Weekend Reflections 10.06.2018
During Advani's Rath Yatra in the early 90's , the Nation was curious to know whether he would be arrested by the UP Government and alerts were sounded in various towns of UP. People feared the worst about UP. Surprise surprise , Advani was arrested when the Rath Yatra was passing through Bihar by the Bihar Government . No one was prepared for this turn of events. How is this relevant to today's markets ??. Today, everyone is concentrating on the Equity Markets and wondering what will happen next. However , the debt markets are larger and affect almost all parts of our lives. We have more money in debt markets ( Debentures , Bank FDs , SB account etc) and connected to debt markets ( Car, Housing Educational Loan ) and specific products like OD, TOD s etc. We have investments in the actual debt market through MFs like Debt funds , Balanced Funds etc. WE SHOULD FOCUS NOW ONLY ON THE DEBT MARK.
For people observing the Govt 10 Year yield , Friday was a landmark day since the 10 Y yield crossed 8 % Intra day. Remember it was 6.3 % just 10 months ago. Which means the yield has shot up TWENTY SEVEN PERCENT . This is huge by any standard. Bond portfolios of Institutions as well as Individuals would have gone for a TOSS.
And this is not the end, probably its just the end of the beginning since the RBI pushed back the yields below 8 at the close of the day. This will continue to rear its head and we don't know where it will stop. WE SHOULD BE ALERT on this more than ever before. Interest rates on everything will RISE. While the retired may be happy to see that the FD rates will now rise , all others who deal in debt are likely to be dealt with a DEATH BLOW.
I have been pointing out for several months , when yields were about to touch 7 % that the interest rate scenario was changing and one should OPT OUT OF ALL BALANCED AND DEBT FUNDS and hopefully people have followed my logic. Its still NOT TOO LATE .
Happy and thoughtful Sunday
Weekend Reflections : 17th June 2017
I started investing in stocks in 1983, while still in college. The first Bull Run I experienced was in 1985 during Rajiv Gandhi's time, but I had not studied history of the markets and hence sold out early.
The second time I thought I was better prepared. In 1992 I was scared of my wits when the market started rising irrationally. However, having seen '85, I held on and saw my NAV spiraling upwards, When I could no longer believe that it was God's intention to make me Rich, I sold out and that day almost coincided with the peak. When the Harshad Scam broke out I thought God was really on my side and keeping some money aside for my first Car : A Maruti 800, I ploughed back the rest of the money a 1000 points below the peak. But I saw a slow downward grind of the market which fell another 1500 points over the next year, thereby completely wiping out all my gains.
In the 1999-00 Dotcom Bull run , I was more careful and I advised clients to put a trailing stop loss ( ie. protecting their profits in case market reverses) and was able to save a few of my client's profits, since most of them did not heed my advice.Same was the case in 2007-08 Bull Run. Again most of the clients called me a Perma Bear and refused to listen.
Now we are in the midst of another crazy bull run with all the analysts in the media goading investors to buy blindly. The valuations today are higher than we have ever seen for so many mid caps and micro caps. Stock Markets are irrational for more time than we can imagine.
In such times, while enjoying the Bull Run and the positive effect it has on one's portfolios, it would be prudent to keep trailing stop losses and protect one's profits. Hope some one else other than me learns from my past mistakes.
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