Atrocious Targets

Yesterday, a market analyst in a interview to CNBC claimed that Nifty was heading to 6750 based on his analysis of the Index. A few months back, another Analyst claimed that Nifty shall move way higher than what it was trading at that point of time. Going back further, I remember a Analyst mincing no words and being certain as hell that Nifty would reach a number that was last seen in 2009.

Other than these, there have been predictions of Sensex at 100,000 by Mark Galasiewski, editor of Elliott Wave International’s Asian Financial Forecast who gave a time line for the target to be achieved by 2024 (Link).

Dow Jones has also seen outlandish targets, the most bullish being Dow 40000 (Book link) to Dow going back to 1000 & even 400. And this target has been repeated since time immemorial so as to say (Link).

Over a long enough time frame, the only way markets can go is Up (unless the world goes into a never ending cycle of deflation) which means that no matter how high a target is seen, it is just a matter of time before the same is achieved.

But the key question is, are any of these prophecies actionable? And the simple answer is a even simpler No.

So, the question that comes up is, what is the need for these outlandish targets when they themselves know very much that its one thing to throw a random number as a target and quite another to be actually be able to take advantage of the same.

What I find is that most of these targets are bandied about by people who are happy to sell Tips / Newsletters while the real money managers generally prefer wiser counsel. Of course, the negative side of listening to fund managers is that you are always a perma-bull regardless of the state of the market.

While it makes sense to be bullish when valuations are cheap and attractive, once markets have moved way higher, there is need to be cautious and reduce the amount of exposure to the market. In fact, in a recent Interview, Hedge Fund manager Samir Arora said that 2015 was more of a Long / Short year (Link)

For a investor, shorting is not possible and hence the best alternative would be to have exposure that varies based on factors such as future growth and current valuation.

Our own Asset Allocation Model (Link) and our Model Portfolio’s (Link) are in a way designed for just that kind of thought process. We believe that even the lay investor can generate above market returns with simple strategies and without having to pay a leg and foot to fund managers who at end of the day aren’t any much wiser than us.