Source: Potential “black swans”
Brijesh Dalmia recommends “Riding The Roller Coaster” as a book to be read by IFAs to help in the profession.
Click on the link here.
Thank you Brijesh.
One of the ex-Presidents of the United States, Harry Truman is believed to have said, “The only thing new in the world is the history you do not know.”
I was reminded of this while talking to someone. When I asked a question, he responded stating that, such a thing has never happened. What he left unsaid was, ” … hence it is not going to happen”.
There are two important issues with such line of thinking.
- While talking about history, we often forget that what has not happened so far can still happen some time in future.
- The history one is talking about has limitations. It is either the recorded history or the one that one has read about or seen. This is what reminded of Harry Truman’s statement.
There is almost nothing new, except that part of history that we have not read. This is especially true in things involving human nature and human mind. Some things do not change. These include our basic instincts and emotions.
Read as much as possible about the history.
Investment is closely related to how one behaves rather than which is the best investment option or whether the timing is correct. If human emotions have not changed over the millennia, it makes life easy – just read.
This is exactly the purpose why I read many books on investment history and wrote “Riding The Roller Coaster – Lessons from financial markets we repeatedly forget”.
Source: Understanding the roller coaster
Read the above post and compare it to what Charles Dow had to say: “Each cycle is the peculiar product of a particular moment in economic and political history, but in Dow’s view the force behind each go-round was the same: human nature.“
Enjoy the roller coaster!
Man is a pattern seeking animal. We see patterns where none may exist. We have seen Ganesh idol in the clouds and we have seen India map on highways between trees.
Those are fine, so long as our lives are not affected. However, when one starts putting serious money while looking at patterns, one may be in for a very big surprise.
Take for example, the recent successful IPO and a blockbuster listing of Avenue Supermart – the D-Mart company.
The success of this IPO brought out some pretty interesting observations from people:
- What is common between R K Damani, Rakesh Jhunjhunwala and Nimesh Shah? There wives’ names are “Rekha”. So now you know what to do to become wealthy.
- The most successful people wear the same clothes to office daily – e.g., Steve Jobs, Mark Zuckerberg, R K Damani. So you know what is required to be successful.
Now, in both the cases, someone has picked up a trait common to some of the successful people (some and not all) and jumped to an easy conclusion.
It was exactly this kind of thinking that led droves of investors to buy any company with “Technology, or “Software”, or “Infosys” in the name during the tech boom. It was exactly this kind of thinking that people biought into emerging markets between 2003-08.
History repeats – it is just that the players change, but many things don’t – human behaviour being one such thing.
“Riding The Roller Coaster – Lessons from financial market cycles we repeatedly forget” is a book that is full of many such examples.
“… the problem was not that no one cared about intrinsic value. Rather, by the late nineties it seemed that few even believed in the concept.” From the book “Bull” by Maggie Mahar
A classical sign of a raging bull, when the old valuation theories are thrown out of the window and new justifications are being presented – and these are justifications of the current situation only.
Read the chapter “On Valuation” for further details …
Sensex at 31,000 and Nifty above 9,500 – what should you buy?
In these times, the best investment would be to buy “Riding The Roller Coaster – Lessons from financial market cycles we repeatedly forget” and read it.