Over the past couple of weeks, it has become a recurring refrain from leading market participants that how they are pained from rising stock levels when our country is going through one of the worst pandemics in the history of mankind. They add that their heart pains to see stock markets being indifferent and insensitive to the sufferings of its fellow brethren and how it should fall as a mark of solidarity. Sounds reasonable, right! No. Let’s see why
I will first talk about why the markets rising or falling is independent of the Covid-19 cases and it’s aftermath and then I will address what I believe is sheer hypocrisy of these supposedly market gurus trying to act great. One, stocks rise and fall not because what is happening now, at this moment but what is likely to happen over a period of time in the near future. How near is that future and how much is in the price is basically the collective opinion of all market participants put together, including you and me. There is nothing called a Mr. Market who’s different from anything we collectively are. We are the market.
Now turn around and ask yourself this, markets fell worldwide by close to 40% when Covid-19 was an unknown entity. We had no vaccine, no masks, no acceptable behaviour, anything. So the world moved towards a collective shutdown and markets in its anticipation fell 40% globally. Remember, Indian markets made a bottom on March 23,2020 when it was not even day 1 of the first lockdown. That the lockdown will kill economy was in the price! So ask yourself this, how long do you think the second or the third wave is going to last when we have multiple vaccines and have already administered them to 17 crore Indians. So just because you see there is a crisis situation NOW, and you aren’t feeling good about it, you believe if the market doesn’t fall as much as you are depressed or your Twitter feed wants you to be, capitalism is broken. This is amateurish at best.
Tell me this, Tata Motors earns 80% of its revenue from global markets, mostly China and US-UK. And it is a fact that they either have fully recovered or are likely to do so in a short period. So just because you didn’t buy it at 60, and since it’s likely to do well and is at 320,you say the market is insensitive and capitalism is broken. Sour grapes, anyone?
I was sure in April 2020 that the market has made its bottom and was hundred percent invested on April 22,2020 ( there is atleast more than a friend of mine who knows this is true) and in the hindsight, I look like a genius. That’s a wrong conclusion to draw. A lot of people must have predicted the bottom correctly as the markets only rose since then. It is pretty simple, commonsensical actually. When everyone around you thinks that the world is coming to an end, this is the greatest buying oppertunity. I would quote from a video of Seth Klarman on YouTube which became my go to line during the last crash – “we don’t think the world is ending, we don’t know how people could think that the world is ending, the WORLD DOESN’T END THAT EASILY.”
Go back to 2009 when the market has made its bottom in March and not until July that the US Fed could figure out that the its economy was officially in recession. If you listen to economists, you will always end up miserable. I have a pretty low opinion of them. Please read newspaper reports predicting doomsday last year in April and the same guys went around town predicting double digit growth in India for FY 2022 a few months later. If we are likely to grow atleast more than what we did last year, don’t you think it’s legit that the companies contributing to that growth will report significantly better numbers. And stocks, mind you, aren’t piece of papers but tiny parts of the underlying businesses. The company does well, stocks do well, period.
Coming to the hypocrisy of some of our leading lights. If Zerodha founder is so worried about market’s insensitivity, why doesn’t he shut down his business for the timebeing as a sign of solidarity. It was interesting hearing Sameer Arora saying I just don’t feel like discussing stocks today publicly as people are dying, however,I still am fully invested and making money daily, privately. Nobody will mind if he says I will donate my profits for the month to help India. My point is, don’t just say things to get some brownie points from Twitter followers. You are not Mother Teresa so don’t pretend to be one.
Here’s my big call I am putting my money in- India is likely to experience a multi year bull market as this is the first time in 20 years that markets and economy have made a bottom simultaneously. This happened in the US in 1979 and what followed was the biggest bull run in its history. I am an India optimist, and I believe that once we overcome this transient problem, we will come out stronger and more resilient. In India, reforms happen only in crisis. Finally, we may see our health infrastructure getting revamped, even if we go through tremendous pain in the near term. So, don’t mix your mood swings with those of the market. Stay invested, this too shall pass.
Life is all about Compounding! 