Money Mantras….(10)

This is the 10th article in the ‘Money Mantras’ series. With this we’ve hit a century, 100 quotes! I’m glad that you continue to enjoy the wisdom from various sources about money.

 

1) Of one thing be certain: if a CEO is enthused about a particularly foolish acquisition, both his internal staff and his outside advisors will come up with whatever projections are needed to justify his stance. Only in fairy tales are emperors told that they are naked – Warren Buffett

 

2) The only man who sticks closer to you in adversity than a friend is a creditor. -Anonymous

 

3) There are plenty of ways to get ahead.  The first is so basic I’m almost embarrassed to say it:  spend less than you earn.  -Paul Clitheroe

 

4) We are not to judge thrift solely by the test of saving or spending.  If one spends what he should prudently save, that certainly is to be deplored.  But if one saves what he should prudently spend, that is not necessarily to be commended.  A wise balance between the two is the desired end. -Owen Young

 

5) The best assets you can have during inflation are your abilities. – Warren Buffett

  
6) The stock market is a no-called-strike game. You don’t have to swing at everything–you can wait for your pitch. The problem when you’re a money manager is that your fans keep yelling, ‘Swing, you bum! – Warren Buffett 

 

7) Tell me who your heroes are and I’ll tell you how you’ll turn out to be. The qualities of the one you admire are the traits that you, with a little practice, can make your own, and that, if practiced, will become habit-forming. – Warren Buffett

 

8)  “If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring” - George Soros

 

9) Growth for the sake of growth is the ideology of the cancer cell. -Edward Abbey

 

10)  The gap in our economy is between what we have and what we think we ought to have – and that is a moral problem, not an economic one.  -Paul Heyne

 

My Experiences – Jaya TV Show

First and foremost I’m thankful to many of you who made it a point to wish me over Phone, Email and SMS for a good performance in the show. Also some of my friends and well-wishers, whom I met on Thursday, encouraged me a lot. Above all my wife was very supportive and was very particular that I should make use of this opportunity and not let it to go due to my nervousness or health concerns.

You were able to empathize with the fact that I was facing the T.V.cameras for the first time and that too in a one hour Live talk show which made me nervous. As I mentioned in the last mail, I thought (even still think!), a recorded show is more comfortable for the participant as there is an opportunity for reshooting / editing / correcting, if some thing goes wrong (which may as facing a set of Cameras focusing on you continuously makes you self conscious and is unnerving). But with effort and counselling from friends like you, I made up my mind to face the day with as much confidence as possible. I also realized the fact how sharing one’s vulnerability with people who can be trusted and counted upon, makes you actually strong. Your weakness can be turned to strength with enough psychological and moral support from people who care for you.

I was asked to come to the studio by 10.30a.m to get ready for the 12.00 noon show. Since I’ve not seen a T.V. studio before, I was enthused like a child and was excited to see various sets, Library, Program monitoring, Camera and sound control etc. At 11.00a.m, the director and comperor of the show arrived to talk to me. They obtained my nod for name of the topic they’ve chosen to display as scroll in the bottom of the screen.

They had a half an hour discussion with me to understand about my profession and the topic they’ve chosen for the day. Armed with this knowledge, the comperor went ahead and started preparing questions and I was asked to go to make up room for touch up.

I was asked to be present in the set by 11.45a.m and the technical team tied up ear phone, mike etc. to my body and was asked to give test speech to understand my voice modulation and set the sound equipments accordingly. The comperor gave me instructions as to when I should face her, when I should face the camera opposite to me and also what I should do in case if I find it difficult or fumble extremely when the live show is going on. I was also given briefing as to how to handle calls, how to know the caller is still on the line or not (this is because the calls land is the telephones in the sound control room and they keep pressing the mute frequently to ensure that noises like TV sound in the caller’s room, a child’s cry or dog’s bark or any back ground noise does not disturb the quality of the show.) So once the question is asked you’ll only hear a deadening silence and there is possibility you may think that the caller is off the line when he is actually on the line.

Effective co-ordination between the sound control room, Comperor and the participant is vital in such as way that the call or discussion flows naturally for the viewers. So all this co-ordination happens as the show is on through physical sign or signals which is not visible to the audience. Also instructions from monitoring room keeps coming through the ear phone for the comperor to know that when the break ends and when program should recommence. The participant also gets a nod or signal accordingly. I realized how well co-ordinated a live talk show (for that matter any live telecast) has to be so that it looks spontaneous and seamless for the viewers.

All the discussion, make-up, instructions for me to understand the nuances explained above, making me feel more comfortable (at home) and removing my nervousness in facing the live telecast….. all these happened within a span of just one hour. I thought all these requires days of preparation, discussion and rehearsal! How naive I was! This shows the competence of the crew and also reflects on their experience in conducting hundreds of such shows.

I was self conscious and nervous initially and the comperor did an extremely good job of making me feel comfortable. My wife was also allowed to be present in the studio (a request I made to the Jaya T.V., which they were kind enough to accept) behind the Cameras and was encouraging me. This also boosted my confidence.

After few minutes, I consciously shut down my noisy mind (which was only making me nervous) and started focusing on how I can genuinely help the callers and also add value to all the viewers who were viewing the program.

Our program was flooded with unusual number of calls. I understand that many people did not get the line and not all who got connected was able to speak due to the time constraints of the show. Till the show was over I was not sure how it was going or perceived. But after the show the entire crew came and applauded me for my performance. I was told by them that the show went extremely well and I may get more opportunities in Jaya TV in the future. They also mentioned that my performance looked very professional and spontaneous. They also said that I was very confident and it did not look like a first live show. I was pleasantly surprised and am grateful to God because I only know the level of nervousness with which I accepted the invitation for the show.

I was also told that it is the first time a celebrity like Mr.’Drums’ Sivamani is making a call in this show. The fact that he conveyed his appreciation for my performance , wanted to meet me to discuss his ‘personal finance’ issues and also invited me for his next show in Chennai was very well appreciated by the crew. I do not know whether he would really be meeting me as he is a very busy celebrity but I’m grateful to him for saying so and appreciating me in public. This has boosted my self confidence and spirit.

I’m glad that I was able to create awareness about the need for Financial Literacy and selecting right advisors like Certified Financial PlannerCM(CFPCM).

I was continuously getting calls (both mobile and landline) and SMS non stop after yesterday’s show till late in the evening. These were from my friends, relatives and lot of viewers (both India and Overseas). I’m very grateful to all of you for your kind words of encouragement and praise. I was unable to attend many calls and planning to return the same this weekend. In fact my throat became very sore in the night after being continuously on the phone since afternoon. I’m happy with this. My sore throat indicates how much affection you have for me and how much encouragement you provide me.

All these happened because of blessings of God, my family support and all your encouragement. My heartfelt gratitude for all of the above.

Please continue sharing your feedback for the articles I post. This is the tonic for my mind and intellect.

The South Sea Bubble

 

Birth and Death, Growth and Decay, Joy and Suffering are all part of natural cycle of Life. Likewise Bubble and Burst are part of any market cycle- be it Stock Market, Derivatives Market, Commodities Market, Forex Market, Real Estate Market…… you name anything, they go through these cycles.

 

As there is no way we can escape the natural cycle of life, we cannot also escape the market cycles, however clever and astute we are. Those of you who have attended my market presentations know how non-investing is also risky. This is similar to the scenario that by simply sitting in home and not doing anything also, you cannot escape from the problems of life. Then problems come home searching for you!

 

So how to face these bubbles and bursts of market cycles? As I always highlight, having a right asset allocation (which is unique for each individual) and not being driven by greed or fear help you to minimise the damages and optimise the returns. But the fact is that you cannot avoid losses totally, however minimal it is, even if you diligently follow the above.

 

In this article I’m going to write about a bubble which happened three centuries ago in stock market, in which even the greatest genius Sir Isaac Newton lost most part of his wealth. This had such an emotional impact on him, he lamented and made a statement “I can calculate the movement of the stars, but not the madness of men”.

 

Warren Buffett was not born then and Newton never had the opportunity of hearing him saying “A pin lies in wait for every bubble and when the two eventually meet, a new wave of investors learns some very old lessons“.  

 

I’m also glad to note here that based on the letter written by Buffett recently to his stake holders it looks like an Indian, Ajit Jain may succeed him. This would be another feather in India’s / Indians’ achievements.

 

Now let’s get into the South Sea Bubble!

 

In the year 1720, the whole of England got involved in a bubble known as the ‘South Sea Bubble’. Many investors, including Sir Isaac Newton and Jonathan Swift lost substantial amounts in this bubble.

 

The South Sea Company was founded in 1711. In 1720, the company was granted the monopoly of trade with Spain’s South American by the British government in return for a loan of £ 7 m to wage a war against France. The monopoly of trade and the company’s relationship with the government helped the South Sea company in attracting large numbers of investors.

 

Shares immediately rose by 10 times, further attracting more investors towards the stock. To satiate the investors’ appetite, the company issued fresh equity in four subscriptions, at higher and higher prices. It also lent generously against its own shares, thereby increasing demand for them.

 

The success of South Sea stirred the British market and investors started believing that British companies are the best. Taking cue from the South Sea Company, several other companies launched their IPOs and they all sold like hot cakes.

 

Nobody questioned the repeated re-issue of stocks nor did anybody check the quality of the company’s management. Investors kept on buying expensive stocks as fast as they were offered. Interestingly, the company’s directors set up opulently furnished offices in the most extravagant localities to attract further investments.

 

Very soon, the massive trading started putting pressure on the settlement process. The South Sea Company closed its books in order to catch up with the backlog and to prepare for the future subscriptions. Meanwhile, rumours about the company’s bad financial state started circulating in the market. As a result, a large number of investors started selling when the books were reopened. The company was found short of cash to pay the debt holders. The stock price declined.

 

The directors promised dividends of 50% of the stock’s face value in a desperate bid to push up the sinking stock price. For this, the company used its financial arm “The Sword Blade Company”. But very soon, in September 1720, Sword Blade became insolvent. Following this event, the price of South Sea stock plummeted. This sent shock waves in the market and stock prices started declining across the board creating a terrible financial mess.

 

Speculation can inflate stock prices to unbelievable levels. Investors find these escalating prices very enticing. As an investor, one’s focus must be on the intrinsic value of a company and not its fluctuating market prices. Those who pay attention to intrinsic values might underperform during bubbles, but they often have the last laugh. As Benjamin Graham says “The individual investor should act consistently as an investor and not as a speculator. This means… that he should be able to justify every purchase he makes and each price he pays by impersonal, objective reasoning that satisfies him that he is getting more than his money’s worth for his purchase.”

(with inputs from Equitymaster)