Bulls, Bears and Other Beasts

Notes from the book

1. One did not need a fancy degree or even formal education to succeed in the stock market.

   1. With a bit of skill, perseverance and, most importantly, luck, there was no limit to the money one could make trading in shares.

2. There are plenty of rags-to-riches stories on Dalal Street that get talked about often.

   1. What doesn’t get publicised as much are the riches-to-rags stories, which far outnumber the success stories.
   2. People get carried away, thinking it is easy to make money in the stock market, and learn the truth the hardway.

3. Short selling means selling the shares without owning them, in the hope that shares price will fall and that you will be able to buy them back cheap.

4. No matter how big or accomplished a player, nobody can correctly predict the top or bottom of a stock

5. There may be plenty of fundamentally sound companies. But you can’t make big money unless you are able to buy them cheap.

6. Higher rate means. company has to pay more on their loans.

   1. This squeezes their profit margin
   2. This will cause stock prices to fall in anticipation of reduced corporate earnings

7. When people can earn 12 per cent on their fixed deposits without breaking a sweat, why would they lose sleep to make 20-25 per cent from equities (where the risk is much higher?)

8. It is only when everybody tells you to buy a stock or sector that you should have second thoughts about them.

9. When stocks became ovrevalues and people tried to justify it rather than admit they were expensive, it is time to book profits.

10. Once overconfidence creeps in, it creates room for indiscipline, and bigger errors of judgement follow

11. In January 2002, Bharti Tele-ventures announced its IPO, the 1st 100 per cent book-built issue in the history of Indian capital market

    1. In a book-built issue, the price is discovered by gauging investor demand for the shares.
    2. This is different from fixed price IPO, where the company offers shares to the public at a price decided by the company

12. The easier it becomes to make money off the shares, the closer you are to the day of reckoning

13. Strong Capital flows was a good thing, but excess of it spelt trouble as it would make the Rupee too strong

    1. By extension, Indian exports uncompetitive

14. One sure sign of trouble is when businessman and traders outside the stock market start heading to the market, convinced this is the place to make good money

    1. The problem is they ignore their main business and start chasing easy money

15. Bull market has no top; bear market has no bottoms

16. Never let yur ego hurt your judgement

17. Conventional market wisom has it that a blockbuster IPO usually signals the peak of bull run

18. About Stock Splits: Ten notes of ₹100 and one note of ₹1000 are same