Tuesday, March 18, 2008

It Does Fluctuate, doesn't it?

“Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one”.
Charles Mackay, author of “Extraordinary Popular Delusions and the Madness of Crowds”

Bombay Addict makes some excellent points here. Since he’s asked nicely, as to what the markets have taught us from the recent mayhem, here’s my take on the same:

1) Re-read “The Money Game” by Adam Smith - If you haven’t read it, read it. If you have read it, re-read it. “If you don’t know who you are, then this is a very expensive place to find out”. Just this glittering nugget of wisdom is worth the price of the book. The market is not what you think it is – it does not know you, and has nothing to do with your hopes, ideas, dreams and fears.

2) As a thumb rule, when the paan-wala starts giving you stock tips it’s time to get out. I’m sure most lay folk, on the Indian bourses, managed to beat Bill Miller last year in total return generated, but there is a reason why Miller is still CEO of a multi-billion dollar investment house while your aunt is trying to hide her losses from your uncle which she incurred by following tips from her kitty party friend who got it from her hairdresser who is knows the vada-pav seller on the street where Rakesh Jhunjhunwala’s office is located.

3) It never is different. The reasons for all indiscriminate great bull runs are different, but they end with the same results – big, dumb banks going bust, other assorted corporate/broking house scandals and YOU left holding the bag and trying to convince your family that the kids can make do without food for a few days every now and then.

4) Life is shaped by Black Swans. A Black Swan, as defined by Nassim Taleb who has written a very well received book called just that, is an event that is an outlier, has huge impact and is explained, ex post facto, as predictable. Put simply – rationalizations, of hugely unexpected events, on hindsight are the first refuge of the Clueless. If you think you know where the market is headed, then you don’t know where it’s headed.

It’s easy to sound knowledgeable and cool when one isn’t at the receiving end of a broker statement awash in red. Perhaps that’s the biggest lesson – be as acutely self-aware when one has a seven figure amount invested in the market as when one has zero amount of money invested in it.

Saturday, March 15, 2008

Appointment Television

In many ways we are currently witnessing the golden age of American television (reality TV included – the concept of that, at least, is brilliant. No expensive actors, no expensive production and/or location costs and no headaches of storylines and script coherence. Of course, for most of us this is one of the signs that civilization is in decline). On Sunday last, one of the best TV series ever, “The Wire”, ended after 5 seasons on HBO. It’s not an exaggeration to say that it’s probably the best TV series ever – in terms of topicality, believability, acting and dramatic thrust. The first 2 attributes might not be apparent to someone without a basic awareness of the peculiar brand of American urban decay that is intimately linked with the underground drug economy that powers inner-city life (in this case, the city of Baltimore). But in different shapes and forms, these problems have been faced, or will be faced, by most major cities around the world. One of the things that makes “The Wire” great is that while showing on a premium cable channel, it actually built up a vast following amongst people who otherwise might not have cared for the characters that make up its cast. Maybe it’s the “train-wreck” mentality at work, maybe deep down viewers felt empathy, maybe it was just good old, old-fashioned storytelling (though story-telling of the highest caliber). Whatever the reason, while watching this series one felt that this was the work of somebody (David Simon, the creator and writer for many episodes) who had spent a lifetime preparing for this show’s 5 seasons.

HBO has redefined TV series. Along with their no ads policy on their TV shows, it just makes it almost impossible for one to watch regular television once one has got hooked onto these channels and/or their shows. The novelistic quality of the programming is a great stand-in (and I emphasize, its just a stand-in) for actually reading the Great Authors. With shows like “The Sopranos”, “Deadwood”, “Rome”, “Oz” (in its first 2 seasons), even “Curb Your Enthusiasm” and of course “The Wire” this has been television like you never imagined it could be. If that sounds like a promotional bit for HBO, then I blithely admit to it. Like B’bay Addict maintains, TV series, done right, gives the writer/director that much more space to really explore different subjects in depth, over a longer period of time and hence do more justice to his storyline than movie directors/movie scriptwriters. As its TV commercial says: “It’s not TV, it’s HBO”.