“It is impossible for someone to lie unless he thinks he knows the truth. Producing bullshit requires no such conviction.” – Harry Frankfurt
The Oxford English Dictionary defines bullshit as, simply, “rubbish” and “nonsense”, which unfortunately does not get to the core of bullshit. Consider the following statement:
“Hidden meaning transforms unparalleled abstract beauty.”
It sounds very meaningful but hardly conveys anything to the reader.
In philosophy many times you come across statements like this:
“Attention and intention are the mechanics of manifestation.”
This is an actual tweet from Deepak Chopra.
Is there any meaning that you can ascribe to this statement at all?
In On Bullshit, the philosopher Frankfurt (2005) defines bullshit as something that is designed to impress and seems to convey a deep profound philosophy. However in reality it is nothing but a meaningless collection of buzzwords put together to impress the hell out of people.
Every day when you deal with people you come across bullshit in the garb of fancy sounding words or statements that actually have no meaning.
When Smart people don’t have answers, instead of saying I don’t know, they give you a profound sounding statement that has no meaning but sounds goods
Bullshit in Investing
Look at these statements, for example:
This time it’s different…
John Templeton famously said, the 4 most dangerous words in investing are-“This time it’s’ different”
This statement starts coming into play more at stock market peaks or bottoms especially tops when it is used to justify higher prices.
When the market is at its peak you will get compelling reasons why stock prices should go higher, why the bull market should last considerably longer than any other in history, why this boom will not be followed by a crash and hence why “this time it’s different.”
There is always some truth here and that’s why the arguments sound compelling. As even Mr. Templeton said, 20% of the times these statements are indeed true.
However the danger lies in thinking that this “Different” will be uninterrupted.
Look at what’s happening with Tech stocks-it seems that there will be no end to tech adoption and companies can continue to grow at very high levels for ever;
However we forget that its “Gravity” that holds us together and “gravity” does come into play if not today than tom.
There are no Buyers, there are only Sellers
If there is no buyer there will be no sale and hence no seller;
However what it really means is that there is no buyer at a stated price; As the asking price goes down, buyers emerge;
Look at everyone’s whipping boy-DLF, it has perpetually been an volatile stock, however even on its worst fall day it has found buyers.
Since it was listed, its average volume on days that it fell has been around 78 million a day. On days that it rose, the figure was 83 million.
Time in the Market and Not Timing the Market
Ask those who invested at the peak of the stock market; Investors who invested in January-2008 had to wait 5 years to cross the peak of Jan-2008 even though they came in striking distance of crossing it within 3 years too.
The statement used to dissuade investors from staying out of the markets so the managers can continue to make money;
However in reality it has not played out very well for the investors and hence for investors keeping some cognizance of the market levels is important to ensure disappointment
Cash on the sidelines
On a net basis, there is no side-line.
People who use this statement seem to suggest that there is some stockholder who sold his stake and is now awaiting re-investment.
However for the market, an equal amount of money get invested back by the buyer so there is no incremental cash.
When the seller comes back as a buyer, he/she would need a seller to re-enter.
Incremental liquidity or re-allocation could come in and push upward pressure on prices, however somebody will have to sell for somebody to buy, unless corporates create new equity.
All of these statements sound “Smart”.
However these are used by market commentators as they need to say something to the Media and when there is no other explanation.
These explanations sounds extremely plausible.
Be Aware and “Stick to your Course” and keep your “Bullshit Filter” on.
For guidance contact manish.verma@manishverma.co.in or on +919920741569.
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