Here's why we've stopped worrying about scams
In this issue:
» The sectors that will put up better results
» Will Spain suffer a lost decade like Japan?
» The Black Swan author on how to prevent another financial crisis
» Oil supply is not an issue, says Saudi Petroleum minister
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Well, India may not be standing at a similar crossroad currently. But the mood isn't quite upbeat either. Scam after scams are tumbling out of the Government's closet and the economy too seems to have slowed down to a crawl. Thus, it does appear as if a clump of rust has gathered around the India growth story. However, as the US example shows, an Indian investor would be making a big mistake if he starts betting in favour of these scams and inflationary trends lasting forever. For these events happened in the past as well but the Indian economy took them in its stride and continued to march forward. It is not for no reason that Indian equities have returned close to 17,000% since the Sensex was rebased to 100 back in 1978-79.
You see, the key to making money in stocks is not trying to find out which scam will happen next or which party will come to power. It is about trying to ascertain how fast cars fly off the shelves in India, how people queue up outside a spanking new multiplex to catch their favourite movie or how people buy snazzy new cell phones every few months. And as long as these activities continue unabated, as long as the wheels of commerce are chugging along, politics can go take a hike we believe. This is the strategy that has made people like Peter Lynch and Warren Buffett rich and successful. There is no reason why the same wouldn't give you a shot at wealth and prosperity as well.
Do you think it makes sense to overlook significant negative events and invest for the long term only? Share comments with us or you can also comment on Facebook page / Google+ page.
01:26 | Chart of the day | |
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Source: Team Lease |
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Renowned economist and author Nicholas Nassim Taleb takes us back to the roots of the financial crisis. As per him, the financial crisis was the result of a mix of wrong incentives, immoral practices and use of complex financial models to manage risks. But the interesting thing is that he doesn't stop at just pointing out the dirt. He also offers a very simple yet powerful policy recommendation that would avoid such catastrophes in the future.
According to Taleb, the best way to deal with complex problems is to have simple protocols. His solution is to apply this basic principle to the financial system - "The captain goes down with the ship; every captain and every ship." He explains this with a very interesting anecdote from history. It may sound surprising but the best risk-management rule was devised nearly 4,000 years ago by the Babylonians. One specific rule went thus: "If a builder builds a house for a man and does not make its construction firm, and the house which he has built collapses and causes the death of the owner of the house, that builder shall be put to death." Will the policy makers of today implement a similar rule where all parties are held equally responsible? We doubt. But we still hope.
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Thus, Spain not recording much economic growth for years is a scenario that is very much in the realms of possibility. Which is why Spain's likely decade of lost growth could very well be akin to that of Japan in the 1990s. Throwing money at these problems will also be of no help given that consumer sentiment has dampened and consumption is on the wane. All this only means that Europe has some tough years ahead of it and an overall recovery seems unlikely anytime soon.
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04:57 | Today's investment mantra |
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3 Responses to "Here's why we've stopped worrying about scams"
Sundaravaradan S
Mar 29, 201220th Century:
Very thought provoking article! i mostly agree with the statement ' In the LONG Term', the Investment in Good Business, will yield better return than inflation.
Why???
As long as the population on this Earth increases, the demand for Goods & Services will increase.
The supply from the earth? Some are limited, as of now (Fuel, Metals, Land, Earth, water etc.). Some thing new will be discovered: Efficient conversion of Solar, Wind, Wave, Gravitational, Water... energies.
So the fight between demand & supply will go on! So do the Innovative Business.
We just have to keep finding good business, continuously!!
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Captain of a Ship:
Those days, a Captain identified morally with his Ship; Captain was the last to escape, if at all.
I do not know, what is the current situation?
Pilot of Air-Craft Fighter:
He has the benefit of ejecting himself, first! (Like American Banks) or the whole Country will come to help him, to save his Customers (even if he faults).
He need to try the culprits in International court and GRILL them LIVE!
jpsbajwa
Mar 29, 2012Interesting wrap up.....I'm positive about cement,IT,and telecom sectors coming out with better numbers next month onwards...
jagdish
Mar 31, 2012as long as Indian economy is prospering by way of purchases of young generation the stock marketwhich which is is reflection of our economy will give high returns if invested wisely inspite of scams that are surfacing daily.