POINT #1. Timing the market is frowned upon. It is almost considered a SIN, a folly. The Pundits look down upon you, if they smell a timer in you. I am not exaggerating, one of the ‘value investor’ started speaking with a ‘strange tone’ with me once he realized that I practice Voodoo of momentum ;)
The Gyan is, it is a sheer waste of time, it should not be attempted because it cannot be done. You would only burn your hands, make your broker rich, mess up the compounding machine.
Investing should be like watching the grass grow or watching the paint dry.
over and above these ZEN statements are numerous quotes of our Buy and Hold grandpa, Warren Buffet who has in his witty ways conveyed the folly of timing and benefits of holding.
Based on the above gyaan and also various mandates, our mutual funds accept money from the public and invest in accordance with their inflows and outflows.
They generally don’t take cash calls due to 03 primary reasons,
B) They also believe in the Gyan “Timing is a Sin”.
C) They cannot afford to be wrong alone. (To die with crowd is an acceptable outcome) No/lack of skin in the game facilitates this way of thinking.
Now after considering the above 02 points consider the 03rd point.
A) Mr Market ( Mr. Buffet personified the character of markets by calling it Mr market) is a crazy son of a bitch. He is anything but rational. He is always swinging on the extremes. He is the exact opposite of a STOIC. When he is happy, he is euphoric and when he is sad, he is suicidal.
We have seen this manifest a numerous times, all the bubbles and the depressions of the past are live examples of that. To say that these cycles of boom and bust won’t happen again is STUPID.
Nothing has changed and nothing will. The twin incentives of GREED and FEAR are as old as hills.
the entire concept of Mr Market, and if you check his (Buffet) investments in initial years, you would soon realize that our holier than thou buy and hold guru has been the best timer, there ever was. He doesn't time it these days due to sheer size.
When you see a record of a typical mutual fund, you would see the same Mr market type returns. In good days they will nail it, in bad, they will get rogered. They act surprised to see the behavior gap of their overall CAGR and wat their best and average investors got. In reality, there is NO REASON TO FEEL SURPRISED. nobody sticks to a fund with a 70% drawdown. Hell you won’t stick to ur wife if she had a 70% personality change ;)
And from there, passing the buck starts.
see the pick above… funds say, Advisors are to blamed because they should have taught the retail better. Should have taught them the concept of Asset allocation and risk management.
On the other hand, it reminds of the XEROX machine example Charlie gave in his speech, If the incentive is to sell mediocre machine,then that would sell, no exceptions. I do not have the figures, but would love to know the kind of money being floated in feeding advisors compared to their social initiatives of educating the investors.
retail would blame the advisor, advisor would blame the fund house, fund house would blame the advisors and the tools, bottom line is history would keep repeating itself.
Like Seykota says. Everybody gets what they want from Markets. Some people like to lose. So they win by losing money.
and Like Warren Says, A fool and his money will find various ways to part ways.
If its not Stock market, loser retail would find “Multi level marketing” or “lottery system” or Derivatives or Nigerian princess these days to fuck themselves.
LIFE GOES ON….