Saturday, January 27, 2018

REMINISCENCE
I have been in the blogosphere since more than a decade, after trying my hand in Yahoo and Google groups; though many of my contemporaries have perished in the warp of time. I feel I don't have to remind you of their names; as you perhaps know many of them....and my historical conflict with one from my home state, Assam. 

I maintain an open-book-style, where the performance of my calls are etched on my blog pages or in other words, one can judge me through my blog-post. Needless to say, those who are with me since a long-long-time, are already privy to my fact-sheet. Your good wishes, innuendos, whispers and murmurs have often helped to improve my style of speaking with you directly, through this mechanism. 

Hope in future too, I would be able to disseminate information to the you in the same way and with passion like I did hereto, especially to the small investor community; keeping the delivery frank, intimate, professional, adventurous and sometimes even romantic. I believe that although the contents of this blog may not be viewed as an investment manual, however those seeking perspective from an expert mind in equity investing will find a great deal in its pages.

But, before, I pen my thoughts further, let me say that even I'm NOT infallible in equity investing space; though the quantum of mistakes may be less than the novices and/or new entrants. 

Also, my hints, tips and suggestions presented here are colour blind-- to say precisely, I don't look into the caste or creed or religion or linguistic orientation or political background of the investor/trader, when I share my views here in this blog. In other words, I am like a doctor, who attends to patients of any colour or caste or any community, when the investments (Equity, Film Financing, Real Estate, Metal Scrap, etc etc) are highlighted -- I am absolutely rigid and crystal clear in this vertical. I don't think anyone has any complaint, as far this part of me, is concerned. May be because of this, I have clients and well-wishers scattered across the globe.

Now switching topic, it is pertinent to mention here that surreal financial killings have always been a part of the stock market euphoria since 1920s. The present condition of India economy can be termed as a "BUBBLE IN SLOW MOTION", especially in the context of recapitalizing of private sector banks (PSBs -- I don't like the Media-Coinage, PSU Bank in the way, I have avoided using two terms: Technical Analysis and Penny Stock, in my writings) with enormous gaping holes in their balance sheets, post ballooning of their NPAs. 

On the flip side, Indian economy is also slowly limping back to normalcy, after the stupidities like Demonetization and a hurriedly implemented GST, rocking the nerves of the investing and trading communities. 

Experience with GST, a Consumption TAX (CT) has shown that products originating from informal and semi-formal sectors are hard to be taxed. Even in the formal sector, CT can be avoided by under-invoicing the sale receipt at the last leg of the value chain, sounding death-knell to those theorists, who had vouched GST as the ultimate device to block TAX-THEFT. That is why the tax rates under GST have been a story of one foot forward, two steps backward.

Indian monetary policy is like a bottle of tomato-ketchup, once gene starts to have effect, it is already too late to moderate it or wind it back. The Intellectual sub-current indicates that bank recapitalization is likely to release a huge quantum of money into the system. This money will be sloshing around, chasing finite resources and hey, the markets are likely to become more crazy in the coming days, before the RBI and other regulators slam the brakes hard.

My gut feeling is that Indian bourses are still not ripe enough to blow up in the near future - the momentum is likely to continue for at least another six months, before we can think of a major correction or perhaps a soft landing (mild crash) of sorts.

Having said this there is another aspect which needs a closer look: while the markets have roared parabolically-up, paradoxically defying the GDP figures and other negative clues, in technicolor and style; the INR-USD ratio, is working some hoodoo in the other rings of this psychedelic circus. But the TV financial shows still haven’t raised shrill alarm bells of dollar tanking in the past several months or the likelihood of interest rates creeping up in the bond markets.

In fact, this could be a crowning comic moment in human history when the world would be interested to buy bucket-loads of sovereign bonds backed by a falling currency. Meanwhile, the US Treasury’s partner-in-crime, the Federal Reserve, is getting ready to dump an additional $600 billion bonds in the market out of its over-stuffed balance sheet. Well let's stop ricocheting from hashtag to hashtag now and focus on other aspects of markets.

With this thought in mind, I would like to share a few things I gathered over the years:
#Sometimes investing can be incredibly simplified and profitable using common sense techniques. The reason that use of this technique works is that for some unexplained reasons there is a lack of it in the annals of stock market. As such, you can use common sense to somewhat predict/anticipate future stock market moves.

#Try to avoid investing through MUTUAL FUND route -- I have never liked the concept and these dangerous instruments perform mostly during a raging bull market. According to a report published in Financial Times, almost all US, global and EM funds have failed to beat their benchmark since 2006 or 99% of actively managed US equity funds underperformed.

So, unless you are a LAZY GUY or have no time to take a look on your investment profile on a regular basis, except your domain of work, always try to invest directly in stock market, albeit with the help of experts (if any). 

It is interesting to note that the total assets under management (AuM) of the world’s largest 500 managers grew to US$ 81.2 trillion in 2016, representing a rise of only 5.8% on the previous year, according to latest figures from Willis Towers Watson’s Global 500 research. Although the majority of total assets (78.4%) are still managed actively, its share has declined from 79.7% from end of last year as passive management continues to make inroads. 

In any case even if you are a die - hard Mutual Fund fan, always prefer open ended schemes, against closed ended ones. 

#Don't invest in more than 2-4 stocks at a time in spite of all the temptations from external sources; so that you can keep a constant track of them -- your portfolio should look sleek and elegant. If a stock is not performing and its sector has started to give negative signals, trim it out of the portfolio, even at a slight loss and ride on the sector which is in trend or will be in long term trend from here. Asset allocation and constant churning of portfolio is what will give the creams of return. Always book profits in the way, because Indian markets are immature and your small profit might soon evaporate to land you in losses. 

#Avoid too much trading in your account. Buy a scrip based on a story and keep holding it with a target in mind. Once the share reaches near the target, book profit and exit. Don't become too much greedy and hold a share for years and months, unless and until there are compelling reasons to stick on that formula. However, occasional try in BTST/STBT or Daily Jobbing is also fine to some extent. Authenticity of source based information should be checked  on regular basis.

#Search for turnaround stories across the financial mosaic, pivoted on company and sector specific outlooks.  Once found then do a bit of research and try to get source based information on the scrip. In the past I have mentioned a lot of turnaround stories in this blog including, Premier Explosives, Suzlon Ltd, etc the latest being 3i Infotech Ltd and the Banking sector. 

#Whatever be your age, always keep at least 30% of your investment in equities. Market crashes are generally not “manufactured” rather they are an emergent side effect of market dynamics. Therefore, to lose extraordinary money in equity market, calls for commensurately extraordinary events. In Bombay, it is said: Everyday 9 people lose their lives while commuting through local trains, considered life line of this metropolis. But does it stop people from using this instrument of communication? No, isn't?

Bull markets often piggyback on Fantasy or/and Euphoria and hence politically loaded, expositions carry little meaning during this period. Moreover, books have been written on timing markets and it's generally accepted that it cannot be done reliably. To get out before a crash then buy cheap would require you to predict three different moments accurately: 
(i) When to get in, 
(ii) When to get out, and then 
(ii) When to buy on the "cheap". 
Timing even one reliably requires luck or clairvoyance or miraculous financial acumen. Therefore, postulating entry and exit theories are really very tough, if not impossible.  

In India active management industry is adding value, as compared to other parts of the world,  where the markets get more institutionalized, i.e more ownership lies in the hands of the institutions. I think passive management will grow in the years ahead and gain market share but the absolute equity asset class allocation will also rise substantially. As regards returns from the asset class like equities, given current valuations and projected figures, expectations should be palliated; till there is a sizable tectonic shift in the macroeconomic parameters accompanied by more pro-corporate government policies.

Lastly, always prefer a full fledged brokerage house instead of budget brokers like Zerodha, who not only provides stock research reports but also have a good trading platform. Safe is a very strong word, hence your choice of brokers may have a direct fall out on many future investing coordinates.

In this information age the outlook of people, who saw equity as a purely speculative, volatile asset class, almost a form of legalized gambling is slowly changing. Statistically, equity still remains the best asset class for wealth creation over the long term. 

The risks inherent in equity can be mitigated by diversification,  finding an expert for guidance and cutting down on hubris and excessive urges. 

And even after several tries if you have failed in Equity market, then try investing in recession-proof Comic books.... 

All the best and good luck!!
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