My father wanted to sue. He is a lawyer. He could have sued them. But they would get off the hook on reasonable doubt. The evidence needs to establish BEYOND REASONABLE DOUBT that you committed a crime or else you are free to go.
That is what got Salman off. Hence they say – Not guilty unless proved.
And you cannot prove shit because analysts word it beautifully. That is what years of experience do to you. You can have your cake, hog it too and not get fat. I know how to bake that cake. So when I see someone baking it, I call his bluff.
When an analyst says these things I know that he knows that he doesn’t know. After reading this, you will know it too.
1) It’s a Stock Pickers Market….
When was it not? Ok, may be we did not call it that two years before but when did a person buy something randomly with the stipulation that because the market will go up my randomly picked up stock will go up with it?
In the bull market of 2005 to 2007 everything went up. If Gravity was listed on BSE, it would go up too. I remember buying some shit stocks which quadrupled or more. But they were backed by stories. Khoday India ( the liquor company ) owned a huge land parcel in Bangalore, RCF owns a land parcel in Mumbai and the story and its land parcel are both as old as my father.
So we bought based on a story. Nobody ever bought a stock without having some dope on the company. It was always a Stock Pickers Market.
What happened in the 2010-2014 was that the stocks with the real stories went up and the others went to garbage. Only analysts worth their mettle could spot those opportunities. The rise of Consumer Durables, the rise of FMCG ( the defensive sector which became the offensive ) the rise of Seed stocks etc.
Others explained their under performance by coining the term – It’s a stock Pickers Market.
It always was a stock pickers market, but you sir, were never a stock picker.
2) More Buyers than Sellers….
This is poor elementary level math.
Every trade has two equal sides. Every stock which is bought is sold. The buyer wants the market to go up and the seller thinks it will go down. If either of them is not thinking on these lines, then he/she is smoking crack or doing some illegal tax manipulation shit and I don’t want to get into it.
There is a meeting of minds at a particular price and that is how a trade goes through.
More buyers than sellers is used to explain an upmove in the market. It also fails on pure logic. Say there are 100 shares traded. 100 people sold 1 share each and 5 people bought 20 each. Which is the stronger side?
Elementary logic says, the buyers are stronger because an average buyer is committing more money to the trade than an average seller. By that logic, Less Buyers More Sellers is more bullish than More buyers, less sellers.
Or maybe they are a bunch of rich guys who have nothing better to do with their money.
3) Cash is on the sidelines…
I think Cash likes it there. Ever since I have entered the market Cash is on the sidelines. Analysts say that the Provident fund money in the developed world is huge and it has not entered India till now. Also, Salman Khan is not getting married. I am waiting for both!
The readily available cash (Bills and coin ) is 8.3% of the world’s financial assets viz. Bonds, Deposits, Equities, Bullion etc. Basically all cash is not on the sidelines, it is invested in some other asset. Just because one asset class (equities) has corrected sharply the cash won’t come running.
As far the readily available cash, I think some liquidity is essential and 8.3% is fair. It may stay like that.
So cash is on the sidelines because that is where it wants to be. Cash is also scared of the future just like you and me.
4) Buy on dips/ Buy on weakness….
Used when the analyst has missed the bus. He doesn’t want to recommend a buy at the current price as he fears of getting caught right at the top of a swing. But he doesn’t want to miss the trend either just in case it goes to the moon. And if the stock corrects and then makes a U turn, he will have caught the bottom.
The fact is that nobody knows the extent of weakness in time and in price. I have a friend who subscribed to an obnoxiously pricey equity newsletter of a US Based Financial Astrologer who also tracks Indian Markets (can’t get simpler than that)
The analyst recommended a buy on PSU Banking stocks in the last quarter of 2014. Bank of India was trading close to 320 then. He also put a buy an aggressive buy on Reliance Industries around 1000 Rs around the same time.Banking started to correct and so did Reliance ( the gas pricing decision was not in favour of Reliance Industries ) He kept saying in every successive newsletter “Add more on weakness.”
Sir, if you are reading this I want to say – Janet Yellen is not my mommy and I don’t have a money tap. If I keep buying these stocks on every dip I have to sell my kidney one day. You need to establish a floor. If I keep adding these stocks on every dip they will amount to 50% of my portfolio which is a bad asset allocation strategy.
But why do analysts keep saying buy the dip as the stocks keep tanking? That is because analysts want to count the returns from the bottom. The same analyst in his recent newsletter rejoiced when Reliance started doing well. He said we recommended Reliance at 880!!
Liar Liar Pants on Fire!
Buy on weakness is fine when you can define the floor and ask investors to stop buying at a particular price range.
5) Take some profits…..
This is the twin brother of ‘Buy on weakness’. They are both evil. Take some profits also goes by the name ‘Sell in strength’. But ‘Sell’ is a word you random hear in the world of research. There is a reason for that.
The downside of a stock is limited. It cannot go below zero. But the upside isn’t. Some stocks go to the moon. The analyst does not want to associate the word Sell in any of his recommendations. They use Sell only when it is public knowledge that the company is bust. ICICI Securities had a buy report on a medical equipment manufacturer. The stock started tanking but the sell report never came until the stock had corrected substantially. That is how badly we hate the Sell.
So we use ‘ Take some profits’. Take some profits helps you cover your ass. If the stock goes down, you advised to take some profit. If it goes up, you still have some of it left. Magic!
There was a technical analyst who posted his calls on a free google forum. On every 3% price rise he recommended to take profits 20% or 30% of the quantity you held. If I were to do exactly as he said I would have had 0.83 shares of Rolta India after a 20% price rise. But Rolta went up 50% and he kept booking 20% profits. Sadly people couldn’t see through this.
A big financial institution then hired him as a Technical Analyst. I wonder if they hired him because of this talent or inspite of this talent.
6) Market is overbought/oversold….
Market is always overbought or oversold. Think about it. The entire fundamental equity research profession channelizes its energy in finding out the Right price of the stock. When the stock deviates a lot below the Right Price so derived it becomes a buy and when it deviates above it becomes a sell ( or profit taking..Hehe)
That is the core of fundamental analysis in layman terms. If majority of the stocks traded at their Right prices we won’t need most of the analysts. The very deviation from the right price warrants the existence of the research industry.
In essence stocks are almost always trading above or below their fundamental price. That is to say they are almost always overbought or oversold. BLAHHH
7) We are cautiously optimistic…..
You are also an oxymoron.
When analysts think the market will go up but don’t want you to come for their throat if it doesn’t they say we are cautiously optimistic. Peter Drucker says ‘What can be measured can be managed’. This statement cannot be measured. If the market goes down we were cautious and if it goes up we were optimistic. (Round of applause)
8) Smart money is entering into the market OR investors are fleeing the market…..
At every point of time each stock is owned by someone. Investors can never flee the market. If at all they do sell, they are replaced by other investors. But there is always an investor or a trader or a guy who has those shares in his demat account.
Besides who really knows the time frame and intent of the guy who purchased the stock? He may be a trader, investor, speculator or he may be an investor who needs money for some emergency and ends up selling the stock before he intended to. Nobody really knows. Neither does he.
Besides Smart Money is also secretive money. Smart money is smart enough to not let you know when it entered the market. That is Rule Number 1 of smart money. Don’t let anyone find out. And if you do find out later, trust me it is too late. You know what that makes you ? Not smart.
9) Earnings meet estimates / Earnings meet expectations but analysts were expecting a beat!!/ Earnings are positive but for one time charges….
BLAH BLAH and BLAHHHHHHHHHHH
When the weather guy makes a forecast and the weather does not match up. What do you say ? Weather estimates were wrong. But in stock markets, we blame the weather for being wrong. Estimates have to meet earnings to decide the quality of analysis and not the other way round.
When earnings meet expectations and analysts are not happy because they expected a beat, I want to beat myself up. Also, I want to teach them the meaning of the word Expectations.
Earnings are positive but for one time charges is the equivalent of I am a vegetarian except for the Beef Burger I eat only on Wednesdays.
10) We are neutral on this stock….
The other variation of this is to Maintain Hold. Wow! I can’t believe people get paid for that.
When you cannot come up with a Buy or Sell report what you are implying is that the stock is fairly valued. So say that. But you won’t because you don’t know what the stock will do next. Just like the rest of us.
I don’t have a personal vendetta against analysts. I trade and track stocks myself. My dearest friend too is an analyst. But I hate when people are misguided and they lose money.