Matching the columns for a smart response!

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CK Narayan

One may not always agree with Samir Arora, the high profile hedge fund manager, but you must admit he always makes for good sound bytes! In a recent interview, he made a cryptic remark that resonated with my thoughts on the same subject.

Samir remarked that anyone talking about 5-year prospects should actually come back after 3 years and voice that opinion! He emphasised on how the market goes through immense gyrations in a time frame that it becomes difficult to voice an opinion that can be valid for the next five years. I couldn’t agree more.

While we are all agreed on the aspect that bigger profits accrue over the longer term, it doesn't mean that we can voice opinions about how that long term period will exactly unfold. There are just too many moving parts that make up the market and hence what we see today is just an expectation.

To convert that into a definitive view is quite foolish. At best, one is able to see a bit into the future where linear actions of all of us will probably achieve those expectations. But to expect our own views to remain consistent and not get influenced with all that happens in our daily lives would be to think of yourself as a bit of a superman.

Samir’s comments are valid from another angle as well. Commenting on the future has now become something like "match-the-columns". You have things like monsoon, GST, earnings etc (local factors) in column A; then you have Fed actions, Dow’s rise, EM currency, commodity prices, oil price moves (global factors) in column B; and in column C you can have personal things like liquidity, sentiment, technicals, SIP, long term, compliance limitations, disruption etc.

So when asked any question, just match three items. Your answer can be something like, "I think it really depends on how the monsoon fares this year and how effectively the govt is able to roll out the GST. But you cannot overlook the role of global factors what with Oil fluctuating so much and emerging market currencies on a roil. Of course one also needs to factor in the fact that liquidity domestically is very high and is currently driving the market.”

It does sound like a cogent answer right? Or, how about this: “GST roll-outs (Column A), in overseas markets, have always created an atmosphere of uncertainty. We can expect some disruption (Column C) here too, especially in the light of Fed’s action of raising interest rates (Column B) which can create some negative sentiments (Column C) in emerging markets (Column B) and that may impact sentiments (Column C) in India. However, if the monsoon (Column A) is favorable, then we can see some much better liquidity flows (Column C) towards the markets and that can alter the equation quite a bit.

Doesn't that make you sound knowledgeable and smart! But did it really mean anything? Of course not. It was never meant to- just logical sounding stuff.

The point here is that this column matching response can be a suitable answer for whether you are talking about tomorrow, next year or five years from now. You just modify the words and phrases slightly. But then, are we really saying something meaningful?

It seems like reporters are getting their job done, and so are commentators. The idea is to fill spaces (for newspapers and time for television) rather than create something of value. That becomes just an incidental thing. Everyone seems to be banking on the possibility that along with everything else, there will be someone accidentally creating some value and that gets everyone by. Not really blaming anyone here, but this has just become the system, the practice and all of us are playing along with it.

Another major point I am making here is that all of us need to develop the ability to sift the wheat from the chaff insofar as what we hear and read about stocks and markets. Much of our own views are formed from these press bytes that surround and indeed, bombard us at all times.

Our actions are determined by our thoughts and hence we need to be careful about how we form them. All inputs for these have to be screened properly to ensure that it is not some match-the-columns type of responses and that people are really speaking from their experience and knowledge. Only those types of comments will really add value to what we do.

(CK Narayan is MD of Growth Avenues. Views expressed are personal. To get trading recommendations from CK Narayan, click here.)