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The return of the Pied Piper of Hamlin

Investing in stock market is surely not for the faint-hearted. With its propensity to destroy the net worth of an individual, corporate or even a bank overnight, investment into the stock market is fraught with significant risks. It is also well known that the rewards are commensurate with the concomitant risks in the stock markets. But what intrigues me is fact that despite the inability of an average trader to stomach such risks, stock markets have become a habit nay a passion, why even an addiction for many. Neither is the stock market for the ignorant. For instance, in a highly integrated world, the happenings in distant America can make or break stock markets in India. But strangely, of late one finds the stock market infested with both the innocent and the ignorant, not only of happenings in distant America but even within India. Put bluntly, it has become a den for punting; an alternative to gambling with all its legitimacy. Naturally all these give stock markets a bad name.

But who cares? If this is not enough, news channels working 24 hours every day, for seven days a week and 365 days a year (this year they will work a day extra!) have found in this gullible audience the potential to exploit and conduct experiments. “The Nifty will get a support at 5200 levels” screams one self-styled expert. That very day the stock market tanked a cool 270 points and closed far below the levels mentioned by the expert. “The two-hundred day moving average is far below the fifty-day exponential average by 14%. Obviously the markets have not yet bottomed out and we are in for a good correction” howls another in yet another channel on the next day. The Nifty rises by a cool 345 points. And these guys are supposed to be “experts,” isn’t it? And on both occasions these Johnnies had assumed global cues to be at the root of their assumption.

All these left me flabbergasted. Naturally I went to my economics professor – now an octogenarian. “Sir, while I am not bothered by the gyrations within the stock markets, I am extremely worried about how quacks posing as experts in the media exploiting the vulnerabilities of the common man.” “Narada, you are right in a way. The success rate of these experts is only matched by the success rate of opinion polls in India. But while the later is a relatively harmless exercise, the potential of these experts to ruin innocent investors in indeed enormous.” That was old-fashioned. What else could you expect from an eighty year old economic professor? “But sir, investments are made by adults fully conscious of the risks involved and rewards involved.” Now it was the turn of my professor to call me old-fashioned! “Narada, this is a primordial assumption, Neanderthal idea and primeval concept,” he announced and like a professor who was about to tell something important lowered his voice and added “Such experts have huge interests in the stock markets. Being players their judgements are clouded by their personal likes and dislikes. Much as they disclose their positions, it is merely a farce.” I could not agree with him not disagree with him. However I did not muster enough courage to tell him that. “What should they do?” I asked, not realising that I had asked the right question. “Good question Narada,” replied my professor in an animated voice and added “We as viewers are not interested in the positions of these self-styled experts. And who knows whether it is correct or not. After all who has audited them? In my considered opinion it is important that every channel must carry out the success rates of these experts in meeting out their predictions in the past. And that to me is the correct disclosure.” I corrected myself about the opinion that I carried about my professor. In fact this is far ahead of the times we live in. Crucially it could well negate the perverseness of these experts who continue to act as the pied piper of Hamlin and leading innocent investors to their doom. Beware of this charlatan called the technical analyst.

Last modified on Sunday, 07 July 2013 07:36