Liqui-Deity

Ammunition. 

Ask the soldier about it.

Running out of it on the battlefield is the soldier’s worst nightmare. 

We’re soldiers too, in our respective fields of work. 

Our liquidity is our ammunition. 

What counts when an opportunity comes is how liquid we are.

When there is a market bottom, most of us are fully invested.

Is that sound strategy?

Putting together ammunition in one place is where it starts.

Holding on to ammunition and using it when most required – that’s sound strategy. 

Saving habits lead to accumulation.

Barriers hold the accumulated liquidity in one place. 

What are barriers?

Welcome to the world of self-created restrictions in an effort to have liquidity ready when one most needs it.

A dedicated bank account is what one requires first. 

Trading?

Link a bank account to your trading account, and use this one for nothing else.

Next, whatever accumulates in this account – take it away from your direct vision.

Meaning?

Block it as a fixed deposit. 

This is a barrier. One don’t see the funds as available. Thus one don’t feel the urge to use them.

When a trade motivates one enough to be taken, one then most need the funds. 

Break the FD.

Transfer the funds. 

Trade.

Has a trade just culminated?

Nothing else coming up?

Again, take the funds away from your direct vision.

Block them, either directly in your trading account, by putting them in overnight funds, or transfer them back to your bank account, if you know that you are not going to be trading for another week plus. 

Both options are valid. Do either. Bottomline is, the funds should not show up as available until you need them.

Investing?

Link a different bank account to your investing-only trading account.

Make multiple fixed deposits in this bank account, each one being one exact entry quantum in value.

Upon identifying an entry opportunity, whenever that happens, break one quantum’s FD, move the funds, and enter into the investment. 

Liquidity needs to be revered.

Unless we don’t give it proper respect, we will not have it at our beck and call when the next opportunity arises, whether we are trading or investing. 

Let’s go, let’s get our ammunition together, and let’s put it to great use.

Rewiring 3.0.3

We grow up, being taught to win.

Slowly, we learn to expect shocks, but only sometimes, in sparing intervals.

We prepare fancy resumés. 

Life must look five star plus all the time, that’s the standard. 

We see this standard all around us. It encompasses us. We become it, in our minds.

It’s not like that in the markets.

Markets are a world, where loss is our second nature. 

If we’re not accustomed to loss, we die a thousand deaths, in the markets. 

What kind of loss are we taking about?

Small…

…loss. 

Your stock holding going down to 0…

…is a small loss…

…when compared to another holding multiplying 1000x over 10 years. 

Both these scenarios are very possible in the markets. They’ve happened. They will happen again. 

How do we react?

Our stock going down to zero mortifies us. We do something drastic. Some of us quit. 

When our potential 1000x candidate is at a healthy 10x, yeah, we cut it. 

Then we quickly post the win on our resumé. 

We must look great to the world, at any cost. 

We keep reacting like this…

…and, like this, we’ll perish in the markets with very high probability.

We can’t take a hit, and are nipping our saving graces in the bud. 

When does this stop happening?

When we rewire.

Rewiring is a mental process that happens slowly, upon repeated market exposure. 

For successful rewiring to take place, real money needs to be on the line, again and again and again, as we iron out our mistakes and let market forces teach us the tricks of the trade. 

While we’re rewiring, we need to play small. 

When we’re partly rewired, we wake up to the fact that this is the age of shocks. 

High-tower professors who’ve never had a penny on the line and have put together theorems about six-sigma events (black swans) setting on once in blue-moons have led us to believe that black swans are rare. 

They are not. They have become the norm. Our first-hand experience of multiple black-swans in a row teaches us that.

Once we rewire fully, the expectation of black-swans as the norm is engraved in our DNA. Then, we use this fact to our huge advantage.

How?

We realize the value of our ammunition, i.e. our liquidity. 

Whenever we have the chance, we build up liquidity. 

We become savers, and are not taken in by the false shine of the glittery world around us.

Also, when markets are inflated, we sell stuff we don’t want anymore, boosting our ammunition for the next onset of crisis…

…and, we stop preparing fancy resumés.

Markets have humbled us so many times, that we now just don’t have the energy to portray false images. 

Whatever energy we have left, we wish to use for successful market play, i.e. to make actual money. 

When that happens, yeah, we know for sure that we’ve fully rewired. 

Welcome to rewiring three nought three. 

Sometimes, you don’t like it

Sure.

Like now.

Bloodbath in small-caps.

Alleged suicide.

NPAs.

Witch-hunt.

Did you choose Equity as an area of expertise?

Ok, then deal with it.

First up, India’s History is laden with scams.

We are where we are despite these.

Secondly, there’s growth. In other parts of the world, there is not much growth.

India is an emotionally volatile nation.

So are its markets.

Since this is where we act, let’s get used to things.

If you’ve been following the small entry quantum strategy, well, then you’ve got ammunition…

…at a time, when the value of this ammunition is immense…

…because lots of stuff has started to go for a song.

You do feel the pinch though…

… because whatever’s already in, is bleeding.

You don’t like it.

It’s normal.

Going in at a time like this, you will feel pathetic.

However, for your money, you are getting quality at cheap multiples. This will translate into immense long term wealth. Quality at cheap multiples multiplies fast.

Here are a few reasons you should feel ok about going in.

The small entry quantum strategy has rendered you liquid…

…after sorting out your basic family life, income-planning and what have you.

You are going in with money you don’t require for a longish time.

Muster up the courage.

Get over your pinch.

Engage.

Buy quality.

Debt-free-ness.

Shareholder-friendliness.

Generated free cashflow.

Transparency.

Diligent managements.

Product-profile that’s going to be around.

Less dependency on water.

Versatility.

Adaptibility.

Make your own list.

Use the stuff above.

Wishing you lucrative investing with no tears and with lots of smiles.

Let if Fall to Zero, I Say

Markets are correcting. 

The correction seems to be gathering momentum. 

Long-term portfolios lose out on net worth. 

Trading portfolios get their stops hit. 

It’s not pretty. 

Should one be worried?

Why?

Have we not taken worry out of the equation?

Sure. 

We have. 

We’re not worried. 

In fact, we want the correction to linger. 

Why?

So we can buy more. 

How long can you keep buying?

Till eternity.

How’s that possible?

Very simple. Do you have savings?

Yes.

Lovely. Do your savings grow?

Yes, month upon month, they do. I make sure of this by spending less than I earn. 

Even lovlier. Now take a very small potion of your total savings, and put it in the market. 

How small?

Small enough, such that if you were to put in that same small quantum on all off the approximately 220 days of the year that the markets are open, even then, your savings would keep growing at a representable rate. 

Ok. I see where you’re going with this. 

Absolutely. Now, suddenly, your whole perspective changes. You want your next quantum to go in. Thus, you want the correction to linger. 

What if the markets go up?

One keeps going in with the same quantum till one is getting margin of safety. No margin of safety anymore means no more entry. 

I see. That’s where your confidence is coming from.

Not entirely. You see, by the grace of God, I have made sure that my family’s bread and butter is secure before putting even a penny into the markets. 

Oh. Well done!

Then, whatever is going in, is surplus. 

Right. 

The rate of entry, i.e. the size of each quantum is minuscule enough to not pinch me upon the onset of a lingering correction. 

Great. 

Please note, that one gets one’s margin of safety on perhaps 20 – 30 days of the 220 days that the markets are open in the year, on average.

Really?!

Yes. 

That means that your savings keep growing at almost their normal rate of growth, because you’re rarely deducting from them as far as your long-term entries are concerned.

Mostly. However, what if a correction lingers for 2 years or more? Even at a time like that, you’ve got the ammo. 

Ammo, yeah, ammo is paramount. Don’t you feel like spending your savings?

I spend wisely. I don’t blow them away. I make sure, like you, that I’m saving more than I’m spending, month upon month upon month. However, I do spend.

Ok, now I’ve understood how you are so confident. 

I’ve not told you about my due diligence yet.

Oh, sorry for jumping the gun.

Due diligence is my most powerful weapon. I delve into a stock. I rip it bare. I get into the nitty-gritty (I wanted to say “underpants” originally) of the management, and let all skeletons in the closet loose. If there’s something crooked, it will emerge. The internet is my oyster. Nowadays, any and everything is available online. Mostly, a stock fails my parameters within the first 15 minutes of research. If a stock  survives perhaps three full on days of head-on research, that stock could be a likely candidate for long-term investment. Then, one looks for an appropriate entry point, which might or might not be there. If not, one waits for it. One could wait even a year. Markets require patience. 

Wow. Can I now say that I understand where your confidence is coming from?

Yes you can. 🙂

Ashes to Ashes, Bitcoin to Bust

Hey,

Sure, Bitcoin and all…

…everyone is humming the word.

Those who didn’t know of its existence a very short while ago, are all gung-ho about it.

Some experts are talking of a million dollars. They’re expecting it to touch a cool million per Bitcoin.

Other slightly conservative ones are talking about half a million.

Last month, someone thought it was chocolate candy that looked like a gold coin. This month, he’s just bought his first Bicoin. I think he paid the equivalent of almost USD 4000 for it.

Citizens are moving black money across borders with it.

It’s original signature exchange in Japan failed in early 2014.

An act of sabotage, perhaps?

Governments want it down.

The US will probably do everything in its capacity to stop Bitcoin from becoming the go-to currency of the future world instead of the USD.

Rumour has it that China has already imposed sanctions against it.

Well, well, well, what do we have here?

There’s a huge push and pull going on.

Who is pushing?

Launderers and terrorists, for starters. That’s where the bulk buying pressure is coming from. They don’t care about paying an extra buck to launder, or to buy weapons with. They’re applying real pressure, and the price has appropriately shot up.

Who is pulling?

Governments. Sanctions spoil the rise. A collapsed exchange enforces the law of gravity.

Where is this going?

Well, sure, who knows, but there’s a few things that one can say or even ask.

Has anyone seen Bitcoin?

What are its credentials?

Where did it come from?

Facts and not ghost-stories would be good here. Does anyone know the facts for sure?

Can one trust something whose whole exchange has once failed?

Now, with the Chinese move, God know what might happen?

Is the machine or device on which Bitcoin is stored not a target?

Where is the peace of mind? Can one sleep soundly with Bitcoin stored on one’s computer?

Bottomline is, there’s lots of ammunition in place to cause some massive landslides here.

Given that, there’s massive room for laundering and terrorism. The world’s launderers and terrorists aren’t done yet. Pressure will keep coming back in the current world situation.

It’s an ideal trading situation that has developed, both for the longs and the shorts.

Fine, trade Bitcoin. Make money. Good for you. I personally don’t trade it. Am happy trading stocks and currency instead, Those are my areas of expertise, and I don’t operate outside the areas of my expertise. However, if you’re making a killing trading Bitcoin, I’m really happy for you.

Just don’t do one thing.

Don’t get married to it.

Meaning, don’t pick it up at these 0% margin of safety prices, never then to let it go.

There’s so much ammunition that can bring it down, that one’s investment could even get wiped out during a swift crash, especially if it has been picked up on margin.

So, careful, people, careful.

Yeah, people, while investing in Bitcoin, tread cautiously. Wait for margin of safety to develop before picking up. Secure your device. Turn it off when you sleep. Back it up, if your backup can’t be hacked.

And…

…don’t bet the farm.