Marketing in Finance

Well after getting some encouragement for previous 2 posts the blogging bite has hit me too. Hmmm..Marketing in Finance.No theoretical stuff just some observations and yes on the critic side. After having seen my father investing in stock markets for many years I took to CNBC too. And my thinking has graduated in each of these years. I have started to see and comprehend beyond the headlines though at a primary level.

Probably the first thing I started learning to understand the things better was a basic hang of economics. No not the theoretical stuff just some practical aspects. So how good are the economists at predicting GDP of a country or calculating the WPI for an economy. Well frankly none of the analysts seem to get it right. After having watched numerous predictions I can safely say its a futile exercise. The latest inflation numbers just confirmed the same with no one coming close to the actuals. Its like every analyst takes the last inflation number and adds or subtracts something and comes out with new one. Entirely futile. It makes much more sense if they just confine to predicting the trend. But every news channel flashes these faulty predictions fully aware that its just a guess.

Next in the line are all these brokerage reports which people use to buy or sell shares. Well the greatest investor ever born,Warren Buffet, says you should buy a stock if it is availaible at a discount to its intrinsic value with the intrinsic value being calculated by a discounted cash flow or some similar pricing models. Pick up any research report and all it does is relative valuation throwing numbers at will and coming out with a target. The research reports by foreign investment banks and brokerages are even more pathetic. Hardly has any research report gone right in predicting stock valuations or prices. The testimony to this fact is only 20% of fund managers are able to beat the benchmark sensex. So lot of froth,less of reality.

What about all these technical analysts and sites giving daily recommendations to buy at a particular level and then keep some stop loss for a given target. Just plain crap. The latest trend is all these savvy analysts are starting their own blog and giving recommendations for free. Then after some time they start charging for these services. When markets are up every tom,dick and harry goes up. People are happy as they are making money and euphoria continues and then bang. The market crashes and retail investors who paid all those money without understanding what they are buying lose half of that. Obviously its business and I am not putting blame on all those analysts but just reflecting the froth. All these technical analysts have been proved wrong more often than they are right but still they get money on news channels just to speak numbers.
Absurd.

Last but not the least are these great investment bankers. People from elite B schools designing most sophisticated derivative products or selling something crap for millions which no one understands. The credit markets in US just reflect this with almost every bank reporting losses. Yes they did a great job fooling everyone in the past but are now taking it on their chin.

So the conclusion is their is a lot of froth and lot of hoopla has been created by media too. Well this is the ugly part of the business and in the end its the common man that bears the brunt. Yes their is a golden line "All investments are subject to market risk. Please be careful before investing". So you cant argue after all.