HAVING GROWN MORE GREY HAIR ON MY SCALP…..

People learn from life’s experiences and apply them to the stock markets and to their investments. I have all the time learnt from the stock markets and applied the experiences to life itself.

I still remember the last general elections quite vividly. The NDA seemed to be in an unassailable position. Not because of its own strengths but by default because of others’ weaknesses. There were those opinion polls carried out by experienced psephologists. There was the “Shining India” campaign. There was the economy doing rather well for itself and cheery balloons everywhere in the stock markets. There was the charisma of Atal Behari Vajpayee which in itself was quite significant. All opinion polls predicted reduced number of seats for the NDA but still gave it a comfortable lead to emerge as the party of governance. Even the exit polls predicted more or less the same. And there were my friends in the stock markets and outside it thinking the same conclusion and putting their money by their conclusion. And all the while I was thinking……

“So, Papa, what do you think? How many seats for NDA?” my daughter asks, knowing fully well my interest in politics. At that stage even she must have become interested owing to the heat and dust the Indian election always generates.

We are sitting in an out-of-town, open-air dining place and I am in a pleasant mood having imbibed 60 ml of the cardioprotective brownish liquid that I call rum. There is more pleasantness in the thought that in a short while I will be protecting my heart even more.

“120,” I say, raising the glass and enjoying myself at the splash I have made in her mind.

“120? 120? But even the opinion polls are giving almost double. You are joking, right?”

With my son it is different. If Papa has spoken, it must be the truth! He gives up more easily. My daughter is a kitten, she would fight.

“But why do you think 120?” whines my son not liking the prospect. He likes Vajpayee and would not want to see him lose.

“It’s not like that,” my daughter looks at her brother. “He is pulling our leg. Don’t you remember how he gets when he drinks?”

“I am not pulling your leg. I am serious. I think it will be 120, if that.”

I am serious. I remember all previous stock market crashes and all previous beginnings of the bull markets. I remember the suddenness of the busts and the hesitant beginnings of the upsurge. But I remember something else. I remember a phrase that is oft repeated in the stock markets (which nobody pays attention to) and which must have been crafted by a person with a gift of language. I also remember a more crudely put observation by my own stockbroker who does not have the gift of the language.

“All bear phases are prophesied in exultation and all bull markets live off pessimism,” is the phrase.

“When everyone thinks that this will happen, that will happen,” is how my stockbroker puts it.

“When everyone (or almost everyone) shares the same opinion, the opposite will happen,” is how this all translates in my brain.

Or, to put it mathematically, the load of an opinion increases in inverse proportion to the likelihood of it becoming a reality.

My entire estimate of the seats for NDA was based on the fact that practically everyone thought that they were coming back. So, I thought that would not happen.

I have applied that rule to almost everything in life and have found it to come true almost every time.

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My stockbroker is a bit philosophical. He goes even further and then he sounds absurd. However, I really do not know whether what he says is so absurd.

When there is a crash, people find reasons for the crash because everything must have a reason. The political situation is rotten and the stink has spread to the stock markets. The GDP is coming down and that is the reason for the crash. The major companies have come out with results below expectations and their weight has crushed the markets. The tap of reasons keeps spouting…..

My broker says, “There are no reasons at all for the markets to fall. They fall, that’s it. Reasons are excuses, justifications that people find after the fall. Ditto for the rise – justifications for something that would have happened anyway.”

We like to think of the reasons for the fall or rise as the causes of the action that follows. But if you believe my broker, the action or the effect is all that is there. The causes are secondary, the causes are excuses, and the causes come after the effect!

Absurd?

I thought so when he ventilated his thoughts for the first time. Having grown more grey hair on my scalp since then, I am not so sure. And my broker? Well, he has a head full of just grey.