Understanding and Assimilating the Fear-Greed Paradox

Holy moly, what are we talking about?

Let’s say you’ve done your homework.

You’ve identified your long-term stock.

Fundamentals are in place. Management is investor-friendly. No serious debt issues. Earnings are good.

Valuation is not right.

You wait.

How long?

Till the price is right.

What happens if that doesn’t happen.

You don’t pull the trigger. It’s difficult, but you just don’t pull.

Let’s say the price is becoming right.

You are looking for an extra margin of safety.

You are waiting to pounce. How long?

What’s your indicator?

Your gut?

Many things have been said about the gut.

It does feel fear.

Look for that fear.

Scrip is near a very low support, but holding. You are afraid that this last support might break and that the scrip might go into free-fall. Look for that fear. There goes your buying opportunity, you are probably saying. Intraday, support is broken. You are now sure it’s gone. Look for that feeling. Intraday, scrip comes back. Closes over support. Large volume. This chronology is your buy signal. You pick up a large chunk. Scrip doesn’t look back.

You don’t have to go through this rigmarole. You don’t have to bottom-pick. This exercise is for those who want that extra margin of safety.

Now invert the situation.

You’re sitting on a multibagger.

Lately, you’re not agreeing with the company’s business plans. You want out. Best time for you to exit would be now, sure. But, scrip is in no resistance zone, and is going up and up and up. What do you do?

Look for greed within yourself, when you start saying “Wow, this is going to be the next 100-bagger!” Look for the moment during this phenomenal rise when you’re getting attached to the scrip and don’t want to get rid of it, despite having concluded that you don’t agree with the vision of the promoters. Look for the time you start going “My Precious!”

Sell.

This chronology is your intrinsic sell signal.

Sure, radical.

I agree.

Sure, I’m combining trading techniques to fine-tune my investing.

I’ve stood on the shoulders of giants.

I’ve seen from their heights.

It’s time I start contributing.

The Market Aha Moment

What is an Aha moment?

Any ideas?

Simple. It’s when you go “Aha, so that’s what it’s like!”

Or “Aha, so that’s what it’s supposed to be!”

You’ve understood something big. Finally. You see light. That’s an Aha moment. 

The human being likes to be happy. 

Professional happiness adds to our well-being. 

To be professionally happy, you need to be doing something during which you forget about time. 

What is this something for you?

Wait for your Aha moment. 

Let’s assume you’ve decided upon a profession in the markets. The next question is… which market?

Which market draws you out fully? Which market consumes you? In which market do you perform the best? In which market are you happy?

Why isn’t your Aha moment coming here too?

Well, Aha moments aren’t for free. You have to struggle for them. 

Start trying out different markets. 

See what gives you a kick.

See where you have a natural flair.

See what lingers.

Discard what you can’t stand.

Hit and try.

Try everything if you must.

Eventually, something will speak to you.

You’ll want to be in one particular market, perhaps two.  

It’ll be your calling. 

Aha. 

I’ll tell you how it went with me. 

I started with Equity. 

Fluked a few. Made some money. Bet bigger. Thought I was good. Won some more. Bet really big. Lost huge. Thought to myself – no more Equity. 

Then came Gold and Silver. Did ok. Found it boring. No more Gold and silver. 

Tried Private equity. Did ok. Boring. 

Arbitrage. Boring. But, an avenue for parking.  

Real estate. Corrupt.

Commodities…didn’t get a kick. The delivery option always loomed over my head. What if I forgot to square off?

Stock futures. Got hammered. No more. 

Foreign stocks. Time difference killed my evenings. Out. 

Foreign mutual funds. Expense ratios were sky-high. Slugged it out for a while, but then finished it off. Lost. 

Structures – broke even, then won a bit. Got bored. 

Debentures. Only do short term ones, to park funds. No kicks. Debt is boring by default.

Mutual funds. Yeah, well, did my fair bit of them. Did excite me, since they were connected to Equity. As of now, there’s just light MF activity. 

Stock options. Lost a bit, but didn’t actually get hammered. Gave me a bit of a kick. Well, it was Equity related, so no wonder. Started interfering with my second Equity stint. I let options go. 

Second Equity stint. Did ok…ok…ok…lost a bit, won a bit, was enjoying it, when suddenly…came Forex. 

Forex…whoaahh…I loved it. Swept me away. Technology, charting, skill-set, I wanted to be here. Aha. Huge leverage, though. Risk. This had to be my second game, not my first. Yeah, safety first, always. Alright, what would be my first game? Yeah, what would be my bulk game? 

Equity of course. I understood it and enjoyed it. I’d done ok. Had leant lessons. Knew how to handle it. Infrastructure was in place. Aha. Nailed it in the third attempt.

So and thus, I found my games upon my Aha moments. That’s where I am. Don’t plan to do anything else.

When’s your Aha moment coming?

Work towards it. 

Whose Game Are You Playing?

Are you playing your game?

No?

Why not?

Why do you play someone else’s game?

Do you think that’s going to make you happy?

Just for the record, working for someone doesn’t necessarily mean you’re playing that someone’s game. You’re walking a common path with someone. Could be your boss. Spouse. Parent. Sibling. Whosoever. You could still be playing your game.

Life’s a game too.

A game doesn’t mean you have to rule over someone, or something. Wherever there’s a lesson to be learnt, a game is on. When we talk about your life-lessons, we talk about your game.

If I’m not mistaken, life is about learning. For some of us. There are souls who come to spend surplus Karma. Once this is exhausted, their game changes by default, since the lessons start again.

We come face to face with people and situations… to learn. The same people and / or situations keep reappearing till some learning is fully learnt. They can appear in an overbearing role, but you’re still playing your game. You’re learning your lesson. Or not. These people and / or situations cause you to behave as per a groove which has encompassed your life. The lesson is to learn how to break out of the groove. If you’re learning the lesson, you’re playing your game. If not, you’re playing someone else’s.

Play the market. Play your game with the market. Someone else’s successful market game might lure you. It won’t give you lasting succes. Why?

Someone else’s successful market game caters to someone else’s psychology. In crux situations, you will falter in that game. You will lose it all. That someone will succeed. He or she has spent years devising a game which caters fully and totally to his or her psychology and risk profile. Not to yours. He or she cannot know as much about your own psychology and risk profile as you do. Therefore, devise your own market-play. Then, play it.

It takes years or perhaps a decade to discover and understand your behaviour, psychology and reactions to varied market situations. Be there. In the market. Make small mistakes. Learn your lessons. Understand your grooves. Devise a comprehensive strategy around this.
That’s your game.

What are you waiting for?

Play it.

🙂

Loneliness of the Successful Investor

Walked alone?

No?

Please try.

Success needs original ideas. Original ideas need solitude.

Successful investors walk alone.

Sometimes, they’re lonely.

Investing is more about sitting than action.

Sitting around inactively breeds loneliness.

The antidote is activity – other activity. Not market-related.

Successful investors do other stuff to tackle this loneliness.

Buffett plays poker.

Branson is breaking into some virgin territory or the other.

Gates is busy souping up his home.

Trump trumps.

Jindal plays polo.

Mallya’s sole focus has been other stuff, so much so, that he’s become unsuccessful.

Mahindra loves to tweet.

Tata walks his dog.

Sachin watches Wimbledon live.

Mr. Bean is seen on the F1 circuit.

You get the gist.

These people follow one or more “other” activity / activities so passionately, that they forget about their main activity for a while.

Their system recuperates. Time is bridged to the next instance of main-frame action. While traversing this bridge, body, mind and soul have recuperated. System is fresh, ready and waiting for new action.

When you’re walking alone next time, you’ll be able to deal easily with any loneliness on the path.

One might make moderate returns, investing with the masses.

To outperform, though, one needs to walk alone.

The successful investor realizes that he can’t get out of this one.

Therefore, the successful investor creates a way to still come out winning.

This is human capital at peak performance!

The Thin Line

Have you met the thin line…

…  between ambition and greed?

You see it. You want to cross it without wanting to cross it.

What stops you?

A deadly sin is… deadly. If you’re sensitive enough, you do fear the effects of a deadly sin.

Greed can ruin. It has the capacity to upset an apple-cart.

Sometimes you want something that extra much.

Ambition turns into over-ambition.

You get your something.

You’re a go-getter.

You become over-confident.

You forget your basics.

Next few times around, you cross the thin line repeatedly. The high is addictive. Soon, you’re crossing…

… without even knowing.

Yeah, the vicious cycle outlined above has made you insensitive. You’ve stepped over, don’t even know it, and on you’re going. You’re blinded by greed.

It’s not happened overnight. First the thin line beckoned you to come back. Your over-ambition spurred you on a few steps more. A few more steps wouldn’t harm, right?

Wrong.

You’re not sensitive anymore. You’ve lost normal vision. You’re greedy for your goal. You’re not sticking to your basic tenets. You’re not playing safe anymore. You’ve started to even play with your safety moat, in order to achieve an even bigger goal.

You’ve set yourself up to fall… big.

If you do, I hope for two things.

First up, I hope you don’t fall too big, and that you can get up again.

Second, I hope that this fall is your last one, and that it has made you sensitive again.

Sensitive?

Towards what?

Yeah, sensitive towards the thin line.

The Price of Value-Addition

Does value-addition carry a price-tag?

You bet.

What, you thought you could add value… for free?

Naehhhh.

Good things in life generally don’t come for free.

One doesn’t value the best of things that are free. One treats them cheaply… because they’re free.

In the marketplace, free-kinda stuff always comes with a catch, or a trap.

Ponzis use high-return free money ad-tags to lure pig-investors.

I generally steer clear of free-kinda stuff, anywhere and anyhow in life.

Don’t be afraid to pay (well) for value-addition.

By adding value, you’re doing yourself a huge favour. You’re creating an asset that will generate towards your corpus on auto-pilot. Why should something like this be coming for free?

In fact, why should something like this not be appropriately expensive?

A Secret Ingredient for Equity-People

Racking your brain about how to make Equity work?

Don’t.

Two words work here. 

Be passive. 

Learn to sit. 

Let’s say you’ve gotten all your basics right.

Company is great. Management is sound. Multiple is low. Debt is nil. Model looks promising. Yield is note-worthy. Technicals allow entry, blah blah blah…

Then what?

Yeah, be still. Learn to sit. 

What are the prequisites for sitting?

You need to not need the stash you’ve put in, at least for a long while. 

You also need to get your investment out of your primary focus. 

For that, your day needs to be full…of other main-frame activities. 

Make Equity a bonus for yourself, not a main-course. That’s how it’ll work for you. That’s the secret ingredient. 

How to… … is stated above.

Why to? Aha.

For it to work, fine, but why the sleeping partner approach?

Human capital needs time to show results. 

That’s why you’re in Equity, right, for human capital? The rest is ordinary stuff, but human capital is irreplaceable. Human capital works around inflation. One doesn’t need to say anything more. 

You’ve got your work all cut out.

Get going, what are you waiting for? 

Finding Structure Within

You are you. He is he. She is she. I am I. It is it. 

Even if the above is the only thing that you carry home from this space, you’re done already. 

Move on then, with your life, because you’ve understood something big. 

If not, do please read on. 

You are not I. I am not you. He is not she. She is not he. That’s it. 

Here’s the next biggie.

Those who come into funds need to know how to manage them. Period. 

Do what you want. Run umpteen miles. Put up a million facades. Muster up all the drama you’re capable of. After that you’ll come to this conclusion …

 … that nobody else is more capable of managing your funds than you yourself. 

Why?

Because you are you. You know yourself best. A third party is firstly (realistically) not bothered about knowing you, and secondly is only capable of seeping into a minuscule portion of you, if he or she makes the effort. Forget about third parties. 

So you realize you need to manage your own funds, what then?

Jump into the water.

While your corpus is small, make mistakes. Learn from them. That’s college. Tuition fees.

Recognize your strengths. Play to them. Pulverize your weaknesses after identifying them.

Then come the structures, from within. These are your structures. They’ll come from inside of you. 

There’s you, and there’s the battle-field. The two are face to face. It’s a do or die situation. You go into reflex-action mode. Your systems start to function at full capacity. That’s when structures emerge.

Yeah, structures need an activation barrier to emerge. 

There’s a protective structure. It’s your protective structure. It guides you to build your moat. It protects your family. 

Then there’s your post-protection bulk-game structure. It guides you towards building up your innings without the worries of basic bread and butter. 

Lastly, there’s your multiplication structure. It chalks out high-reward-high-risk strategies, tweaks them towards maximum possible safety, and tells you where to put that minute percentage of your corpus with the intent of achieving extra-ordinary gains. 

Allow such structures to emerge. Embrace them. Innovate. Improvise. Achieve. Educate.

Go for the jugular. 

Harnessing FD-Power within your Meta-Game

Everyone’s heard of fixed deposits (FDs). 

Are they so non-lucrative?

I believe that in some countries, you need to pay the bank to hold a fixed deposit for you. 

Why does our system shun savings? 

What are savings, actually?

On-call cash. Ready for you when an opportunity arises. 

That’s exactly it. The system doesn’t want you to have ready cash when an opportunity is there. 

Why?

Because finance people have already dibsed on your cash. They want it when opportunity is there. The cash should be available to their institution, not to you.

That’s why, your bankers generally try and get you to commit whatever spare cash floats in your account. They try for commitment towards non-access for a specific period of time.

I don’t know how things are in other parts of the world, but in India, a fixed deposit is still considered ready cash, because one can nullify one’s FD online, in a few seconds. Some banks charge a penalty for such nullification, but this penalty is charged on the interest generated, not on the principal. Therefore, in India, you have access to at least your FD principal (plus a part of the interest generated) when you really need it, all within a few seconds. 

What’s the meta-game here?

You “lock” your money in an FD for one year, for example. Let’s suppose that within that one year, no opportunity arises for you. You cash out with full interest. In India, as of now, if you’re in the top taxation bracket, and are a senior citizen, you’re still left with a return of between 6.6%-6.8% after tax, whereby we are not looking at the effects of inflation here, to keep the example simple, though I know, that we must look at inflation too. We’ll go into inflation some other day. 

Meanwhile, your FD has been on call, for you. Let’s assume that a lucrative investment opportunity does arise within the year, and your break your FD after 6 months, reducing earned interest to 4% annualised from 9.5-9.75% p.a. However, your investment yields you 20% after tax, because it was made at the most opportune moment.

You do the math.

Do you see the inherent power of ready money?

Your FD has thus worked for you in multiple ways. 

It has worked as an interest-generator, yielding a small return. Simultaneously, it has worked as ready cash, on-call in case of opportunity. Should the opportunity arise, and if the investment that follows works out well, a handsome return could be made. It’s all should/could/would in a meta-game. 

There is yet another way FDs are used. I use them this way. 

FDs are a safety-net. They allow you to take high risks elsewhere. You lose the fear of high risk once you know that your family is secured through your safety-net. In a safety-net, sums are large enough and deposits are regular enough to discount (actually effectively / realistically nullify) the power of inflation. With the haven of a safety-net going for your family, you can enter high-risk arenas fearlessly. Fearlessness is a perquisite to do well in high-risk arenas. If you’re afraid of loss, don’t enter such areas. Safety-nets make you lose your fear of loss elsewhere. 

People – SAVE! 

Create FDs. Don’t listen to your bankers. Commit your money to an uncompromisable lock-in only if you’re convinced that the investment is safe and really worth the lock-in for you. Harness the power of the FD for yourself. A safety-net of FDs is the first step towards the formulation of a profitable meta-game.

Did you also know that when you create an FD, the money used to create the FD doesn’t show up as ready cash in your account. Bank accounts with large amounts of ready cash over long periods of time are like red flags which online fraudsters look for. Creation of FDs gives extra online safety to your money. 

ONLY you are responsible for your money.

Start looking after it. 

Start making it grow.

Start saving. 

NOW.