India Vs Englad. India Wins! Markets go up!

A trader friend of mine who is lives, eats, drinks Cricket has a theory.

Here’s what he says – “In next few hours India plays against England. Tendulkar scores big 100 and India wins! And markets will go up starting Monday”

Sachin Tendulkar Hits 100 - markets go up next day

Stock market sometimes reflect what will happen in future, but most of the time there is disconnect from real world. Market is made up people and people have emotions. Emotional areas inside our brain are all near each other. Our decision making process always gets influenced by quality of our mood. Feeling low means making decisions with less objectivity.

Let me give example:

scenario one) India looses match badly. Funny looking Gadaffi from Libya (I have no idea where Libya is on map) said he will fight back — “this is not good. I don’t feel good – if my shares go down, I am going to sell them before I go home”

Emotions mess up our economic decisions.

scenario two) India Wins match, Sachin made a extraordinary century. Now Gadaffi from Libya says that he will fight back — “Man this Gadaffi fellow is a big fool. Anyways let me see how my shares do today. Most probabaly it’s goign to be flat or good day for everyone. I am going to stick to my plan“

Markets are going through lot of after effects from Libya, 2g scam and what not. Many stocks which have nothing to do with these news and events, are getting whacked. Indian markets in short term (couple of weeks) are probabaly going to go sideways (within a range). Any good news that makes them feel good is going to do wonders.

Why you should [Buy] or [Not buy] Gold ?

Disclaimer:  (1) This post is not going to make everyone happy.  (2) I am not a market expert (3) my predictions are as good as predictions made by a cow inside Goregaon Aarey Milk Colony.

People who keep open mind and contemplate over different ideas do well in long term. Let’s talk about Gold today.  And my plan is to talk about 2 contradictory ideas. One makes a strong case of Gold price to go up, other one makes strong case of how buying gold is for suckers.

Idea number 1) why gold will go up and touch sky

Gold Price Chart for last 10 years in INR

Gold has gone up massively in last 10 years. Look at the chart showing gold price rise in last 10 years. If you bought gold few years back, you made a smart move.

Does that mean Gold will continue to rise? Yes! No! May be! No one really knows.

I have no idea how will gold price head further. No one really knows. Not sure if you know, but today, if some country like India, wants to buy Oil from some middle-east country, it needs to make payment in US dollars, inside oil exchange which is only in New York & London. There are chances that some middle east country  starts selling Oil in return of rice, wheat, sugar, Euro, Chinese Yuan. This will put US dollars in question. Once some country does this, may be other countries will follow. Ethically there is nothing wrong if some country decides to sell it’s resource in return of some currency it likes. I don’t see why this will not happen sometime in future, looking at the way facebook & twitter are changing governments in middle east.

When this happens – US dollar will go for toss. This might trigger Gold to amazing heights.

Idea number 2) Why buying Gold at wrong timing can screw you up big time

Here’s a catch – no one knows what will happen in future. Like anything else in this world, Gold has it’s own chances of going up or burst like a bubble.

Do not blindly believe in to some idea. I hear all the time – “Since Gold did well last 10 years, it will do good for next 10 years“. You should always look at an idea from all angle. And let me put forward one angle.

gold historic chart - if you bought gold in 1980 - it took 26 years to breakeven

Look at the second chart. It’s historical price of gold. Let say your dad or uncle bought Gold in 1979 – 1980, since gold price was rising.

Believe it or not – it took them 2006 – 1980 = 26 years to break even. I am not saying this – charts never lie – chart says it.

Once again I am not saying that tomorrow morning Gold will go down or up . No one really knows. But all I am saying is -that – it’s a good idea to keep mind open.

History repeats itself. Nothing is new in market – everything that is happening today – has happened before.

You are Short Seller – let me prove it!

Short Selling a Stock

Met a friend and we started talking about shorting in stock market. His first expression was – never Sell Short. It is risky and difficult to understand.

I told him that we sell short almost everything, almost everyday. You are already living a career which is in to Short Selling and you don’t even know about it.

Let me give an example. If you do something similar in life – You already are a Short Seller.

Carpenter bhai:
last year we called one of our favorite carpenter to make a Dressing table. He understood  what we wanted, took measurements, explained us our options. We have taken his help in past and we know he does good job. Next we started talking about Price. He said – 2000 rupees. We said – 2000 is too much – make it 1500. He said there is no way he can do 1500. Finally we fixed 1800 rupees. “Give me weeks time and I will get your Dressing Table ready”.

He took 1800 rupees and left.

Next Seven days:

What do you think carpenter is doing? He tries to search inside his workshop to find some good but leftover wood or any other material he can re-use. He goes to Plywood store, bargains and tries to get wood for discounted price. Month back, he got a big lot of nails, screws, fevicol etc at wholesale price (cheaper price). He is skilled and knows that he has to spends just 2 days and table will be ready. For polishing, he asks one of his assistant to do the job.

Week gets over and he hands-over Dressing table.

What do you think Carpenter did in weeks time?

First he took 1800 rupees.
Secondly, he tried to produce table for minimum price.

Lesser the cost to produce table, bigger the profit. From his experience he was confident that he will be able to produce table in weeks time for cost less than 1800 rupees. Let’s say the cost of material came down to 600 rupees and cost of man power is 600, total cost of producing table = 1200 rupees.

On delivery Carpenter made 1800 – 1200 = 600 rupees.

This is Shorting!

We do this all the time. We promise to sell/produce some product/service for certain [market price] and then go back to our workplace to produce that item for less than market price.

90% of Market creates Opportunity for remaining 10%

Three tings to in Stock Market - Buy, Sell, Stay Out

When I started stock trading few years back, I always thought to be successful in stock trading – I should keep trading.

When I was right – I made money, I was happy, I traded more.
When I was wrong, I always thought may be very next day I will get lucky and price will go up, hence I kept trading.

Whatever the case, I always thought that I have to keep trading to win.I was wrong!

I see many people in market who think same way. There are 3 things you can do in market –
‘Buy‘
‘Sell‘
‘Stay Outside‘

The only thing where you will never loose money is ‘Stay Outside‘. My uncle who is experienced stock trader shared his insights. There is time when you ‘Buy‘ , there is time when you ‘Sell‘ and there is a period when you ‘stay out‘.

While you stay out – others are creating newer opportunities for you.

If I have to talk about a very short time frame – Indian markets have gone sideways. Unless you know very clearly what you are doing, it doesnt hurt to stay out.

Interview of Rajeshbhai Gopalji

Bhavnagar has history of rising from a normal king’s town to an important center of maritime trade. In late 19th century, under name of Bhavnagar State Railway, it was first state in India to build its railway on its own. An Englishman once described Bhavnagar state as follows: “With flourishing finances and much good work in progress. Of financial matters I need say little; you have no debts, and your treasury is full”

Today we are talking to Rajeshbhai Gopalji who moved from Bhavnagar to Mumbai. He has suggestion for new comers – “Times have changed. Education and qualification are important criterias in Indian Diamond market like any other industry”

Rajeshbhai Gopalji, Diamond Broker, Mumbai Diamond market

Tell us about how you started career in Diamond market?
I use to work in Diamond market in Bhavnagar. Business opportunities brought me to Mumbai market. In Mumbai I started business in to Diamond brokerage. I have worked with more than one company in different stages of my career.

Tell us about your experience in 2008 slowdown?
You can assume that no one in our industry has seen slowdown like 2008. People will not easily forget last slowdown for at least next 8 – 10 years. Many at various levels changed their industry because they got scared of uncertainty. No one knew when crisis will end.

In recent times is there any good or bad change you have seen in Indian Diamond market?
In last 12-18 months I have seen lot of business activities in market. There is lot of work happening and somehow I feel that previously I have never seen so much growth and business.

What do you think about Mumbai Diamond market shifting to Bharat Diamond Bourse in BKC (Bandra Kurla Complex)?
Mumbai market is divided in to two different groups at this point of time. Many members who are working in market for long time are not enthusiastic about moving to new place. However big companies have already moved or made decision to do so. I feel eventually everyone will move. There was time when our market used to be in Zaveri Bazaar and then it moved to Pancharatna Area (Opera House). Mumbai market has already seen such a change in past. I am sure that it will take time but market will move to BKC eventually.

If you get to change one think in diamond market what it would be?
I really cannot think of anything. With time things change. Change is always happening. Business which is not doing well might improve and ones which are in great shape might go down. So with time things do change. This is the cycle of the universe and it will go on & time will play role in it.

Do you want to give any message to Diamondbhai.com readers?
For a very long time Indian Diamond Market was made up of members who were street smart but not highly educated. However things are changing. Present times have newer demands and slowly we are seeing need and presence of educated people in market. So my advice for new comers is do not assume that Indian Diamond market doesn’t care about education and background. Things are changing. Education and qualifications are becoming important in diamond market like any other industry in India.

Why Rs. 100 is not same as Rs. 100 ?

One more post, one more thought on how our mind works.

Here’s my plan – I want to write interesting thoughts/ideas on how we make decision and how we can improve it. The purpose of all such posts where I give an example or a situation about buying or selling, is to become well informed. Improve decision making – for myself and everyone who reads it.

Today’s post, once again has a situation. I will prove that Rs. 100 is not equal to Rs.100, lets begin

I have a friend who wanted to buy papers for his printer. He does this perhaps once a year. Most of the shops sell this paper for 400 Rupees, but he knows one shop who sells same paper for 300 rupees. He walks 10 minutes extra to reach this shop and buy paper. That sounds like a good idea – 10 minutes extra walk but you save 100 rupees. I would do same. 100 rupees discount on a 400 rupees item sounds very exciting.

However here comes a twist in the story. This same friend, recently, was shopping for a cell phone. Price was 9000 rupees. Someone told him that if he would walk 5 minutes further, another reputed store was giving 100 rupees discount on same phone. “Come on!  I am buying a Cell phone. And MRP of this phone is Rs. 9000 for sure. It doesn’t matter, I don’t want to walk to a different store to save 100 rupees. I think I will just buy it. Here’s my 9000 rupees”

He proved for himself that 100 rupees was not equal to 100 rupees. There have been times when I have proved same to myself. Have you also proved same? If you don’t understand what happened here that’s alright! You can even understand this after a year, there is no rush.

Interview of Hasmukbhai Shah

In Business, world we hardly hear people talking about Unity. A group of people can be more more productive and can get more satisfaction in work they do if they are united and have some formal understanding and protocols.  Lets meet Hasmukhbhai Shah, who believes that our market needs some level of standard procedures and understanding for everyone to do healthy trading.

Hasmukhbhai Shah, Diamond Trader and Broker, Mumbai Diamond Market

How did you start yours career in diamond industry?
I started my career in Indian Diamond industry in 1978. In last 32 years I have worked for different companies. Started in Shantilal Parikh then moved to Nanavati then Janam and then C Parkash. Eventually I started my business, mainly in to Diamond trading, Diamond studded Jewelry and Diamond brokerage.

How was the slowdown of 2008 in diamond market?
Slowdown impacted everyone in Indian diamond market. My business also faced problem. There was a period of 4-6 months in which I believe almost everyone went through tough time. Slowly things started improving and business activities came back to market.

Tell us any good or bad aspects of market that come to your mind?
* Our market lacks Pramanikta (Standard approach or formal understanding). A standard process is important part of our existence, however the average individual in our market gives little or no thought to it.
* Trust factor is very costly in market.
* There are many incidents where people take your service to get business, once deal goes through, they go direct and skip your commission.

* Very few people in market stick to their words and they grow in business.

If you get chance to change any one thing in Indian Diamond Market, what would you like to change?
Diamond Brokers should come together as a group. We can do better by taking the same basic principles of unity and mold them into something the whole profession can gain from. At present we lack leadership and direction to be able to come together. Some standard practice and protocols of trade can help everyone to grow business in a healthy way.

Can you think of any new changes that can occur in our market in next few years?
As I told earlier there is tremendous need of trust and understanding in market. Without these it will become more and more difficult to grow business. People have to come together and not try to take shortcuts to make quick profits.

You have been part of Indian Diamond market for last 32 years, do you want to give message to members who are new in market?
It takes lot of work and patience to build trust but it takes one small incident to loose it all. Stay honest and stick to your words.

 

How was the slowdown of 2008 in diamond market?

Slowdown impacted everyone in Indian diamond market. My business also faced problem. There was a period of 4-6 months in which I believe almost everyone went through tough time. Slowly things started improving and business activities came back to market.

Here’s one Money Mistake we all make

Ratan Tata with a Nano Car. He asked his team to built a car under a challenging max cost

A person I know bought a new Car last year worth 6 lakhs. At car showroom, salesman got him really excited about new car. While signing the papers, salesman asked him if he wants to buy a cool accessory. A Car video (LCD screen) with wireless IR Infrared transmitter. This was priced only for Rs 20 thousand. What do you think this person did? He thought in his mind – ‘I am already spending close to 6 lakhs to buy this car,  so 20 thousand more is no big deal“. He said ‘Lets do this‘.

Later we asked him that he never bought Car-DVD-player for his old car, what made him change his mind. His answer was ‘I am already spending so much so a small additional amount is no big deal’

This is how we think and make buying decisions lot of time. If you have to spend money today for some accessory, you think of it as expenditure or loss of money. However if you were spending a huge amount then you don’t mind adding additional small amount for accessory.

Let’s suppose you’re buying a new house built for your family for 50 lakhs. The builder has you excited about the latest Microwave oven, LCD TV, Blue Ray DVD player, Air conditioner, Dish washer and Surround sound speaker system, which he’ll include for only 2 lakhs more. If you wait until you move in to this new place, you might even buy all these items for just 1.5 lakh rupees. However, because you’re spending (or borrowing) 50 lakh rupees to have a home built, additional 2 lakhs just doesn’t seem like so much.

To avoid making this money mistake you have to mentally step outside of the situation and ask yourself if the proposed expenditure is one you would have felt good a week ago. Consider any other options you have, and finally, just wait a bit. A few weeks later – after a large purchase – you might be in a more rational state of mind to decide what something is worth to you. It is tough to avoid these money mistakes, but it is worth it.

5 Reasons why your Business Website Fails

Apologies for blunt language but this topic needs attention. I see many small and medium business in Indian Diamond market operating their company websites. Theses businesses spend their hard earned money in developing website without paying attention to what works on internet. A person you meet in real world, behaves differently once he or she goes online.

Are people interested in your company finding you?

Reason 1)Not real:I know you are aspiring to become next king in Indian Diamond market, but at this point of time you are struggling to pay rent of your shop. Be realistic. Don’t claim big things on your website if hey are not in existence. People who visit website do not mind if you tell them that you are small soldier inside whole empire. All they want to know is that you are honest and you care about your customers.

Reason 2) Not Working: That link on your front page goes no-where. I see many business website which have page or links which go no where. They keep it because it came as part of design or because it looks cool. If you don’t care about such non-working items on your website, why do you think your visitors will care about your business. Remove it or fix it.

Reason 3) Not in Sync with new trends: Just because you have website doesn’t make you techno-savvy business owner. Having a website is just a beginning. Keep clarity in mind. Decide what do you want to achieve out of your business website and take actions. Spend time regularly in understanding how Internet is changing the way people buy and sell. Read how Internet helps in brand building.

Reason 4) Not making money: I have seen many websites owned by Diamond businesses in Mumbai and Surat market, all they want to do is sell some costly Diamond Jewelery or diamonds. Unfortunately, chances are that at-least 95% or more of these websites have never sold anything. Your website doesn’t sell your products is absolutely fine. There are many other business benefits you can get which eventually will grow your business. Don’t just stop at selling products, give something interesting (information or entertainment) to users, so that they remember your website. Try to convert some of your first time visitors in to second time, third time and regular visitors.

Reason 5) Not updated since launched: You launched a website. Great! then it never got any new information or changes. There are very easy to use tools which can allow you to add new information to your website. Add some information, video, pictures. When users feel that you regularly update your website their trust factor goes up.

(Bonus)

Reason 6) Not Speed tested: dude! remove that 30 seconds of flash introduction on front page. 80% of the Diamond market websites have some silly Flash animations introduction as soon as website is loaded. Only after this animations gets over, you see a button “Enter into website”. Heres one important thing to do. Buy fafda jalebi and tea for group of 10 people, give them computer and aks them to visit your website for 30 seconds not a single second more, just 30 seconds. After this ask them what did they see on your website and what do they think about it. Did they feel motivated to click somewhere or read something? Did they feel like doing business with you? Did they feel like they should visit this website again? Did they feel like calling a friend and tell him about your website? Speed test your website for 30 seconds, 10 seconds, 1 minute, 3 minutes max. Do this with different group of people. Believe it or not – sometimes all you get is few seconds to catch attention of your visitor before she or he rejects you and jumps to a different website.