Power & Responsibility

Of the major Superheroes – Batman, Spiderman and Superman, to me, Spiderman deserves a special place for unlike Batman, he is no Billionaire with a R&D team to conk out his villains nor has the Superpowers that Superman has.  He is just a ordinary guy who gets ability to jump buildings. Maybe his humility also comes from his Uncle who provides with one of the great quotes ever

“With great power comes great responsibility”

Of course, that is not original and if you are a sticker for the truth, this link should help you find the source of similar sounding statements from history (Quote Source).

In the world of Finance, Experts / Fund Managers who come on Television and provide their views for one and all can be considered the super heroes for many a investor / trader. But do they exercise caution when asked to provide views / predictions on the future of a stock / market?

Fund Managers are generally bullish on markets and stocks for one, they understand the probabilities better in the sense that there is a much higher probability that markets can say double from here than halve from here (Current Nifty level being around 7K). But more than that, its always better to sell Greed when you are looking for funds from clients than spread Fear (more so if you are say a Long only PMS manager).

But this probability is not true at all times since when markets get into bubble territory, 50% fall is something we have seen happen. Dow Jones for instance has seen a 80% crack from its peak and while those times may not repeat, there is nothing like “will not happen” in markets.

A fan blog site which was pumping up all and sundry when mid & small caps were hitting the sky suddenly seems to have started believing that fund managers are clueless since their stocks have fallen a lot during the current bear market.

While Nifty is currently down 23% from its peak, a lot of stocks are way down. Here is the distribution chart of the same

60% of stocks that are trading on the National Stock Exchange of India are down 40% or more from their peaks (4.5 years look back). A substantial number would still be well above what they were a couple of years ago, but this fall is nothing to be laughed at.

I am not much of a fan of guys who sell subscription services since they carry / assume no risks and its all down to how they market themselves. Fund managers on the other hand have quite a skin in the game. Their performance numbers maybe tough to access (especially Hedge Fund Returns) but end of the day, they are answerable to their investors and bad news can spread fast as history clearly has shown us.

I was browsing through the twitter time line of one such fund manager who has not a single bearish / caution tweet right from beginning of 2015. Right from Jan 2015, his target for Nifty (even as he advises that unless you are of the time pass variety, you should be looking past Nifty) has been > 10K. I am sure, some day in the future, that 10K will arrive and he will claim to have “told you so”. But by then, a wave of investors who follow him since Television channels now sport him as “Market Guru” would have disappeared never to come back to the pits.

Thanks to experience of burning hands, I am aware of the risks of following such junkies, but when I entered the markets, this was the only way I knew how to buy / identify stocks. Even today, when people enter markets, it takes a few years before they start differentiating the good from the bad and the ugly. What I really hope is that people who come on television provide a bit more balanced view for as a Idiom says “What goes around, comes around”.