Cola holdings clearly changed his position in the case of Ulta Beauty. Did he read the numbers wrong? Or was there new information about the company he unearthed after putting in the millions? There are stocks that he has held for less a few years – Exxon Mobil, JP Morgan, McDonald’s but positions seem to be getting shorter - details below from Reuters.

While Reddit threads are flush with speculation, the lesson here is to minimize buyer’s remorse regardless of how big your position is.

5.  Hedge fund billionaire and quant investing pioneer James Simons passed away this May.

Mr. Simons, a Math professor at MIT and Harvard and a codebreaker at NSA turned to trading out of “boredom for Mathematics”. Having made a lot of money initially, he discovered patterns in data – lots of data as he puts it in one of his interviews. Mr. Simon’s Renaissance Technologies is one of the most profitable hedge funds to date. His pioneering use of quantitative technologies identifies price patterns and trends that trade on variations in the prices of securities. The flagship Medallion Fund achieved an eye-popping annualized return of 39% (after fees) between 1988 and 2018 according to the book “The Man Who Solved the Market”. The company works mostly with PhDs in Math and related fields.

6.  AI is fast emerging as a transformative general-purpose technology in scientific research according to a report published by World Economic Forum in June this year,. The technology is unearthing discoveries that would otherwise remain hidden. The authors foresee advances in the areas of

a.  Diagnosis, treatment and prevention of diseases

b.  Novel materials that enable next-generation green technologies

c.  Breakthroughs in the life sciences that extend current understanding of biology

d.  Transformative leaps in how the human mind is understood

Concerns around the risk to individual privacy and societal disruptions remain. Also, environmental impacts from high energy consumption needed to sustain growth in AI need to be considered.

The report also details the top five countries leading in the innovation.

7. Dr. Manmohan Singh, Mr. Ratan Tata, Mr. Osamu Suzuki – three individuals with outsized impact on the Indian economy passed away this year. Dr. Singh’s and Mr. Tata’s contributions are well documented. Mr. Suzuki who led Suzuki Motors for more than four decades completely changed the automobile industry in India. Set up in 1971 by Sanjay Gandhi, Maruti went through a few iterations and even a court order for its dissolution in 1978 before being able to give vision to its founder’s idea of an “affordable people’s car”. The Emergency in 1977 and Mr. Gandhi’s demise 3 years later didn’t help; it was acknowledged that the company needed to collaborate with an experienced manufacturer. However, earlier collaboration with Renault fell through and the company was later snubbed by many brands including Fiat, Subaru and shockingly Suzuki. However, by a quirk of fate a newspaper report of a potential collaboration with a Japanese small-car rival Daihatsu convinced Mr Suzuki that partnering with Maruti would be the right strategy for his company. Today Maruti Suzuki has about 40% of India’s market share.

Mr. Suzuki is credited with ushering in change in the class-conscious country bringing in quality in the workplace – open offices, single canteen, same uniforms for executives and assembly line workers.

8. People are turning away from news - this is now backed by data. A report by Oxford University’s Reuters Institute found almost one in four people worldwide actively avoid news describing it as depressing, relentless and boring. The survey was run by YouGov in January and February this year across 47 countries involving ~95,000 people. Women and younger people are more likely to feel the fatigue of politics. The report also found a drastic change in source – from traditional print and TV to online or via social media.

9. Indian IPO market raised $16.65 billion this year – it was the year made for listing. Per the S&P Global Market Intelligence as of beginning of December 298 companies listed on the Indian bourses and raised $16.65 billion. This is more than double the amount raised last year. The biggest ones were Hyundai Motor ($3.3 billion), Swiggy ($1.3 billion), NTPC Green Energy ($1.2 billion). A few IPOs were marked by an almost never-before seen level of hysteria. Led by the retail segment with an eye on listing day returns, these companies defied all logic and reached stupendous levels of oversubscription.

a. Resourceful Automobile – 400X

b. Boss Packaging Solutions – 135X

c. Broach Lifecare Hospital – 151X

Japan also recorded significant IPO activities with Japanese companies raising $12.6 billion.

10. Meme stocks made a comeback this year. These stocks, weak on fundamentals, typically are shorted by Wall Street. The anticipated profits fail to materialize when the stocks start to rise, against all expectations (and logic). This was first seen in 2021 when a series of posts on X platform from the account of Keith Gill helped the fans come together and push up the price of American video game retailer GameStop. The meme stock icon returned this May after a silence of 3 years and pushed new life into the meme stock phenomena and short sellers took a hit. The same month, YTD loss on paper for GameStop alone was $1.28 billion