The Truth about Stock Markets - 3

Dear Friends,

I would like to recount one particular event related to stock losses.

This was during the year 1999 when there was a team of people frequenting the brokers office for online share trading business.

Many became friends as we sat with excitement picking and choosing shares between 10am and 3.30pm each day.

If one member were to have made some profits, he or she would order some tiffin and coffee from a good vegetarian restaurant downstairs. It was bonhomie. It was fun until the losses began to haunt us all.

One particular person just known to us as Dev, a middle aged Malayali man, was a frequent member hardly speaking to any of us. He would do the deals in a calm and collected manner. We could all see he was influenced by some of our choices, enough to change his selection to ours - all with the hope of making that extra buck for the day.

My favourite counter used to be Satyam Computers which used to quote around 200 to 220 per share, if I recall it right. We bought and sold and pocketed the difference as profits. It shot to 400 and above a few months later. So that was all the more reason to buy into the share which had shot up to double of what it was. Such was the craze and madness with all adults acting like a bunch of excited kids out on some picnic with no one to reprimand them or correct them, stop them from such madness, then and there!

When it doubled I was the first to get out of that share for fear of the bubble bursting. With all my past experience at shares I should know at least this much. I could hear Dev placing an order for Satyam at that a high price and that too in bulk quantities. I called him aside and told him to cancel the order as I feared it would all go bust in no time as it had reached its run already before purchasers turned sellers to profit.
The broker who overheard got so furious about my advice to a prospective client not to deal for the day, that he asked me either to keep good advice to myself or refrain from coming to the centre on such days instead of interfering in his other clients' preferences.
He also praised Dev to us saying he is reaping so much profits out of all his deals which now ran into crores of rupees without actually investing in such huge amounts!

Obviously Dev was very happy to hear praise about his profiting though we came to know later that it was far from the truth. This was pure PR in tempting more people to deal so that the brokers got their brokerages no matter what.

He waited till the last minute to close the deal but the thought of making a huge loss made him hold back at every little rise on that fateful day, The shares had plunged to a low of 20% whereas he had bought them at the day's peak price of +20%. So both ways it worked to a huge difference of 40% from the original price. He had made a loss of 25 lakh rupees (Rs.25,00,000/-!!) as it was bulk purchase. He was warned not to keep his position open anymore and expose the broking firm to such heavy losses. So with his oral permission the brokers sold it for whatever market rates that were prevailing in those last few minutes of trading just before closing bell struck to mark the end of the trading day.

I saw the pain and shock in that man's eyes and empathized with what he was going through at that moment as we had also gone through the same in earlier couple of deals but losing only a few thousands which we could easily cover in the next few deals. This was huge. For that price we could easily buy the best bungalow in Adyar, a posh locality in those days.

He went home that evening. He dint report back at all for a couple of days. The brokers then began making enquiries about the exact location of his address which he had indicated in his application forms.

They had phoned him at his home but none was picking it up. On the 3rd day, his wife answered the phone. She did not know what these men were talking about!! Ignorance thy name is bliss for the uninitiated. She informed about her husband's sudden travel plans a couple of days back to his native village in Kerala.

These men went knocking at his door to find only the wife there with her school going kids. They explained matters to her and she in turn did everything in her power to bring him back to Chennai. Of course anyone can imagine no wife could have tolerated or borne this news with calm. She must have brought the roof down trying to blame him for all her troubles. The next day saw him come to the office.
He was approaching anyone with an offer to sell his beautiful house in Chennai for 25Lakhs but for only cash down parties.
It took him quite a while to sell and settle his debts. Later I found him on two or three occassions dealing in shares again.
The human mind thinks it can salvage this huge loss in quick time but knows the truth that it will further lose the fresh amounts invested.
That is how gullible the human mind is in its total and unsahkeable faith in making only profits in gambling activities while the contrary (of always making losses) is always true 99.9999 out of 100 cases.

I could never go back to trading after these events but I would go just to see who are all there to lose more of their hard earned money.
Most of them would be retired people from all walks of life. Those who arrived in self-driven cars would have retired from high posts and got a hefty amounts as gratuity, PF, other retirement benefits in the form of bulk money payments from their work places.
Others perhaps would have retired as clerks, accountants, etc. but still have some bulk money to lose!
One common thing that I noticed was how boastful they would be if they made a tiny profit in hundreds and how quiet they would remain with long drawn faces when they made losses in thousands!
Often all would end up with losses each day.
Yet those very feet would find their way to such centres come morrow.
Is it a habit?
Is it an addiction? A sort of compulsion having nothing better to do?
Is it a routine they are getting used to just as they would in attending office each day?

I stopped going there to see their expressions long time ago. Some sad faces do haunt. There would be couples or singles with no one in the family to go to. But all had enough money for maintaining a certain lifestyle. The kids would never know their parents were indulging in such activities. It would be a very well kept secret. Some would confess in passing that the money was sent by their son or daughter for buying a house or flat in the city. The idle money could be used to double in no time at the stocks!! But alas only in reverse!!!

I pray to God to give such people better sense than to lose hard earned money in such choppy ventures where cartels work hard to make the adventurous ones poorer within a second.
What I write comes from deep within my heart. It took me this long to open up to blog about such things publicly, almost a decade to open up! Even if one person were to benefit due to this these true stories would have served its purpose and a family saved from near ruin.
Take care of your hard earned money. More on finances in the coming days!!

Mahalakshmi