This was one hell of a week. We went from worrying about inflation in the US to prophecies of WW III in no time. Also, if we look it on a monthly basis, everyone went from worrying about Covid to inflation to elections in India to all out war. This, my friends, is the pitch on which long term investing is played.
As all of us are now making geopolitical predictions, here’s my two cents. Russia is winning, hands down. If you ignore the propoganda on Twitter, ask yourself this- the Ukranians citizens in Kyiv are posting their live videos, including how they’re on guard against approaching Russians, their comedian President is making Instagram reels saying he’s enemy number 1, and if the Russians really wanted to bomb everyone and kill this man, how difficult would it have been! I mean, you don’t even need an army to do that. Israelis have taken out men and of all things secret nuclear reactors deep inside Syria, Iraq, Iran and all other enemy territories without deploying even the army. Their sleuths did this. So for all those saying Russians miscalculated/ repulsed etc, need to wake up and smell the coffee.
For someone who hoodwinked the entire West and went inside Ukraine, how difficult would it have been to bomb civilians like what US did to Japan in WWII and finish it off in half an hour? The endgame is to bring Ukraine down to knees, prop up a friendly regime and go home. The only losers in this game is US and NATO. Donald Trump must be a very happy man right now! Also, this is a stark reminder to all of us why you need a strong India, an aatmnirbhar India and a no nonsense administration. It’s so soothing that the Ukrainians who basically always opposed us at each opportunity are now begging us to mediate on their behalf. As an Indian, I’m a very proud man!
Let’s come back to the markets. After an unbelievable drop on Thursday, we had a superb Friday and if nothing special happens tonight and tomorrow, we’re set to see a massive plus day on Monday, going by how US closed on Friday. I must say the drop took each one of us by surprise but I did what I always do as reflex- buy, buy and buy. Let’s see how and why:
On Thursday, we opened about two percents down and with the news of Russian attack. People predicted catostrophe and global destruction. They almost preempted a US led NATO invasion and that this was WWIII. Well, all you had to ask yourself was this- is the world really coming to an end! And to all of you, I have a simple talisman. When the two sides of the bet are: the world is coming to an end, we’re all going to die and two: this too shall pass, this is the easiest bet on offer. The world doesn’t end that easily. This is what Seth Klarman said in his famous video about 2008 global Financial Crisis: ” We didn’t think the word is ending, we couldn’t believe as to how people could think that the world is ending, The World Doesn’t End This Easily!”. This is a man who put close to $4 Billion in six weeks during September- October 2008 and is a legendary investor of the same league as Buffet.
So I didn’t know if this was bottom but from my Covid crash experience knew that the selling was unreasonable. People sold because they said companies with European exposure might suffer. Agreed to some extent. So I understand Tata Steel dropped and to a distant angle, Tata Motors sold off. However, on a day cash market turnover was probably highest ever, why did BSE drop 10%? Why did TCS drop whose almost all engineers are working from their respective homes in India? So this is what you must remember when the screen tells you something you would not be able to explain to a ten year old. I didn’t know if TaMo would collapse in Europe, which anyways is too far fetched but knew half my office is lining up to buy a Nexon. However, I was happy that atleast United Spirits held up as joy or sadness, who says no to Johny Walker.
The point I’m trying to make is that too much macro predictions will take you nowhere as you will be so worried that won’t be able to make any sensible decision. Whenever you face such a dilemma, take a deep breath and zoom out on life, look at it on a monthly or yearly chart and ask how many things market worried about and sold off actually happened. In January we sold off because of third wave, in Feb because of rising inflation in US and now this.
Here’s my takeaway- Be extremely optimistic of the India story. Foreigners have sold over 2.25 lakh crores in this FY alone( April to date) and our market is down hardly ten percent from top. This is when Nasdaq is down more than 20% and most US and global markets are down much more than us. The Indian retail is rising. Our SIP is over 11k crore monthly. The total AUM of Indian MF industry is hardly $500 Billion. This is when only 8 cr Indians have demat accounts. Imagine what will happen when 20cr Indians flock to buy stocks in years to come.
So as I said earlier, be proud of the fact that you’re witnessing a rising India, an India which is respected and will be a major super power in our lifetime. Stay Bullish on India, stay invested!
Life is all about Compounding! 