Here are the best things I read and thought about today –

• “Have the record number of investors in the stock market lost their minds?” asks The New Yorker, given how investors appear persuaded that the markets are headed for a “V”-shaped recovery even as history suggests a more complicated story –
  

  Stocks don’t always rebound in a “V” shape. During the last lengthy bear market, which accompanied the Great Recession, stocks prices started falling in September, 2007, and didn’t bottom out until February, 2009, seventeen months later. During the Great Depression, in the nineteen-thirties, the bear market lasted even longer. It began with the Wall Street crash of October, 1929, and lasted until the middle of 1932; by then, the market was down about eighty per cent from its pre-crash peak. Stocks didn’t hit new highs until the nineteen-fifties.

  [Read more…] about Are You Betting on a V-Shaped Recovery in Stock Market?

Heard of the Rashomon effect?

It is a term related to the unreliability of eyewitnesses. It describes a situation in which an event is given contradictory interpretations or descriptions by the individuals involved.

The effect is named after Akira Kurosawa’s 1950 film by the same name ― Rashomon. The story revolves around a murder described in four subjective, alternative, self-serving, and contradictory ways by four witnesses.

Each of the characters relate the incidents as a contradiction of the other, but they describe them in such a convincing manner that the audience tends to believe them all.

[Read more…] about The “Rashomon Filter” to Make Good Investment Decisions

Before I share the best things I am reading and thinking about today, here’s a request.

If you’ve been enjoying the newsletter, please share it with friends on WhatsApp, Twitter, or just send them here.

[Read more…] about Oh, EBITDAC!

Newspaper headline reads – “Modi’s ₹20 trillion package: What does it mean for stock markets?” Reminds me of a Hindi idiom – गाँव बसा नहीं लुटेरे पहले आ गए (Translation: The village is still not thriving, but the robbers have already come).

The first part of the article reads – “Indian equity markets rallied in early trade on Wednesday as the size of the economic stimulus package announced by Prime Minister Narendra Modi is significantly higher than the Street’s expectations.” Well, after everything ‘unexpected’ that has happened over the past few months with the economy, businesses, markets and in people’s livelihoods, we are still playing the expectations game? Ha!

[Read more…] about Is Value Investing Dead?

Based on requests from people loving my Saturday posts, I’m experimenting to be more regular in sharing stuff I’m reading and thinking about, in bits like pieces. Let me know if you find this exercise useful, so I may carry on.

[Read more…] about No One Has Any Idea

I have a confession. I have never been crazy about basketball. I played the game in school, but my body was too frail for the 625-gram ball to find any meaning in my life, like cricket and football did.

It was this lack of craziness that the only superstars from the game I ever knew of were Michael Jordan and Magic Johnson, also because the names sounded similar.

It was early this year that I first heard about another of the game’s legends, Kobe Bryant, and because of the news of his demise in an air crash. Then, the more I read and saw of this man just led me to feel an immense amount of respect for his basketball prowess and the efforts he made over the years to reach the pinnacle.

As I read about Bryant, I realized that life for him was not free of controversies. The worst came in 2003 when he, at the top of his career, was charged with sexual assault. He proclaimed himself innocent and the charges were later dropped. Bryant and his accuser reached a civil settlement, and his reputation was badly tainted.

[Read more…] about Mamba Mentality and How to Win at the Stock Investing Game

I started my career in the stock market in 2003, when I joined an equity research firm in Mumbai. It was purely an accident that I got into this field, as this was the only decent job that came to my MBA Finance class, among all others that required door-to-door selling of insurance and loan products. We were just coming out of the 2000 dot com crash led economic decline, and thus jobs were far and few in between.

My job, starting day one, was to study companies from the technology space, and write reports around what I understood. Annual reports were available online, but most companies made available only the latest 2-3 years’ reports. Not many companies were conducting investor meets or conference calls, and not many had functional investor relations department.

When I look back at those days, equity research was not such a well-known career and not many people outside finance really knew what investing in stock market was all about. Yes, we had passed through the Harshad Mehta and Ketan Parekh days, but stocks were mostly looked upon as a way to gamble instead of creating serious long-term wealth. Apart from television and newspapers, there were no other media to read about the stock market or investing and related ideas. Yes, Internet was available, but investing resources were not that much available or credible.

Despite this, that period around the start of 2000s was still modern compared to investors who came even earlier, some of whom I have had the privilege of interacting over the past few years.

[Read more…] about Once Upon a Time in the Stock Market