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Noise: An Investor’s Dilemma!

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  3. Noise: An Investor’s Dilemma!
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In our previous article, we spoke to you yesterday about 2 types of investors, let us start by showing you 2 charts showcasing Automobile Production in India and how you are forced to think negatively with the noise outside.

Chart 1 showcases the trend line over the past 18 odd months.

Chart 2 showcases the trend line over the past 20 odd years.

Chart 1

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Chart 2

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Chart 1 shouts out that India is going through an extremely rough phase, and if the chart is to be believed, doom is something we would see ahead.

Chart 2 shows a longer trend and shows a completely different picture. The trend line shows what to expect in the future.

Let me highlight a couple of pointers to you on this:

    1. To start, check the phase between 1997 & 1999, automobile production was flat and then had a fall. And after that, they jumped up. The same has got repeated each and every time the line dips for a short period.
    2. Every time there has been a dip, there is usually a big jump up that follows.

The automobile production has had a CAGR increase of 10%+ if I look at the data over the past 19-20 years.

It really amuses us when all the noise out there is only about short term happenings and spelling doom for the future.

The good part of the story – every time this has happened – in 1999-2000 or in 2008-2009 – if an investor ignored the noise and preferred to be Type 2 investor, he would have been a participant in the big bull runs that followed.

But, if you are a Type 1 investor who invests only when everything looks green and wonderful… not sure what I can say to that approach.

And in view of the phase that we are at currently going through, data suggests that we will see a repeat of or rather see a bigger bull run in the coming few years.


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