Sunday, July 31, 2016

The value investor and technical trader in me both agree for a change......

Note: If you are not interested in the Indian stock market, feel free to directly head to the last paragraph. I think it pretty much applies to all markets and asset classes.

If, like me, you are an investor or trader in the Indian stock market, then you have had a pretty good last three-four months. All dips, and there haven't been many, are being bought and new 52 week highs seem to be pretty much the story of, well, everyday. As someone who is an alumnus of Class of 2008 of Stock Market University, I certainly do appreciate times like these. IPOs getting way oversubscribed, newbies giving advice about trading, pundits looking way into the future. These are magical times. I for one, am certainly not complaining. Normally this means conflicting times for the value/growth investor and technical/momentum investor in me. But not this time. Let's have a look at the NIFTY chart. 

You can see the new highs I talked about. But the MACD indicator is telling a different story as far as the last few weeks is concerned. New highs in the index are being accompanied by lower highs on MACD. Its a pretty decent negative divergence that we see developing. This could mean two things, (a) price consolidation (b) time consolidation. When would this happen? While a couple of years I would have tried to time exactly when this would happen, and you could find plenty of such posts in this blog, now, I don't care about exactly when it would happen. All I am interested in is the probability of it happening, and with each new high, the probability of either of the above two scenarios occurring increases.

What am I doing about it? Well, as a long term believer in India's growth story who has a dream of attaining financial independence, I don't have a choice but to be a long term investor in the equity markets. Most of my net worth is in it. But July was the first month in many years, that I have taken money out from the markets on a net basis. Times like this are a great opportunity for removing the weeds from your portfolio and that's exactly what I am doing. I am not too concerned about the index, if anything, I am enjoying the ride, but I am finding it harder and harder to allocate new money in the markets. So I am not going to force it. Taking some existing money off the table and holding on to the new money till the valuations reach a reasonable level is my strategy for the time being. If the markets continue going up, I am going to enjoy the ride. If the market correct from here, I am going to be ready to try and use the opportunity.

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Tuesday, July 12, 2016

The Poverty of the Rich

I am a firm believer of the fact that our entire moral compass is a function of the times, and thus be extension, the society that we live in. Continuing on the same lines, so many of our thoughts, ideas, dogmas, beliefs are just so ingrained in us, ever since our childhood, that we spend our lifetimes without even, forget questioning them but even thinking about them. I read something today morning that made me not only question a very simple concept, but also see it in a whole new light. The concept of poverty.

What is your definition of poverty dear readers? I will first share mine. Not having enough. Having very little. Struggling to make ends meet. Just few of the phrases that would come to my mind if you were to ask me to try and define poverty. And I am willing to bet that most, if not all, of you readers would have also come up with similar answers.

As the regular readers of this blog know, we have been visiting the works of Seneca in the recent months and trying to gain some financial wisdom. And it was while revisiting his works that I found myself changing my mindset about poverty. Seneca quotes Epicurus and states 

"Contended poverty is an honorable estate. Indeed, if it be contented, it is not poverty at all. It is not the man who has too little, but the man who craves more, that is poor."

I was so impressed by these lines, I found myself reading them again a couple of times. I would suggest you readers to also do the same. Being from a developing country, you come across poverty everyday and by no means, do I want to undermine their condition. But what these lines did was made me expand my definition of poverty. Hence, the title of the post. The Poverty of the Rich.

More on Seneca as applied to finance:

Tuesday, July 5, 2016

Indian stock market - Just some observations

This is what I have been observing about the markets in the past few days......

(1) Articles forecasting stuff like NIFTY i.e. the primary Indian stock market index will go to 13,000 in 2 years. For the uninformed it is at less than 8500 currently.

(2) Every IPO is getting way oversubscribed by retail investors. It is already being said that this could be the best year for IPOs since 2011.

(3) On various forums, people are starting posts talking about quitting their jobs and shifting to equity investing/trading as a full time career.

(4) Colleagues at work, who have always thought that equity markets are risky, are discussing stocks with each other. No, they are not asking about investing, just about how to trade stocks and how to invest in IPOs.

Not making any conclusions, just stating some facts. All the above observations and links are from this week only. Are you readers seeing anything similar in your equity markets?

Take care and good luck!

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