Tuesday, March 27, 2007

Timing is everything

It has always been an annoying dilemma. Whenever an opportunity presents itself, it comes along with its own baggage of risks and rewards. This is part and parcel of ever-day life. The opportunity often changes its balance... some times, the risk weigh more and at other times the rewards are too tempting. The whole business is very dynamic (volatile and beyond reason as some of my friends describe it).

It is always too difficult to know the exact time to act. Too soon you may lose what you have. Too late, you may miss what you could have had. Too soon, you repent. Too late, you repent. You either have to know the future or just get lucky to not repent. Such is the nature of the opportunity.

Apart from timing, there is a problem of reversal of trend when you are evaluating the prospects of an opportunity. History tells me that reversal of trend normally happens immediately after the action. Dangerous.

There is another problem with opportunity. It has a tendency to change very very fast. One extreme of this is that it could vanish in an instant - without warning. Even if after a long deliberation, you are ready to take the risk - the opportunity (and there by the reward) simply does not exist any more. Too bad.

In the past one year, the dilemma I am fighting is taking me through ups and downs nothing short of a roller coaster... Has the time come to act? To seize the opportunity or to let go and wait for the next one? Oh wait, is it still there? Was it ever there?

Those who know me well have by now realized what exactly I am talking about...
Those who know me too well.... take that grin out of your face.
Others (who have cared to read till here) would be already speculating... reading between the lines, between words... trying anagrams may be... let me clarify.

;-) Yes, it is the stock market that I am talking about.

Its been 10 months since I did my last trade... I am simply not been able to make sense of the market. Every tanking, I am thinking "Next rally, I am booking profits"... By the time, there is short rally I am already thinking "Next plunge, I should be buying".

Have we seen the bottom yet, or is there still pounding to be taken... ??
Should I start buying now? Or should I have booked profits last week? Was the market ever worth investing in? Is India still hot?

If only I knew the answers.... (or at least the future)

Saturday, March 24, 2007

What is the picture saying?

There is a photo competition at office. Yes, amateurs only. I am not able to find a good caption for this photo... I would appreciate if you could help me....

I could think of a few, but they were in ಕನ್ನಡ. Not permissible in the contest... or is it?
ಬೆಟ್ಟಗಳ ಮಧ್ಯ ಮನೆಯಿರಲು, ಮನೆಯ ಹಿಂದೊಂದು ಮರವಿರಲು,
ಮಕ್ಕಳಾಡಲು ಬೇಲಿಯೇ ಇಲ್ಲದಷ್ಟು ಅಂಗಳವಿರಲು,
ಬೆಂಗಳೂರಿನ ರಿಯಾಲ್ ಎಸ್ಟೇಟಿಗೆ ಕಿಚ್ಚು ಹಚ್ಚೆಂದ ಸರ್ವಜ್ಞ.
this is for all the fellow fans of the hit movie " ಮುಂಗಾರು ಮಳೆ "
ಮುಂಗಾರು ಮಳೆಯೇ, ಏನು ನಿನ್ನ ಹನಿಗಳ ಲೀಲೆ?
ವಸಂತ ಬಂದ ಋತುಗಳ ರಾಜ ತಾ ಬಂದ - ಬಿಎಂಶ್ರೀ [english geetegaLu]
Cuckoo, jag-jag, pu-we, to-witta-woo!
- Thomas Nashe (1567-1601)

Wednesday, March 21, 2007

Pavlov's Dogs

Through his studies in the early part of last century, Russian scientist Ivan Pavlov demonstrated that reflex actions can be conditioned. His experiments involved in feeding a dog always (and only) when a bell rang in the back ground. Once the dog got used to the combination, he removed the food and rang only the bell. Poor dog started salivating on hearing the bell ring. This proved that a reflex action (salivating at the sight of the food) could also be cultivated by conditioning the brain to some other stimulus.

What I fail to understand is the need for all the dogs in the experiment. This conditioning of different stimulus happens to us humans every day. Doesn't it?

Don't we all remember our childhood when the sound of bell ringing always reminded us of ice cream?

Haven't you slowed down and looked around even while walking on busy crowded sidewalk... just when you caught the scent of Ralph Lauren in the air - just because you associate that fragrance with your wife (girl friend)?

When you are waiting desperately for a letter, doesn't the sight of the postman create the excitement in your heart irrespective of how many days he has no letter to give you. Some times just the sound of the cycle bell is enough to get your hopes (of getting that letter) high.

There are different sounds that we have got so accustomed to and readily associate them to totally unrelated feelings. Cell phone manufacturers have used it effectively to associate their signature ring tones to happy feelings. There is a Nokia AD that is shot in black and white... Half way through the advertisement, there is a phone ring and festivities of Holi (festival of colours) begin. I liked this AD because it tries to connect the feeling of being colorful, festivities and happiness to that one phone call. Isn't it exactly the same feeling that a phone call (the ring tone) from your loved ones trigger in your mind?

If these reactions of the mind are indeed reflexes (not under voluntary control) then each one of us is just like a "Pavlov's Dog". But unlike those dogs, its our mind/heart that is doing the trick on us (and not just chemical reflexes).

Wednesday, March 07, 2007

How to make your tanking stock work for you?

Yes. There is a way you can make your loss making shares save taxes. In India, short term capital losses can be offset only against short term capital gains. The long term capital losses can be offset only against long term capital gains. Given this, there is no 'use' (apart from cutting losses) of booking long term capital loss.

So, If you are sitting on capital losses then don't let it turn LONG TERM. At the stroke of an year book the losses. This can be now offset against the short term capital gains (if any). You saved 10% there.

If you bought 100 shares of Ranbaxy at Rs 510/- per share on June 1st 2004. Then by March 25, 2005 you have accrued a tidy sum of Rs 30,000/- as short term capital gains [by some other intelligent investing]. You would have to pay Rs 3,000/- as tax on that amount. But alas, your Ranbaxy has plummeted to Rs 325/- per share. You are sitting on Rs 18,500/- of losses. But if you book the loss in March 26th, 2005 then your net short term gain has been reduced to Rs 11,500/- which attracts a tax of just Rs 1,150/- A gain of Rs 1,850/- right there. Too bad about your loss though.

If you really are bent on having Ranbaxy in your portfolio (and not ready to wait for the real bottom) then buy it the next day. You would have saved Rs 1,850/- by just accounting.

On the other hand, if you hold Ranbaxy continuously beyond June 1st 2005 then and even if the stock price is Rs450/- per share (greater than Rs325/- per share as in March 2005) your loss of Rs 6,000/- would be long term capital loss. This Rs 6,000/- can not be offset against any short term capital gains made by you from April 1st 2005 to Mar 31st 2006.

Thursday, March 01, 2007

The fear of expression

80% of the words framed in mind are never spoken. They are used to talk to oneself.

Man is undoubted most intelligent animal. He has created a complex form of communication. Spoken Words. Various cultures around the world made it even more complex by adding etiquette to the words. Now communication is no longer just semantics... It's not about being grammatically correct, Its about conveying the right emotions and that too in a manner that conforms to all the rules of propriety. No wonder 80% of the words framed in our mind remain there only... Its we humans who have put this stringent filter on what is actually spoken (or written).

At this point, I begin to wonder what good is this highly complex mode of communication, if social structure is not letting you talk most of the time. I would rather be a honey bee or an ant. There would be only two types of dances I would know. At least I would never think 100 times before dancing :-)

This fear of breaking the protocol, fear of crossing the boundaries of propriety has devastating effects on mankind. Clearly, there will no fluent flow of ideas among people... A lot is left unsaid for fear of making fool of one self... exchange of ideas is the basis of civilization...

New relations are very difficult to be established... between people., between nations, between cultures for the very lack of communication. A sincere honest dialogue is the corner stone of any kind of relationship... (even across species)

Friends, I request you to relax the filter a bit... talk more openly to others... Human-beings were not made to be like this... we put these chains ourselves on the words we speak... cut them loose and reach out to the world.