Someone has rightly said, “the best way to lose money is to look for a rational investment strategy in the stock market”.
With markets around the world playing with the nerves of all investor class, be it big or small, no one has the faintest clue as to where we are headed. Each one is looking towards the other for some definitive clues to give some sense of where we are heading but to then its like a blind man guiding another one. The memory of equity markets are very small and with the rally as sharp as the current one having taken everyone by surprise, people are now feeling left out. These are the same people who were all predicting that the worst is yet to come and more downside is there.
Now every 5-10% dip in the markets is seen as a buying opportunity by this same class of ‘investors’ / ‘traders’. It is this class of people who are giving all the support to the markets on the downside. Whether we call it god’s gift or shere irrationality, only time would tell. One thing is for sure,”money can neither be created nor destroyed, it only changes hands”. We all know the old and time tested and all so cliche teaching of wallstreet “buy low sell high”. What is confusing is that there is no scale to measure high and low. what might seem a high for someone, might be the low for another, else there would be no transaction in the first place. If everyone in the market had the same levels in mind, then there would be no buyers at higher levels and no sellers at the bottom. So it is important to understand that value is a measure whose magnitude and boundaries varies from person to person. It is this basic feature which sustains all trades in the world, be it in any form. Equity trades are no less different and as long as this irrationality persists in the market, we could continue to see higher levels in global equity markets, unless we are awaken one fine morning with the realization that all is not well, like the credit burst of 2008! Till then play to the music of the market….
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