Warren Buffett, the World’s greatest investor, rightly said that the fundamental rule of investment is that “investors should never lose money”.
What Warren Buffett means is that we have to be conservative in our investment philosophy. We must always err on the side of caution. If there is even a slight risk to the investment thesis, we must take defensive measures to protect our capital.
Viewed in the light of this sage advice from Warren Buffett, the attitude of the local gurus to the warnings issued by legendary visionaries like Jim Rogers and George Soros is indefensible.
The Gurus, comprising of Nilesh Shah, Porinju Veliyath, Samir Arora, Sandip Sabhrawal and others, united as one to trash the fears expressed by the legends.
Nilesh Shah wrote a point-by-point rebuttal to all the issues raised by Jim Rogers. He also mocked Jim Rogers by urging him to “consider investing in equity mutual funds as most of us are outperforming the benchmark indices by large margins”. Porinju and Sandip Sabhrawal attacked Jim Rogers on twitter. While Sabhrwal contemptuously called Rogers a “one-hit wonder”, Porinju was at his vituperative best: “Dumb Rogers ‘exits India’ without really entering; holds world record in getting almost every prediction wrong!” Samir Arora also taunted Jim Rogers with his classic one-liners, which were laced with wit and sarcasm.
At that time, the unity of the Gurus was very inspiring to us. We were impressed at their advice to us to “ignore the noise and stay invested” despite all the adversities that the economy was passing through.
Today, we see that the failure to heed the advice of the Legends and to take counter-defensive measures has cost us dearly. Our portfolios have taken a severe battering. Worse, our confidence has suffered a major dent. It will be a long time before we get our swagger back.
In hindsight, the Gurus ought to have taken a cue from Warren Buffett and advised us to stay cautious. They ought to have said “We don’t know whether the gloomy predictions by Jim Rogers etc will come true or not. However, it is advisable to be cautious and raise some cash so that we are not caught unawares should the predictions come true and the markets plunge”.
We have also to blame ourselves for throwing caution to the winds. We were also naïve in believing that NAMO would single-handed be able to steer the nation out of the mess that it has been in for the past several decades.
Anyway, to their credit, the Gurus are now candidly admitting that they read the situation wrong.
Porinju Veliyath has, as usual, taken the lead and issued a heart-felt apology to Jim Rogers:
— Porinju Veliyath (@porinju) February 20, 2016
Porinju’s gesture of humility was well received by his vast legion of fans and followers. Several rushed to compliment him for his stellar act of statesmanship.
The other Gurus are not as forthright as Porinju though they are also veering around to the same view. Sandip Sabhrawal claimed that he was “bearish” earlier owing to the negatives in the economy. Samir Arora said that he is “willing to laugh now also” in response to a query on why he had laughed at Jim Rogers’ bullishness on gold. “i like laughing rather than feeling sad” he added, suggesting that there are circumstances to be sad for laughing at Jim Rogers.
From our perspective, the important learning experience from the bitter episode is that we should never be over-confident. In fact, the unbridled optimism of the Gurus is itself a sign of caution. Instead, we should pay keen attention to the contra calls and messages of discontent from various stake holders in the economy and take appropriate defensive action and not be overexposed to equities at any point of time!