"Well, what a year it's been! If you're anything like us, you're probably feeling a little overwhelmed by the sheer amount of drama, excitement, and (let's be real) stress that 2022 has brought. But fear not, because we're here to give you a quick rundown of all the major events that have happened this year. From political upheaval to natural disasters to the ongoing pandemic, there's been no shortage of news to keep us on our toes. So, grab a cup of tea and get ready to dive into our 2022 recap – it's going to be a wild ride!"
Russia-Ukraine war front
The conflict between Russia and Ukraine began in 2014, when Russia annexed Crimea, a territory that had previously been part of Ukraine. This action was widely condemned by the international community and led to the imposition of economic sanctions against Russia by the United States and European Union.
According to the General Staff of the Armed Forces of Ukraine, Russia has suffered significant losses in the ongoing conflict in Ukraine. Since the start of the war on February 24, the country has lost 100,950 troops. In addition, Russia has lost 3,005 tanks, 5,986 armored fighting vehicles, 4,622 other vehicles and fuel tankers, 1,984 artillery systems, 414 multiple launch rocket systems, 212 air defense systems, 283 airplanes, 267 helicopters, 1,698 drones, and 16 boats. These losses demonstrate the significant impact of the conflict on Russia's military capabilities.
Ukrainian President Volodymyr Zelensky stated that a high percentage of people in Ukraine want to regain control over all territory currently occupied by Russia, including areas seized in 2014 and this year. He believes that Western security guarantees are insufficient and that preserving Ukraine's territorial integrity is more important. However, supporters of Ukraine believe that it will be difficult for the country to achieve this goal, as it may involve freeing people who do not want to be liberated. During the President’s recent visit to the US, it appears that the President Joe Biden, pledged to maintain a united defense. In addition, the US government announced $1.85 billion in military aid, including the Patriot air defense system, which is considered to be one of the most advanced air defense systems in the US.
The White House has accused North Korea of shipping weapons, including rockets and missiles, to the Wagner Group, a private Russian military company, in order to help bolster its forces as it fights alongside Russian troops in Ukraine. The US has expressed concern that North Korea may plan to deliver more military equipment in the future. North Korea has denied the allegations, calling them a "groundless theory" created by "dishonest forces."
Russia is reportedly amassing an alarming number of troops and weapons for a new potential offensive. Experts believe that the attack could occur as early as January, but more likely in the spring. It could potentially come from multiple directions, including the eastern region of Donbas, the south, and even from Belarus to the north. If launched, the Russian forces would aim to push back Ukrainian forces and could even make a second attempt to capture the Ukrainian capital, Kyiv.
Also, the escalation could affect in other areas too as in a recent statement, Russia's Deputy Prime Minister Alexander Novak revealed that the country may be forced to reduce oil production by 5-7% in early 2023, and halt sales to countries that have implemented price caps on Russian crude and oil products. According to Novak, the price caps imposed by the European Union, G7 nations, and Australia could lead to a decrease in production of 500,000-700,000 barrels per day. This comes on the heels of a $60 per barrel price cap on Russian oil that went into effect on December 5th, along with an EU embargo on imports of Russian crude by sea and similar measures by the United States, Canada, Japan, and the UK.
Demographic projections for Ukraine indicate that if current trends continue, the country's population is expected to decline by approximately 16% over the next two decades and become older. If the impact of war casualties and the displacement of a significant portion of the population due to the conflict are considered, the population is projected to decline by approximately 33%, particularly among the working-age population and children. The invasion of Ukraine by Russia has long-term demographic consequences in addition to causing significant human and economic costs.
You know as they say,
“Everything’s fair in love and war!”
Political Uncertainty Reigns as UK Government Struggles to Find a Solution
The United Kingdom experienced a dramatic year in 2022, with the loss of its Queen and the appointment of three different Prime Ministers. The drama began in July when former Prime Minister Boris Johnson resigned following a series of scandals. Liz Truss was chosen as the new leader of the Conservative Party after a competitive leadership race, in which Indian-origin MP Rishi Sunak came in second. Truss took office in September and promised tax cuts, but her policies led to market instability and discontent among Tory MPs. In an attempt to salvage her leadership, Truss dismissed her Chancellor of the Exchequer, Kwasi Kwarteng, and appointed Jeremy Hunt to the position. However, Truss's efforts were ultimately unsuccessful, and she resigned in October. Sunak was then chosen as the new leader of the Conservative Party, and he became Prime Minister in October, when King Charles III invited him to form a government. Sunak's appointment was celebrated in both the UK and India, as he became the first Prime Minister of Indian origin and the country's first leader of color. Additionally, at the age of 42, Sunak became the youngest UK Prime Minister since 1812.
On one hand the performance is not too bad as interest rates have stabilized and there is a sense of stability in government economic policy, but Inflation is currently high at over 10%, wages are not increasing at the same rate, causing many people to become poorer. Strikes are being held by nurses, train drivers, and postal workers to demand higher pay. The government is introducing tax increases and spending cuts to address financial issues, which may not be popular with the public. “There’s little doubt that Sunak will remain the team captain for the next couple of years, but he is on a losing wicket.”, says The Wire.
The Great Twitter War: Will Peace Ever Be Restored?
Elon Musk, CEO of Tesla, recently completed the acquisition of social media platform Twitter. Upon completing the deal, Musk tweeted, "Let the good times roll" and "The bird is freed." However, not all Twitter employees have shared in this optimism as Musk has reportedly been firing staff left and right. As per Elon’s latest appearance on All-in podcast, Twitter Global currently has ~2,000 full time employees and ~5,000 contractors, and the threat of company going bankrupt is receding. It remains to be seen whether these changes will ultimately lead to better times for Twitter and its employees.
Elon Musk has reportedly been seeking to refinance a $2.3 billion loan that he took out to fund his acquisition of Twitter with a personal loan secured against his Tesla stock. The current group of seven banks that lent the money, led by Morgan Stanley and including Bank of America, Barclays, BNP Paribas, Mizuho Financial Group, Mitsubishi Financial Group, and Societe Generale, reportedly stand to lose hundreds of millions of dollars if they sell the bonds at the current 60% of face value offered by hedge funds. Twitter’s $3 billion of unsecured junk bonds, reportedly yield 11.75%. In comparison, the yield on riskier loans such as those to Twitter has risen from 10.7% in April to 15.2% today due to the Federal Reserve raising interest rates. Refinancing the loan with a personal loan secured against Tesla stock would transfer some of the risk to Musk, who would pay less interest as Tesla equity is seen as more valuable than a claim on Twitter's cash flow. However, Tesla's stock price has fallen more than 69% (nice!) over the year, and if Musk is forced to sell to meet margin requirements, it could further hurt the company's market value or jeopardize his control of the company.
Although as the CEO himself claims, the usage is at an all-time high and automated bot accounts have been significantly reduced as also claimed by other prominent users on Twitter.
Maybe the value creation is still underway as they have been able to understand the user pain points in a deeper manner such as tweet impressions are more relevant than the likes and people have gone to some crazy end that they have now started guiding the man who built many successful companies by going against the tide.
…well, it was about time.
FTX case
Beautifully explained by the besties here what exactly happened and how one of the largest crypto exchanges collapsed.
Sam Bankman-Fried, the former CEO of Alameda Research and FTX, has been released on a $250 million bail following his extradition to the United States. Gary Wang and Caroline Ellison, former executives at FTX and Alameda Research, have reportedly been cooperating with federal prosecutors and have pleaded guilty to multiple charges. They have also been charged by the US Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC). Ellison has testified that Bankman-Fried's company misused and diverted customer funds and that she and Bankman-Fried agreed to hide the fact that Alameda could borrow billions of dollars from FTX from investors, lenders, and customers.
Qatar World Cup 2022 was a success?
The 2022 FIFA World Cup that took place in Qatar, has already generated a significant amount of revenue for the organization. According to reports, commercial deals related to the tournament have brought in approximately $7.5 billion for FIFA, an increase of $1 billion from the previous World Cup held in Russia in 2018.
Qatar's CEO, Nasser al-Khater, expects that the World Cup will contribute $17 billion to the country's economy during the event. This is a decrease from the initial estimate of $20 billion, but still represents a significant boost to the economy. In fact, financial analysts predict that Qatar's GDP will increase by 4.1% by the end of 2022 thanks to the World Cup, with an average growth of 3.2% between 2022 and 2030.
The World Cup is just one part of Qatar's National Vision 2030 plan, which includes a range of infrastructure projects aimed at improving the standard of living and international relations in the country. These projects, which have a total cost of $229 billion, include the expansion of highways, upgrades to airports, and the construction of hotels, stadiums, and other facilities. Qatar hopes to attract future international sporting events to the country and has already been named as the host city for the 2030 Asian Games.
The long-term impact of the World Cup on Qatar's economy can also be seen in the performance of the Qatar Stock Exchange (QSE). The QSE Index, which measures the 20 largest and most liquid stocks on the exchange, has grown by as much as 24% since the beginning of the year and is expected to continue this trend even after the tournament.
Macro conditions in India
Latest RBI’s monetary policy statement released on December 7, 2022 gives us some interesting insights.
Global economy
The global economic outlook is negative due to slowing growth, tightening financial conditions, and weakened consumer confidence
Inflation is high and persistent due to food and energy price shocks and shortages
There are signs of moderation in price pressures, leading to expectations of easing in monetary tightening
Capital flows to emerging market economies are volatile and pose risks to growth prospects
Domestic Economy
Economic activity in India in Q3 (October-December) of 2022 is showing resilience and expanding, particularly in the agricultural, industry, and services sectors
Demand conditions are being supported by pent-up and discretionary spending, although the impact is uneven across sectors
Investment activity is modestly expanding, but merchandise exports contracted in October
Inflation moderated in October to 6.8% compared to 7.4% in September, with food and fuel inflation easing, but core inflation remaining elevated at 6%.
The overall liquidity in the country is in surplus, with money supply and bank credit increasing year-on-year
India's foreign exchange reserves are at $561.2 billion as of December 2, 2022
RBI’s outlook
Inflation in India is likely to be influenced by both global and domestic factors, including supply concerns for certain food items, adverse climate events, geopolitical tensions, and the movements of the US dollar.
Inflation is projected to be 6.7% for 2022-23, with Q3 at 6.6% and Q4 at 5.9%, and risks evenly balanced. It is projected to be 5.0% for Q1 of 2023-24 and 5.4% for Q2, assuming a normal monsoon.
The outlook for the agricultural sector in India is positive, with the prospect of a good rabi harvest and sustained rebound in contact-intensive sectors supporting urban consumption. Investment activity is expected to be boosted by robust credit growth and government spending on capital and infrastructure.
However, the economy is facing headwinds from geopolitical tensions, tightening global financial conditions, and slowing external demand.
Real GDP growth for 2022-23 is projected at 6.8%, with Q3 at 4.4% and Q4 at 4.2%, and risks evenly balanced. It is projected at 7.1% for Q1 of 2023-24 and 5.9% for Q2.
Inflation has been a major concern for policymakers around the world, with many attributing the pressure to the ongoing war and pandemic-related restrictions. According to CRISIL, the input to output WPI ratio (a measure of the pressure on input prices compared to the increase in output prices) has been greater than 1 between March and September 2022. This has contributed to a decrease in profitability and margins for corporations, even as revenues have increased. While the WPI has begun to decrease, consumer prices have not yet moderated as the process of pass-through often occurs with a lag. Despite the moderating food and fuel prices, the research firm believes it is too soon to fully assess the economic environment.
Interest rates have been on the rise globally in recent times, with central banks across the world increasing rates in the last cycle. According to data, approximately two-thirds of G20 countries have raised interest rates in the last monetary policy meeting, and almost all of them have increased since the beginning of 2022.
This trend towards contractionary monetary policy has significant implications for businesses and investors. Higher interest rates can lead to an increase in borrowing costs, which can impact the profitability of companies and the attractiveness of investments. It can also affect the value of financial assets, as higher rates can lead to a decrease in the price of bonds and other fixed-income securities.
For consumers, higher interest rates can also impact their purchasing power, as they may have to pay more for loans and credit card debt. This can in turn affect economic growth, as it can lead to a decrease in consumer spending.
After taking a hit in Q1 of FY22, consumer spending is showing signs of recovery - but uncertainty still lingers post-pandemic.
Industrial outlook in India
In the past 99% of the year, India's major industries have shown varying levels of performance. According to the snapshot, NIFTY Metal has taken the lead, followed by Auto and Energy.
NIFTY Metal, which comprises companies in the metal and mining sector, has consistently performed well over the past year. This could be due to a number of factors, including an increase in global demand for metal and a rise in commodity prices.
The Auto industry has also seen steady growth, with a number of major manufacturers reporting strong sales figures. The growing middle class in India and an increase in infrastructure development may have contributed to this success.
Energy, on the other hand, has seen more fluctuation in performance. While some companies in the sector have performed well, others have struggled due to changing market conditions and global economic trends.
Headlines that caught our attention
OpenAI was able to showcase where the world is headed with some really great launches this year. One of them was Chat GPT-3 in collaboration with Microsoft. The ML algorithm is superhuman-like and since launch, people have gone crazy using it. Taking about the finances, it is estimated to cost OpenAI ~3M per month, and since it is in collaboration with Microsoft, the actual cost might be lower. However, an interesting thread about the product is below.
Scientists at the National Ignition Facility in Livermore, US, have achieved a major milestone in controlled nuclear fusion. On December 5, 192 laser beams were used to initiate a fusion reaction in a small capsule filled with deuterium and tritium. The reaction produced 3.15 megajoules of energy, exceeding the 2.05 megajoules of energy carried by the lasers. This marks the first time that a controlled nuclear fusion reaction has produced more energy than the energy used to initiate it, resulting in a 54% energy gain. While it required 322 megajoules of electric energy from the grid to deliver the 2.05 megajoules to the target, this achievement is a significant step forward in the quest for a sustainable energy source.
So, it looks like 2022 has been a wild ride so far. We've seen advances in technology, tensions rise between nations, and who could forget the Great Toilet Paper Shortage of '21? But fear not, dear reader, because the future is looking bright. We can expect flying cars to become the new norm, robots to take over all menial tasks (including writing articles), and world peace to finally be achieved. Okay, maybe that last one is a stretch, but a boy can dream, right? In all seriousness, the future is always uncertain, but one thing is for sure: it's bound to be an interesting ride. Hang on tight, folks!
…or what if we are already sure that the sun is not going to rise again that soon?
…well, my fellow readers, that’s the 99% of 2022 for you.
Happy holidays everyone!
Disclaimer: The content published is only for educational purposes and not any kind of investment advice..
Author(s): Akshit Agrawal
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