What is the rush to invest?

It is a tough time for anyone associated with the stock markets. One has to keep track of different businesses and sectors and the earnings of different companies. This however is not enough, one also has to know about the financial health of various banks and financial companies all over the globe and whether these will survive or go bust and if so when. The amount of discussion this generates would have beaten that of the Indian Premier League (IPL) cricket matches. I wonder whether the TRPs of CNBC and CNN have surpassed those of Star Plus and its Saas Bahu fare.

My grandmother has asked me whether the bank where she has her fixed deposits is ‘safe’ and others are asking whether the money market schemes and fixed maturity plans are safe. We live in an environment where if things were to continue the way they are going, each country will have only one bank. This bank would be owned by the government of the country. All the deposits would be guaranteed by the government. There would be no cross border investments or lending. Even within each country, businesses would be essentially self funded. Only secured loans would be available with a huge mark down on the security value. 

It is very easy to be pessimistic these days. There is hardly anything that is positive which is mentioned in the present day media reports. In the midst of all this, I have tried to list out some positive (and some not so positive things) that may happen in the days to come …………

  1. With all speculators tired of speculating in all sorts of things like wheat, corn, rice, sugar etc. there will finally be some of this stuff left to eat.
  2. With crude oil prices coming down, one won’t need to be a billionaire to fill up the petrol tank in one’s car. Plane ticket fare will again start approaching a second class A/c rail ticket fare. We will again use corn to make pop-corn or have bhutta rather than run our cars.
  3. All the land grabbers (construction companies) realise that there are no buyers for their properties at the price at which they are trying to sell. Further the potential buyers have cornered the land grabbers in a David vs. Goliath re-enactment by choking off the funding sources of the land grabbers. Liquidity is scarce and any mutual fund manager who buys debentures or commercial paper of construction companies is risking his job. The cost of one’s monthly EMI on the dream flat in Virar will be finally be lower than 80% of the monthly salary. With the way the US property prices are going, it may however be better to buy an apartment in Manhattan though.
  4. With inflation easing off and the consequent easing off of interest rates, the loan tenure of many ‘floating’ rate loans will come back to 20 years from the 60 years it had reached.
  5. The price of cinema tickets and pop-corn will be low enough that one will not mind wasting some money on a dud movie like Drona or Kidnap.
  6. One will not have to loot a bank to pay the hotel room rent. Hotel staff and taxi drivers will be more respectful of the local tourists as the foreign tourists would have all but disappeared.
  7. Fresh graduates lucky enough to get a job will turn up for work on the appointed day. They will not leave the job within a few weeks of joining. They will not expect a 30% pay hike every quarter to be retained.
  8. The pesky phone calls marketing credit cards / personal loans will come down as the banks will be busy collecting the previous loans that they have made. On the other hand they might start bothering you for deposits.
  9. Your wife (for male married readers of the blog if any) will start pestering you for jewellery. She will remind you that her necklace bought a couple of years back has appreciated while you need no reminding about the status of your stock investments.
  10. People again start discussing the prospects of Kolkatta Knight Riders vs. Rajasthan Royals instead of discussing whether Wachovia will merge with Citigroup or Wells Fargo.

Is there a sense of Deja Vu in all of this? It is there because this was the life we had just a couple of years back. Or in other words we would be seeing something called mean reversion. Mind you this is not something which will take decades to happen. This could happen in a matter of months.

I discuss stock market investing and some bottom up stock picking opportunities (not across the market – please note) with many clients. A lot of these clients tell me “What is the rush?” or “Why try to catch a falling knife?”. So far these people have turned right. Every week of delayed investing gives a discount of some 20%.

However this may not last forever. By the time the discussion moves to IPL, Saas Bahu serials and US Presidential elections or our general elections for that matter, most of the panic selling may be over and done with. One just has to wait for the global and local media to get some even more interesting topic to discuss in the headlines.