Tuesday, January 22, 2008

Humpty Dumpty

The recent performance of equity markets worldwide brings back memories of the nursery rhyme--Humpty Dumpty Sat on a Wall.

It goes something like this

Humpty Dumpty sat on a wall,
Humpty Dumpty had a great fall,
All the King's horses and all the King's men,
Couldn't put Humpty back together again.

Now just substitute select words with the following:

Humpty Dumpty = Capital Markets
King = Fed
His Horses = CEOs, CIOs, CxO's
His Men = Bernanke
Wall = Wall Street

How much ever our CEOs, CIOs and CxO's try... I cannot see them putting back this Humpty Dumpty (capital markets) back together again in the next 3-4 years (which is a lifetime in the financial arena).

Today the Indian Humpty Dumpty fell around 875 points. Yesterday it fell by 1408 or so. Mr. Chidambaram called a protocol meeting (finally) and told the retail investors not to worry.

Many people would advise this is the right time to buy, hence the market shall rise again. I feel the market might dip more based on more US recession news/data. Who knows--I may be wrong, I am not a Warren Buffet or a Harry Potter.

When I had landed in B'bay in mid-april '07, Sensex was trading at a "paltry" 13,000 pts. Didn't pay much attention to the news ticker which runs at the bottom of the TV screen as I was more interested in the Abhi-Aish wedding bash. How time flies.... My ex-VP has been investing in the markets ever since it was in its mid-2,000's way back in the early 1990's.

The main question here is... can our markets sustain the 20k+ limit? Are our stocks overvalued? Is Reliance the culprit? Is our market still immature? Can I turn back time to when my ex-VP had invested his first salary in the markets?

I throw the floor open to you.


baidik said...

Hi Mate,

Very imaginative take on the substitution!

Anyways, that's been the bane of the retail investor the world over. When the markets go up: retail guys wait for a correction; when the markets stay calm: the retail guys open F.D's; when the market falls: the retail huys vidicate their stand of not venturing into the markets!

I used to follow a similar pattern, until I borrowd the concept of a 'going concern' and juxtaposed it with my theory that utimately for both the bulls and bears to make money the markets just have to go up. The key is to not fall in love with ur holdings and exit them after u've met ur time target.

Yes, that the Fed has been retained by Wall Street is now official. Just see how they tango when he announces a cut later this week. If only it was as simple as altering a few basis points.

Keep it going :)

Sushmita said...

No comments. Please write something for us lesser mortals!