Running in the big league
When our fund managers placed their bets on Citibanks, UBS, Merrill Lynch, Barclay etc etc, I thought it was a good idea. I still believe it was a good idea. Under normal circumstances, it was a window of opportunity opened for a little boy to enter the big league, on invitation. Even if the situation wasn't of the best, it should turn out well in the long run. We could be co owners of some of the biggest names in the financial world. Obviously things did not work out the way they were expected. Our losses were phenomenal. No numbers have been quoted except in vague percentage terms. The art of selective use of absolute numbers versus percentages has been honed to a fine skill in this paradise. My guesstimate is that the loss could be around $150b to $200b. Oh, let me be more precise on this. It is paper loss. And we outperformed the market and even trimmed our investments to 7% cash. Outperforming the market is a way devised by fund managers to tell investors that they have lost a lot of money but they are still cleverer than the market. As to the 7% in cash, good fund managers would probably have 70% in cash, not 7% or 10% or even 20%. What went wrong? On hindsight, we were in a hurry. We could also be too trusting of the Angmohs that came knocking at our doors asking for money. That was ok. The sore point is whether we have done enough homework and done enough to protect our investment if things were not what the Angmohs said they were? Placing such huge bets, in the billions, must be done with a lot of caution and hard facts. It is not betting in a casino! Everything is now water under the bridge. We would have to wait for the long run to recover our losses. There is this conventional wisdom that in a 30 year cycle, the prices of stocks and shares will outperform any kinds of investments. We will see what will happen in 2038. With the advantage of hindsight, any money put into the market today could probably double in less than three years. But the risk to lose everything is still there. The difference is that the risk is much lesser and the loss relatively lesser too. Many investors in the market have learned their hard lessons since the bull run of 1993 and the subsequent years of crashes. And they are still learning and still hurt by the present crisis. The important thing is to learn that old conventional wisdom may not always hold and investing with big money must be done carefully, patiently, unlike gambling in a casino.