Vegetarian Brokers And Their Ilk
Or, how we let our biases rule our logic! 9th Sept 2014.
I used to be a market maker in the trading ring back in the mid-90s. Among the stocks that I handled were Aquaculture stocks. There were many brokers in the market who would not buy these stocks because they were considered ‘non vegetarian’ in nature and hence not ‘worthy’ of being held. Any which way I look at this, I find this a ridiculous concept. Though many stocks from this sector went bust (and took my money with them), that had absolutely nothing to do with them being non-vegetarian. But a couple of survivors from that era have more than made up my losses in the others (Waterbase and Avanti Feeds). These two stocks are still flying and going from strength to strength. The profits from any trade or investments in these stocks get me the same Mahatma Gandhi- wale note that I get from Tisco or Tata Power. The colour of the money doesn’t change because the company is selling prawns or lobsters!
This is sheer personal bias that prevents otherwise rational people from seeing the reality as it is. Another area where this is prevalent in a much more serious way is the conversion of trades gone badly into investments. As though converting losing trades into delivery based investments will undo the mistake that you have made! All you are doing is sweeping your error under the carpet and hoping that no one would notice! Most of all, you yourself! Another variant of this is to convert into long term investments of the short term or momentum picks that did not come thru. This silly practice is indulged in by practically the whole market and results in more junk accumulating in your portfolio than even a deliberate attempt to build a junk portfolio will! It is bias of a different sort- that one should not book losses! The truth of the market is that only the man who knows how and when to take his losses survives and flourishes in this market. The rest have ‘portfolios’ which are really NPAs!
Recently I read that a leading commentator spoke against investing into MCX on the basis that the business is only about buying and selling and gasp, gasp, about selling short!! Oh my god, said that commentator, can you think of something as terrible as someone selling what he doesn’t own? Therefore an exchange that facilitates this should be ignored as an investment. Almost went to the point of calling that business unholy or sleeping with the devil or some such evil thing!! How incredible that such view can be held! The whole world thrives on trading. Any commission based work is based on trading. It is only for the uninitiated and the suckers that trading is a zero sum game. The rest of us are making a very nice living off it, thank you very much.
Commentators, particularly in influential places should be careful that they don’t allow personal biases to cloud fundamental truths about businesses. If you are a vegetarian it in no way means that a business dealing with meat export or poultry farms or eggs will not do well. Or those profits from those shares are tainted. If you don’t know how to trade, never learnt it, never bothered to meet up with people who make a very comfortable living from it, don’t go around making statements that it is not for the common man. It is just not for you. Don’t think that your bias goes for the rest of the populace.
And finally, the market doesn’t give a hoot what your bias is. It is going to do what it is going to do. Forever. That is the only truth.