Waiting for Dr. Subbu

What started out in a forceful manner is now showing its true colors. The earnings season is under full swing and there are many losers here than those standing tall; and though revenue numbers are really very strong, profits are plunging like falling nine pins. Well, this is that phase of the business cycle where companies would try to raise prices, curtail expenses and try to secure profits. While doing this, typically revenues would stagnate and so would profits – in fact profits would move into losses for companies.

This is typically the bottom of the cycle and we are getting very close to it. The stock prices would typically take a final dip (over and above the 40% falls that many counters saw). This is the best time to shop around for bargains. I would imagine that the first half of the calendar is the period where this phenomenon would be wide spread. Beyond this, most of the bargain hunters would emerge and if the cycle turning around becomes eminent stock would start to move faster than you can capture or participate.

The denial mode for investors where they expect prices (stocks) to correct/fall before they buy again would come into play. Alas it becomes too late and it goes on higher and higher. Finally the cycle repeats on the upside as well. And there is a set of investor who like foxes (those foolish varieties) who always curse the sour grapes. They curse when the market falls that they don’t make money and they curse the market when stocks rise since they did not participate.

So it is important that we don’t become these foxes.

Today, was a breather sort of a day; a day where despite everything moving the index did not do much. The churn was evident. The banks were dancing and shaking a leg. Did Dr. Subbu whisper something in the ears of these bankers. God alone knows. Tomorrow, Dr. Subbu would announce some thing like – CRR, SLR and repo Reverse repo etc. up, down or holding same and the market would dance, frown and move.

Such is the importance of this man, since he could slow or hasten your decision on what you do with your money.

We are waiting.