“IPL is 100 percent fixed and I am only aware of one owner who is directly involved in betting (Vijay Mallya). Mallya is himself involved in betting, he earns 100-200 crores in IPL.”
These were the statements from actor Vindu Dara Singh who was caught in the 2013 IPL (Indian Premier League) spot-fixing scandal.
Singh’s comments aren’t something most of us don’t know of this cricket tournament (and others) that has been mired under betting and fixing controversies ever since its first edition in 2008.
But as die-hard cricket fans, we have come to take fixing as an integral part of the game.
“After all,” my friend, who loves watching these matches in stadium, tells me, “sport has been fixed through the ages – athletes dope, they cheat, they dive and try to fool the referee/umpire all the time… they try and eke out every little advantage they can. It is an undeniable truth.”
“Yeah, it’s an undeniable truth,” I say, “…and thus the cricket lover must beware that what he may be watching is not a game played on the field, but one that’s played in the room full of bettors and fixers.”
Now, if you are still reading this, you may be wondering why I am talking about the IPL and its fixing.
Well, I want to lead you to another kind of betting and fixing that’s going on in a different world that’s far from cricket and sports. And the person who pays a heavy fine for falling for this betting and fixing is…YOU.
Yes, you!
Welcome the EPL!
Here, EPL does not stand for the English Premier League soccer tournament.
It stands for “Earnings Projections League”, and the fixers and bettors here are the anchors and experts that appear daily on business channels and papers to spout out their next corporate earnings or EPS projections. 🙂
Now the EPL seems to have reached its Super-Six stage as is made clear by the things I am hearing and reading these days, especially after the formation of a new government at the Centre.
There have been “upward revisions” in “forward earnings” of not just companies left, right, and centre, even the Sensex earnings and thus the index levels are being revised upwards on a daily basis.
So, the scammers who scammed you with their earnings projections and constant upward revisions in the heydays of 2007-08 seem to have gotten back in the business – the business of revising earnings to match the rise in stock prices!
That’s reverse engineering, isn’t it?
In a rational world, people would try to assess where the stock prices would go given a certain change in earnings.
But this world’s isn’t rational, you see, and here people are trying to assess where the earnings will go given a certain change in stock prices.
Here is some proof from a table shared by Mr. Ajit Dayal in a recent edition of his newsletter, The Honest Truth…
Table Source: Equitymaster
You can see from the table above how analysts have increased their Sensex earnings estimates for Dec. 2014 and Dec. 2015 by 17.5% and 15.3% respectively, all in a span of four months.
And these are “consensus” estimates! You will find people who are going to the extremes and playing the EPL as if we are already living in the golden period of the Indian economy and businesses.
So it’s normal to read headlines like…
- Indian markets at the cusp of a long-term bull run
- India gearing up for a strong bull market
- We’re at the beginning of a long-term bull run
- This is the mother of all bull markets
- You can stop worrying now. Stock market crash is not happening anytime soon
Investing is NOT an Adventure Sport
You see, I am not a pessimist and don’t see a bad future for the Indian stock market. Also, I do not find it wrong when people expect better times in the future.
But what I hate is when people, who have proven time and again that they have no skills in making predictions (especially about the future) appear again and again to fool you with their latest predictions and projections.
I hate it when people who fooled you, the small investor, get away from any punishment for their past mistakes and are rewarded for making new ones.
As Mr. Dayal writes in his newsletter – “Buyer Beware: you are dealing with a bunch of intellectually dishonest fraudsters.”
Yes, “intellectually dishonest fraudsters” is the right term for people who are all set to dupe you again with their intellectually-sounding but dishonest advice – after all, their incentives depend on such advice.
So, the more they advice and the more you fall for it, the more will they earn – business channel anchors, analysts, all of them!
Keep Playing, but Mind the Bouncers
I have been asked by many people whether they should stop investing now given the euphoria all around, or whether they should ride the tide.
My advice always has been, and always will be, to stick to basic rules of investing.
Investing, unlike bungee jumping and scuba diving, isn’t an adventure sport. It’s a like a cricket test match.
You miss 100% of the shots you don’t take, so getting to the sidelines is not a profitable plan. Staying in the game always and playing it with patience has been, and always will be, the way to profit.
But just watch out for the bouncers coming at you from all directions, and duck when necessary.
Most bowlers – read, stock market experts – out there are playing an unfair bodyline game, and you may get hurt if you aren’t wearing the safety guards.
Hi Vishal,
I read your other articles too. Seems like you don’t like business channels at all (I am not a die hard fan of these channels too). Also, all of them are currently yelling that the market is at the start of a bull run. Let’s keep them aside.
But even Mr. Rakesh Jhunjhunwala has said that we are at the start of mother of bull markets a couple of times on the business channels. Now, as Mr. Jhunjhunwala is most successful Indian value investor that we know, what is your view on his say?
Thanks Vishal ! In the context of cricket, ‘you’ remind us of a third umpire.