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Confessions of a Rally Misser

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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!

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