Working Backwards

In trying to gauge the markets,…

… we work backwards.

What’s the starting point?

Current state of affairs.

One step back…

…is where the market is coming from. 

One step ahead…

…is the impact being had on the retail investor.

The rest is extrapolation.

Why are we targeting retailers?

This is because we wish to gauge market tops and bottoms. 

These are scripted by retail investors. 

At the top, retailers are left holding the hot pie in their hands, for which there are no further takers at that price. 

At the bottom, retailers rid themselves of stocks as if the world is coming to an end.

If we get a handle on how retailers are reacting to the market at hand, that’s huge.

This is working backwards in action.

We’re not first forming an idea about how the market should behave…

…and then we’re not trying to shove this perception down the market’s throat.

Because we are reacting upon what is happening, and not dreaming up what’s going to happen first, chances of winning are tilted in our favour. 

We’ve not invented this course of action.

Others have done it before, with huge success. 

We stand upon the shoulders of giants.

Here’s Steve Jobs on working backwards : https://youtu.be/oeqPrUmVz-o .

See?

It’s taken a while to get here, and also many knocks. 

However, we’re here now, and we’re here to stay!

So, Who’s Buying?

Yeah, who’s buying?

Superinvestors? 

Sure. Tremendous pipeline, great bargains, of course they’re buying. 

Who else?

Market-makers.

They buy and sell for a living.

They make the market for us to trade in.

Let’s forget about them for this discussion.

Anyone else?

The syndicate?

What syndicate?

I mean, is there even a syndicate?

Let’s not go into conspiracy theories. 

Whether or not there is a syndicate should not affect us. 

Moving on…

…think of anyone else?

Mutual funds?

Sure.

Lots of SIPs going in, a few NFOs doing the rounds, yeah, MFs are biting.

Foreigners?

More like exiting.

Hedge funds?

Busy trading I guess, won’t count them as strong hands, they’ll book a profit and will be sellers, over the short to medium term. 

What about retail guys?

Retail investors are scared. 

They’re tired of bad news. 

They’re tired of the markets.

Most have run away. 

Most of those who haven’t, want to. 

Is any retailer buying?

Well, the small entry quantum guys are. 

Why?

Firstly, they’re liquid.

Their strategy leaves them liquid, … , like forever. 

Till when are they going to buy?

As long as quality is selling cheap, they’ll continue to buy.

Are they scared?

No.

Why?

Their strategy gives them the courage to work on full throttle at times just like these. 

Times like what?

You know, bad news galore, whatsapps, lay-offs, scams, everything under the sky that can take place – is taking place.

And you know, bring it on. Gloom, doom, kaboom, and quality will start selling even cheaper.

We are loading up on quality and will continue to do so as long as it is cheap.

We’re happy that there’s a buying opportunity.

🙂