Tag Archives: #Contrarian

Cluster of Blessings

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Hey.

We realized…

…that what we’re doing…

…is anti-fragile in nature.

How, you ask.

Since what we’re doing is in stocks. Equity. Robust at best. Not anti-fragile.

?

Well, take a definition, and expand it a bit, and the definition starts to make broader sense. One draws on the definition, and creates a utility for that definition in one’s own line of work. That’s what we’ve done. Creator of the term anti-fragile, Mr. Taleb, could turn around and say, hey, you’ve just taken my thing and used it in your thing. Of course we’ve done that. We stand on the shoulders of giants, giants like Mr. Taleb. And now we’ve got his thing, projecting onto our thing, making something new out of our thing. Bottomline, we have a thing that is anti-fragile, and Taleb gets credit for his thing starting to develop universality, at least across another asset class.

So how are we doing stocks in an anti-fragile manner?

We benefit from chaos, volatility, uncertainty, fear and the like.

How?

Before these conditions cause mayhem in stocks, we have gravitated, in a growth market, over the years, to exhibit meaningful holding power. Both mentally, and financially. So, what do we possess before topsy turvy conditions, like now? Holding power.

What else are we armed with?

Liquidity.

Liquidity is a state of mind. Our state of mind causes us to be liquid at the right time.

Next.

We have…

…high conviction. In a basket of market players. Our due diligence regimen, over decades, has allowed us the means to recognize such stocks. In these, we have developed what?

High conviction.

We are itching to buy these underlyings, at huge…

…margins of safety.

Cut to current conditions. Chaos, volatility, uncertainty, fear, war, maniac, missiles, nuclear threat and what have you.

The margin of safety that we look for starts to abound. We accumulate high conviction underlyings, over multiple buys, ending up with low buying averages.

As conditions amplify, buying averages get lower. We are benefiting from chaotic conditions in that our buying averages are getting lower and lower.

Perceptions change for the better. They always do. Gone is 1929, where it took the better part of two decades for circumstances to change. Till 2019, one used to talk about max 15 to 18 months being the length of a bear market. Information flows very fast. When efficient, whenever that is, markets are then super-efficient. Factoring in is taking days, perhaps only a day. A change in perception is incorporating very, very fast. Frankly, we’re talking months, not even years. And, we’re mentally and financially prepared, with our holding power, for a time-frame measured in years.

Comes the turnaround. Sooner than later, such are the times.

Our low buying averages multiply fast. In fact, very fast. The lower they are, in our high conviction holdings, the faster they multiply. We start to hold many 2-baggers in 3 to 6 months, for example.

Now we call the shots. In fact, our very low buying averages do.

We can choose to pull our principal out, full 100%, at 2x, 3x, 4x, 5x or what have you, depending on our muse.

The moment we go cost-free, we have moved into 100% margin of safety. Nothing can break our cost-free-ness (except ourselves). We can choose to leave our cost-free-ness to our children, by which time it will have majorly compounded. Since we have no principal invested in our cost-free-ness, we won’t be in a hurry to liquidate it. In fact, we won’t even be looking at it.

We’re calling our low buying averages anti-fragile. The lower they get, the more anti-fragile they behave in the aftermath of chaos. We’re adding an allowance towards fast incorporation of change in perception to the definition of anti-fragile, because of which our inherently anti-fragile low buying averages get to benefit from their anti-fragile nature (thanks again to Nassim Nicholas Taleb for giving us the framework of anti-fragility).

And what are we calling our cost-free-ness? I mean, it is seeming to be beyond fragility. It is giving benefit beyond any scale. Generational benefit. I don’t have a name for this effect, yet.

Our cost-free-ness has generated generational well-being. It has allowed us to not liquidate it, by the state of mind it has caused in us. It has allowed itself to be passed on.

Hmmm. Taking a phrase from Nichiren Buddhism, it is our…

…cluster of blessings…

…that we pass on…

…to the next generation.

Constants

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Hey.

We play the game…

…with numbers.

Numbers are…

…our thing.

The thing with numbers is…

…that once we create a constant for ourselves…

…a pivot…

…something like a compass…

…AI doesn’t have access to it.

It’s our number.

It’s in our mind.

By the time AI gains direct access to our mind, we’ll be gone.

For example, we establish a low buying average, over many buys, in something we consider to hold value.

Each individual establishes their own, meaning…

…it’s each person’s own low buying average.

It decides the multiple.

It’s the centre-half. The libero. It creates the play. It’s unique to a person. No AI access. The whole game has been taken away from AI. It remains a human game. It’s not what the masses are doing. It’s contrarian. It’s going to make money.

Volatility is a constant.

Disruption is a constant.

Fear is a constant.

Greed is a constant.

Mass-behaviour is a constant.

Pigs getting slaughtered is a constant.

We play it by constants.

We’ve even started using unique mass-logic defying indicators, that only we have defined, that no one else knows about or can dream of, and we’re using them successfully, with no access to AI.

We’re functioning from within a matrix where we control the game, AI doesn’t.

Beauty is, outside of our protective matrix, we have access to all of AI’s capabilities, should we choose to use them.

Not yet though. Specifically after the 160+ girls murder rumoured to be caused by intel provided by AI, correct me if I’m wrong. AI as it currently is doesn’t seem ready for seamless implementation. All those foolishly believing so at this moment are the pigs referred to above. Pigs get what? Slaughtered. I didn’t say this first. It’s a common market saying. Markets are a – constant. We trust constants.

There will be many more blow-ups before seamlessness is achieved.

Think of banking systems causing and compounding massive errors because of blind reliability on AI.

This of AI suggested war strategy backfiring because of lack of understanding of human psyche.

Think of investment strategy imploding, left with eyes wide shut to AI, owing to lack of proper understating of human behaviour and its unpredictability. Anyways, on the plus side…

…think of any level of positive upheaval that AI will cause.

Think maximum.

Thought?

Since we play it by constants, we’ll continue to thrive, maximum disruption and beyond.

Such is the power of constants, that we successfully harness.

Matrix Diaries

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Hey.

I think…

…you’ve pretty much understood…

…that we’re buyers in this whole mess.

I’d like you to add one more word to your understanding.

We’re…

…fearless…

…buyers.

We were not always fearless.

The human being is born with fear built in as a protective emotion.

During the process of rewiring, we wired this emotion out.

How does one do that?

Before I delve into it, wish to reiterate the we.

Who’s the we here?

Everyone who gets taught forward in this space and from this space, and then goes on to implement successfully, that’s the we. Why do such a thing? Gives me a kick. What’s a good life? A collection of meaningful things that give one a kick, implemented repeatedly.

Now imagine a matrix.

We are in the matrix.

Outside the matrix are all things that cause us fear.

Inside the matrix we implement our strategy without fear.

We have built systems that have automatically thrown out of the matrix all things that cause us fear against acting in the markets.

First we created a safety net. An emergency fund. Perhaps two. Out went fear of existence.

Starting with a small networth, we plunged into the markets. Luckily, we tasted failure fast, and lost it all, broken down, emergency fund to fall back on, young, enough energy and will power to bounce back. Now we had a model of how not to do it. We knew where we didn’t want to land up, and understood somewhat how not to do it. The experience of a blow-up and the knowledge of how not to do it made more fear exit the matrix, as we itched to get back into the game.

Slowly we built a system. Incorporated models. Saw what worked. What didn’t work for us exited. Model developed a slight edge. Tasted some wins. Confidence started to grow. As it grew, more and more fear exited.

Then came replication. Would the model work again? It did. Would it work bigger? Scaled up a bit. Working. Till not working. Fine-tuned. Working again. Knew we had something now. Came a black swan and its aftermath. Model excelled. Realized we were anti-fragile. Whatever was left of fear was now outside the matrix. We were tready for all out implementation.

And that’s where we are functioning from in this crisis.

If you say might last a year, no fear, we silently implement. We’re liquid because the model creates liquidity in good times. Two years? Still no fear. Liquidity might run out after 18 to 20 months, probably, but that’s the whole goal, to be fully invested, as per a model in which one has high conviction. Three years you say? We say still no fear.

The biggest money is made by…

…sitting…

…and we didn’t say this first. Someone you look up to did.

We’ve learn’t how to sit. Sitting is an integral part of the model.

While we sit, we do many constructive things. Since we’re investors, while we sit, we invest heavily…

…in OURSELVES.

Do the math.

Fool?

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I don’t mind.

What?

Being called that.

Why?

For me, it’s an indicator.

How?

When someone in my environment expresses that he / she considers me foolish, this acts for me like a guage.

Where?

In order formulation.

Which?

Good till traded orders.

Explain.

Ok. Let’s say someone considered my 787 GTT HDFC Bank entry foolish. With price having fallen to 745, and still not showing signs of stability, someone might consider me foolish for having entered ‘early’ at 787. I want this to happen. I want to sense this attitude in another person’s behaviour.

Then?

Simple. Formulate and enter next GTT for HDFC Bank at 690.

What’s the logic?

That’s just the way I use this indicator.

Position-sized small quantum?

Absolutely.

Considered bulk-entry at bottom?

What’s the bottom? Who claims to know the bottom?

499?

No idea. How do you know you’ll catch the bottom? What if you miss entry altogether?

What if I get full entry in lumpsum, at 499?

What if price stays below 400 for a month after that? Your lumpsum entry will hardwire you to your terminal, and it’s one month of sleepless nights, I can promise you that. Neurosis. Psychosis. Freeze. God knows how long it will be before you can take another rational decision.

And your staggered full entry with a higher buying average will not cause all these things?

That’s the whole point. It will not.

It will not? How?

Market psychology is counter-intuitive. When are you going to understand this one basic point? Going in, let’s say ten times, between 800 and 499, over three months, at every new entry, the nervous system forgets older price. It focuses on newer price, not even on buying average. It actively registers one small quantum entry at 499 as per this strategy, and forgets other entries above, at least forgets them well enough to suit the purpose. Bottomline – such a nervous system is poised to avoid neurosis, psychosis and the like.

You’re just making this up.

Try it out. This is what works for me towards full strategy implementation. I am able to successfully fool my nervous system into buying maximum units without setting it up to hurt itself, should the market fall more, and stay lower for longish periods. This is my win, and a cornerstone of my lowering the buying average strategy in high conviction stocks during crises. Tested successfully during CoViD. No more testing. Current crisis is about full implementation. Will keep this buying strategy on through the entire crisis, or till fully invested, whatever comes first.

Why put in everything?

This is money sidelined to go in. It’s not daily resources money, or college fund money, or family expenses money. It is investing money. It’s supposed to go in. What’s better for it than to go in low?

Where is the courage coming from?

High conviction is a state of mind. It’s a reflex. Over time and over many, many studies, observations, behaviour analyses etc., you develop it for a stock. Once you have high conviction in a stock, nothing should come in between you and full entry, if price allows.

Am still trying to decided whether you look foolish or intelligent?

Though I don’t care for your opinion, I don’t mind it either if you give it to me, for I will use the encounter as an indicator.

Is that what you’ve gravitated down to, using ridiculous and self-concocted indicators to navigate the markets?

Doing things which no one else has before sets me up for vindication no one else has gotten before. No more questions, do the math.

Miners

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Hey.

We’re miners.

We mine for…

…margin of safety.

Surprised?

As in, can one mine for…

…something abstract?

Sure, no biggie.

Ok, bear with me on this.

Entry quantum = shovel.

Wedge it in deep enough = Good Till Traded (GTT) Order = Poise.

Emotional sell most likely on open or on close = mined material falling into basket.

GTT executed = margin of safety mined successfully.

All the time?

No. In times like this, specifically, when there’s blood on the streets.

Isn’t margin of safety already available in times like this?

Yes it is. However, we want to mine for extra on top of what is available.

Like your yesterday’s experience with the HDFC Bank GTT hit well below trigger, a couple of seconds after open?

Exactly like that. Oh, there’s another add on.

Tell me.

We buy with a lag.

Meaning?

Let’s say something’s fallen big, and has come on our radar owing to levels broken.

With you. Then?

We let it fall for the whole session, setting up GTT only after the session, and placing GTT around 4 to 5% below close. Time and price lag.

Isn’t that way below?

That’s the whole point. An emotional sell will hit, and then price will stabilize.

What if no hit?

Possible. Good with that. What’s also possible is, there could be no hit for two or three sessions, and then there might result a soft execution. We’ve still mined the extra margin of safety, even though it’s taken us a few more sessions.

What was your experience with the recent HDFC bank buy?

GTT was set up on 2nd March, for 809, when price was at 887.

Just fishing in the air or what?

Didn’t want it at 887. Wanted it at 809. That’s all there is to it.

So, 78 points were mined, that’s almost 8.8%, wow!

Hold on. There was so much emotion in play, that scrip opened at 770, a massive 72 points below previous close, order triggered at 773 a second or two later, and was executed at 778 after some more seconds. So that’s about 12.3% mined. It took 17 days and 13 trading sessions. By the way, the extra 12.3% mined goes a very long way.

Explain.

In 25 years, at 15% per annum compounded, it compounds to 4 times plus the entire sum that’s gone in just now.

Tremendous!

Welcome to the world of compounding, and that of…

… mining.

Constants

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Waldermort…

…overplayed his hand.

Thought he had the nuts…

…and bet the farm.

Turns out…

…that the adversary’s hole cards…

…plus the flop, turn and river…

…are leading to a full house.

As opposed to Waldy’s…

…ordinary nut flush.

Waldy is oversmart and a half.

Backfires at times.

This one has backfired at the worst possible time.

Only one result.

Waldy loses…

…everything.

Reserve status.

Serious player status.

Reputation, if there was any.

Loyalty, which was abundant from former allies, but is now…

…not even zero, but minus.

What more can one lose?

Whatever one can. It’s lost.

When this is over, a new methodology of doing everything business and financial will have emerged.

Meanwhile, a few constants remain.

There are areas in the world, where there is growth.

And will be, for the next 25 years.

Like India.

Semblance of stability?

Yes.

Integrity?

Yes.

Win-win attitude?

Yes.

Loyalty?

Yes.

Balance?

Yes.

Clout?

Yes.

Consumption.

Yes.

Period.

Buy India during this fall.

As long as the fall lasts. One year. Two years. Three years. No one knows.

What one also doesn’t know is whether India will give this buying opportunity again.

So, buy India.

Even if it means that you get fully invested during current fall.

That’ll be just great.

Hot-Iron Action

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Cockiness, …

…over-confidence in oneself, …

…under-estimation of adversaries, …

… rule the world as if king forever, no matter what, …

… irrespective of domestic and international horrors committed, …

… when an entity exhibits such characteristics, …

… implosion is not far away.

Right. Entity implodes.

Now what?

You’ll get value. Buy it.

Use a small entry quantum.

Buy repeatedly. As value deepens.

Buy as much as you can, so that your buying average gets lower and lower. Needless to say you are buying high-conviction underlyings. Ideally, you are then fully invested during the ensuing mayhem and before some kind of normalcy resumes.

However, when there’s blood on the streets, it’s very difficult to buy. Fear rules. Everyone you know is advising you different things. Your own pants are threatening to slip. One of the best independent indicators to green-signal buying is when every square inch of your body and mind squirms at the thought of buying. Can you teach yourself top buy during such times?

It doesn’t come automatically. We are not born with it. We have to rewire. We need to see such times, more than once, watch others do it right, and learn. Going against the crowd needs courage and self-belief. Comes with time.

How does one identify contrarian times?

At such times, close people will have a world full of advice to offer. It doesn’t matter if one has been doing something for multiple decades, they ‘know’ it better and will ‘teach’ one how to do it properly. If one can recognize such moments, one knows that contrarian times prevail. Why such behaviour? People around us become enthused. Perhaps owing to ‘developments’, the ‘this time it’s different snare’, or owing to some mania that has caught their fancy, or something or the other that has deranged rational thinking. You need to recognize those times when such derangements prevail.

Like now.

And this will continue. Am sensing a huge derangement. Noticing large irrationalities in thinking. Lots of advice flowing in. Noted. This is the time. Identified. Big chunk done.

Fine.

Now, we act.

No second-guessing once identification is done.

We remain active till there’s time to act.

What if…

…after the mid-term election in the US there’s no opportunity to invest in value for a while? Longish while?

Might as well do so when value is available.

Right. Let’s go.

Banana Trajectory

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Growth …

… is a non-linear entity.

Especially…

… high growth.

Amongst many things, …

… one point needs …

… pointing out.

Between periods of high growth…

… anything can happen.

The levels of what can happen are, amongst other correlations, directly proportionate to the number of similarities between an economy in question and the functioning of a proper banana republic.

Freedom of speech can be suppressed.

Parallel economies can thrive.

Extortion and blackmail can rule.

Genocide.

Landgrab.

Terrorism.

People buyouts.

Apathy.

Dysfunctionality.

And then there’s high growth again, perhaps soon, if the economy gets its act together despite its rulers, and perhaps accelerated, if the rulers come to their senses and return back to being peace, growth and democracy loving .

Without getting into what kind of a republic we live in, for lack of a better phrase, and with a very small use of one’s imagination, one could venture to suggest that our own path of growth could resemble that of a banana trajectory.

The banana in this title doesn’t have much to do with the curvature of the fruit.

Much rather, it’s about the economy to banana republic correlation.

Might I suggest that our economy’s banana behaviour is mostly mild. Then, rarely, it gets intense. Normal growth returns. Then comes high growth. Periods of very high growth are rare, but there too.

Overall I’m happy with my and in my republic.

Sometimes, its banana behaviour beats me up.

Yeah, every ten years or so, there’s a big hit.

No one likes getting hurt.

I do remember to stand up and continue fighting, …

… because it is in this very republic, that I can make my 15% p.a.c.

On the conservative side, that is. Perhaps I can make more.

I don’t get that in any other economy.

You see, occasional banana behaviour is good news for a long term contrarian.

Banananomics lead to blunders, and temporary downfalls, with all indices falling big.

Which is where we have the guts to buy, and big.

Why?

We know we are on a high growth trajectory with intermittent banana behaviour.

A very simple formula suggests itself.

Buy big during reactions to banana behaviour.

Take principle out after spurts of high growth.

Sit tight on underlying in profit, perhaps for life.

A high growth trajectory with intermittent banana behaviour will give you many such cycles in your lifetime.

One stands to make multiple times the ten-yearly hits.

Upon recognising this recurring pattern, one can even fine-tune and enhance loss-attenuation.

🙂

This is Why Your Blockbuster Gain Story is going to Happen

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You’re learning to sit. 

You buy with margin of safety. 

You buy in small quanta,…

…and that’s why you’re always liquid,…

…to avail any opportunity that arises. 

Yeah, there’s nothing impeding your liquidity…

…because you’ve kept yourself virus-free, i.e. debt-free. 

You only buy quality…

…that’s going to be around for a long, long while,…

…because you don’t sell for a long, long while. 

You don’t listen to what the grapevine is saying…

…because of the conviction and strength of your own research and opinion.

Yes, you regularly go against the crowd. 

You either buy into debt-free-ness, or into managable debt that spurts growth. 

Your input into the market doesn’t affect your daily life, leaving you tension-free to address your non-market world and thrive in it,…

…and that is why,…

…for all the above reasons,…

…your blockbuster gain story is going to happen,…

…and what’s more,…

…you are also enjoying the ride leading up to it. 

Wealth-Generators often go Contrarian

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You knew that too, right? 

Sure. 

Going contrarian is a buzz-phrase. 

We hear it again and again…

… till we begin to start thinking… 

… that we know what it means. 

Well, try going contrarian. 

Yeah, try actually doing it. 

You’ll see what I mean. 

It’s real hard. 

Going against the crowd takes all the strength you might have… 

… and then some. 

Most humans aren’t able to go contrarian. 

Most humans aren’t wealthy. 

When there’s blood on the streets, there’s no telling how much more there will be. 

Under such conditions, the contrarian investor lets go of his or her hard-earned money into an investment, knowing perfectly well that the Street might even value the investment tomorrow at a huge discount to today’s price.

That’s ok too, says he or she.

Why?

Because homework’s been done.

Underlying is strong.

Debt-free.

Management is stellar.

Balance-sheet is robust.

Projections are paramount.

That the world is pricing the investment wrongly is a problem with its vision.

Underlying is not going under. With above credentials, this alone matters.

Times change. Vision of the majority changes. Investor makes a killing. Cashes out some, principal and what have you. Leaves lots of free-standing shares… forever… or till parameters change.

Wealth-generators repeat this behaviour-pattern many times in their lives.

They’re not afraid of going against the grain.

They know otherwise.

Also, the money they use has been freed up.

Its being out of action for a long time is not going to change their lives even a bit.

They will have the last laugh.

Wealth is the reward of going contrarian. 

What about Daddy Cool? 

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Boney M sang this blockbuster hit in the ’70s.

I’m sure you’ve heard it, because it’s still the rage. 

he’s crazy like a fool – what about daddy cool? 

Who’s Daddy Cool? 

You tell me. 

Is it you, in a cool cucumber moment, slow to respond to stimulus, devoid of anger, master of your situation in a kinda non-bossy, non-micro-managing (cool) way? 

And what of Mr. Hyde’s Dr. Jekyll nature? 

We’re talking about your “like a fool” moment.

Just for your information, winning behaviour is often termed foolish by the crowd. 

Contrarian investing is one such example. 

Successful derivative trading is another. 

To cap it, let’s not even talk about private equity in real-estate. 

Did someone mention high-yield structured-debt? 

There are many examples of “foolish” behaviour. 

These same examples earn very well. 

So… 

… how do we do it? 

We maintain our cool. 

We keep all basics going, as they are. 

With a small portion of our surplus, we take calculated risks, in a controlled environment. 

Sure, these risks will appear foolish to someone on the outside. 

However, our controlled environment has installed riders for our safety. 

A balance-sheet might be stressed, but not stressed enough for bankruptcy. 

A lock-in might be ultra-short. 

A stop-loss might be in place. 

Collateral might be up to 4x.

There might be a highly reputed Trustee in between. 

What have you.

Have your Daddy Cool fool-moments. 

Take some calculated risks with small portions of your surplus. 

These should give your portfolios an extra-boost. 

The Age of Shocks

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We are in it. 

Bang in the middle. 

There’s some shock almost everyday. 

Even Yellen’s words have shock effects. 

Had anyone even heard of Yellen a few years ago?

Natural disasters, terrorism, scams, frauds, upheaval…

…well, you have no choice…

…but to incorporate them into your market strategy. 

If you don’t, well, God bless you and God help you. 

So, where do we stand. 

Definitely towards value. 

Growth – hmmm, we’ll take growth after we take value, in a stock picked up for value. 

We’re not following any growth strategies. 

Let growth happen as a matter of course. 

We’re not entering something which is in the middle of growth. 

We’re entering it before its growth potential is apparent to everyone. 

Why?

Stocks, whose growth is apparent to everyone, are very susceptible indeed, should they show even one bad quarter. They can be cut down to half their size even if one ruddy quarter goes out of line. That’s the problem in the age of shocks. 

What about stocks with growth potential which are in the doldrums?

Well, bad quarters are the norm for them, temporarily. One more bad quarter is not going to make much of a difference. It will make a small but digestible difference. Nowhere near the effect the bad quarter will have on a growth stock. 

Yes, the way to go is contrarian. 

We’re going contrarian with our eyes open. 

We’re not picking the dogs of the Dow, or the rats of the Sensex.

We’re picking gems people are throwing into the dustbin. 

What’s this dustbin?

We’ve made this dustbin. 

In cyber-space. 

It scans what people throw away. 

It couples 4-7 algorithms, makes them into a mother-algorithm, and scans. 

Today, one doesn’t need to know how to programme to achieve this. 

One just puts the algorithms together on any leading equity website. 

One concocts one’s dustbin. 

One looks in the dustbin everyday. 

What have people thrown away?

Anything that looks valuable?

No?

Let’s move on. 

Yes?

Lovely. Lets take a closer look. Let’s take this stock that’s looking valuable, and let’s put it through the works. 

Let’s fully analyze the stock. 

We do our analysis. 

Takes us a day or two. 

It’s yes or no time. 

No?

Move on. 

Yes?

Look at the charts. Pick up accordingly, in the next day or two. 

Quantum?

Small. 

So on and so forth.