H.N.Y -Hazards of working in Stock Market

Dear All,

Its Year End/New Year and stock market community is in general very serious business, so here is something to light up the mood.  Every job has certain hazards and so does that of stock market, I have compiled few (114 to be precise). Given I have spend considerable time on sell side analyst, Most of the jokes are on Sell Side and few on Buy side too. Request to all my friends & clients who are on both side, kindly take all in right spirit and don’t take any offense.

I had made this few years back and had shared this in my facebook post, for some it may be repeat, but its good run down the memory lane. Also some of them may no longer be applicable. Kindly excuse brevity & typos.

Once again Wishing you and your family a Very Happy New Year and Hoping  our stock picks sky rocket , our portfolio double in no time and our investors give us more money.

Hazards of working in Stock Market

• Most (not everyone) of them expect FREE stock tips, as if it’s their birth right
• Most (not everyone)of them believe you know what’s gone happen tomorrow in market
• Most (not everyone) of them believe you know about every stock listed on stock exchange or at least you ought to know
• Most (not everyone) of them believe you can double money in week or at the most month. year is toooooooo long
• Most (not everyone) of them believe you would have inside news from CEO/Company
• Most (not everyone) of them believe one can get great stock/investment tips/recommendation from Rs2 newspaper or Business News channel
• Most (not everyone) of them believe you know what Rakesh jhunjhunwala & FII’s are buying
• Most (not everyone) of them ask you ” market kya lagta hai”…the sole reason they ask u is…they want u to in turn ask them the very same question
• many (not everyone) of them believe that we are the scamster
• Most (not everyone) of them believe you know (or you ought to know) in detail about all the techniques & products pertaining to FINANCIAL PRODUCTS- {hence they ask you Qs pertaining to F&O or next resistance for Nifty or demat charges or 50Day MDA of RIL or CDSL or Mutual funds or RSI of SENSEX or PMS or next support level for Infosys or Gold or Commodities etc}
• many (not everyone) of them believe that we are the scamster and hence they admire us (think of Gordon gecko, if u don’t know watch Wall Street)
• Most (not everyone) of them believe you are part of some operator who move stock up & down
• Most (not everyone) of them believe you are really nice law abiding citizen, but you should freely share insider news with them, as laws don’t apply to us
• Most (not everyone) of them believe company annual report is good source of income through scrap sale (while we buy it from scrap dealers).
• Most (not everyone) many of them believe there is special software that tells/give us TIPS/ stock Ideas to make big money
• Most (not everyone) of them believe Rs2000 stock can never give match returns that Rs2 can generate.
• Most (not everyone) of them believe you should buy stock first and then research (we call it listening to what one wants to hear)
• Most (not everyone) of them believe stock market is very risky can fall by 50-90% just like that
• Most (not everyone) of them believe this times “it’s different” (depending at point of time he means either he is gone be millionaire, or everybody on dalal street is gone shut down)
• Most (not everyone) of them believe key to making huge money in stock market is to make a friendship with Udayan Mukherji or any other business channel anchor
• Most (not everyone) of them believe the one working in the stock market along with the company officials run the price
• Most (not everyone) of them believe the one working in the stock market usually get 200% of salary as bonus (and that is minimum).
• Many company promoters believe, by gifting analyst expensive stuff they can manage to convince analyst to put out glowing report with BUY recommendation on their company. (surprising but true)
• If u don’t give importance to company giving bonus share or one that splits its share, most (not everyone) will think you are idiot or stupid and you don’t know how market works.
• Most (not everyone) of investor treat stock market like restaurant and us like waiter, hence everyday they call us to ask “aaj kya aacha lagta hai” or “aaj kya lene ka?”
• inspiration behind this thought is I would continuously recommend 1 stock to an investor for almost 1 yr & he got frustrated every time he called and I had one stock idea as if I had to have different stock on every day {aaj ka special}, surprising that stock gave more than XXX% return over 3yrs period.
• If u don’t give importance to surname of promoter, most (not everyone) will think you are idiot or stupid and you don’t know how market works. (Guess what…I didn’t apply for Reliance Power…ha ha ha…Now who is laughing…huh?)
• If you tell investor biggest risk in stock market is not companies or institution but investor itself. Most (not everyone) of them will reply “idiot, stupid , moron”
• If your model says there is not upside in stock price from current level at given PE, your HoR would guide you in increasing EPS to arrive at BUY target price.
• You are free to value 3 different companies operating in same business in 3 different ways without too much justification. So I can value Airtel with DCF, Idea with P/E and MTNL with EV/Subscriber and it’s alright…because investor likes all of those fancy jargons.
• Once an elderly gentleman (GM) asked analyst, “what do you do son”, he replied: sir, I work in stock market.
• GM: hmm….what exactly do you do?
• Analyst: (with chest filled with air) I am a Research analyst.
• GM: what’s that?
• Analyst: (with full confidence) a person who prepares investigative reports on equity shares. The research conducted by the research analyst is in an effort to inquire, examine, find or revise facts, principles and theories. The report that this analyst prepares could include an analysis of equity shares of companies or industries.
• GM: got it, Intellectual Masturbation
• equity research is vicious circle , stuck between result preview & result review
• Most (not everyone) believes in direct & high correlation of one’s intelligence with his/her appearance in media (TV/newspaper).
• Most (not everyone) ranks money higher than life or why else people who don’t believe in astrologer or weatherman’s forecast have more faith in analyst
• After meeting an company when Analyst say ending was nice & view was amazing, he does not mean that management gave good growth guidance for future and analyst’ view company as positively for future investment. he means he has been to rooftop of trident/Hilton (nariman point) avoid food go straight for deserts (they are best) and don’t forget to check out view of Mumbai from topmost floor
• you risk being called moron if you tell anybody profits are not sole thing to look at while evaluating which stock to buy
• More fancy/sexy company’s business, more analyst & media are attracted to it and less money it makes for investor. Think of wind power, solar power, infrastructure, all TV channels & Media Company, water & wastage management etc etc.
• Most (not everyone) treats stock as bullet (used in gun) hence they ask Analyst for trigger that will make stock shoot up…I guess stock market is only for cowboys…eeehaw
• Ever heard Most (not everyone) experts agree to one thing, well that’s what happens on Wall Street most of analyst have similar ratings (buy/sell) on any given stock. consensus is always same
• it takes 7-10yrs to understand true meaning of “business cycle”
• if your estimates (financial forecast) are lower than management guidance, sales guy would point out same in morning meeting
• Most (not everyone) analyst’s first recommendation on stock is “BUY”
• very often (not always) one of the many reasons given by fundamental analyst to justify stock recommendation BUY is , “technically stock looks good & it is placed for upward move”
• As analyst you are suppose to have view on everything right from weather to agriculture to industry to economy to politics to latest bolly affair – even thought you might have no knowledge about it, you should have read about it & vomit same thing during discussion
• maximum investment and highest buy recommendation from analyst are found during peak of the market and lowest when markets are at bottom
• Most (not all) company spend higher amount on keeping analyst fraternity happy (think of trident/Hilton & taj) then they spend on investor
• An analyst knows how much money his clients have to invest, although s/he might have no clue about his own net worth.
• Most (not all) Analyst love models………………..Financials Models (those tons & tons of excel sheets interlinked, with one change in number action happens, just like video game or game of domino)
• Most (not all) Equity Sales guy would always trust newspaper article more than analyst’s insight. {Or for Most (not all) Equity Sales guy believe analyst are moron compared to newspaper}.
• Most (not all) sales guy always dreams of replacing research analyst team with automate software that would vomit out report at click of mouse
• Most (not all) analyst believe that industry with high future growth is good investment which seldom is true
• Most (not all) Analyst believe good company to invest is the one that keeps announcing & doing huge capex / investment (imagine your best friend/spouse/gf etc who loves spending but has little visibility on next pay check)
• You overuse “per capital consumption” argument. One of the easiest way to show future high growth potential is to compare “per capita” with developed & peer country (e.g. if you want to show there is good future of car then show India has 1 per 10,000 compared to 1 per 1,000 in China and 1 per 5 people in USA, hence there is huge growth potential…simple)
• Most (not all) Analyst suffers from “supplementary diseases” , more the number of pages in research report more strong belief good work they have done (remember school exams where highest mark earner was the one who filled more supplements)
• Most broking house have rules that bars an analyst from benefiting (by trading or investing) in stock researched by him/her, while secret being Most (not all) anyway won’t act on their own recommendation.
• Most (not all) relationship manager of your own firm would ask for Research report of other broking firm from you (Analyst).
• what is the favourite porn of analyst – Economic times , CNBC, ET Now
• Most (not all) analyst tend to give higher weightage to mngt planning rather then mngt execution
• Most (not all) analyst give more weightage to future then past
• Most (not all) analyst believe day after day, year after year iron , steel, house, gold etc prices only go one way….up up & away.
• as per science humans are the Most dominate species , however (not all) human are stupid when it comes to financial investment
• Most (not all) analyst take plant visit as paid holiday or some of the best holidays of analyst are spent at plant visit
• Most (not all) analyst have bigger ego than CEO of any company
• Most (not all) fund value analyst ability to arrange meeting with company higher than his/her analysis on industry or company.
• Most (not all) analyst are judged by level of complicated excel sheet they can make
• Most (not all) analyst know funda of compounding, but very few really understand it and rare one have experienced its true beauty.
• during boom time they call research team “idea machine” during bust time – the white elephant
• it takes 10yrs to understand strategy of cost leadership, differentiation & segmentation
• Most (not all) are surprised by the fact that one doesn’t own a car and prefers travelling by public transport, but you come on CNBC.
• every buy side (mutual funds) analyst thinks of going on sell side (for pay/salary) while sell side thinks of going on buy side (no more report writing)
• Most (not all) sell side analyst believes buy side (mutual funds) have less work load compared to them
• many (not all) a times a research/stock ideas are actually suggested by our client (fund manager) and many a time (not always) he already has position in the stock.
• Most (not all) analyst believe CEO has responsibility to meet him/her (no matter how much experience analyst or CEO has)
• Most (not all) sales guy expects analyst to pitch idea to all fund manager, his job is only to supply market info (khabar) to fund manager and contact details (card holder) of fund manager to analyst
• when somebody ask analyst, what’s your (rational) argument to buy this stock, analyst with full confidence replies “because the largest mutual fund of country ABC Mutual Fund, Because Govt of Gane-Pore and India biggest investor Mr Jhunkhunwala holds stake in it and hence you would be stupid not to buy this stock.
• If you ask too many question before buying stock people would say “u would never make money if u ask soo many questions.
• analyst learns how to make simple things complex, all in name of “being intellectual” or “justifying ones pay”
• How does Analyst entertain them in traffic jam? by counting car/scooter/motorcycle brand wise
• How does analyst entertain themselves while waiting for gf/wife outside movie hall? – counts number of people booking ticket for movie released by UTV
• How does analyst entertain themselves in shopping mall/ departmental store? – In linger section he monitors which brand is more preferred by ladies – jockey or lovable? ( check out stock return of Page Industries since 2008)
• How does analyst entertain themselves in shopping mall/ departmental store? he counts people going in for shoppers stop and pantaloon
• Where does analyst order food from? Only & Only Dominos (because he has buy recommendation on Jubilant Food and he needs to achieve his EPS target)
• Every novice analyst’s favourite question to ask CEO of a company is, “Are you planning any Acquisition or M&A activity?” (as if he is son-in-law of CEO and he should be first one to know about it)
• How to spot analyst in party/gathering? His claim to fame is he has meet CEO of all the major companies
• How to spot analyst in party/gathering? His claim to fame is he has had Tea/Lunch/Dinner at all 5 star hotels in Mumbai.
• How to spot analyst in debate on eco-friendly power generation through solar?….he is only one in team that’s against solar power
• How to spot analyst in departmental store? where Most people search for price tag, he is searching for name of brand owner
• How to spot analyst in a non-stock broking company?
• Many a times he works as temp employee (ranging from few days to month) in a company he is researching.
• Most (not all) would ask technical analyst for view on stock before researching a stock or releasing report { trying to time the stock – traditional wisdom (long on tradition & short on wisdom) says not to do but who listens.}
• if asked view on company/stock based on certain scenario Most (not all) analyst would reply ” I would have to check my model & get back to you”
• Most (not all) of us are confused on what actually to write in budget preview report, like what we expect budget to be or what budget actually will be or what companies wish for or whether what everyone is expecting will be announced or not.
• a day in life of analyst
  1. Reach office by 7am be ready for morning meeting for India client- impact of news & aaj ka tazza stock idea.
  2. 8am – morning meeting for India client
  3. 30am – breakfast
  4. 45am- morning meeting for south asia market client (korea, singapore, china etc)
  5. 30am – indian market opens – watch your stock 1) the one in your portfolio how they are performing and second, the one you recommended how’s their performance
  6. 10am – read CLSA research report
  7. 30am – sales guy query on some irregular stock, wants quick note on company, Google it, copy paste and send by 11.30am
  8. 30am – sales guy calls fund manager wants to talk to you about your research
  9. 33am – chat with fund manager that is when you realise sales guy told him that we have meet the company and this report took 1 month to make. [izzat ka bhaaji pala]
  10. 12 – 1pm – internal meeting of sales & research titled “How to serve customer better” (screwing research) research doesn’t give proper output, no new virgin ideas, no proper research. {all the virgin ideas are ignored because there is no stock volume and hence institutions are not interested, plus we don’t know how to copy-paste}
  11. 1pm lunch
  12. 30pm – morning meeting for EU client
  13. 15pm- check stock performance, execute personal trades
  14. 30- find stock to research, running screeners & studying stocks (upar upar se stock research karna)
  15. 30 – Nityanand has come with stock of new annual report select & pick
  16. 5pm – evening snack with technical & derivative guy to understand they take on market & stocks
  17. 30pm – send mailers to company for meeting
  18. 30pm – morning meeting with US client
  19. 30 – check out news & research report
  20. 30pm – leave for home
  21. 10pm – dinner + CNBC
  22. 11pm – sleep
  23. 5am – get up and repeat above cycle

• As an Analyst you are always worried about future, rather than appreciating past and best of the best PRESENT.

100) Most (not all) Analyst are great believer in “history repeats itself” hence they keep making all those mistakes committed long ago by others (few just don’t learn by reading or listening but by doing, but rest don’t learn even after doing it)

101) Most (not all) analyst call companies idiot that doesn’t give earning guidance (as he has to actually forecasting, don’t’ ask what’s job description of analyst states).

102) As analyst one of the key jobs is to forecast revenue & profit of a given company. however in case of Infosys its different (when it is not?) one needs to forecast a) by how much will infy beat its own guidance, b) what guidance will it give & c) what guidance market expects infy to give

103) You show off by carrying business newspaper in such a way that its visible to everyone (for bigger show off, some carry multiple newspaper)

104) One of question you can never understand that sales guy ask is “why is it (stock you recommended) trading at such low /cheap valuation?” {Suggestion to all future/current analyst doesn’t give any rational & logical reply it’s useless, just say “so that morons like you & me can buy it and make money on it.

105) we fail to explain to our parents – what exactly we do and why we do it

106) Most (not all) company secretary looks at us with disgust when we ask for last 5yrs annual report (some wonder whether we are in business of arbitrage – that is we get annual report for free and sell it for money to scrap dealer)

107) We believe DCF is holy grail and can solve any & all problem

108) Most (not all) lose faith in earning money honestly, hence Most believe (they don’t think, they BELIEVE for sure) warren buffett runs scam or does insider trading to make money.

109) Most (not all) take time to know there is limit to one’s happiness but no limit to your unhappiness due to investing in stock market.

110) Most (not all) make less money by working in stock market (working with buy/sell side brokers) than they would by not working in it

111) How to spot analyst at party/gathering? His claim to fame is he has been on all business news channels.

112) It’s difficult to get man to understand something, when his salary depends upon his not understanding it – Upton Sinclair

113) Dylan Grice – SocGen – Telling investors you find cash an attractive investment is about as big a faux pas as you can make. It might even be on a par with telling your wife her rear end looks big in those new jeans. Just because it might be true doesn’t mean you should say so.

114) There is nothing so disturbing to one’s well-being and judgement as to see a friend get rich. – Charles P. Kindleberger