January 8, 2008 was the day. The day on which you should have sold all you had in those ill-fated demat accounts and walked away. Just like Jesse Livermore did 80 years earlier. It was the day on which Sensex closed at a historic high of 20,873. For the next couple of days it tried to break upwards, but in vain. Though on the next day it hit an intraday high of 21,113 and 21,206 over the next two days, the January 8 high could not be topped.
On the fifth anniversary of what probably is the biggest collective missed opportunity since the collapse of the Tower of Babel, the Sensex is still 1,000 points off that mark. The next biggest common missed opportunity came in 2009 when the index was scratching 9,000. But, it is obvious that since we missed the first, we were both too broke and scared to take advantage of the second.
Now, there is a sense of solace that it is only' about 1,000 points off its historic peak. Excuse me, but this is not what I signed up for. You should have help me beat inflation. You should have helped me beat everything in the long term. All these only reinforce my strong long-term hunch that equity analysts and salesmen blabbering away on TV channels have no clue what they are talking about. They have no right to wean away people keeping their life's savings in gold and other bankable stuff making false promises, which they are neither capable of nor accountable for, making.
Just because you want to increase "retail penetration" of equities or more fundamentally repay the oversized loans you took to get your overpriced B-school diploma and the ones you took to bankroll the lifestyle you learnt there, why should a retail guy be deprived of his right to earn real income from his money elsewhere. At present, the small guy is dragged in to the market with promise of inflation-beating returns but the devil is kept hidden in the disclaimer which says, "subject to market risks."
Just disclaimers won't do. As I am being forced to move from gold or other so-called unproductive assets, the people making these calls should be made accountable for it.
The advisor regulations, which Sebi is now in the process of making, should somehow make the advisors accountable for their recommendations. There should be provisions to ensure that advice given is recorded in a verifiable manner. Any wrong calls should be penalised. I am not asking for the moon. I am just asking for democracy. Because, that is how the rich invest. That is what the rich bargain for from their advisors – a commitment for absolute returns.
Let me leave you with some numbers to ponder over. In that January 2008 week, the number of Sensex shares traded was a little over 20 million on most days. Turnover was in the range of Rs 1,400 crore to Rs 1,900 crore. The price-to-earnings (PE) ratio (on a trailing basis) was 28.54 times whereas price to book was 6.92 times.
As you read this, the number of Sensex shares traded was around seven million whereas the daily turnover was in the range of Rs 330- 380 crore. Sensex PE was little under 18 times, whereas price to book was at three times. Livermore would be laughing in his grave for that day looks very far away. So far away that it may never come again.