It’s a new day, it’s a new world and I’m only human

Dear friends,

i congratulate all of you who have remained invested till date to see the markets at a new high. You have sailed past china, USA, Brexit, Trump, demonetization, RBI, fii selling, oil prices and xyz reports on market lows that were likely to make it here.

You deserve this high.

For you its business (investing) as usual. For others it’s a new day (of highs or moves), a new world (of momentum) but you are still the same- (rational) human.

 

what is your primary learning amongst all this? I can’t say. Mine is- market is about temperament, belief and usually going against the tide and holding your sails well.

 

In a beautiful quote I came across as I read: when you take a belief that’s different from the world, many will laugh at you or ridicule your faith as they think you are a loner, different or sometimes write you off as arrogant. They cannot accept your not bending to consensus on markets or stocks or fear or whatever.

You can in turn stay glued and laugh at them for if they think you are different, you think they are all the same. This point gathers more weight when one sees that markets over time reward few at the cost of many.

 

While it’s true that in market rallies many make money (a lot of which is eventually lost), serious money is made by those who go against the tide but have time and temperament to keep moving on.

 

Here lies the difference between a shorter joy of claiming x y z % return and the satisfaction of knowing you made a big difference to your portfolio (and perhaps your life and savings).

The former is about a few percentage points of profit usually eroded or spent and done with while the latter is about counting how many times over. In the later there is a good chance that dividends alone become sizable and give you the joys of indulgence.

 

i will share an analogy with you. Consider market bottoms to the base of a mountain. (By the way there is nothing as a “known bottom” but somewhere around you may have sound reasons to believe the downside (risk to reward) is not too bad, even more so if you have investable capital and time as your friends)

At the bottom of a mountain many stand with you. They look at a mountain and debate day in and out (particularly in whatsapp groups and  media including social media) how difficult it is to climb the mountain.

Sometimes they debate so much that it casts a spell on them and they even forget that even a small step and another and another they could try.

 

In that crowd you get lost. The voices echo as if they came from heavens. There is consensus in the belief that notwithstanding the madness of crowds the crowds must be right.

The opportunity is there in front of your own eyes but the fact that you are in the company of masses makes you believe if they all say it’s rough and not worth it and gretarnkife is yet to be discovered below the mountain it must be. Your identity remains buried in the crowd.

a few however decide to walk towards the mountain. They deploy energy and develop a temperament to climb. Tough as it may seem every step is viewed as progress. They leave behind the masses knowing if they can manage their stamina (temperament) and not misuse their tools (capital) one day they may find a reward.

In the climb up, the voices of the masses are lost. They actually look for signals. Of avalanches, of day light, of snow and rain and on such days prepare harder. But keep moving.

 

finalky one day they reach the mountain tops. And stand usually proud to hoist a flag or symbol to reward their process. At that time no matter how far the ground below is, these few are spotted at the top of the mountain. They may not see people at the base but people at the base see them.

 

suddenly everyone thinks climbing is possible. Everyone wants to be at the top. Roads (reports) are made, short cuts (tips) are found, horses and other ways to expedite the climb are put to use and a lot many make a dash for the top. The top is photographed, socially shared and suddenly is euphoric. Tickets are issued for going to the top of the mountain and per person cost (returns) are compromised. One day there is a stampede and many lose their climb (money). They vow never to climb again and the mountain is again deserted for the first lot to re do the process. And life goes on.

 

while I have shared this analogy to explain a social truth of investing and behavorial science, I am not necessarily advocating the market is at a peak.  in fact it doesn’t interest me to know this market peak.

the question to ask would be is there excess in the system that the infrastructure (current stock price) can’t handle. Or is infrastructure right now in the built stage which means it may be likely that many more will climb the mountain for a while till infrastructure (valuations) look stretched.

Then again. Different mountains (stocks or sectors) have different climate. One rule may not apply to the other. Some may remain dormant and tall for years, some may have avalanches and some volcanoes. The question to be really asked  in context to market highs or pursuit of highs is what are you standing tall on? What are your tools (back up plans).

Now to talk more in your market lingo, to me it appears that choices to invest are still there but are drying up. Investing is becoming tougher if one wants risk to reward that are favorable. Markets are getting researched well for new ideas and ideas re getting lapped up very fast. Am I selling? Not yet. Am I buying? Well yes but my search is getting tough. Will I buy? Yes if I find irrational reactions to stocks caused by market votings. Will I sell- or switch? I actually did with some.

It gives me peace and a greater sense of confidence in a long journey. I need the stamina he temperament and the belief to keep going.

in the larger scheme of things, I see no room for regrets and negatives. I am pleased with my decision to exit micro finance just as I am delighted to have switched the funds to housing, nbfc, private banks and select mid cap stocks that went for a toss in December.  I don’t count a stock bounce to where we sold it or somewhere along the lines as a lost opportunity. I find solace in owning what is today at new highs particularly if the story is more secular than cyclical or improving.

Dont forget…..your returns are never evaluated by the movement of a stock or sector. They count as a portfolio movement.

Some sectors I continue to like and own include housing, Nbfc, pvt banks, tyres, speciality chemicals and textiles. With a bit of nibbling in pharma. Hardly any significant changes in holdings except for mfi.

My best learning continues to be the select few I find as friends in the journey. This post is dedicated to them as they pass positive energies, share lessons and learnings, reinforce discipline and make each sunshine an awaited moment in my journey to investing. my gratitude to them.

 

 

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3 thoughts on “It’s a new day, it’s a new world and I’m only human

  1. Angsuman says:

    Thank you Sir for sharing and enlightening us!

  2. amitdipsite says:

    Great, Safir Pranayama practice kar lena to breath at the thin oxygen levels but those enlightened peaks.

    BR

  3. jamal says:

    made very interesting reading, well done !

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