At this point in time, there are dime-a-dozen reports about Artificial Intelligence or AI replacing humans and the increasing possibility of millions across the globe losing their jobs.
It was against this backdrop that I recently read a report of a tech company in the USA holding a lavish party in a fancy hotel for its employees and then following it up with an email terminating the services of 30% of the very same employees.
Reading this, took my mind back to around 1998 when one of the biggest Foreign Institutional Investors (FIIs) did the same in Mumbai. In fact, the employees thought they were leaving the party at one of India’s premier Five Star hotels with Gift Vouchers. They soon realised that what they mistook for Gift Vouchers in fancy envelopes were actually Termination Letters and final severance pay cheques.
They also realised that the FII had used the party that ran from noon to the early evening hours to lock down its office and shut its Indian operations. Every employee of that FII lost her/his job that day.
I remember this day, dating back a quarter century now very well for three reasons - firstly, a very close friend used to work there, secondly, the market crashed that day in the last hour of trade as they dumped all their shares as part of closing their Indian operations and last but not least, I lost heavily as I had an outstanding long trading position on a premier FMCG company whose share price rarely fluctuated too sharply.
Its share price tanked over 100 points that day and I worsened matters for myself by making the classic mistake of doubling my position once it shed 50 points. This was a classic case of ‘Catching a Falling Knife’ in the market.
I learnt a hard lesson that day. The very next morning, I changed my investment time horizon from a maximum of Seven days (Trading) to a minimum of Seven years (Investing). Needless to say, it made a difference. A big one -- and a positive one at that, over the last 25 years.
Does that mean, no market participant can make money via Trading? Of course not. Some surely can. The problem though is that Trading is a Zero sum game and more often than not, the only consistent winner when Traders participate aggressively is the Stockbroker.
I remember one of the first stockbrokers I got to know, offering rookie traders a standing commitment of a counter order with a weekly off-market all cash settlement. I saw many a rookie trader turning wiser over time, albeit poorer.
Almost nine times out of ten, the broker smiled and collected without even bothering to have looked at what stock the rookie trader had bought or sold and he had countered. Like I mentioned, Traders can make money and I could be wrong, but as far as I am concerned, I found the Route to Wealth Creation via Investing.
Ashok Kumar
Head of LKW-India.
He can be reached at ceolotus@hotmail.com
(Views expressed here are personal)