About two months ago, I received a late night
call from one of my close acquaintances. The man was in a tearing hurry. Almost
gasping for breath, he informed me that the stock market in India is going to
crash and the benchmark Nifty is certain to fall to at least 12500 levels. He
had learned from some very credible sources that the markets world over are
going to crash soon; and India may actually go the Sri Lanka way. “Crude prices
will top US$140/bbl soon and USDINR will collapse to 85”, he sounded extremely
confident. Half asleep, I did not know how to react to his claims
instantaneously. To buy some time to react, I pleaded “could we discuss this in
the morning, please!”.
When I called him in the afternoon, the next
day, he had already liquidated half of his portfolio. He sounded quite relieved
and exuded the confidence of a victor. I had no contact with him, till he
called again yesterday evening. This time, he wanted to know “Could Nifty make
a new high in the next 3-4months?” I again had no instant answer to his earnest
inquisition. I am sure that the question was mostly rhetorical; since he
sounded quite convinced about this proposition of market scaling new highs
soon. I think he will deploy his cash in a day or two.
I am not sure, if this one isolated instance is
indicative of a larger market trend, viz., the greed dominating the fears”. But
from my experience of over three decades, I can certainly tell that this person
definitely has a lot of people accompanying him “in” and “out” of markets at
frequent intervals.
Many of these proudly claim themselves to be
“seasoned investors”, who have the ability to read the pulse of the market and
foresee the future trends well in time. They alternatively use “macroeconomic
factors”; “technical charts”, “political developments”, “geopolitical events”
and “valuation” arguments to camouflage their “greed and fear”.
One morning they would swear by valuations and
economic fundamentals; and on other days they sound like experts and loyal
followers of the Elliott Wave and Japanese Candle and Sticks. One day, they
feel confident listening to the “mother of all bull market” narrative of Rakesh
Jhunjhunwala and “fastest growing economy” claims of the finance minister,
while the very next day they need tranquilizer to sleep because some Nancy
Pelosi is boarding a flight to Taiwan. They confidently forecasted, in February
2022, the end of Ukraine within one week and beginning of WWIII.
What actually surprises me the most is that
despite their frequent mood swings and mostly intuitive actions in the market,
they are not only able to beat the benchmark indices consistently, but also
outperform some of the most seasoned fund managers and long only investors;
though they may not be earning to their full potential, meaning their actual
return may be lower than what they could have made otherwise. This
consistent outperformance lends them confidence and belief that their strategy
and methods are the best way of “investing” in stocks.
I would never concur with them, even though I could never earn more than them from my investments. The question that arises from this is – if I cannot beat them, should I join them? My answer is an emphatic “No”. Because - I always sleep peacefully. I do not bother to call anyone at midnight to ask what is happening in the markets. I do not give a damn even if President Biden is also flying with Speaker Pelosi to Taiwan and PM Modi is flying to Tibet to meet the Dalai Lama. And I certainly do not care if Wave C of 3 is opening or it is an extended 2 Complex.
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