Control

Who’s in control?

You?

Market?

Does the market control you?

Do you control yourself?

How do you answer this?

Why are these questions relevant?

Control is pivotal. 

It sets the tone for market life, and its overhang affects normal life too. 

That’s why it is essential to have such control in one’s hands, and not hand it over to Mrs. Market. 

So, how does one answer this question?

What triggers you to open your terminal?

The market?

Or you yourself, at a time and place of your own choosing?

If your answer is the former, the market controls how you act.

However, if you decide when and where to let market forces into your life, and for how much time, well, then you’ve not handed over such control. 

Bravo!

How did you position yourself to achieve this?

Primary income not from the markets? 

Not.

Don’t listen to tips?

Don’t.

Have a set time for work?

True.

Have a set place for work?

Roger.

Have a set system that’s implemented?

Affirmative.

Watch market TV?

Nope. 

Read financial news online, or in print?

Only while researching a company.

Do your own solid research?

Do.

‘K, you’ve not handed over control all right.

Sure. Hand over control and the next thing you know it’s your life you’re handing over. 

Advertisements

Impedimenting II

Is this even a word?

You know, I don’t care. 

It gets a lot across. 

Isn’t that what matters?

I care about what matters. 

I don’t care about what doesn’t.  

What do we understand by “impedimenting”?

Putting stuff in the path, right?

Yeah. We put stuff in our path, deliberately. 

Are we mad?

Would one put stuff in one’s path, oneself?

Yes. We would. We are not mad. 

Amongst other things, markets…

…fall.

Amongst other things, we as market players are…

…trigger-happy. 

We need to let the fall deepen. 

Our action must be staggered. 

How does one stagger one’s action. 

This is done by putting impediments in the path. 

I can tell you about my ones. 

I start the day with exercise and prayer. 

Then comes a good meal. 

Coffee.

Paper.

Notes.

Emails.

Market study.

Writing.

Charity work.

Anything pending. 

It’s already well, well past noon. 

Back to the markets. 

Dust has settled. 

More study. 

Then, there’s two hours to do whatever needs to be done in the markets. 

Markets end. 

No more market work for the day. 

Out of the two hours for action, I only act during half an hour, or an hour. 

How many mistakes can I make in half an hour?

Sure, many. 

However, a lot lesser than those others can and do make in six and a half hours. 

Success in the markets is all about getting a handle on our mistakes. 

In long-term play, less is more.

You Miss, I Hit

We’re in the markets to…

…capture gains. 

How do gains come about?

Buy low sell high?

Sure, you’ve then got some gains. 

Enough?

Probably not, because everyone of us holds enough losers. That’s part of the game. Amongst many losers, we then find a winner.

How does one maximize gain?

One looks for mispricing. 

Let’s say we’ve id’d a stock. 

It passes our entry criteria.

Now, we look for an entry point that will give us a price advantage. 

We would ideally like the public to misprice the stock on the downside. 

That’s when we would like to pick it up. Higher the misplacing, higher our advantage. 

When is maximum gain captured?

This happens when the same stock is mispriced by the same public on the upside. 

Is such a strategy easy to implement?

Sounds easy, but NO!

Why?

(For starters), That’s because it goes against our grain to buy something really low, for fear of it going even lower, since sentiments are so down. 

Can well happen. You buy something really cheap, and before you know it, your something is down by another half. 

What’s your protection?

Rock-solid research. Identification of sound fundamentals. A shareholder-friendly management. Technicals that support you. Mispriced entry point. Product-profile that’s going to be around. Lack of debt. Substantial free cash flow. Etc.

If you’ve got such pillars going for you, it’s only a matter of time till they start to shine forth. 

If mass-depression causes you to wilt, though, it’s on you. 

Mispricing on the upside causes us to blunder too. 

Most sell their big winners which still have sound fundamentals, and can potentially go on to bag much higher multiples. 

Do this, sure, but only if you NEED the money. 

If not, give your potential multibaggers the time to become full-fledged ones. 

Sell early, and you won’t perhaps ever find another entry point. Winners barely ever give an entry-window. 

At market highs, sell your losers, because they’ll perhaps be inflated too, and you might get a good exit. 

When others misprice, make sure you hit some home-runs. 

Listening to Time

Market work…

…has some eccentricities.

One can’t work in the markets all the time.

That’s normal, right?

Well, yes and no. 

At a place of work, one should be able to work. 

Markets don’t always allow work.

So don’t other work places, sure. 

At other times, you don’t feel like doing market work. 

Aha. 

This happens multiple time a year. 

What do we do here?

We create an environment that incorporates this eventuality seamlessly. 

First up, why is this incorporation essential?

Let’s assume that we need to work in the markets all the time. 

When we don’t feel like, and we have to, well, then, we are likely to make mistakes. 

Read mistakes as losses. 

Mistakes in the market translate into losses. 

(Amongst other things), we are in the markets to …

… minimize losses. 

Therefore, when we don’t feel like doing market work …

… we just sheer don’t do it. 

So, back to square one, how do we incorporate this seamlessly?

By making market work our secondary source of income.

Our basic income needs to be sorted through our primary source. 

Now, we can shut off the markets at will without this affecting our basic income. Whether we can also emotionally detach is a discussion for another day. 

There are times when one just doesn’t feel like opening up the terminal. 

Listen to such times. 

Shut out the markets at will…

…only to open them up again when they’re a go for you.

We’re still at step 1, which you’ve just cleared for yourself. 

Now we try and gauge whether times are such that markets allow work.

Listen to such times. 

When you feel like working and markets allow you to work, go all out. Exhaust existing work potential. 

When you feel like working, and markets don’t allow work, do other stuff. Get your research ready. Become poised. 

Sooner than later, your action criteria will be met…

…and you will be able to act. 

The Cue from Disturbia

I am disturbed. 

This stock that I’m invested in is continuing to fall. 

That’s ok.

I want to be disturbed. 

That’s my cue…

…to invest more in the stock.

I’m in the stock for a reason. 

Something appeals to me. 

That something continues to appeal to me, despite the continuous fall. 

If that were not the case, the case for the stock would be closed, and one would look to get rid of it on a market high. 

However, that is the case,…

…and, I follow the small entry quantum strategy.

Where does that leave me?

My investment in the stock is small.

I am liquid.

That’s the beauty of the small entry quantum strategy.

It leaves you liquid.

Continued fall means better margin of safety, and that another quantum can go in.

The small entry quantum strategy ensures multiple entry opportunities as the stock continues to generate margin of safety.

When do my ears stand up?

When the fall is disturbing enough. 

The fall is the cue to go in. 

It is from Disturbia. 

Who said making money was easy?

This strategy works as long as one’s research is sound. 

Let’s go with what works.

Where do you want to be?

Where do I want to be?

Do I want to look at a stock price and know where things stand with the stock in question?

Yes.

That’s where I want to be.

It’s not going to come for free.

What will it take?

Looking at the stock…

…for an year or two.

That’s what it will take.

How boring, you say?

Sure.

When stock market investing seems boring…

…that’s when you’re doing it right.

Excitement and roller-coaster rides are for video-game pleasure, and for making losses.

Money is made when it’s outright boring out there.

Where do you want to be?

In the money?

I thought so.

Then, please get used to boring and don’t ever complain again that things are boring.

How does one position oneself in such a manner that one studies a stock for an year or two.

Hmmm.

Let’s put some skin in the game.

I know, this phrase is becoming more and more popular, what with Nicholas Taleb and all.

Yeah, we are picking up stock.

What stock?

The one we wish to observe for an year or two.

Why pick it up? Why not just observe it?

You won’t. You’ll let it go.

Why?

Because it’s not yours.

So we pick up the stock? What’s the point of observing if we’re picking it up now?

Well, we’re picking up a minute quantity – one quantum – now. That gets our skin into the game. Then we observe, and observe. Anytime there’s shareholder-friendly action by the management, we pick up more, another quantum. We keep picking up, quantum by quantum. Soon, while we’ve kept picking up, we’ve observed the stock for so long, that now, one look at the stock price tells us what kind of margin of safety we are getting in the stock at this point.

Wow.

Now, future entries become seamless. One look and we have a yes or no decision. Isn’t that wonderful?

Absolutely.

That’s where we want to be.

Happy Eighth Birthday, Magic Bull!

Hey,

Today, we turn eight.

This is an extreme time.

Extraordinary moves have become normal.

How do we react to a world full of upheavals?

Does anyone have a satisfactory response?

We don’t know, and time will tell if our responses are correct.

However, we do know, that we possess common sense…

…, and we are going to hold on to it for all our life’s worth.

It has not come for free.

It has been earned after making costly mistakes.

It is very valuable.

It is going to see us through.

The topsiness and the turvyness is good for us.

It will set up opportunities.

We are only going to grab opportunities.

When there’s no opportunity, we do nothing.

We have learnt to do nothing.

Doing nothing actually means no entry.

We use this time to do due diligence for the future, when entry is allowed as per our entry criteria.

Doing nothing is a steady part of our repertoire.

However, when opportunity comes, we are going to let go of all fear, and we are going to pull the trigger.

We know how to pull the trigger.

We are not afraid.

Why?

We are debt-free.

Our basic incomes are in place.

Our families are taken care of.

Without that, we don’t move.

We invest with surplus.

We implement a small entry quantum strategy.

We enter again and again and again, upon opportunity.

Because of our small entry quantum, we are liquid for life.

Crash?

Bring it on.

We’ll keep going in, small entry quantum upon small entry quantum.

Don’t forget, we have rendered ourselves liquid for life.

And, we’ve got stamina!

Happy eighth birthday, Magic Bull!