Happy Ending

“So finally this is the happy ending we were looking for!” said Swami, in an especially exuberant mood today, as we met for coffee this weekend. Swami’s smile knew no bounds today. “I wonder what took them so long!” he exclaimed.

My broker friend, Jigneshbhai, obviously realized that the reason for Swami’s impish glee was that the Rajya Sabha had finally cleared the constitutional amendment needed to bring in the ‘one country, one tax’ GST regime, and that too unanimously.

And today, even my broker friend, was happy. “Indeed it is a momentous step, a happy one” he remarked making Swami smile. “Politics was why it took so long” he added.

Swami looked at me almost as if to say that, for once, your broker friend has agreed with me. And he seemed to agree with Jigneshbhai too. But today Swami was in a happy, almost filmy, mood.

“You are right. But all sides did ‘Give Some Take Some’ I guess” Swami said, coming up with a new full form of GST.

“But you have to give it to our PM. Kabhi kabhi jeetne ke liye kuch haarna bhi padta hai. Aur haarkar jeetne waale ko baazigar kehte hai!” Swami was in a truly jubilant mood today, which had turned filmy for some reason.

Jigneshbhai gave a surprised smile on hearing the dialogue from Swami.

“But it is the start, not the end,” he proclaimed. “It is not the happy ending, it is the muhurat shot!”

Even my broker friend wasn’t to be left behind in this trading of filmy dialogues today. “The producers and the cast are all set, but the entire film has to be shot still.” They were now speaking only in filmy metaphors.

But he was right, I thought. I had read in the papers that this thing they had done in parliament of clearing a constitutional amendment was only an enabling start.

The states had to now bring their own GST law, and at least 15 states needed to pass it. And then separate GST bills for central and state taxes had to be brought back to parliament, and finally a GST council of finance ministers had to set the tax rate. All this just to get the law started on paper.

Later of course, the bureaucracy – also consisting of former, presumably disgruntled, central excise, octroi and state tax departments, who would then have nothing to do and little avenue for under the table money – had to implement it with utmost sincerity – using a new IT system that was being built.

When all of this is done, it would probably be a happy ending.

But Swami had the habit of celebrating early. And he wasn’t ready to take doses of my broker friend’s realism today.

“So are you saying this is not going to happen?” he questioned, now with the smile gone away.

“Chances are bright that the film will be completed” Jigneshbhai remarked, still in filmy-speak. “But we will have to wait for that to see if it is a happy ending. You know how various stars develop tantrums or sometimes the producer runs out of money!” My broker friend seemed to have taken the filmy thing really seriously today.

But Swami had already declared it – ‘The GST film’ so to speak – a hit. So he had a frown on his face on hearing this from Jigneshbhai. But he was not the one whose enthusiasm could be cowed down today.

Kehte hain agar kisi cheez ko dil se chaho toh poori kayanath use tumse milane ki koshish me lag jaati hai” he finally remarked continuing his SRK dialogue sessions. “Everyone wants this so badly now, that it is going to happen. So don’t worry, this will be done!” Swami continued with a splendid show of confidence.

Well, it was true that there was reason to think of the possibilities of the future, given the leap of faith that our politicians seemed to have taken two days back. But it was equally true that, with time, those tenuous equations change, and there could be obstacles that could put GST on the back-burner again.

So while I was thinking about what was right – Swami’s unbridled happiness, or my broker friend’s cautious hope – the wealthy old man in the sprawling bungalow, who always spoke cryptically walked up to our table.

It looked like the filmy virus of our conversations that he had been listening to, had caught him as well, as he left us wondering with a dialogue of his own.

“Hamari filmon ki tarah hamaari zindagi mein bhi, end tak sab kuch theek hi ho jaata hai.. Happies Ending.. Aur agar theek na ho toh woh the end nahi..Picture abhi baaki hai mere dost!”

Double-Edged Sword

“It’s a bit like Karma. Every entry on the debit side has an entry on the credit side. There cannot be a single absolute good or bad” said the old man in the sprawling bungalow sitting next to our table while Jigneshbhai, Swami and I were enjoying our coffee.

Today while we were silent, the old man was speaking. I wasn’t quite sure what he was referring to, but he seemed to react to Swami’s exuberance on the markets reaching new 52-week highs this past week. Swami was in a great mood today, and had nothing to complain as he thought about how well his investments were doing. When he has nothing to complain, generally he has nothing to say.

“Everything is so good. Markets are going up, hitting new highs, and they say this is just the start” Swami had said, a few minutes earlier when we were starting our coffee.

The old man in the sprawling bungalow was probably reacting to that, I thought.

“There is nothing like only good” he asserted.

My broker friend Jigneshbhai was listening attentively. When the old man spoke, all of us generally listened. But today Swami’s exuberance got ahead of him.

“How can you say that? Brexit is behind us, the GST bill is going to be passed, earnings have come up well, and the markets are going up. How can all of that be anything but good?” he protested.

Jigneshbhai and I waited but the old man in the sprawling bungalow did not say anything.

Swami directed his gaze at my broker friend, expecting an answer. There was a silence.

Finally knowing well that the old man in the sprawling bungalow doesn’t speak much and whenever he does, it is quite cryptic, Jigneshbhai thought that it might be time for him to speak.

“Well – for every buyer there is a seller. And both of them think they are right. Both of them think what they are doing is good for them.”

My broker friend seemed to agree with the old man. But Swami clearly wasn’t in agreement. And I was confused, trying to digest what both of them were saying.

“But isn’t good earnings good?” Swami revolted.

My broker friend smiled. And after brief thought replied. “Yes – but the buyer of shares is buying because earnings are good, and the seller of the same shares is selling because of the same reason – earnings are good. And both of them think they are right.”

Swami was still not convinced. And I was wondering what’s the truth in this circular argument of my broker friend.

“This is all philosophy. Markets are up and that is good. Nothing else is right. How can there be two sides to that?” Swami finally concluded with a tone of confidence.

My broker friend continued with the same logic that he had earlier.

“Sure – but the buyer of shares is buying because markets are up, and the seller is selling because of the same reason – the markets are up. And both of them think they are right.”

“So what? Who is right? And isn’t it all good?” asked Swami, by now quite impatient, and finally added, with an uneasy tinge of uncertainty “And finally what should I do?”

Despite the tacit explanations of my broker friend, Swami wasn’t convinced. All he knew was markets were up and he felt good about it. My broker friend had tried to explain the duality of markets.

“That’s the thing about economics and finance. No right or wrong, no good or bad in absolute sense.”

But clearly the message of balance was lost in Swami’s exuberance. But it had, nevertheless, raised some doubts in our mind on what’s good and what to do anyway.

And while Swami and I were musing about it, the old man in the sprawling bungalow got up and prepared to leave. And he left us with some food for thought.

“There is no good or bad. Markets are always a double-edged sword. For every greed buying, there is a fear selling. For every greed selling, there is a fear buying. You just need to go beyond both, so that you are never on the edge.”

 

The Madness of Crowds

Either I am a completely outdated, antique piece who doesn’t get it, or I may be a very calm composed person. I tend to give myself a positive spin with a benefit of doubt thinking it is the latter, but I suspect the former is perhaps closer to the truth.

The last week has seen me pose a dumb look on two seemingly obvious phenomena that I supposedly should have been lapping up and going crazy about. Both of them made me feel like that guy in the ‘Yeh PSPO nahi jaanta’ advertisement with the sheepish smile.

The first happened earlier this week when everyone was talking about a new game called Pokémon GO and I made the mistake of asking a colleague ‘is that a new cartoon series?’ And the second one, perhaps an even bigger faux pas yesterday, specially in Bangalore, was to ask a friend ‘What is this Kabali?’ I probably might have narrowly escaped a thrashing from the onlooking crowd.

I find myself in numerous such situations of late. Perhaps such situations are happening more often in this new age of social and mobile and trending or whatever – again my own benefit of doubt to myself.

Mark Twain said that a ‘Classic′ is a book which people praise and don’t read. In that era, it probably took a long time after a book is released for it to achieve this kind of status. A few of Twain’s own books achieved that kind of status.

It seems that this period has been drastically cut of late. And it applies to not just books, but probably to movies, new products, games, apps, mobile phones, electronic devices, and what have you. And it looks like most of them become classics before they are released. Things people praise, talk about but haven’t yet read or seen – because they are not yet released. And I am left wondering what to do every time such a phenomenon turns up with the ‘Yeh PSPO nahin jaanta’ sheepish look.

This phenomenon was probably started by the iPhone mania in the US. For apps, maybe Angry Birds started it. Harry Potter movies used to see these delusions before release. And lately every new mobile phone release is ‘highly awaited’. So the stampede surrounding Kabali is hardly a surprise.

madnessofcrowds

In the 1841 book, Extraordinary Popular Delusions and the Madness of Crowds, Charles MacKay wrote of the crowd psychology that drive numerous “National Delusions,” “Peculiar Follies,” and “Psychological Delusions.”

“We find that whole communities suddenly fix their minds upon one object, and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first.”

It does look like these delusions are more frequent of late – perhaps because there are so many objects attracting the attention of these minds (and their pockets) with easy channels of communication.

Many of these delusions are fleeting of course, and in all honesty, quite entertaining. All of them have the common result of getting some money out of your pocket. Some high, some low. A movie ticket here, or a book there, or some paid app, or at best a higher sum for a new electronic device maybe. So the harm is limited somewhat – for all the mania, it won’t leave a big hole in your pocket before, or even if it turns bad, a lasting one on your mind after.

But in the financial markets, these delusions are dime-a-dozen, and can be quite harmful. In fact, much of the day-to-day markets run on some delusion or the other – big or small. Many of them can also last quite long pulling even the most patient and experienced hands in. And with Love in the air (as in my last post), there are lots of new money-dwindling devices (like IPOs, new fund offers, expensive stocks, research reports, technical tips, stories of riches, business news, what have you!) waiting for your mind to get fixated on them. That’s where the madness of crowds can be not just entertaining, but positively harmful as well.

In such delusions, a dissenter from the crowd can look foolish, and despite all the patience, can eventually end up joining in for the fear of missing out. It is only later that one can learn whether one was sane or stupid. It is better to miss out on such madness of crowds – due to being outdated, lazy or composed, or some other reason.

It is worthwhile to remember what Charles Mackay rightly wrote in 1841.

“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one.”

Now let me go get my ticket for Kabali.

Love Hate Aur Dhoka

“Indians have a love hate relationship with stock markets” said the CEO of the Bombay Stock Exchange a few months back. And he goes on to add “We have a market that is not safe for investors to a large extent.” Further he adds “Only 2% of India i.e. 20-25 Million people invest in shares or mutual funds.”

My broker friend was reading out from a magazine as we met for our coffee this weekend. Swami and I were wondering what he was getting at. But he continued, this time from another article.

“SIP inflows are now about 3000 crore monthly as against 2500 crore six months back.” “FII inflows till date are about 22000 crores this year against 60000 crores last year.”

Swami and I were thinking that our broker friend will now tell us what he was getting at. But he continued again. This time with even more exclamation.

“Quess IPO was oversubscribed 147 times, L&T Infotech IPO was oversubscribed 12 times, Thyrocare was oversubscribed 62 times, and Ujjivan was oversubscribed 41 times. And I am sure there are more to come.”

Finally he looked up at us, smiled and said, “Looks like we are falling in love again.”

Swami and I looked at each other kind of wondering “What’s love got to do with it?”

“The hate of the past few years is gone. The love was cooking, now it seems it is served.”

Swami and I still confused. Love, Hate, Cooking and Investing. We just weren’t getting it.

Finally Swami had just one question “So?” Our confused state of mind was amply clear to our broker friend from the question itself. He finally obliged with some explanation.

“Well – it does look like there is increased participation in the markets from individual investors now. Which is great. But I hope it is not out of love.”

We were finally getting some of what Jigneshbhai was trying to say.

The quotes he was reading from did seem to indicate that individual investors were putting in money in the markets faster and in greater amounts than earlier. More money in SIPs, more money in IPOs, and lesser impact of foreigners’ money seemed to suggest that.

As we were musing over the apprehensions of our broker friend, he continued speaking.

“Because even if you love the markets, it won’t love you back. This kind of love can quickly turn into hate with the slightest mishap.”

That got Swami and I thinking about our broker friend’s skepticism.

The old man in the sprawling bungalow who was listening to our conversation walked over to our table. He always spoke cryptically, and this time was no different, albeit a bit clearer.

“Don’t love the markets. If there’s no love, there’s no hate. And if there’s no hate, there’s no dhokha. Go by your long-term plan, love it and stick to it, so that there is no love, hate or dhokha with the markets.”

Nothing is Impossible

“What’s up? Where have you been?” asked Swami, when we finally met after a long gap over coffee last weekend. It was indeed a long time since we had met our broker friend Jigneshbhai. “So many things have happened, and you have disappeared!” Swami repeated while sipping his coffee.

Our broker friend had a sly smile as he looked up from his coffee at Swami and I. “Indeed, the more things change, the more they remain the same” he said in typical nonchalant style.

“How can you say that?” Swami revolted as usual, waiting for our broker friend to react. But all he did was keep sipping his coffee. So Swami continued.

“So many things have happened in the past few months. The Fed increased rates, Modi government finished two years, our RBI governor left, Europe got bombed so many times, Britain exited the EU – so many things, and you say they remain the same?” Swami clearly had gone through the newspapers of the past six months in detail as he listed the significant events of 2016.

Jigneshbhai and I were quite pleasantly surprised by Swami’s listing. But he wasn’t done.

“And then PSU banks wrote off so much debt, Oil prices and gold prices rose again, BJP won in the state elections, a good monsoon is happening, new policies and a cabinet expansion were announced, and Trump may actually become US president!! So much has happened, we had so much to do, and you have disappeared for the past few months!”

That was indeed quite a list of happenings, I thought. I looked at my broker friend, and he was smiling too. I wasn’t sure whether it was because of the scale of events itself, or because Swami actually managed to list them out. But beyond the smile, he wasn’t speaking much as usual. After a brief silence waiting, Swami finally spoke again.

“We have missed doing the right things in the past six months. So what should we do now? Are we on the cusp of a new bull market? Is it time to get into the thick of action?” he asked excitedly, waiting for our broker friend to answer.

people-say-nothings-impossible-but-i-do-nothing-everyday-winnie-the-pooh1-600x222

After a couple more sips of coffee, finally Jigneshbhai said “I don’t know. Ideally do nothing.”

That left Swami dumbstruck. He looked at me as if to ask “what’s wrong with your broker friend?” How can he say ‘do nothing’? Isn’t it time to act? And how does he – supposedly an expert – say I don’t know? Does he really ‘not know’? Maybe he doesn’t want to share his secrets. Those were the lines of Swami’s thoughts.

I was equally surprised. Both of us looked at our broker friend waiting for him to elaborate. After waiting in silence for a few sips of coffee, Jigneshbhai seemed to have sensed our discomfort at his answer and finally relented.

“That’s the reason I disappeared. I had nothing new to say”, he said with a sense of resignation. “Honestly, why say anything if you have nothing to say? And moreover, in response to all of those events you listed, my answer was still the same. Stay Put and Do nothing. Nothing to say and nothing to do. How can I say ‘nothing to say, stay put and do nothing’ in different ways?”

Swami and I looked at each other in mute surprise on hearing Jigneshbhai’s explanation. Swami was probably thinking whether our broker friend had ‘lost his edge’. He was probably wondering what’s the point in meeting for these coffee’s if the advice from our broker friend essentially remains the same – nothing to say, stay put, do nothing. If the advice doesn’t change, probably change the advisor. Maybe that’s what Swami was thinking.

Just as we were sitting in silence (actually doing nothing!), the old man in the sprawling bungalow (who always spoke cryptically) was listening to our brief exchange from the adjoining table, and came over to our table. As we finished our coffee, he spoke and left Swami and me in further confusion, and our broker friend Jigneshbhai with a grin on his face.

“Your broker friend has told you the secret. It is (doing) nothing. Nothing is impossible, but I do nothing every day!”

A Plan for a Punch and a Bitten Ear

“What should we do now?” asked Swami, as my broker friend Jigneshbhai sipped his coffee when we had our first meet of the New Year this weekend.

“Now that markets are back to their levels before our PM Modi came in, all my long term investment plans seem to be back to square one. So what’s the plan now?” Swami was unusually less aggressive today with my broker friend, specially given that markets were down so much, almost pleading for this attention.

As usual, Jigneshbhai kept reading – this time he was reading a sports magazine. Looking up at me and Swami, he smiled and read out. “When Mike Tyson was asked by a reporter whether he was worried about Evander Holyfield and his fight plan he answered; “Everyone has a plan until they get punched in the mouth.”

tyson

“And the market is punching us in the mouth” Swami cried out.

“It is almost 20% down from the top of last year, and they are giving all kinds of reasons from Oil to China to Europe to whatever. So what’s the plan now?” he continued with his question.

I watched as my broker friend kept listening while he sipped his coffee.

“Those are all punches that the market is giving you. You can avoid them or get out of the way only for some time. Eventually they will get you” said Jigneshbhai non-chalantly.

Swami was in an irritable mood. Falling markets have this effect on him. Earlier he used to get angry. This time he did not seem angry, but still looked dismayed, as if he was helpless. And here my broker friend wasn’t even pretending to offer any comfort or solace.

“All that is fine – punches and all. But people are saying it is like 2008 again. That’s not a punch, it’s a knockout!” Swami responded in dismay, on the one hand worried in thought if that happens, but on the other hand, almost happy with himself that he had spoken in Jigneshbhai’s language.

My broker friend was also surprised and looked up in amusement.

Almost sensing that he had got Jigneshbhai’s attention due to his metaphor, Swami repeated his question, “So is it going to be a knockout? What’s the plan then?” this time with a mischievous twinkle in his eye.

“I have no idea what’s in store” insisted Jigneshbhai, and then also said “But you better have a plan.” After this brief talk, he got back to his nonchalance, his coffee and his magazine.

In fact, he read out from his sports article. He said “You should read what Tyson said a few years later when asked why he said that.”

Jigneshbhai continued reading from his sports article.

“People were asking me [before a fight], ‘What’s going to happen?,’ ” Tyson said. “They were talking about his style. ‘He’s going to give you a lot of lateral movement. He’s going to move, he’s going to dance. He’s going to do this, do that.’ I said, “Everybody has a plan until they get hit. Then, like a rat, they stop in fear and freeze.’ ”

No sureshot answers irritate Swami no end. “Why does your friend change the topic?” he asked me in dismay. I had no clue and looked back trying to figure out what’s next.

Just as Swami was almost ‘getting ready to get angry’, I noticed that the wealthy man in the sprawling bungalow had come in and was sitting on the table next to us listening.

As we finished our coffee, the wealthy man walked to me and Swami, took the sports magazine from Jigneshbhai, and left us with some words on what looked like boxing, but left us wondering nevertheless.

“Whether it is a knockout is up to you. But if you have a planned for a few punches on your mouth and keep going even as you may end up with an unplanned bitten ear, who knows – you could still end up winning the fight – twice – like Holyfield eventually did!”

सोने पे सुहागा?

“As if all the fixed deposits and mutual funds and shares and gold funds weren’t enough, I also have to think about this gold deposits now” complained Swami, as we met this weekend over our customary cup of coffee. He looked at my broker friend Jigneshbhai, and asked “So should I invest in this new gold deposit scheme?”

My broker friend silently looked up from his coffee at Swami and said, “It is worth considering, but it depends.”

“Why can’t you just answer Yes or No?” asked Swami in a irritated tone. And then he looked at me and as if I was responsible for it, he asked me, “Why doesn’t your friend give straight answers and talk like this to me?”

I just waited for Jigneshbhai to speak, as I was equally eager to figure out what to do about this new gold scheme.

Swami and I waited, half expecting our broker friend to speak up. But Jigneshbhai kept sipping his coffee. After a couple of minutes, Swami lost his patience as usual and insisted, “So what? Should I go for it or not?”

Finally my broker friend spoke. “If you have black money in gold, you won’t even look at it.”

Of course, we don’t, otherwise we won’t be here, thought Swami and I. Perhaps our broker friend realized that, when we looked blankly at him, as if saying “Not applicable.”

He then continued. “If you or your wife like jewellery, you won’t look at it. Because you are going to lose it.”

On hearing that, Swami’s interest was piqued. “There is so much jewellery at home. It is not always used anyway. I hope I can convince my wife to part with some of it.”

Jigneshbhai gave a wry smile on hearing that. Can we really part with that jewellery? Swami and I were thinking.

Our broker friend continued smiling while we were thinking.

Swami finally confessed that maybe he could part with some of his jewellery. “But I am going to need the gold a few years later. Maybe for my daughter’s wedding, maybe for my retirement.”

Jigneshbhai stayed silent for a while when he heard that.

As we waited for further inputs, he finally said with some semblance of clarity. “Well, gold is honestly not the best way to plan for that, but if you insist on buying or holding gold, then the gold deposit scheme is worth considering.”

That made Swami slightly happy but still unclear. The ‘worth considering’ was still there.

Meanwhile our broker friend now started opening up a bit. He started explaining the details.

“Well, for the gold deposit scheme, they take your gold at today’s rate, and you get it back after a few years at the gold rate then, plus they give you interest for that period. Plus they have said no income tax on interest, and no capital gains tax on finishing the deposit.”

While we were absorbing what our broker friend had said, he continued speaking.

“And for the gold bond scheme, you put fresh money into a gold bond at today’s rate – like a gold mutual fund. But in addition to tracking gold rate, they also pay you interest. But in this case, interest and capital gains is taxable”

Jigneshbhai finished talking and went back to his last few sips of coffee, while Swami and I were trying to understand what he said. We looked at each other, and the deposit scheme did seem like a decent way to get interest on unused gold lying with us. And gold bonds did seem like a decent way to invest in gold.

But Swami had his doubts as always, and finally asked, “But the interest is only 2.75% or 2.5% or something? Why not 7-8% like FD in banks? Why should I go for it then?”

Our broker friend got visibly irritated at that question, and shot back. “Well – because it is a gold deposit, not a fixed deposit. You are getting your gold back at the end of it – that’s why. And I didn’t say go for it – all I said is if you want to invest in gold, then among jewellery and gold funds, the deposits and bonds are worth considering.”

The ‘worth considering’ came back, and so did Swami’s discomfort. He liked being clearly told yes or no, and my broker friend didn’t provide that, and insisted that he decide.

Just then, my old, rich neighbour, the wealthy man in the sprawling bungalow, who had been listening to our conversation for a while, walked up to our table. He always spoke cryptically and only Jigneshbhai seemed to understand him. When he spoke, he often left Jigneshbhai smiling, and Swami and I scratching our heads.

Today too, he had a twinkle in his eye and a smile on his face. As we paid the bill and were leaving after finishing our coffee, he left us wondering when he said,

“Cakes, especially in excess quantity, aren’t good for health. But sometimes you can have your cake and eat it too, and this cake of gold also has icing on it. The gold deposits and bond schemes are indeed सोने पे सुहागा.”

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