Nostalgia of the Past

Do it yourself by investing while not exactly the flavor of the day has been gaining momentum. While smallcase and websites today offer a variety of portfolio’s to choose from, back in the good old days, Do it yourself meant Do it yourself. Starting from researching ideas to buying the stock and getting them transferred to your name, the investor of today has very little idea of the hassles faced during those times.

A weekly momentum strategy would have been unfathomable during those times. The delivery itself took 2 weeks if not more. Then you had book closures and record dates that required you to send the stocks to the company for transfer. If it was a great company, you would hopefully have them back in a month or so, with many others it was an ordeal following it up and finally getting it transferred.

Sometimes one was unlucky that the seller’s signature did not match with the company’s record. They would send back the certificate which you gave back to the broker who gave them to the exchange and who themselves handed the same to the originating broker. By the time you received the replacement share, remember not yet transferred to your name, it would be a month. Time really flew those days.

Markets for most part were sedate. Brokerage was high which led to a lower number of transactions and turnover. Information was scarce. With no Television to blast out the results the second they are out, everything came with a lag. 

Times have changed though. The regional stock exchange where I wet my foot had at one time nearly 300 members. Today barely 50 are active and even among them very few actually having client business worth talking about. 

Today, trading in markets has exploded, education democratized and retail itching to invest in stocks and securities. Oh, Zero Brokerage for delivery. Who would have ever dreamt of that couple of decades ago.

But human behavior hasn’t changed much. In 1999, we had a client who was a Chartered Accountant. Had some fantastic companies as his holdings. The IT boom was just taking off but he was not deeply interested. While one had no relative performance to compare on Social Media, one was relatively isolated from the happenings on the exchange floor.

As the rally continued, for active investors it very soon became tough to see clueless investors make tons of money while those who actually worked to identify good companies lagged. Starting in early 2000, he shifted his portfolio wholesale from the old economy companies to the new age. KLG System, Satyam are those that I remember buying for him. 

What was interesting was not just the change in his portfolio but change in his viewpoint on why these companies were worth even after having rallied a lot in recent months. The narrative he spun was more or less the creation of the print media in which many investors took up lock, stock and barrel.

Once the dot com boom exploded, we lost touch. While I hope that he did well post that mishap, experiences of other folks who saw the boom and bust though doesn’t give me comfort. The 2000 bust followed a long and sedate period which lasted until April 2003. 

Markets have never been the same. While the 2008 boom and bust is still new in the minds of many investors, the euphoria one saw in the dot com was something else. At the peak of the bubble, Bangalore Stock Exchange had almost 50 companies which were being traded. Very few exist today. 

The dot com bubble in hindsight was brought about by the easy money policies of the fed. Has anything changed today one wonders.

Thanks to the actions of Central Banks, Fed Primarily, Investors have been protected from a deep and long draw-down recession for a decade now. Can they get it wrong – well, history shows the mistakes of Japan’s Central Bank created the bubble and later the mishandling of the bust. A more recent mistake would be the ECB with countries like Greece.

As this post was being written, the Fed policy came out with its views. The low interest rate seems to stay for a while. When we are in a bubble, it’s not easy to imagine that one is living in a bubble. Are we living in one? I guess only time will tell us to be sure.