Can this game make you a better investor?

Dec 1, 2012

In this issue:
» Global food prices continue to remain high
» Latest quarter GDP growth continues to disappoint
» Free enterprises are facing a challenge
» Japan government approves a US$ 10.7 bn stimulus
» ...and more!

---------------------------------- Market-Proof investments inside... (Last 48 hours!) ----------------------------------

Will the Sensex touch new heights in 2013 or are we heading for a market crash?

If you listen to the Investment Gurus on the television, you'll find there are people predicting both these positions... every second day.

Some say we are in for the biggest of the bull runs while the others say that they see a market drop up ahead.

The question arises... Is there a way to profit from BOTH these situations?

Yes, an investment which could create profits for you whether the market goes UP or whether it goes DOWN!

And we're happy to share that there is!

We're sure interested to know more.

However, you need to act now... This window of opportunity closes in 48 hours.

Click here for full details... and market-proof your investments!

You must have definitely played a game of checkers when you were younger. It's a simple two-person game involving an 8x8 board with back and red squares with twelve pieces on each side. Chess on the other hand is a much more complicated game, with a number of hypothetical outcomes. The greatest players of chess, Garry Kasparov, Anatoly Karpov and our very own Viswanathan Anand are pretty much celebrities in their own right.

But has anyone heard of Marion Tinsley, the greatest player of checkers that ever lived? Probably not. An article we read about him in Mercenary Trader caught our attention. Tinsley was crowned as the United States champion in 1948. And in his 45 year career he lost only 7 individual games! In two of these games he was defeated by 'Chinook' a computer program. He was the reigning world champion in 3 separate decades. And this was despite the fact that he didn't play for long periods of time. He was also a professor of mathematics at Florida State and Florida A&M Universities.

As they say, practice makes perfect. Tinsley's success resulted from years of deliberate practice. In his youth, Tinsley spent eight hours a day, five days a week, studying checkers. He continued to study the game, although less intensely, throughout his life. He had a phenomenal memory that allowed him to recall the flow of games he played decades earlier.

What's surprising is that a simple game like checkers was able to yield such a significant competitive edge. Checkers is just a game of red and black discs jumping over a board. There does not seem to be much scope for genius in that. However, Tinley's 45 year domination proves that there can be mastery in any competitive endeavor. There are certain activities such as riding a bike or boiling an egg where excess effort is wasted. But, in certain activities like trading or investing, significant rewards can be reaped by a mastery of simple processes and discipline. Haven't the greatest investors like Warren Buffett, Phillip Fisher and Peter Lynch had an unparalleled track record? Well, they were only able to do so by understanding a few simple rules of investing, tracking a few companies and mastering them.

Do you believe you can master the game of investing? Let us know your comments or post them on our Facebook page / Google+ page

 Chart of the day
Fraud cases are on the rise. The public sector (PSU) banks constitute over two thirds of India's banks and frauds involving these enterprises have been reported as Rs 64.6 bn in 2012 as per the Finance Ministry. This was much more than Rs 38.5 bn reported in 2011. Today's chart of the day shows that the number of fraud cases at some of India's top PSU banks continue to be at elevated levels. The Reserve Bank of India (RBI) is making an effort to sensitise banks from time to time about these frauds by issuing modus operandi circulars. The RBI has also advised banks to introduce an audit system and constitute a special board committee to exclusively monitor frauds of Rs 10 m and above. Let's hope these initiatives have the desired effects. With a slowing economy, rising bad assets, and elevated interest rates banks don't need to deal more problems.

Data source: Financial Express

The ghosts of the Lehman crisis are haunting the Indian economy once again. The latest quarter's GDP growth number came in at an abysmal 5.3%. The previous instance of sub 6% growth was just after the collapse of Lehman Brothers. But a swift recovery in the subsequent quarter erased that from our memory. This time though things seems very different. More importantly because the Indian economy has now grown at less than 6% for three quarters in a row. A far cry from the double digit growth policymakers were once targeting. No doubt the economy has lost momentum in recent years. The reason? A combination of investment collapse, fiscal profligacy, policy paralysis, corruption blame game and a weak global economy. Neither inflation nor fiscal deficit is likely to offer any breather to the economy anytime soon. As a result interest rate cuts can also be ruled out. While corporate India may be sitting on huge cash reserves, political deadlock on key reforms could seal India's growth potential for good. It is a 'now or never' moment for the government to step on the accelerator.

Fearing that Japan maybe on the brink of its fifth recession in a decade and a half, its government approved a US$ 10.7 bn stimulus on Friday. This is its second package in over a month. The country would be tapping into its reserves to spend towards rebuilding areas hit by last year's earthquake. It would also be spending towards supporting employment and small-businesses. A key factor that has called for this development seems to be the 0.9% contraction in GDP between July and September this year. As for the rest of the calendar year, a similar situation is expected. The IIP data released on Friday showed a few signs of encouragement. There was a 1.8% rise in industrial production during the period September to October. However, parameters such as job losses in sectors and industries that depend on exports to the developed nations indicate a bleak outlook. This is what necessitated the stimulus. But one has to remember that stimuli are nothing but short term boosts. What Japan needs is a long term plan for sustenance.

Global inflation in food prices has abated for now but prices continue to hover close to record high levels of 2008. As per the World Bank food price index, though food prices have stabilized they are still 7% higher than year-ago levels. Amongst food, grains witnessed the steepest escalation of 12% from year-ago levels. They are inching towards the all-time high level set during the global food price crisis of 2008. Severe droughts in the US Corn Belt and the food basket region of Black Sea fuelled the price jump in wheat and maize during the year despite slowdown in the world economy.

Even in India, poor growth in agriculture is decelerating economic growth. For the September 2012 quarter, the economy grew by a slow pace with agriculture registering a mere 1.2% rise. According to a report by World Bank, the 2008 global food price levels are a new normal. Prices are expected to be volatile in future thereby raising the risk of hunger and malnutrition in the world's poor nations. The World Bank has urged countries to increase investments in agriculture to scale up food production and fill in the demand gap that is pushing up prices. Although the Indian government has blamed low rainfall for slower farm output in September 2012 quarter, higher investments in agriculture are required to tackle slowdown and inflation in future.

'Free enterprise'. As per Investopedia, the phrase implies an economic system that places very few restrictions on business activities and ownership. It is the system of free enterprise that led to the growth of global conglomerates. When everything was hunky dory in the global economy, these conglomerates and big entrepreneurs thrived. But when things turned sour, these are the ones that are being blamed for all the woes. The latest entrepreneur to come under fire is Mr LN Mittal. His decision to close down a part of ArcelorMittal's operations in France has become a subject of contention with the French government. The latter has threatened to shut down all of ArcelorMittal's operations in the country. The reason for this harsh stance - the part of operations that are being shut down employs nearly 629 people.

In the wake of the economic crisis, the government views any decision that leads to a loss of jobs as a harsh one. The thing is that such a socialist stance has been adopted by nearly every government in the developed world. To combat the crisis these governments need to create jobs. If during such tough times the industrialists and big companies go on a firing mode, it adds to the governments' woes. The crisis has brought out the dark side of industrialization. The big industrialists are no longer forgiven for firing on one side to boost their companies' profitability. And on the other side leading flamboyant lifestyles of their own. This is true not just in the developed world. Things are not much different in India either. Signs of socialist policies have started to crop up. Companies are being questioned if they make supernormal profits. But will this mean that the entire world will turn socialist? Probably not.

It was a mixed week for global stock markets. The global and European stock indices were capped by uncertainty in US. The US stock markets closed the week a little unchanged (up 0.1%) as concerns regarding a stalemate in US budget talks weighed on the economic growth prospects. A weak economic data from Brazil and Canada further added to the global fears. The sentiments over the outlook for Europe have improved post a deal between Greece and the global lenders earlier this week. Going forward, the focus will be on US fiscal crisis due to its potential impact on oil demand. A delay reaching an agreement on the fiscal cliff in the same is likely to rattle markets and keep them volatile.

The Indian equity markets were up 4.5%, posting highest weekly gains since June. The increase was backed by the hope of reform measures to cap India's twin deficit and higher FII inflow. This was amidst a week GDP data for the second quarter of the fiscal. The GDP growth for the quarter ended September stood at a poor 5.3% suggesting that this could be the worst year for Indian economy in the decade. It has also raised hopes of some monetary easing at the next meeting of the central bank.

Source: Yahoo finance

 Weekend investing mantra
"I am a better investor because I am a businessman and a better businessman because I am an investor" - Warren Buffett

  • Test Your Warren Buffett Quotient Now!

  • Today's Premium Edition.

    Today being a Saturday, there is no Premium edition being published.

    Recent Articles

    All Good Things Come to an End... April 8, 2020
    Why your favourite e-letter won't reach you every week day.
    A Safe Stock to Lockdown Now April 2, 2020
    The market crashc has made strong, established brands attractive. Here's a stock to make the most of this opportunity...
    One Stock that is All Charged Up for the Post Coronavirus Rebound April 1, 2020
    A stock with strong moat is currently trading near 5-year lows.
    Sorry Warren Buffett, I'm Following This Man Instead of You in 2020 March 30, 2020
    This man warned of an impending market correction while everyone else was celebrating the renewed optimism in early 2020...

    Equitymaster requests your view! Post a comment on "Can this game make you a better investor?". Click here!

    3 Responses to "Can this game make you a better investor?"


    Dec 13, 2012




    Dec 10, 2012

    Warren Buffet's case proves the point.He is neither a Checker/s or Chess player.
    The Stock market is empirical with many factors involved.And throw in the nexus between the Governments and the Big Players.It becomes a ponzi scheme,especially,as obtains now.
    The following simple rules will help one to become a better,"player",in Stock markets:-
    1.BUY LOW and Sell Dear,as the "boom-burst" cycle is the way the Big Players make mega-profits.That is,enter after a crash and exit during the "euphoria phase" of the Bull Market.In the Indian Stock markets we are about to witness one[Bull phase euphoria!].
    2.Liquidity is the sole driver of the Indian markets.Liquidity is controlled by the FIIs.

    Like (1)


    Dec 3, 2012

    To achieve financial success , you don't need to master the game of investing. I doubt if anybody, even the so-called gurus, have been able to emerge winners all the time. I think it is good if you are successful 6 or 7 times out of 10, this will ensure you have enough funds. regds

    Like (1)
    Equitymaster requests your view! Post a comment on "Can this game make you a better investor?". Click here!