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This time of year, the financial media is flooded with predictions for the coming 12 months. Where will the Sensex be? Which sectors will outperform? What will the rupee do? I've never found much use for these exercises, even though I sometimes get shepherded into participating. The predictions offer no special insight into the future, and their track records, if anyone bothered to check, would prove it. I find it more useful to observe the world as it stands and ask what these observations might mean for ordinary savers.
So here's what catches my attention as the year draws to a close.
Warren Buffett's Berkshire Hathaway is sitting on nearly $300 billion in cash. This is not a man who hoards cash because he lacks ideas or has lost his nerve. This is someone who has spent seven decades buying businesses when they're attractively priced and waiting patiently when they're not. When the world's most successful investor is holding this much cash, it suggests he doesn't see compelling value in American markets at current prices. There's talk of him looking at Japan, which has seen a remarkable resurgence in global investor interest. Perhaps he's found something there that he hasn't found at home. Either way, his cash pile is worth noting.
Gold has continued its remarkable run. I've written before about my evolution from outright gold sceptic to reluctant acknowledger of its role as portfolio insurance. Central banks continue to accumulate the metal, driven by concerns about the weaponisation of currency reserves and questions about Western fiscal sanity. Gold produces nothing and compounds nothing, but in a world where monetary assumptions are being questioned, a small allocation no longer seems irrational. I still wouldn't make it a large part of any portfolio, but I've stopped dismissing it entirely.
Cryptocurrency, meanwhile, has entered another down cycle. The pattern is now familiar enough to describe with some confidence. Prices surge, fuelled by leverage and speculation, creating millionaires on paper. Then they crash, wiping out the late arrivals who bought into the hype. What has become abundantly clear is that cryptocurrency has no connection to any real economic activity. It is a pure financial asset in the most literal sense: a line on a graph that powerful operators push up and down to extract money from smaller players. The technical talk of blockchain and decentralisation was always a distraction from this fundamental reality.
Suggested read: The endless crypto hype
Perhaps most striking is the behaviour of governments regarding debt. In America, the new administration, like all its predecessors, has quietly abandoned any pretence of fiscal responsibility. The debt continues to grow, and no one in power seems interested in addressing it. Europe has outdone even America in budgetary fantasy. The recent decision to borrow $90 billion to fund Ukraine comes with terms that belong in a satirical novel: zero interest, and a maturity date defined not by any time period but by ‘when Russia pays compensation for the war’. When you structure debt with zero cost and a maturity defined by some imaginary future event, you're not really issuing a financial instrument. You're issuing a prayer.
What does all this mean for the ordinary Indian investor? Less than you might think. These are large forces operating at the national and global levels. Your job as a saver is not to predict how they'll play out or to position yourself cleverly for various scenarios. Your job is to maintain a sensible, diversified portfolio of productive assets, keep your costs low and resist the urge to react to every piece of news.
Suggested read: The best investment strategy is simplicity
If Buffett's cash pile tells us anything, it's that patience is a virtue. If gold's rise tells us anything, it's that a small amount of insurance against monetary disorder isn't foolish. If crypto tells us anything, it's that pure speculation eventually reveals itself. And if government behaviour tells us anything, it's that we cannot rely on those in power to be prudent with money.
As it has been every year, the sensible path remains unchanged: own good businesses through equity, maintain some insurance, avoid speculation and ignore predictions, including this one.
Also read: Stay goal-oriented: Ignore tariffs, trust your plan
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