While Indian flags were fluttering proudly, global markets were selling off everywhere. One could not help heave a sigh of relief that our Independence Day had at least bought us freedom from yet another global sell-off. As we get back to our workstations on Thursday morning though, it is with the sagging feeling that the dark clouds have not blown over.
The seeming tranquility of the last couple of days is about to be disturbed by another wave of volatility. This is not unexpected as this phase of volatility is only three weeks old. Given how murky the sub-prime situation is, it would have been too perfect had global markets stabilised so easily.
The fundamental situation is quite confusing; what compounds the confusion is the polarised nature of expert opinion that is floating around. Views range from the ultra-bearish--predicting a global recession that brings the four-year bull market to its knees--to the super bullish who believe this is the best buying opportunity in a market set to jump back to newer highs. Both camps have blue-blooded voices and the arguments for either seem compelling and credible. Both cannot be right, though.
This game will have only one outcome. While it is always important to take on board quality opinion, coming as they do with decades of experience and wisdom, it is necessary not to get carried away by the strength of any argument.
This is not a school debating society where the guy who argues best takes the trophy. Opinions do not make markets, markets make opinions. There are other nuances, too. Some experts have been bearish for years now. At every stage of this amazing bull run they have been deeply sceptical and pronounced it a bubble waiting to burst.
At the first sign of genuine distress these experts will come out of their shells and shout "we told you so". Then there are the bulls, emboldened by the heady rally of the last four years. Drunk with the potion of success, refusing to believe that something can go wrong with financial markets, after all. Make no mistake, these are all highly intelligent people, much more so than you and I, yet their chosen stance on the market or their level of vested interest can play tricks with their minds. It is not just greed and fear, the market is a playfield for almost every human emotion and attribute.
This is not to say you ignore everyone. Far from it. In these times, investors need to be more aware of a lot many more things then they ever had to care about. Local and global.
Yet, it is equally important not to get swayed by one-sided opinion and make mistakes. Sometimes it is easier to ask the simple questions: does anyone really know how this situation will play out? Maybe not. Even if it gets quite bad in the next few weeks, is it likely to signal a multi-year bear market? Not impossible, but unlikely.
Are the chances of India heading into a long bear market from here high? Does not seem so, just yet. Could there be a deeper correction from here without signalling the end of the longer term bull trend? For sure. Should one take this bull run for granted then and be certain that things are not turning for good? No, these things never come with prior announcement, you need to monitor constantly and position accordingly.
Very few people are actually able to predict the onset of a bear market, in time. Talking to yourself often helps clear the mind, strangely sometimes even more than reading research reports from intelligent analysts.