Where are the Yachts

We human being are always in a state of flux. Many of us are what George Soros once said about opinions – Strong opinions, weakly held and some of us are also those who have Weak opinions but strongly held. We constantly keep changing our view of the outside world depending not on the signals that came from outside but from noise that diverts our attention from the core to the crust where we really wonder as to how we got here in the first place. Many a time, we do not even wonder since we believe that we have held this view from so long. Of course evidences are strongly to the contrary with there being heaps of material available on how we believe in something that we may not have believed in just the other day not due to any major change in the approach but due to the fact that we were convinced that our path was wrong and their logic was superior.

 Unlike most of the lower animal kingdom, we do not like to live in an island of our own with our own thoughts making up for all we know and care. We like to hook up with persons who seem to have similar interests to us and that one reason in itself has led to a resounding amount of new innovations in the world of academics and laboratories. This did not happen because they believed in what the books wrote but happened because they were able to rise above the ordinary and showcase how things can be done differently or maybe even how the process that is followed is lousy and is not worth the effort that has been put into it.

Before the advent of the Internet, socializing with similar likes was tough since one does not carry a board placing on record all that interests him. Clubs were born of the need for such socializing among people who believed or liked or were involved in some activity. So, a Golf club was the place to go if you wanted to meet Golfers and a Stock Exchange was a place where you went to meet other folks who invested in markets and with whom you could have lively interactions to understand their process and their list of likes and dislikes.

But that was still a very small world with a huge limitation on how many you knew and how many cared to share their views / thoughts with the rest of the folks. But the Internet in one swipe has changed all that with one being able to converse and communicate with persons in countries which one may never have known existed before. After all, Internet is a world without boundaries where freedom of the speech is evident in the very real sense as to what that freedom means.  It’s hence no wonder that autocratic countries try every trick in the book to limit the ability of their citizens to freely communicate. How the hell are they supposed to govern if citizens became enlightened and started posing questions for which answers were either difficult or worse, they had no answer to shield themselves from.

 The arrival of web based groups / forums have given a lot of people the ability to interact and learn from the knowledge and experience of others. Unfortunately it also has meant that many a self styled guru has taken advantage of the ability to convince others of his logic at the cost of the alternative even if the alternative had a better foundation or way of approach.

While the most hotly debated topics remain to be Religion / Politics and Nationalism, they also have the advantage of the fact that there is no damage – physically or mentally or financially to those who participate in such discussions. But there are huge numbers of groups that are devoted to markets and unlike elsewhere, a wrong decision due to wrong guidance can lead to actual damage to those who follow.

Markets operate on the very basis of a conflict of opinions (my belief that the price I am buying the share is cheap as compared to the seller who believes he got a good price for his holding). Without there being such a convergence, there can never be a trade since if everyone believed the same, everyone will either be a buyer or the seller.

A very long time back, there was this article about a young guy who operated in penny stocks in US. This was during the time of the Dot com boom when every stock that had any name with .com or Infotech was instantly valued higher than what it was just before. Since most of these companies never had any volume so as to calculate a Price Earnings Ratio or any real fundamentals backing it up, the measure many looked up was the number of visitors rather the revenue it could derive out of those visitors. It was during this madness that this young chap identified small illiquid stocks, bought a good quantity and harped on it on every yahoo chat forums he could find. If I remember right, he made a lot of money before he got caught by SEC which fined him a bit but compared to the profits, it was a slap on the wrist so as to say.

With the advent of twitter and groups, this phenomenon can be easily seen in India as well. I see quite a lot of persons claiming stocks they having bought getting doubled /tripled in no time. The stocks they choose are mostly in the mid cap and small cap category and hence both illiquid and very volatile. Having followed a few of them for quite some time, all I can say if that if you buy everything they recommend, you shall end up with a very big portfolio if not for a big profit.

It’s easy to get swayed by others screaming about making big money but the reality as far as I am concerned is that the guys who really make big money are unheard off by a majority of the population. They corner all the money and let others take all the glory. After all, real humbleness is to share with others what you have achieved.

So, the next time someone shouts on top of the voice about making big money, do check, verify and finally ask…Where is your Yacht 

About Prashanth

Have been a full time participant in the stock markets since 1996. Run a Yahoo Group where focus is exclusively on discussions of the Indian Markets using Technical Analysis as the tool (groups.yahoo.com/group/technical-investor)
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