Ken Fisher says….so you listen!

Investors, students, relationship managers shattered and beaten by the fall in the equity markets world wide are asking: “When will we touch 21000 on the Sensex again?” The other favorite question is “When will the bear market end?”  My answer: I don’t know.

This is met with sarcasm “Actually you know, but will give us the answer only for a fee”.

Actually there is no way how I would know. Ken Fisher in his column in Forbes says more or less the same thing. I quote “There is no way to really know. Just guess. But when the recovery comes, it will come much faster than you expect. Bear markets are almost always followed by bull markets in a pattern with a V shape. The steeper the descent, the steeper the ascent. We had a steep descent.”

In fact Ken calls his column “Blink and You’ll Miss It”. Those people who have stopped their S I Ps and those who are waiting with cash for the markets to come down again, should read this column. It is very difficult to say “You cannot time the market” again and again. The human mind likes to believe “this time it will be different” – we know it will not, but …you know how it is like! Then there are people who had seen the market post Harshad Mehta – the 260% rise was followed by a 46% fall. Then the 46% fall was again followed by a fall! The pattern seekers look at all this and get scared. Then there are others who think 40% return is their birth right. God save them. To me expecting 20% year on year for 30 years looks like a fraud (mathematically speaking!).
Again I quote Ken Fisher: “There are the endless comparisons with 1929–32, a crash that was followed by a partial recovery and then another bear market (with another economic downturn) in 1937. I don’t think that comparison is at all valid. The key point is that investors fear a 1930s-like L-shaped bottom with stocks going nowhere for years. But the 1930s had no L. There were, rather, several Vs in succession. In the first three months after 1932’s bottom the market was up 92%. We should be so lucky now.”

All those people who abandon the equity markets for the debt market may see that their next 5 years returns have come in equity markets in 5 weeks. That hurts hard. At the higher price earnings of the market it might now make sense to shift to some listed debentures (the listing rules are being announced shortly) surely not now. Yes if you had sold at higher levels and are sitting on cash, you can deploy it partially in equities and debt. However to sell now or redeem now to invest in debt instruments is not an intelligent move. Or so I think. And an important caveat “I have been wrong many times in the past”. I got save because many times when I was sure what would happen, I did not act. My laziness saved me!

Frankly picking stocks is something which I inflict only on my own portfolio – refuse to share it with others. Pick a nice ETF – based on the Sensex if you are aggressive and on the Nifty if you are less aggressive. Pick it up at every dip (unlike a SIP) – and hold on for at least for 5 years. By 2013 you would have got the next 7 years return on bonds. Not bad, right?

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3 Responses to “Ken Fisher says….so you listen!”

  1. Ravinder Makhaik on May 14th, 2009 at 7:59 pm

    In all this rise and fall of the equity marekts, one question that is predominating now is, one who is the market betting – Advani or Sardar Manmohan Singh (SMS).

    And on whom do you put your money on.

    I have my penny on SMS

  2. for the equity market long term investor it is NOISE. nothing you can do about it. Elections and Equity markets are media events to keep the advertiser happy. For the common man he would do well to ignore it on a day to day NOISE basis.

  3. Ravinder Makhaik on May 18th, 2009 at 7:43 pm


    The NOISE simply crossed the sound barrier this time.

    Never in the history of Indian stock market have we witnessed such gravity defying movement because of a positive political event.

    What is your take on what appears to be in store over the forseeable timeframe ———–?.

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