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Confessions of a Rally Misser

Today I sat back and read nearly all the stuff I’ve written for the last few months. It looks incredibly bearish – and I’m starting to feel like that too, a disbelieving bear.

Sometimes markets misbehave. I might still believe that the rally we are seeing is a bear market rally, but that’s just a label. It’s been big enough to have real money made, and I missed it. Perhaps I couldn’t invest, due to restrictions at the job (which I recently found out only apply to F&O – I can still buy stocks, so expect some investing going forward). Perhaps I didn’t care enough because my money, other than the few taxsaver funds I have, isn’t in the market. Perhaps there’s the overwhelming fear that the rally will be short lived because I refuse to believe the tape anymore. Perhaps I had the fear of joining the party too late.

But those are just excuses.

I missed the rally. That’s perhaps less than a cardinal sin nowadays, with everyone missing something or the other, but it’s a time to take myself to task. If I were trading, I would simply shoot myself; you can’t go on with theories when the real world is going somewhere else. Like Jesse Livermore (reportedly) said, “Markets are never wrong. Opinions are.”. And my opinion was wrong, even if it were to come about as right later than today. It’s judgement time, and the future doesn’t count.

A post I wrote two years ago:

My son’s taken to ghazals. He only sleeps when I play Jagjit Singh’s numbers, so I’ve been listening to a lot of them lately. So it struck a chord with me when I realised how some investors have completely missed this rally, calling the markets “overpriced” when it was 4500 Nifty/16,000 Sensex. How some stocks which were “hot” were labelled irrational and investors refused to buy them. How some commenters here were actually angry that their stocks had not even moved while the market scaled new highs. Sometimes, you miss things because you’re too focussed on “value”. In a Jagjit Singh number, quite aptly put:

Hoshwalon ko khabar kya, bekhudi kya cheez hai.

And when this all dies down – the crazy bull run, the madness to buy and sell, the
insanity goes away, another number applies:

Tum chale jaaoge to sochenge,
Hum ne kya khoya, Hum ne kya paaya.

I feel like the hoshwala : sobriety can be bad sometimes. The madness of this run feels exactly like what people seemed to be feeling then; that they missed the bus, that there’s a great story (hey, I believed it too), and that markets deserved to rise and keep rising. In the eye of the tornado it always looks calm, but you fear and cherish the turmoil outside. I believe we are in another tornado right now – except I’m watching this one with a binoculars and shaking my head in disbelief.

There may be a lot of value in stocks now – low p/es abound, even when you see indices reach heady zones. That is a useful longer term game.

Having said I’m wrong, would I change my mind about the rally? Well, momentum is momentum, so if you like roller coasters this is the place for you. Ride it and be ready to jump off when it’s over. Given I can invest in stocks, I need to figure out if the short term zone is ok for me (given I have no time to monitor or trade, I have to take a three-four month view) – and if it is, I will jump in too.

That things are good, markets are strong and “recovery” is imminent is no longer a question – it’s a foregone conclusion. What I believe is we won’t recover much; it’s like an American diamond, it looks like one, it feels like one but when you look deeper its not quite the real thing.

With an index P/E of 22, and a past two year growth of zilch, I am still suspicious. But, as I’ve realized, this has nothing to do with markets – they will do what they want, and I can only try to provide a context. Happy Investing!

  • Indian says:

    >Well finally you realizing that u have missed the rally and became too much bearish suspecting every thing to be a bear trap but not every year is same and this year I suppose is meant for killing hard-core bears like past year was for bulls irrespective of economy/market conditions. So, how far do you think this rally can go. I don't think we will go past 5500 on nifty this year in any case and I have observed that market mostly moves by anticipating the future rather than seeking present conditions.

  • Anonymous says:

    >Deepak, take it easy on yourself and IMHO one should suck it up and get over it and get back to refining one's methodology.

    Having a principled method (which serves as a check on one's opinions) I believe is important – whatever it might be and while recognizing that it will evolve over time.

    Anyway, hope you get back in the groove soon and look forward to many more interesting posts and tweets from you. Cheers!

  • Rama says:

    >hey DS, you are taking it too hard on yourself…we all commit mistakes…and well be rest assured people who have played this rally well, have also benefited from your blog in this time….If u rem, I had written to you at the start of the rally, that we are making higher highs and lower lows and the bear market is over…well in hindsight that seemed to be correct…anyhow…just one observation, you are following SOS, but have you noticed that markets over a long period of time always go up…which basically means that it would be 10 times more difficult to make money shorting rather than going long!!! Cheers and keep posting…

  • CA says:

    >Every one here seems to feel that it is time to jump into the markets. Anon talks about a principled method. Well here is my method

    With a P/E, P/B/ and Div yield values of 22.41, 3.91, 1.02 it does not seem like a good time for me to jump into the markets ( based on fundamentals ). But maybe I'm wrong. Well no regrets, its better to be safe than sorry.

  • Bob says:

    >Dear DS, I want to know something really different from this talk, if you could help me..
    Somewhere I have read in your blog that for taxation from capital gains on stocks, "FirstInFirstOut" is considered. What about intraday buys & sells if you already have the same scrip in your demat account? Also what about BTST stocks when they are already available in anybody's portfolio?
    Hope u got my doubt…

  • Anonymous says:

    >Deepak your honesty is so damn refreshing! And that's what sets your blog apart! More power to you man. Please stay the way you are, and if everyone once in a while you feel like a fool (i do and it's far more often than once in while) just take it easy!

    The way i see it, the only sustainable way to succeed is to develop a method to the madness and what's happened in the past is all good ingredients. Without a method you're dead! So take it easy and all the best! Keep the writings coming!

  • Deepak Shenoy says:

    >Thanks for all the kind comments, folks. Will go on, and am learning from the process and building the methodology.

    Bob: If you maintain separate portfolio accounts for short and long term (i.e. dn't mix teh two up) you should be good with declaring one set of profits (business income) for the trading and one set for long term gains. the IT dept needs to be convinced the books are separate.

  • Sajal says:


    Even I've missed this rally.

    I sometimes wonder if the blogosphere is too bearish? Zero Hedge, Mish, Aleph etc are perenially bearish.

  • Anonymous says:

    >Hey i read somewhere that internet as a whole is a bearish enviornment.

  • Gana says:

    very refreshing and honest post. I am in the same boat but I did not sell when it went down early this year and I am back to my level of Aug 2009. Please continue to post and provide knowledge 🙂


  • Gana says:

    another quick question on the taxation.
    If I have 100 Infy bought in Apr 1 2007, bought another 100 in Apr 1st 2008 and sell 100 in Apr 2nd 2009. How is my sell considered from 'long term capitial gain' and 'short term capital gain perspective ? Is it not 'first in first out'?

  • Anonymous says:

    >IT's ok things happen.. take it in the stride .;) i have been trading and sometime have missed out opportunities which is not possible..but trading with relaince money kinda helped me out.. so happy investing to u..