All It Takes Is A Day

There are many types of people who make a capital market. Most come here to create wealth-a pretty long and scary excercise. Yet, the finfluencers, the media, social groups and what not will mostly espouse the investment cause. Why then run 24X7 TV channels or business newspapers? Are these meant to aid the process of wealth creation or make you as an investor react to all and every bit of non sense that may come from financial participants, judiciary and market regulators?

I am different

Somewhere in the late 1970s I dabbled into this huge, fascinating world of investing. I pitched my savings (all of my pocket money) into the divestment by Firestone. From the day I applied for the Firestone OFS, I knew I was sunk. This was the era of MNC forced dilution of ownership by Mrs G, post introduction of the FERA in 1975. Entities like Otis, Philips, Colagte, Castrol, Nestle and what not would fetch oversubscriptions of 100X. On the other hand, Firestone was barely subscribed. My bad. I went for a stock, a company that was headed towards the doldrums. I applied for the Raymond convertibles, the Voltas convertibles-all this while giving the go to the entrance exams for my CA admissions. I was wrong, I got both the stocks and yet they too went nowhere. For decades Raymond and Voltas traded around Rs 100-200. Building wealth even two decades after holding a bunch of stocks seemed impossible. It seemed a futile effort.

As they say

When covid struck, the GOI was quick to shutter down all liquor vends. One of the memes that erupted in those days was, " Khol de, Sab Chai nahin peete". I have deliberately taken out the name of the person responsible for the closure. Anyway, there is a trade-off-wait endlessly for that stroke of luck that will make wealth for you or do something else. I believe I am an excellent short-seller. My purpose is only to substantiate my income. I have no family to pass on stuff and I do not have the pleasure of being born into a wealthy family. I live for the day, for the moment. There no roads to travel, no forests to cross and no dreams to fulfill. I simply get the thrill of my life having outfoxed the 99 per cent of the community that believes and espouses wealth creation through long term, almost indefinite holding of Equities.

I would rather have the money today. Pay full tax and be emotionally unattached to the shenanigans of the government, regulators, promoters, hnis and wealthy investors all belonging to an esoteric collection of insiders who have never been caught by regulators and perhaps never would be.

The Dynamics

We are told market equilibrium is a result of the actions of buyers and sellers. On a given day, one side would take sway. Which side, I ask, would you be rather on? IMHO I would like to be on the winning side, no matter the market goes up or down. To achieve this aim people do technicals, find a trade set-up, have option stratgies and what not. The net result of so much effort is often Zero. You just one bad trade or a bad day to wipe out everything.

Almost 4 decades on

Everything is cyclical in markets. If you have figured out that all you need is a source of income to live and not wealth to leave behind you have understood the core concept of Equity markets. Now you can proceed accordingly and pace yourself.

Way back in 1987, I used for the then small cap Hero Motocorp. For four years we struggled with the stock quoting below Rs 10 (FV Rs 10 each). The market cap was below Rs 300 crore. After 37 years, that saw the demise of the original two who set up the entity and exit of Honda, the market cap of Hero Moto is Rs 110,000 crore. A super figure. Remember the aim? It was income and not wealth. In these 37 years I have lost count of how may times the stock lost close to 50 per cent of it's market cap. I had seen HM in those years visit our office, meet the management and take big positions. By the hundreds people would throng the small confines of Basant Lok to have a glimpse of Harshad.

The Year 2001, start of 2002

I was in New York that December-New Year of 2001 end and 2002 beginning when I read online the great HM had passed away in prison. That convinced me further on, that there was no necessity of a buy and hold strategy. Life was too complex and too short to be wasted on instruments which have daily mood swings. Make your call, take the money and carry on with your life.

More cycles followed

After the 1992 peak of BSE, I saw the 1998-2000 cycle, which was followed by 3 years of depression and then another peak in 2008 followed by another collapse. The UPA I and II came and went, Kargil happened, so many assassinations, droughts, wars, hostile actions in and out of the country, and so many lower circuits on the BSE/NSE by then. Each government post 2000 has had their own fair share of lower circuits exchange wide. Such moves, especially the prolonged ones are hugely detrimental to mental health of the participants. In one day, all gains of 20-30 years go. More so, if you happen to own a once feted stock like Jet, DHFL, Bhushan Steel or Yes Bank. Anyone of them can destroy your family, and the life you have built. The cocoon inside which your human microcosm feels safe and protected.

The present

I hear daily stories about Renewables, Green Hydrogen, EVs, power, automobiles, hybrids, real estate and so on. The financiers like IREDA, PFC, REC and what not. Some of these entities have just regained the market cap they had 10 years ago, maybe more. Where does your wealth go in such situations? Is that feeling of safety just a mirage or is there something more to it.

I see a reckless 130X PE multiple on most MNC power stocks, some like GEPIL and Schneider have no financial record even after 2-3 decades of existence. Yet, you would find biased people tell, how great India is and how much power and power innovation we would need. They forget all projects have timelines. What is announced today will not be set up for another 5 years. Why way such premium multiples on earnings so far ahead into the future? More importantly, the GOI is now on a debt that equals 90 per cent of GDP with more and more freebies being thrown at the restive, poor of the country-some say as much as 90 per cent of the 1.4 bn people. Where do you think, the financiers will borrow to feed the dreams that only exist in the minds of the participants in the capital markets.

Bring in the nay sayers

Look at today. For no defined reasons the market was down 800 points in early trade. One guy called it a party, another called it not a euphoria but a stampede. How would you know which side are these guys on? Short, cash or long? Believe my words, live for the moment, live for the day, learn to Short. I know you would be on the side of the 1 per cent of people who do this for a living. But all it takes is just one day.

Leave Wealth Creation to the chosen ones, and if I may say so, to the Gods.