The Share Market Bull Run Infection

The Bull Run InfectionEvery few days, newspaper frontpages announce the Sensex’s march past another milestone, 10000, 15000, 20000 and so on. You have photos of brokers jumping for joy and quotes from experts. Business channel hosts are all smiles and it feels like it’s already Diwali. Media portrays the event as a big win for India.

Why the markets surge when nothing seems to have changed or why they crash suddenly is beyond the understanding of every expert, let alone a layman like me. There’s always some exotic reason put forward, like change in interest rates in Timbuktoo. However the fact is that no one knows. If the experts knew, wouldn’t they be making millions and then relaxing on a private island rather than giving tips on TV all day?

Most young professionals today are dabbling in stocks. In many companies, share trading portals are used more often by the employees than websites about the company’s business.

Who doesn’t want to make a quick buck? It is human nature to bet and bid and want luck to do the trick rather than ability. Lottery, gambling, and horse racing have always been around but the share markets now seem to have emerged as a more dignified form of gambling for the educated. A young educated IT professional wouldn’t be caught dead at a lottery shop but will blow lakhs on hunches, guesses and tips about some stock.

A few years back, like everybody around me, I too registered on ICICIDirect hoping to outsmart the masses and make fortunes from nowhere. I did make money, as making money has been a fairly brainless activity over the past few years. Almost all share prices have just keep rising all the time. It would however be stupid of me to start thinking of myself as a banking or petrochemicals business expert only because those stocks made me money. Even my 2 year old nephew was just as likely to make that much money.

So is it just luck that I am to rely upon to get me returns? Is this just gambling in an acceptable avatar? There is some skill involved in picking a stock, but then even gambling and horse racing requires skill with cards and horses respectively. Yet these forms of making money are by and large considered improper for ordinary citizens as cards and horses cannot be the primary skill of the common man.

It’s an ethical question for the individual investor and not for mega businesses or the stock markets. Also should someone spend time tracking stocks of businesses where he has no say or should he invest that time and energy into his own business or profession? A number of software professionals I know, spend more time tracking the markets than they spend in upgrading their core business skills or their knowledge of software and technology.

Strangely governments seem to want people to play with stocks and money. The government says that to save tax, buy certain kinds of funds, take loans and what not. The finance minister also regularly offers share market advice to the people. Share trading seems to have become an addiction. Like people in casinos keep playing till they lose, share market investors never stop. I find share markets even riskier than casinos as with a slot machine, you know for sure that it is just luck. In the share market you like to think that it is skill and expertise that is making you money when in reality, it is still primarily luck.

If tomorrow someone asks me to lend them a 1000 rupees at a certain rate of interest for a new technology business, I would probably consider the proposal as not only do I have some understanding of the business but I can also judge if the business can perform well enough for them to pay me the promised sum. However I certainly will not lend, if someone asks for money to start a new oil refinery, give no guarantees for even the capital but just tells me that for some reason my money might suddenly double one day.

I am not questioning the need, working or the use of the markets. I am also certain that the stock markets can make a person a lot of money. I am questioning the over the top interest from individual investors. Shouldn’t we be focusing on our areas of competence rather than joining the hordes and hoping that luck will make us rich.
(Published as “The Bull Run Infection” in my fortnightly column for the Maharashtra Herald)