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valueman
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 Topic: Lessons from January 2008: Udayan Mukherjee Posted: 22/Jan/2008 at 7:10pm |
Lessons from January 2008: Udayan Mukherjee
http://www.moneycontrol.com/india/news/udayans-comments/lessonsjanuary-2008-udayan-mukherjee/19/30/322449 CNBC-TV18's Executive Editor, Udayan Mukherjee - The thing about life is that one makes mistakes. Many mistakes were made in the second half of 2007 and those sins have to be washed away by blood, such is the way of financial markets. Some participants will go down under and never be able to get back to the market again but most will survive. The pain will linger for many months, maybe years but lessons have to be learnt. Every such debacle has lessons for us and the sooner we forget them the more we suffer.
The first lesson is not to let stock price performance become the sole reason for buying, a mistake which was made in abundance in the last 3 months. What couldn't be explained by fundamentals was credited to liquidity. The present lost all relevance as people chose to focus on the distant future, perhaps simply because the present could never justify those ticker prices; only a hazy dream of the future could. Traders and investors had no time for fundamental analysts, in many cases they were labelled "cribbing fools". Chartists became the most celebrated tribe on the street as only they could see and predict the one way run to glory for many of the hot stocks even as fundamental watchers cringed at valuations....till the music stopped. Don't get me wrong, charts do work in trending markets but once stock prices veer away completely from fundamental value, people need to get careful. But they never are. Now that the blinkers are off, people should ask themselves why stocks like RNRL, Ispat, RPL, Essar oil and Nagarjuna fertilisers have lost 50-70% of their value. It is simply because their stock prices had snapped all connection with underlying business fundamentals, earnings and value. Their stock prices became the only reasons for buying them which works for a while but not forever.
The other big lesson, one which should have been driven in earlier in May 2006, is the danger of overextending oneself in the futures market. The lure of stock futures is easy to understand. Put in some margin, take a big exposure on a fast moving stock, make a killing when prices shoot up. Repeat exercise. Just that people forgot that prices may also come down and at a pace which noone can even imagine, maybe their friendly stockbrokers forgot to tell them that part of the story. The result : unbridled speculation that ran into lakhs of crores, excesses that we are paying for today. Even this fall will not cure investors of their love for futures speculation but if at least some amount of caution is injected it would have been a worthwhile learning. Futures are not toys for amateurs, they are time bombs in the hands of inexpert and inexperienced traders, it's only a matter of when the fuse runs out.
The other learning which I hope will play out in the future, as it has in the past, is that it pays to be brave in times of panic such as these. If I was allowed to invest myself , which I am not, I would have no hesitation in deploying serious money into the market today, knowing fully well that prices may fall more tomorrow. And I would be standing there tomorrow to buy more of the same, till my money ran out. India is going to be a terrific stock market story for many years to come, even an intermediate bearish patch cannot shake that conviction of mine. At best, one will have to wait a bit for the returns to follow. That's alright. You are happy to put money in a bank FD and then wait for one full year to collect that measly 8%, aren't you? Then why does the stock market need to give you 20% every month? In the last one year, I haven't seen so many good stocks trade at such mouth watering levels. Forget trading, avoid the duds which were fuelled up by operators, just go out and buy those bluechips. They will deliver, even if there is a global market meltdown for a while, and if you are a bit patient you will be rewarded. But do remember January 2008, as history will repeat itself again in the future. Just that our memories tend to be too short and our greed too much.
NOTE: This column was written at 2pm, even as the markets were trading.
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To achieve satisfactory investment results is easier than most people realize ; to achieve superior results is harder than it looks .
Benjamin Graham.
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omshivaya
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 Posted: 22/Jan/2008 at 7:18pm |
Originally posted by valueman
comments/lessonsjanuary-2008-udayan-mukherjee/19/30/322449
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At last, one sensible thing he has said. Usually, by the end of his speeches one doesnt have an idea whether he is positive or negative on something. He usually keeps dilly-dallying between both ends till the finish.
Edited by omshivaya - 22/Jan/2008 at 7:18pm
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The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it
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gcpradhan1
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 Posted: 22/Jan/2008 at 7:24pm |
Originally posted by omshivaya
Originally posted by valueman
comments/lessonsjanuary-2008-udayan-mukherjee/19/30/322449
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At last, one sensible thing he has said. Usually, by the end of his speeches one doesnt have an idea whether he is positive or negative on something. He usually keeps dilly-dallying between both ends till the finish.
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Feeling same here ! I generally avoid seeing his videos
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Only buy something that you'd be perfectly happy to hold if the market shut down for 10 years - Buffet
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nitin_jagtap
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 Posted: 22/Jan/2008 at 7:24pm |
Thats true Om ..but one thing is whenever a fall of this magnitude takes place Udayan speaks sense ..but its after the fall and it doesnt really matter 
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Warm REgards
Nitin Jagtap
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investor
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 Posted: 22/Jan/2008 at 7:33pm |
I agree totally. Normally he just blabbers on and on, but the moment i read this piece today afternoon, it seemed a good writeup, even sent it to a few of my friends who were panicking last 2 days.
Originally posted by omshivaya
At last, one sensible thing he has said. Usually, by the end of his speeches one doesnt have an idea whether he is positive or negative on something. He usually keeps dilly-dallying between both ends till the finish. |
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The market is a place where people with money meet people with experience.
The people with experience get the money while people with money get experience!
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India_Bull
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 Posted: 22/Jan/2008 at 7:41pm |
That is a good one from Udayan,
And that is what I am doing since last week, buying the best stocks at the best prices which I dont think I would be able to see again.
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India_Bull forever Bull !
www.kapilcomedynights.com
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tigershark
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 Posted: 22/Jan/2008 at 7:55pm |
great speeches are written after an event has occured.poweroff udyan babu on!
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understanding both the power of compound return and the difficulty getting it is the heart and soul of understanding a lot of things
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SORUB
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 Posted: 22/Jan/2008 at 7:57pm |
very nice article...its looks very easy to do but controlling the emotion is the hard part!!!!!
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K.I.S.S(keep it simple silly) is the most easy management formula i ever came across!!! but it is very hard to follow!!!
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