Category Archives: Safety

Not in the Mood?

Posted on by
Reply

Right, good.

You don’t have to be. And good that you’ve recognized it.

Mood sets the tone for success… or failure.

For example, just now, I’m not in the mood to conduct due-diligence. There’s one company which has sparked my interest, a few days ago. Work needs to be done, to decide whether I’m investing or am out. Quality of work needs to be of the highest order. Otherwise I might take a wrong decision, meaning that I might invest in a dud, or might reject a multibagger. And what happens? I’m not in the mood to conduct any kind of due diligence. For whatever reason. What’s to be done?

Nothing.

I just don’t conduct it.

Period.

What if the opportunity goes away?

So be it. Another will come along. When? Whenever. World is full of opportunities.

Why am I so pricy about my behaviour?

Well why not? It’s called being in the sweet spot. You call all the shots. Including working when in the right frame of mind. Such a condition enhances the probability of success.

When will I be conducting the due due-diligence?

When would that be?

Whenever it happens naturally, without artificial pressure.

Am I just born lucky, to be in a position to work when I want?

Well, I’ve definitely had my share of great luck, and continue to have it, by the grace of Nature. On the other hand, and to put things in perspective, I also have, over the last twelve years, worked hard to create a situation for myself where I only invest when I wish to. There’s no pressure on me to invest. My bread and butter isn’t dependent on it. I call it being in the sweet spot.

Work towards your sweet spot.

Now.

Deciding to Invest?

Posted on by
Reply

An investment opportunity comes along.

How do you react?

This is how I react.

First up, funds. Do I have clear funds to invest? No? Forget it, obviously.

Funds – maybe? Meaning, if I do some wangling around, fund demand could be met? Ok, move on to next step before taking a decision on the wangling.

Funds – clear – yes? Next step by default, but I’m telling myself that I’m not letting these hard-earned funds go just like that. The opportunity will need to clear my scrutiny. Period.

Then – time? Do I have 15 clear days to conduct deep due diligence.

No? Forget it. I may be travelling. Some event might occupy my time and mind. No time – no investment. Period.

Yes? Ok. Next step.

Energy? Due diligence is exhausting. I need energy reserves. My body and mind tell me. If they’re up to it, I’ll know. If not, the sheer idea of due diligence at that point will make me want to puke. Such is the power of mind and body to convey a message. No energy means improper due diligence. Not happening. No investment.

Yes for energy? Body is alive. Mind is alert. Moving to next step.

Due diligence. Digging deep buddy. I’m going to get under their skin. I’ll pick out their lie. I’m going places they won’t imagine I could get to. The internet is my oyster. We’ve never had it so good wrt information flow and disclosure. I start digging, and get so engrossed, that I forget about time.

Due diligence scrutiny check block oblique spoiler alert oblique deal-breaker? Could be an uncovered lie. Recently I discovered 100% pledging in a company, with everything else ok. Could be any dirt or its tracks. No investment.

Due diligence cleared. Go back to funds – maybe. Bring out mental weighing scale. Is the investment so worth it that I’ll wangle fund demand?

No? No investment.

Yes? Next step.

Think clearly. Very hard earned funds are about to go away for a while. What does the sum total of my everything tell me?

No? For whatever reason. I don’t question my sum total. No investment.

Yes?

Investment.

Happy investing! 🙂

IUCS – Investing Under Controlled Stress

Posted on by
Reply

Let’s assume there are funds waiting to be invested. 

In what form do you keep them?

Free?

Bound?

What?

Investors have the luxury of time. Traders don’t. 

I’m really telling you, an investor’s funds need not be kept in free form. 

Traders need to pounce, not investors. 

If you don’t need to pounce, don’t keep your funds in free form. 

Keep them bound. Semi-bound. Let’s call it stressed. Keep them stressed. Stress that is under your control. 

What are we talking about?

Also, why are we talking about whatever we are talking about?

Free funds are open to whims and fancies. 

Whose? 

Yours. Your bankers’. Anyone’s, who has an eye on the funds. 

Plush with free funds, you take liberties. Your defences are down. You are liable to make mistakes, perhaps big ones. 

Bound funds, on the other hand, are subject to activation barriers before release. 

You think twice before releasing them, or perhaps thrice, if the locking is tight. You win precious time. During the extra time, you can well scrap an investment with a faulty premise, or you can discover hidden agendas or angles which cause you not to follow through. You get saved because of controlled stress. 

Furthermore, bound funds don’t reflect on your banker’s system as funds waiting to be invested. He or she won’t bother you or incite you to make a mistake. You’ve knocked him or her out of the equation. Bravo!

Controlled stress can be of different degrees. When funds are irreversibly locked-in, then we cannot talk of control anymore. Anything below that is under our control with varying levels of effectivity. The stronger the (reversible) lock-in, the harder you’ll think about the new investment, because the activation barrier for making funds free again to invest is large. 

Let’s not get too carried away. We can just make simple fixed deposits. These are completely within our control. You can break them with a letter to the bank manager. The activation barrier to free them is relatively small. However, you do think twice before freeing them. The’ve disappeared from your banker’s horizon. They’ve also disappeared from any online fraudster’s horizon, who was perhaps looking to clean you out. 

Also, actually, you don’t really need to break these fixed deposits to get into a new investment, since breaking goes with a small interest-penalty. If you’ve got fresh funds coming in at a later date, but wish to invest now, you can borrow against a fixed deposit. This will again make you stop and think, because borrowing comes with a cost, i.e. interest. You will only get into the fresh investment if you really, really have to / want to. You will discard any half-baked investment idea. It’s still worth it, despite the interest. You might find this a bit crazy, bit I like to do it like this. For me, the biggest win here is that I am not breaking a former structure. Add to this the extra safety. Plus the extra thinking-time to ward-off bad investments. Add everything up, and you might also think that the borrowing cost is peanuts when compared to the benefits. Don’t forget, since you’ve got fresh funds coming in soon, you’ll soon be releasing the fixed deposits you are borrowing against from their overdraft mode. This is a meta-game strategy. 

Yeah, keep investible funds in fixed deposits. It is really as simple as that. 

The best things in life are really very simple. 

Complication and sophistication are facades used by humans to hide their mediocrity.

A successful person does not need to hide his or her simplicity. 

Simplicity is one of the biggest precursors to mega-success. 

Are There amy WMDs in the Markets?

Posted on by
Reply

What’s a weapon of mass destruction in the markets?

Well, practically anything that the masses don’t know much about, and are being handed on a platter in a repackaged form, to savour. 

Sure, I’m using one of Warren Buffett’s analogies here. Loosely requoted, Buffett once warned, that futures and options were weapons of mass destruction (in the hands of those masses, who didn’t know much about them, but still used them). 

Yeah, I will stand upon the shoulders of giants if required. 

As long as I quote them, I’m good. 

The view from their shoulders let’s one think from a height. That’s an ideal situation for fresh thinking. 

Supposing something new comes up. That would be a contribution from my side. And why would it have happened? Because I took the liberty to stand upon the shoulders of giants. 

Bottomline is, that everything can be classified as a WMD if one is handling it and doesn’t know much about it. 

Equity is a WMD for newbies. For someone who spends many hours a day for many years, delving into Equity, the scene can be quite different. 

Rome wan’t built in a day. 

You don’t become a PhD in a day. 

You can’t master Equity in a day. 

Or anything else, for that matter. 

Do your homework. 

Put in the hours and the years. 

Burn the oil. 

Take what you do seriously. Not casually. If you’re casual about any professional line, drop it now, or start pursuing it seriously. 

Why do you want to give something the power to become a weapon of destruction?

You don’t. Period. 

The Market Aha Moment

Posted on by
Reply

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. 

Take that –>@&%# Mr. Peer Pressure

Posted on by
Reply

Dear Mr. PP,

I don’t give in to you, never have, never will.

You’re not that important.

I don’t spend my time thinking about you.

I don’t respect any entity without a backbone, and you certainly don’t have one.

I’ve met you many times.

At first, I felt you, and was taken aback. You wanted me to do something I didn’t wish to do. You were strong.

I was stronger.

When you don’t know anything about the reputation of your opponent, frankly, you don’t give a d*m*. You fight. Till you fall or till the other fellow backs down.

I won my first head to head with you. Thank my stars.

After that I found out who you were. Yeah, who was it exactly that I didn’t succumb to?

After I’d grown up and all, and fully realized your devastation potential, I always leaned back on my first head to head. I mean, you were beatable. Period.

Yeah, I was lucky to have beaten you first up. It’s been a huge psychological advantage.

I’ve carried over this advantage into my market life.

Take a hike, Mr. PP.

[As far as market related activities go, I follow and advocate an unbiased, singular and customized path which doesn’t follow any crowd or any myths as such.

This path certainly does not let me invest under any kind of pressure.

Where there’s pressure, there are vested interests.

Please beware of investments which don’t suit your risk profile and are touted to quench vested interests].

What’s the Frequency, Flipkart?

Posted on by
Reply

Hmmm, a zero-profit company…

In fact, a loss making company…

Do you get the logic?

People are probably seeing an Amazon.com in the making.

Amazon exists in a highly infrastructure-laden country with systems.

Can we say the same about us?

As of now – no.

Are we on the trajectory?

Sometimes yes, sometimes no. It’s been five steps forward and then three back till now.

What’s all the hype about?

Institutions want to make money during the ride.

Whether the ride culminates into an Amazon.com is irrelevant for institutions.

Public opinion acknowledges the ride.

That’s enough for institutions.

They’ll ride to a height and exit, irrespective of any MAT or what have you.

While exiting, they’ll hive off the hot potato to pig-investors in the secondary market, post IPO.

Hopefully, a valuation is calculable by then. Even the PE ratio needs earnings to spit out a valuation. No earnings means no divisor, and anything divided by zero is not defined.

Keep your wits about you. Follow performance. Follow earnings. Follow bearable debt. If you see all three, a sound management will already be in place. Then, look for value. Lastly, seek a technical entry.

Don’t follow hype blindly.

Cheers! 🙂

Hanging On to a Structure

Posted on by
Reply

How does one build a wall?

Brick upon brick, right?

One doesn’t usually take out the brick two layers below to use elsewhere. Common-sense. 

Why should it be any different while building a rock-solid portfolio?

Well, it’s not. 

Those who feel it is will soon realise… that it’s not.

You set up an investment.

You then see it through to its logical conclusion. 

You don’t let it go in between… …unless we’re talking about a life and death situation.

Apart from this one caveat, you just don’t let the investment go. You see it through… to its logical conclusion. Period. 

Meanwhile, other opportunities arise. 

You are tempted to get into them. That’s what opportunities are for. 

Now you need to be creative. 

You’re not letting one structure go for the sake of creating another. 

You are going to keep the former and create the latter. 

How?

Dig into your reserves.

How were the reserves created?

They were created by former structures that were seen through to their logical conclusion. These contributed along their paths and upon their culmination. 

Reserves not enough?

Borrow agains a former structure. 

Don’t borrow big. Borrowed amount should not be big enough to harm the former structure, but big enough to couple with your reserves and see your new structure through. 

Still not enough? Requirement for new structure not being met?

Let the new structure go. 

Opportunities keep coming and going. No one’s got a copyright on opportunities. 

Save up for the next one. 

Brick by brick, remember. Without sacrificing the bricks below. 

🙂

The Thin Line

Posted on by
Reply

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.

Harnessing FD-Power within your Meta-Game

Posted on by
Reply

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.

Speed of Rise vs Speed of Fall

Posted on by
Reply

Specifically, equity markets have this one repetitive characteristic.

Their average speed of rising is lesser than their average speed of falling. Much lesser, I would say. 

Why?

Falling has to do with selling pressure being more than buying pressure. Selling pressure is connected to fear. Add caution to fear, and one has already sold out. 

Rise has to do with buying pressure being more than selling pressure. Buying pressure is connected to optimism. As markets keep nudging higher, slowly, optimism turns into euphoria, with a hint of caution. This caution slows the speed of rising, till greed takes over in the last stage of the rise, and one fails to see any caution anymore. At this time, the speed of rising is the highest, but is still lesser than the speed of falling at the nadir. Why?

What is the prevalent situation at a nadir? There’s blood. People are running for their lives. They take action before asking questions, and before looking here or there. 

Many times, you come across someone holding a stock which he or she has inherited from a parent. This someone comes to you with the ubiquitous query – what to do, sell it now? You look at the chart. Whoahhhh! You see the buy price, one and a half decades ago. You look at the current level. You calculate the profit. Along the time axis of the chart, you also see that the stock fell back to its buy price or below in a market crash, all within a month and a half. After this, the stock has recouped its losses of the crash, and is showing a healthy profit again, six years after the crash. During the crash, how long did it take the stock to fall below the buy price of one and a half decades ago? A month and a half. Holy moly!

That’s the equity playground for you. 

It’s directly connected to human emotions. 

Anything can happen on this playground, so keep your eyes and ears open, and…

… be prepared. 

Am I Taking Bitcoin Seriously?

Posted on by
Reply

Yeah.

Bitcoin is a serious new kid on the block.

Am I getting into it? That’s the more important question, isn’t it?

Well, not yet.

First up, I know very little about it. I’m not going to get into something because of the smoke. Gone are the days.

So, I’m educating myself.

The Web tells me that Bitcoin is not alone. Numerous Crypto-currencies have emerged. Confusing.

Many of these have their main servers or their secondary addresses located in ex-Soviet / ex-iron-curtain nations. Intimidating. I’m afraid.

Then I look at the bid-ask spread for Bitcoin. There’s typically a 1% difference between buying and selling price. That is huge. In fact, it’s outrageous.

After that I look at the Bitcoin price vs time chart.  I can see the panic in the chart. I don’t like panic. I generally stay away from panic markets. If I’m entering a long-term market, I like entering on a solid base foundation. The panic dust hasn’t settled yet. Technical bases build after panic settles, and only if the underlying has long-term mettle. They’re visible on the chart as horizontal stretches. Not happening as yet on the Bitcoin price vs time chart. Means I’m not entering yet.

Then there’s this mining stuff. Like, virtual mining. I don’t understand it. Yet. Looks silly, off-hand. Could this be connected to currency-backing? Or, is this just a hype-creating gimmick that doesn’t make economic sense? I’m not sure, I tell myself.

Last point I’m making against current Bitcoin entry – theft and loss. If I store Bitcoin on my computer, it becomes a potential target. I don’t wish to have the 5 million odd extremely sharp ex-Soviet ex-chess wizard brains targeting my computer. Period.

So, where do we stand?

Meaning, why am I taking Bitcoin seriously?

The USD has nothing backing it. The US seems to be following a fiscal policy with high risk of implosion due to escalating debt. They’ve got no reserves left. Savings are nil. The USD will probably maintain its hierarchy till the world has another alternative.

A few years ago, I thought that Gold could be this alternative. Today, I think Bitcoin is a more serious contender.

First, I need to convince myself that Bitcoin is backed. Meanwhile, the noise will even out, and only the most solid crypto-currencies shall live on. I’d like Bitcoin to still be at the top of all crypto-charts once the noise settles. By then, there’ll be someone reliable in my own country offering Bitcoin investment and trading, someone I know, like an HDFC Bank, or a Kotak Securities. Volumes will escalate. Slippage will be down to a bearable 0.1% or less. Bitcoin’s chart will show a base foundation. I’ll have understood the virtual mining stuff, and hopefully it’ll be connected to currency-backing. Banks will store Bitcoin as an e-holding, which will reflect in one’s Netbanking.

That’s when I’ll enter Bitcoin.

Happy Third Birthday, Magic Bull!

Posted on by
Reply

Hey,

We turn three.

You know it, and I know it…

… that this year’s been a slow going.

Sometimes, life is slow.

Such junctures are great times to recuperate and consolidate.

Inaction is big in the markets.

Very few know how to be inactive – and stay sane.

Those who do – well – they make big bucks when it’s time for action.

That’s only if they haven’t gotten rusty and lazy by then.

Yeah, inaction is an art.

In the markets, it is at least equal in importance to – action.

So, for the most part of the year that’s gone by, my market activity’s been practically zilch.

It’s not that I’ve been sitting and twiddling my thumbs. No! For heaven’s sake! Of course I’ve been doing other stuff.

Inaction in the markets must be coupled with action elsewhere, if one plans to stay sane, that is.

Also, inaction in the markets leads to preservation of capital. That, what you made during active times, remains safe, pickled and intact.

Then, when there’s opportunity, you’ve got your whole arsenal to cash in with.

While changing gears, don’t jump out of your seat with your saliva drooling, though.

Have some rules in place for opportunistic action.

I have some basic rules for myself at such junctures. I don’t put more than 10% of my networth on the line, while pursuing an idea. This rule applies for me while changing gears too, more than ever. Also, I don’t pursue more than two ideas at any given point of time. Most of the time, I’m not pursuing any idea, till an idea appears, refuses to break down, and just sticks.

Safe.

Simple.

Comfortable.

Ideal circumstances…

… to hit the sweet-spot…

… when it’s time for action.

Wishing you happiness, safety and profits in whatever market activity you pursue,

Yours sincerely, and just there for you, period,

Magic Bull.

Taking the Pan out of Panic

Posted on by
Reply

Panic – Pan = ic = i see = I SEE.

Times are unprecedented.

We’re breaking new lows of evil everyday.

Ours looks to be a hopeless nation.
Is it over for us?

Shall we pack up our bags and migrate?

Just take a deep breath. Bear with me for a moment. Try and cast your panic aside. Try and think clearly.

I’ll share with you an observation. Take any Indian. Doesn’t have to be an outperformer. Take an under-averagely performing Indian, for all I care. Weed him or her out of our pathetic system, and place him or her in a nation with good governance.

Lo and behold, our candidate will start performing. Not only that, soon, he or she will be outperforming. After a decade or so, he or she will probably have mastered the system and punctuated it with innovative short-cuts.

Get my point?

We are a resilient race. We might look fickle, frail and harmless superficially, but we can struggle, bear, survive, and finally break out. Just give us good governance.
Don’t panic. We’re not going down that easily.

What’s happening currently is a purge. Yeah, it’s a catharsis with a big C. While it continues, asset classes across the board will probably get hammered.

What does that mean for you?

Only one thing.

Stay in cash. Accumulate it. Learn to sit on cash. Sit on it as long as the purge lasts. Let its value depreciate, doesn’t matter. Park it safely with a conservative private bank. Fixed deposits would be the instruments of choice. Yeah, you don’t want to leave unattached cash lying around. Potentially, unattached cash could be susceptible to online fraud. Attach your cash, safely, and keep it before your eyes. Put some watch-dogs in place, as in sms and email alerts. Password-change attempt? You are immediately alerted. New payee added? You are immediately alerted. Watch-dogs bark.

As per my instinct, though we probably won’t go bankrupt as a nation, we might just go a long way down before the purge is over. After the purge, there will be tremendous bargains on offer, across the board, in all asset-classes. Cash will be king. Save your cash and sit on it – for that day.

Meanwhile, your wealth-manager will try to push you into panic purchases with your cash. As in, buying gold at 32k, and the USD at 65. Don’t listen. These are crazy levels. One doesn’t invest at crazy levels. These are not even normal trading levels. Yes, they are institutional trading levels. One does not invest at institutional trading levels.

It’s time to use your common-sense and maintain a cool head.

You can only do that by refusing to panic.

The Art of Emotional Recycling

Posted on by
Reply

Taken a hit?

If yes, at least admit it… to yourself and for your own sake.

People take hits at various times in their lives.
That’s the way of the market.

That’s how it teaches us to make money next time.

Think of your loss as tuition fees.

In my opinion, the best way forward is to take lots of small hits in the first seven years.

Then, in nine cases out of ten, you won’t fall for the big ones.

Big hits can decapacitate a player, especially when they come late, since there is no time for full recovery. Besides, emotional breakdown at a late stage is very difficult to get out of.

Make it a point never to take a big hit.

That’s only possible, if at any given time, the capital that is risked is within reasonable limits.

Let’s say you risk not more than 1% of your networth at any given time. What’s the maximum hit you will take at one time? Right, 1%.

That’s bearable.

That’s something you can shake yourself out of, and move on.

Moving on is a huge quality to possess in the markets.

Taken a hit?

Move on and make your next trade.

All this while, you are putting any remnant emotional hurt in cold storage.

Yeah, there’s a certain portion of emotional hurt that won’t be nullified by family time, vacations, hobbies etc. We’re talking about the hurt to your ego. Only a big win will wash that away. Only then is your emotional recycling complete.

Put yourself in line for that win.

After a hit, rest, recuperate, grab your wits, focus, and…

… put on the next trade.

What’s your Answer to Dictatorial Legislature?

Posted on by
Reply

Cyprus almost bust…

Money from savings accounts being used to pay off debt…

Five European nations going down the same road…

US economy managing to function for now, but without any security moat (they’ve used up all their moats)…

Our own fiscal deficit at dangerous levels…

Scams in every dustbin…

Mid- & small-caps have already bled badly…

Let’s not even talk about micro-caps…

Large-caps have just started to fall big…

Just how far could this go?

Let’s just say that it’s not inconceivable to think… that this could go far.

Large-caps have a long way to fall. I’m not saying they will fall. All I’m saying is that the safety nets are way below.

I see one big, big net at PE 9, and another large one at PE 12. Getting to either will mean bloodshed.

Inflation figures are not helping.

In a last-ditch attempt to get reelected, the government recently announced a budget for which it’ll need to borrow through its nose.

Oops, I forgot, it doesn’t have a nose.

The whole world is aware about work-culture ground-truths in India.

Things are out of control, and this could go far, unless a miracle occurs and Mr. Modi gets elected. Before such an eventuality, though, things could go far.

When large-caps fall, everything else falls further.

How prepared are you?

Hats off to those with zero exposure.

Those with exposure have hopefully bought with large margins of safety.

Those who are bleeding need a plan B.

In fact, a plan B should have been formulated during good times.

Anyways, how prepared is one for a Cyprus-scenario, where dictatorial last-minute legislature allows the government to whack money from savings accounts?

In future, you might need to find a solution for loose cash in savings accounts. It needs to be kept in a form where government doesn’t have access to it.

As of now, what’s serving the purpose is an online mutual fund platform, through which loose cash can be moved and parked into liquid mutual fund schemes. For government to exercise full control over mutual fund money, it’ll probably need to be more than a bankruptcy scenario.

That’s just for now. Adaptability is the name of the game. It’s always good to be aware of one’s plans B, C & D.

Organic is In

Posted on by
Reply

Is your institution “organic”?

What could organic mean?

Let’s try and answer this based on sheer intuition, without surfing the net or getting biased by other opinions. It doesn’t matter if we’re wrong. At least we’re thinking independently, and that is invaluable.

So, what kind of an institution is organic?

A non-synthetic one? Hmm.

One that’s alive? Not bad.

In sync? Better.

One whose left hand knows what its right hand is doing? Good.

One that tugs at the same string at the same time in the same direction. Yeah!

One that’s devoted to a holistic boss. You got it.

Are you part of such an institution?

Yes? God bless you.

No?

Why?

Never looked?

Looked and never found?

Looked, found, and then couldn’t fit in? Keep trying. If you don’t fit in fully into any such institution, firstly, don’t get worried. It’s ok. Found your own organic institution. On the other hand, maybe you are your own institution, but don’t know it yet. When you do discover it, try and be an organic one.

Organic growth is digestible. It sustains.

Short cuts are big in our world.

Why do we try and cut others short?

As investments, look for institutions where employees are not cut short. When talent is rewarded, it starts to perform beyond boundaries.

Apart from good valuations, corporate governance criteria and organic growth are critical factors that one must look for in an investment.

Organic is in, and will remain in.

Is Your Money Comfortable?

Posted on by
Reply

Everyone likes being comfortable.

So does your money.

Can you function optimally under tension?

Well, neither can your money.

So… make it comfortable. Allow it to breathe.

Money is a concept, a force.

Soon, it’ll find its flow. Till it does, yes, you’ve allowed it to breathe.

What does all this mean?

What are we talking about?

Don’t worry, I’m not getting metaphysical on you…, yet.

Simple – no confinement, no locking, just parking, no further expectations – that’s when your hard-earned life-savings breathe freely.

Yeah, you park them, where you can see them.

If, then, a daily dividend emerges, well, that’s a bonus. Try and make sure that the avenue you’ve used for parking doesn’t reduce your corpus on a daily basis, even slightly. You are more than happy with a miniscule daily dividend, which, of course, is auto-reinvested into the same avenue.

Now, both entities are breathing freely – you and your corpus.

You can take a break.

Reassuring is the fact that your resting corpus is visible to you on your mobile.

You do take that break.

At times you think – freely.

You enjoy life for a bit.

Slowly a thought process emerges.

Where will your money go next?

Where does it want to go?

What’s the most lucrative path for it to flow upon?

You listen to the universe.

The answer floats in the universe.

It is your answer – the resultant vector of your struggle and learning.

For it to flow into your mind, your per saldo vibration must match the exact vibration of that part of the universe, where your answer lies.

If there’s a mismatch, then perhaps you need to struggle a bit more, till your vibration gets even finer and there’s a match.

The solution flows into you.

It’s like an energy bomb, that slowly explodes inside of you, and as the emitted energy starts to seep into every cell of your body, your new system simultaneously starts to dawn upon you.

You are now ready to move your funds to a more permanent and lucrative location. Speed of movement is defined by your new system. So are time, mode, avenue, repetitiveness and tenure.

Meanwhile, your funds have remained intact. That’s a very big thing. Very few human beings know how to keep their funds intact. If you know it, you already know a lot.

Soon, your new system takes over. More than half the battle’s won already.

All the best, wish you well, and if I did get metaphysical on you, it was only to get the point across.

Maybe you actually even liked the meta-bits, so let’s call it even stevens.

Where to, Mr. Nath?

Posted on by
Reply

Last month, I scrapped my market-play system.

Happens.

Systems are made to be scrapped later.

One can always come up with a new system.

I love working on a new system.

It’s challenging.

What I want to talk to you about is why I scrapped my last system.

I found four accounting frauds, as I did my market research, all online.

You see, my last system worked well with honest accounting.

It had no answer to accounting frauds.

Also, I got disillusioned.

Are we a nation of frauds?

How does one deal with a nation of frauds?

More importantly, how does one play such a nation?

Does one invest in it? Or, does one sheer trade it?

Questions, questions and more questions. These encircle my mind as I work to put my new system together.

I am in no hurry to come up with an answer. A country like India deserves a befitting answer, and that it will get, even if the sky comes down on me while I put my system together.

Slowly, I started to think. How many systems had I scrapped before?

Hmmm, four or five, give or take one or two.

I have an uncompromising market rule of going fully liquid when I scrap a system.

Full liquidity is a tension-tree state. It allows one to think freely and in an unbiased manner. Being invested during volatility impedes one’s ability to think clearly and put a new system together.

Ok, so what answer would my new system have towards fraud?

All along, it was very clear to me that future market activity would be in India itself. Where else does one get such volatility? I am learning to embrace volatility. It is the trader’s best friend.

Right, so, what’s the answer to fraud?

Trading oriented market play – good. Not much investing, really. First thoughts that come to mind.

Buying above supports. Selling below resistances. Only buying above highs in rare cases, and trailing such buys with strict stops. Similarly , only selling below lows in even rarer cases, and again, trailing such sells with strict stops.

Trading light at all times.

Fully deploying the bulk of one’s corpus into secure market avenues like bonds and arbitrage. You see, bonds in India are not toxic. Well, not yet, and with hawks like the RBI and SEBI watching over us, it might take a while before they turn toxic. If and when they do start turning toxic, we’ll be getting out of them, there’s no doubt about that. Till they’re clean, we want their excellent returns, especially as interest rates head downwards. In India, one can get out of bond mutual funds within 24 hrs, with a penalty of a maximum of 1 % of the amount invested. Bearable. The top bond funds have yielded about 13 – 15% over the last 12 months. So, that 1% penalty is fully digestible, believe me.

With the bulk of one’s returns coming from secure avenues, small amounts can be traded. Trade entries are to be made when the odds are really in one’s favour. When risk is high, entry is to be refrained from. A pure and simple answer to fraud? Yes!

You see, after a certain drop, the price has discounted all fraud and then some. That’s one’s entry price for the long side. On the short side, after a phenomenal rise, there comes a price which no amount of goodness in a company can justify and then some. That’s the price we short the company at.

Of course it’s all easier said than done, but at least one thing’s sorted. My outlook has changed. Earlier, I used to fearlessly buy above highs and short below lows. I am going to be more cautious about that now. With fraud in the equation, I want the odds in my favour at all times.

These are the thoughts going on in my mind just now. Talking about them helps them get organized.

You don’t have to listen to my stuff.

I’m quite happy talking to the wall.

Once these words leave me, there’s more space in my system – a kind of a vacuum.

A vacuum attracts flow from elsewhere.

What kind of a flow will my vacuum attract?

Answers will flow in from the ether.

Answers to my burning questions.

Shaken, and not Stirred, Mr. Trader…

Posted on by
Reply

Trading models crumble. Happens often.

Does this shake you?

Please don’t let it. Models are meant to crumble.

Construct a new trading model, instead of mourning over the loss of your current one.

Your belief in your model might be shaken, but you are not stirred, right? Helooooo, Mr. Trader, are you there?

Let’s get this straight – you are not stirred. You stand solid as a rock.

What allows you to do so?

Firstly, your safety net stands. Meaning, nothing’s making your safety net crumble. That’s the first thing you do as a trader – construct  a safety net that stands. Your safety net generates steady income and affords your family a comfortable lifestyle. Before that happens, not a single trade is pulled.

Secondly, ever since your safety net has been standing, you have been trading lightly. You’ve been chiselling away at this trading model, but are still a little uncertain about it, and thus, you’ve been going light. It’s recent crumbling has given you losses – which are also light. You are able to swallow such losses easily, since their magnitude is digestible. You’ve been very sensible in not scaling up prematurely.

Then, you’ve stuck to all your trading rules, and this is helping you immensely. Your rules called for a week’s break between two trading models, and you took it. You were not afraid to not work for a week. You didn’t care about what society said. You were confident about yourself, and made your own rules. This week off has kept your personality balanced, and you continue to be a good human being, working for the welfare of society. Your relationship with your family continues to be excellent, despite any losses on the markets.

Yeah, you’re still standing, and pretty comfortably so. Recuperated, and rejuvenated. You are raring to put together a new trading model after the collapse of your old one.

Slowly, you start chiselling again. You watch the market and its movements for a week. Charts are studied. A befitting trading instrument is identified. Trading direction is pinpointed. Trading magnitude is determined. A comfortable entry setup is chosen…and you’re in. Your trade triggers.

After trade upon trade upon trade, your fine-tuned trading model takes shape and yields profits…until it crumbles and gives way to a newer one.

Welcome to the world of trading. You’ll be shaken, many times, but if you stick to a few basics, nothing will be able to knock you off the path.

All the best! 🙂