Investing


What to do now? Markets crashing like anything! Seems to be the question everyone is searching an answer for.

My advice, breathe easy. Nothing; really nothing has changed with the world.

People will still wake up every morning, brush and shave, and shower. They will still read newspapers printed on paper, sipping tea with sugar in it. People will still drive bikes and cars and suvs to work. They will still need electricity, and oil and roads and bridges. And companies which build them will still need steel and cement. People will still goto banks for deposits and loans. And those banks will still need software to run. People will still buy TV and Refrigerators and Music systems and other consumer goods. And they will still need medicines when they are not well.

It takes thirty years to build rock solid companies like Seimens, Reliance, M&M, SBI, ITC, Hero Honda etc. Can the fundamentals really change in just a weeks time?

Do what you have been doing before. Play with your kids. Spend time with family. Talk to your friends. Give your best to your workplace. Enjoy life. If you have made your buying decisions right, you can sleep sound.

Unless the dollar crashes or unless you are leveraged beyond your limits, you have nothing to worry. And if any of that happens to be true, then also you don't have to worry. Because then you are royally screwed up, and worrying won't change that.

Personally I find Investing to be very much like Rock Climbing. You need intelligence + risk apetite. If you are not intelligent, you won't find the way to the top of the mountain. If you are intelligent, but don't have the risk apetite, then that is more dangerous. You will climb up the cliff, but at the slightest movement of a stone beneath your feet you will look down, and fall off to death.

Unrelated: Incidentally both investing and rock climbing are my overriding passions. Though I haven't got time to do much of the latter recently. 😦

Update: Someone pointed out that if I have made my biggest call on derivatives, am I not over-leveraging? Answer is, No. Coz that biggest call is still just a single-digit percentage of my stock portfolio. That means I am way under the point you can term over. I can pay off my obligations any day, which is what every leveraged player must keep in mind.

Butchery. Savage Massacre. And today, raw Blood on the Streets.

Charles Dickens starts A Tale of Two Cities with. 'It was the Best of times. It was the Worst of times.' He was certainly not referring to India 2006.

Sensex crashed a mind-numbing nerve-rattling stomach-wrenching 887 pts in preclose trade to create the biggest fall in the 130 years history of Indian stock markets.

Nothing expresses it better than this Live Mkt Data, I captured on my laptop. ALL Nifty in Red!
Biggest Fall

Rediff lists the 10 biggest falls in the history of Sensex. I have some interesting observations,

  1. Todays fall eclipsed the previous record fall of 507 pts by a big margin. Then it was a huge Eleven Thousand Crore Harshad-Mehta scam, the biggest till then. This time its a host of international factors – the commodities bubble, the pressure on Fed rates, rising crude, and currency manipulations.
  2. Of the 10 biggest falls, three (yes, that's right, THREE) have taken place in last one month! The biggest today, and the 4th biggest just 3 days back. We are surely living in the most turbulent era of Indian mkts. Read Charles Dickens quoted in the start of this post. You know what I mean. If we have seen the pink of Hedge Funds flocking to India like never before, we must suffer the blue as well.
  3. And now, the most startling observation. April and May are omnious. Nine of the ten falls occurred in these months. Actually all 10, if you notice that Mar 31st, 1997 was just a day before April. What's with Indian May and April?

I was listening to Fanaa all day long, as I witnessed history unfold before my eyes. And I think I can hear the Market singing to us,

Ye jo iraadey bata doon tumko,.. sharmaa hi jaaogi tum.
Dhadkaney jo suna doon tumko,.. ghabra hi jaaogi tum.


Btw, does that last line means its NOT over, yet.

My Personal Call –

What did I do today? Over the last few days I've particularily been very active in Derivatives. And it led me to building my biggest position till date on Tuesday. So, did I pare it today? No, I have further increased it. Its a big call. I'm generally a very confident, clear-thinking level-headed investor.

Now, if things move in favor, I'll shoot through the roof. No, make that 'I will go through the stratosphere'. If not, you can fish me out alongside Titanic or somewhere near Maraina's Trench.

Btw, Do Do Do positively grab a print edition of Indian Express and TOI tomorrow morning. Even if you have no interest in stock markets at all, you can save them as a collectible or even gift it to me later. 🙂

NSE alone has Thirty One Lakh Crore of public money at stake with it. I wonder how much of it went 'fanaa' today? Waiting for the EOD stats to come out. Till yesterday, Fanaa was about Aamir and Kajol. Today, its about my romance with the markets.

Subhaan Alaa.. subhaan allaah..
Sharmo haya key pardey gira key.. karni hain humko khata..
Jid hain ab to khud ko mitaana,.. hona hain tummein fanaa..

Humming along..

Update: If you haven't yet tuned into Chand Sifarish from Fanaa, its time to do so. The post makes more sense after you have listened to the song 🙂 Plus, its an absolutely wonderful song.

mktbear2.jpg 11:30 ish AM – Sensex dives another 460 pts! Nifty down 140 pts!

A commodities meltdown on LME causes another Black Monday in India – can the world be more networked!?

Wonder how many traders got margin calls today, and were forced to pare down their positions further adding to the slide.

But when the sanity returns, the markets will have only one direction to go – North! 🙂

markets_crash4.gif markets_crash.gifToday was the biggest intraday fall for both Sensex and Nifty since,… since May 17, 2004. Coincidence?

Sensex nosedived 463 pts at close. Nifty145 pts.
All stocks in Sensex and Nifty closed in red. (Very rare indeed!)

All indices in red. Midcap and Smallcap down 3%, IT down 2.5%, Bankex down 2.7%, Metal down 11%, FMCG, Oil & Gas, CapGoods and Pharma down 4%.

All emerging markets in red. Indonesia -6%, Russia -3.5%, Dubai -7%, Poland -3%, Thailand -2%, Philippines -3%

All major World markets in red. DOW down 120, Nasdaq down 29, Nikkei down 114 pts, HANGSENG down 407 pts, Kospi down 100 pts. FTSE down 129 pts.

Little wonder then, that Nifty and Sensex also crashed. The wonder really is the huge amount by which they have fallen. Are we in a bear mkt now?

International cues are all negative. Rising crude, falling commodities, Fed hikes, USD gaining Vs Euro etc.. Local cues are also all negative. Left getting a stronger foothold, cement under pressure, under-recoveries in oil, metals under pressure and most importantly a real-estate bubble etc..

But still I think, no. We're in a short-term bear phase, with long term story still intact. And based on that I have taken my biggest exposure till date on the Futures. I am Long on it.

Now, let's see now what happens.

Its certainly a red-letter day for stock market as sensex crossed the 10,000 mark today! I feel kind of emotional, my romance with sensex started when it was at 2800. I have always been optimistic – indexes the world over are anyway designed in a way that they can only go north in the longterm. I can still remember talking to Amit and Madhur at Webtek about the day sensex would touch 10,000. Only thing is, we didn’t know it would happen so soon. 🙂

No words for the people who are jumping in now, I anyway don’t give advice on stocks. I find investing a very personal affair, just like marriage. Its about perspective, its as much about wants as it is about needs. The stock best suited for me may not be worth a penny for you. So all I can give out today is good wishes – happy investing everyone! May SEBI become more watchful of the movements and may we become the most respected market in the world.

Still 8 years to go before 2014. Will we be 20k by then? Yes.

I love one-liners, especially the ones that are simple, witty and power-packed. Here is the latest that I came across – Investing is nothing but arbitrage of ignorance.

There goes EMT for a toss! How apt. You bet on what the other person doesn’t know that you know about it. That reminds me of an interesting article I read long back, about Warren’s talk at Columbia University in 1984. He takes on the advocates of EMT who say that Buffet, and the likes (Walter Schloss, Tom Knapp etc) are “lucky exceptions”. Just to fire up you interest, here is a part of the speech –
“Before we begin this examination, I would like you to imagine a national coin-flipping contest. Let’s assume we get 225 million Americans up tomorrow morning and we ask them all to wager a dollar. They go out in the morning at sunrise, and they all call the flip of a coin. If they call correctly, they win a dollar from those who called wrong. Each day the losers drop out, and on the subsequent day the stakes build as all previous winnings are put on the line. After ten flips on ten mornings, there will be approximately 220,000 people in the United States who have correctly called ten flips in a row. They each will have won a little over $1,000.

Now this group will probably start getting a little puffed up about this, human nature being what it is. They may try to be modest, but at cocktail parties they will occasionally admit to attractive members of the opposite sex what their technique is, and what marvelous insights they bring to the field of flipping.

Assuming that the winners are getting the appropriate rewards from the losers, in another ten days we will have 215 people who have successfully called their coin flips 20 times in a row and who, by this exercise, each have turned one dollar into a little over $1 million. $225 million would have been lost, $225 million would have been won.

By then, this group will really lose their heads. They will probably write books on “How I turned a Dollar into a Million in Twenty Days Working Thirty Seconds a Morning.” Worse yet, they’ll probably start jetting around the country attending seminars on efficient coin-flipping and tackling skeptical professors with, “If it can’t be done, why are there 215 of us?”

By then some business school professor will probably be rude enough to bring up the fact that if 225 million orangutans had engaged in a similar exercise, the results would be much the same – 215 egotistical orangutans with 20 straight winning flips.”

An edited transcipt of the talk later appeared in the Appendix of The Intelligent Investor. You can read the full transcipt here. Warren Buffet surely is the smartest person in any room.

So what is my piece of wisdom for the next EMTists I come across? Investing is nothing but arbitrage of ignorance.