One Eyed Man Is King In Land Of The Blind

Appearing to seem knowledgeable and insightful about the stock market is easier than you think!

Over the last few months, the financial press has been obsessed with the upward trajectory of the Indian stock markets. After a couple of lacklustre years, the bulls are galloping at a breath-taking speed leaving financial journalists exhausted. There are hordes of articles on the future of the financial markets; numerous experts claim that "this time is genuinely different" while others are more cautious. As discussions on the future of this gambling den take over social conversations, you can be lost amidst fancy jargon and numerous hypotheses. However, if you want to seem knowledgeable about this market without knowing an inch about it, the following 600 words will be of great aid to you!

Before we go on to what should be done, here is a bit of advice on what not to do!

While numbers and ratios are synonymous with the financial markets, using certain versions of them can kill your social charm. Avoid metrics like PE (trailing & leading), alpha, standard deviation, etc. They have been beaten down to death in every news studio and in every class since you were 13. In addition, technical analysis and talking of numerous spreads is a strict 'no no'. Such dry priestly sermons will rob you off your social charm. You have a better probability of winning over your audience by pretending to be Ed Sheeran than quoting technical analysis. While we are at actions that rob you off your social charm, using phrases like "long term potential", "India's fundamentals are strong", "consumerist economy" are equivalent to digging your grave and hiding in it akin to an ostrich!

Like most good things in life, I will divide 'what to do' into three key themes - high society numbers, dinner table theories and Dilli style name throwing. Let us get started!

While some metrics are bound to be dry and boring (refer the list in the previous paragraph), there are certain metrics for financial assets which come with an inherent rockstar charm. Quoting these can make you stand out in a crowd and give you valuable social attention. Some of these are Sortino ratio (risk of return falling below the required rate of return), Beta (volatility of asset with respect to market) and PEG (very very cool! Implies ratio between price of asset, earnings and expected growth). There are sound financial reasons why these metrics are considered higher society compared to their poorer cousins. Even if you are not aware why, quoting only these will implicitly convey that you are conversant with the reasons!

The financial markets are flush with abundant studies on them. Some of them are quite different and quoting them are a great way to draw social attention. For instance, monkeys throwing darts have been found to do a better job at picking stocks than Ivy League educated money managers. There are others that have proven that doing nothing in the markets (aka passive investing) is far more lucrative than testosterone driven active investing. In the last quarter, the stock markets of Ghana were the world's best performing financial markets!

Finally, in good old Dilli style, it is always good to throw a few names. Quoting opinions of controversial fund managers & analysts generate far more social attention. For instance, a Barclays analyst was arrested on allegations of cat torture. Or how a famous Indian born financial analyst was taken into police custody after targeting a leading financial services conglomerate. Despite their rich history, Berkshire Hathaway and their investments are considered old school. Quoting lines along "Mark Mobius reaches out to my Dad for regular advice" are at best avoidable!

For the more intellectually aligned, throwing names of books and quoting passages is a great magic trick. At social gatherings, entertaining passages from 'The Intelligent Investor', 'Barbarians at the Gate', 'Super Freakonomics' will be readily lapped up by all and sundry!

In conclusion, it is very easy to come across as an expert on the financial markets. A pinch of jargon, a tea-spoon of big names, an ounce of interesting theories and hordes of personal confidence go a long way in preparing a delightful dish. As long as your own money is not where your mouth is!