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How MCM is Reacting to the Demon of Demonetisation - Views on News from Equitymaster
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How MCM is Reacting to the Demon of Demonetisation
Dec 6, 2016

The worst kind of monsters to fight are the ones you don't fully understand.

Demonetisation is proving to be precisely such a monster. No one fully understands all its ramifications or what the final outcome will be like. As things stand today, things look very messy indeed. The move has resulted in a lot of confusion amongst the people and businesses, and the government's attempts to solve this resulted in a series of ad hoc measures and flip-flops.

Unsurprisingly, investors have been on the edge. The markets have seen wide swings on both sides through the period since 8 Nov.

How is Microcap Millionaires handling all of this? I touched upon this last week. We're not trying to predict the future. We don't know how good or bad the next few months or even the next year is going to look.

The magic of the Microcap Millionaires strategy, instead, is in being reactive and not proactive. You react to the prices Mr Market offers you. But you do not try to predict those prices. Market prices were unusually low before Modi rode to power in 2014, lower than our pre-determined buy limits for a lot of good companies with strong balance sheets. We duly recommended a handful of companies. Most of these recommendations went on to make great returns for subscribers. Importantly, all our recommendations at the time were only a reaction, and not a prediction. We knew prices were much lower than historical levels and that, sooner or later, they had to go up.

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