Nobody knows Anything

Markets have been falling across the board. Some indices more than others. Auditor resignations, Additional Surveillance Measures, Trade wars, Oil prices, the list goes on…

The live tracker of stock recommendations for 2018 by the major research and fund houses is down 12% for the year, with 72% of recommendations in the red.

There is a general sense of “Oh crap!” about all that’s happening. It’s like that scene from ‘The Matrix Reloaded’ when Neo (the market) battles hundreds of Agent Smiths and they just keep coming and overwhelm Neo.


Times like these, it’s natural to look for guidance. For someone to look steadily into your eyes and make definitive statements about what’s coming in the markets. You might prefer someone who’s bullish on near-term prospects, but might be willing to settle for someone who confidently predicts a short duration of pain followed by a rally. Certainty is what you crave.

And financial media supplies that certainty, with experts with impressive credentials. Comfortingly precise estimates of index levels or timelines at which markets will bottom out and resume their upward march or more dire predictions of how this will be worse than 2008 because markets are more connected.

It’s all meaningless. Tracking down what various commentators have said before and after the fact leads to the stark conclusion. Expert predictions tend to be extrapolations of recent trends and not much more.

Not convinced? Consider the sequence of financial news and commentary from Sep 2007 to Mar 2009, from just before the financial crisis to a while after. I have listed all relevant financial news in those periods courtesy google time-range searches. The urls to those news articles are listed at the bottom of the post.

Sep 17, 2007 – Jan 14, 2008: Breakout

The markets did this.

The Calm Investor | Analysis India Stock Market

NIFTY up 38%, NSE 500 up 40%

This was the market commentary in that period:

Expectations of continued up moves. Commentary for sectors poised for (more) growth. Overall sentiment entirely positive.

Sep 19, 2007: The rise, and rise of the Sensex [all links to source news articles at bottom of post]

Sep 20, 2007: KP Singh pips Anil Ambani as 2nd richest Indian

Dec 16, 2007: FMCG & Pharma: Down but not out

Dec 17, 2007: Housing stocks are a good long-term bet

Dec 27, 2007: NIFTY at 6,950, Sensex at 22,880 by July 2008

Jan 07, 2008: Sensex may cross 27,000 in first half of 2008 (Sensex was at 20,300 at this time)

“Even if we keep aside this over-optimistic view, the target of 27,000 could be achieved and that too most probably in the first half of 2008.”

Jan 15, 2008 – Mar 17, 2008: Sharp correction

The Calm Investor | India Stock Market Analysis

NIFTY & NSE 500 down 27%

Most commentators called it a temporary correction. Return expectations tempered but still positive and bullish, especially on specific sectors.

Jan 21, 2008: 10 stocks to make young investors crorepatis

List includes Reliance Industries, Reliance Petro, Gujarat NRE Coke, Tata Steel, Hindalco, Sterlite Industries, Sesa Goa, RCom, Tata Motors, ICICI Bank, Reliance Capital, L&T, Patel Engineering, Glenmark, Cipla, DLF, Unitech, Sobha Developers

Jan 23, 2008: 20 stocks that can make you rich

“The current mayhem in the domestic stock market provides an opportunity to buy quality stocks at cheaper valuations. After the bloodbath in the last few days, which saw bouts of selling across the board, many experts believe that this is the right time to identify and pick good stocks, as valuations are fairly attractive relative to fundamentals.”

Jan 27, 2008: (India) still looking good

“I expect 2008 to be tougher, yet a positive year for Indian equities. Valuations overall are not really a big concern once embedded asset values are considered, but further P/E (price-to-earning) multiple expansion looks unlikely,” adds Ratnesh Kumar, Managing Director & Head India Research (Equity Strategy)”

“We expect it to touch a high of 24,800 this year,” Dhanokar says. “It will not be an easy ride as we will see bouts of volatility with the Sensex even expected to witness twin dips that can bring it down to a low of 17,150,”

Jan 29, 2008: BSE brokers blame bull vaastu for bear maul

Feb 12, 2008: Reliance Power stumbles. So does the stock market

“Reliance Power listed at Rs547, a premium of 21% to its issue price of Rs450, but selling pressure pulled it down to Rs355.05, a 21% discount to its issue price, before it closed at Rs372.30 a share.”

Feb 14, 2008: What’s a recession? How will US slowdown hit India?

“The whole of Asia would be hit by a recession as it depends on the US economy. Asia is yet to totally decouple itself (or be independent) from the rest of the world, say experts.”

Feb 15, 2008: NYSE to pick up 5% stake in Multi-Commodity Exchange

“The size of the deal with NYSE is not known. But a recent transaction in MCX had put the valuation of the exchange at around $1 billion. MCX is promoted by Mumbai-based Financial Technologies (FTIL). FTIL shares rose 4% to close at Rs 2,093 on Thursday.”

Feb 18, 2008: 10 good construction stocks to invest in

Feb 26, 2008: World’s largest hedge fund firm now in India

Mar 02, 2008: The best investment options – Budget 2008 special

Mihir Vora, CIO, HSBC Mutual Fund. “I don’t see short-term taxes having any major bearing for the long term. On the whole, the Budget is neutral to the overall market. However, short term volatility cannot be ruled out due to global factors. I see markets stabilising in two-to-four months,”

Mar 03, 2008: FMCGs, in the fast lane, globally

Mar 18, 2008 – Mar 13, 2009: Crash & the grind downwards

The Calm Investor | NIFTY NSE500 Index

A stream of bad international and national news. Except for a few mildly bearish statements, market outlook/index target statements dry up. Except for the RJ statement, none mention cheap valuations and opportunity to buy

Jul 4, 2008: Sensex can go below 10,000

“Sharma is the closest India has to a bear.”

Sep 14, 2008: Markets may remain under pressure

“World markets are likely to pressurise the domestic market downwards… We will maintain a cautious outlook in the coming days as a negative bias is expected to continue this week,” brokerage firm SMC Global’s Vice-President Rajesh Jain said.”

Oct 13, 2008: One-fourth of BSE 500 stocks trading below book value

Dec 4, 2008: Infosys to freeze new hiring, no job cuts

Dec 11, 2008: Rakesh Jhujhunwala sees Sensex rising on valuations

Dec 27, 2008: Stocks that did the best in 2008

Notable winners in 2008 – HUL: 20.5%, Hero Honda: 16%, Glaxo Smithkline Pharma: 9%

Jan 7, 2009: Sensex slumps on Satyam fiasco


Reading definitive points of view explaining short-term market movements is comforting, but a waste of time. The experts presenting their points of view fall into two categories:

1. Those that know they don’t know and it is a waste of time. But saying “I do not have the slightest clue where markets are headed” won’t get you invited back to the CNBC studio so they say/write something infused with enough uncertainty to not be particularly useful

2. Those that don’t know they don’t know. More dangerous since they tend to make precise assertions bristling with confidence. They are the ones on the early part of the Dunning Kruger curve where confidence far exceeds their real knowledge of investing.

Unfortunately, when it comes to the future, nobody knows anything.

Breakout links–down-but-not-out/story/1017.html

Sharp Correction links

Crash & Grind Downwards links

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