It would seem like the bad old days of 2008 are back upon us!
August 4 & 5 saw global markets collapse. Early part of this week seems to continue the trend. Dow and Nikkei have been seeing 4% plus falls!
We have had some weeks with a continuous flow of bad news - globally and domestically. The noise emanating from the Investment media with doomsday headlines are not making it any easier - not getting influenced, that is. Most of the “noise” however matters to short-term traders. If the FIIs are going to pull out money from our markets for a month or two, or resort to shorting the Indices, these are the guys affected. Not, long-term Investors!
Most of us long-term investors survived the 2008 debacle without major pains, and many with spectacular turnaround gains within less than a year of stoicism! Unless you had PANICKED! Those who panicked, lost out as they stayed away completely from the markets.
We need to focus on the “ABSOLUTES”. India growth story has been impacted, but is still growing at 7-8%, much better than the rest of the world. There are plenty of GROWING BUSINESSES with low debt and strong cash flows that will generate wealth. As long term investors our job is to take ADVANTAGE of market situations like this. Purge the portfolio of non-performers and high-debt candidates, take a strong look at performers, and keep accumulating our favourites, at every significant fall. Yes, your Portfolio must have CASH to be able to take advantage. But that’s another topic, covered under our Capital Allocation Framework thread.
What we faced in 2008 was a crisis. This time it is NOT a crisis. It is more like a “Permanent Condition”, as one senior investor astutely put it to me. I tend to agree with him that there is no magic prescription by which the US and the EU economies will quickly revert to healthier states. Domestically also, it is not realistic to see growth without high inflation! The world will have to learn to adjust to the new realities. New EQUATIONS will emerge. How long will this take and how much pain this may inflict on currencies and markets worldwide, is a moot question?
We as long-term investors will be better-off realising and adjusting to this truth, Asap. Meanwhile, let us NOT LOSE TRACK of healthy, performing and growing businesses!