What the Recession taught me

Long ago, I read somewhere, “There is a different thrill to do business with someone else’s money.” Only now I understood the meaning of it. The second half of 2008 saw a whitewash of investment banks from the global financial set-up. Looking at the carnage caused by the economic and financial crisis, one does question the existence of a business model, which does not have a product or service to back up the revenues. This is where the age old FMCG’s score over the Investment banking industry.

The golden rule for investment is “one man’s loss is another man’s gain.” So if a load of people have lost their money, someone must have made money too. Else the whole global financial market defies pure logic. Not everyone’s portfolios can be ‘red’ with no one in ‘green’. Whatever happened to the bears of the stock market? Whatever happened to the pessimistic lot, ready to go short? Logic says that in the current turmoil, these guys would have made money, and loads of it. But where are these guys? None of them being reported? Are these guys sitting within the so-called investment banks, trying to square up the losses made by their erstwhile colleagues? Or is this cash (paper is worthless these days), sitting somewhere in the Cayman Islands or Maldives?

Well, whatever the Warren Buffet’s of the world may advice, there are a few things that I have learnt:

- 100 rupees in hand is always worth 200 in paper holdings (read shares). Atleast you know that the value Rs. 100 will not diminish, unlike the paper (not counting inflation, which effects both)
- I prefer getting 7-8% regular returns than 20% in one year and negative the next year.
- If my portfolio is green, I will sell, make my money and get out. What goes up will come down. Gain control over the ‘human greed’. When the markets come down, invest your money back
- Inflation as an economic indicator is meaningless to me, as my living costs are always increasing
- If investing in the shares of a distillery can enhance my returns, I will go ahead. Consumption of alcohol is personal choice and freedom
- I am interested only in my mortgage interest rate. The central bank should do something to ensure my bank passes on the rate cuts to me, instead of me having to scout for alternate banks, to switch my home loan
- The Arab world is sitting on a pot of gold and even if their real estate investments fail, oil will see them through
- Our next to next to next generation will still be buying oil in US Dollars
- Bailout based on book transfers of debt is not the solution. For a long term solution, a fundamental shift in the actual business model is needed.
- Hedge funds do not add any value to economic fundamentals
- Sovereign Wealth Funds are cousins of hedge funds, only portrayed differently
- Developing economies have neither the value nor the volume of trade and consumption to lead a global recovery

And finally, finally, finally !!!!

There was never a recession. What the market is worth today is the real worth. 2007 and early 2008 was a period of an over-priced and inflated market. Now that’s the bitter truth we all have to swallow, whether we like it or not.

Don’t count your stock, before they are cashed……..