Learnings of the Week-2. (2/2)

Wile coyote effect

  • From many years, the printing of newspapers and magazines (ad expense) keeps decreasing, after a peak of 2001 – dotcom bubble
  • Going to the peak and to start falling, it called as “the Will E Coyote effect” – i.e. you’ve run off the cliff, but you’re not falling, and everything seems fine. But by the time you start falling, it’s too late

  • When iPhone came in 2007 Palm, Microsoft, Nokia was in threat, strangely blackberry was having normal – even high was enjoying high sales for next four years, and then, in started collapsing like the Will E Coyote effect
  • the collapse of firms happens in two parts, first by Apple and then by Android
  • The fact here is every time new technology comes and in changes the things which people used to use, and now people will go for newer one
  • Internet have come with many substitutes, but at the advertisement side, we have TV, radio, newspaper, magazines since long and it is tough to changes them here

But as history tells us, successful innovations are capable to change many things, we will be victim of what will happen

Article link:
https://www.ben-evans.com/benedictevans/2020/5/4/covid-and-cascading-collapses

Nifty 50 is a Different India. Economy not Equal to Nifty 50!!

  • We take nifty as a representative of Indian economy, but here we will see how it is altogether different than economy
  • Nifty is a Free-Float Market Cap Index so more weights to companies with lower promoter shareholding makes it Bank and Financials Heavy
  • There are 5 stocks who cover 42.5% of nifty, groups like reliance and HDFC cover around 30% of nifty, only 3 sectors are covering 63.8% of nifty
  • And if someone it buying Nifty, they will only have exposure to these top companies, and if any of them go very bad or very well, it can change short term value of Nifty altogether
  • Market topped out in 2018, but Nifty topped out in only 2020
  • Hence, stop seeing Nifty as representative of Indian economy

Article link:
http://www.nooreshtech.co.in/2020/05/nifty50-is-a-different-india-economy-not-equal-to-nifty50.html?utm_source=feedburner&utm_medium=twitter&utm_campaign=Feed%3A+TechnicalViewByNooresh+%28Technical+view+by+Nooresh+on+Sensex%2FStocks%2FCommodities%29

What Have We Learned Here?

  • Most of the business is operating at razor-thin margin which means the difference amount is very small
  • Many businesses ignore the advice of financial advisor to have six-month emergency fund, and faced bankruptcy due to losing few week sales. Here the main problem is not poor preparation but the it is to ignore very small mistake which can result in disaster
  • Some lowest paid workers like garbage collectors etc, are proven most vital during a pandemic, who were getting little respect before it
  • It is easy to comment on past and it is very difficult to comment on future
  • Businesses or investment strategy which has survived calamity may be good but nothing is guaranteed
  • People want certainty, especially when the stakes are high
  • The people who make forecasting models probably have less faith in their accuracy than those who read them, it only because things like confidence intervals are rarely discussed in the media
  • Whatever happens in the economy, it will look obvious when it is passed or happened
  • Also, some people without any reason takes the danger of leverage, they never estimate tough time while taking debt and its badness become huge in these times
  • Lockdown previously was unthinkable view but people suffering from sudden, unexpected catastrophe are likely to adopt views

History is only interesting because nothing is inevitable one is able to predict the future and if someone predicts it may be probably wrong. Things change in ways people can’t imagine at times they never considered

Article link:
https://www.collaborativefund.com/blog/what-have-we-learned-here/

Published by Aakash and Meet

I am Aakash Raotole I am currently doing Bcom from Dr. Patel and Rb Patel commerce college I am currently studying at finnacle investment academy Recently done distance internship with windrose capital, Pune - for a period of 14 weeks I am Meet Bhatt Completed HSC in commerce Now studying finbridge program at finnacle investment academy and Bcom externals I had completed CFA institute's investment foundation course and distance internship with Windrose capital, Pune - for a period of 14 weeks

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