Imtiaz Gadar, CFA follows up on his hilarious post on retail investor behavior during bull runs. Check out his first write-up here. For the lazy ones who do not want to read earlier posts, here is a short profile of him. Imtiaz Gadar is presently the Head of Public Markets at Bank Alfalah and was the Head of Equity Research at KASB-Merrill Lynch Pakistan and JP Morgan Pakistan in the past. He was also voted the best equity analyst of the country four times.
Following my first guest post on Asif’s blog, “How bull markets find their way to weddings”, some of my retail investor friends were offended and thought I was too harsh on them. This happened because I didn’t really say much about the BIG FISH, i.e. the institutional players (brokers, fund managers etc). So, as a gesture of goodwill to all those offended old friends (and to offend some new ones), here is my take on the different species of institutional players you come across at a bull market wedding.
Specie # 1: The Blackrock’s and Fidelity’s of the local market
These are all seasons, 24/7 popular guys, with popularity being directly proportional with Assets Under Management. They don’t really have to move from their spot once they enter the wedding. They just attract attention. Whether you like them as people or not, you still will gather around them to hear their thoughts, to get a sense of their next big move, given the impact it can have on the relatively shallow markets that frontier/emerging markets can be. In short, everyone wants to smellllllllll what THE ROCK is cooking!
Specie # 2: The Worried Bear
Market has rallied, but this guy will sound the most worried. He will give you 101 reasons why the bull run is not sustainable. He will cite newspaper headline of 3 weeks ago as very concerning to him, in spite of the fact that the market has rallied another 20% since that headline first appeared. He will give you reasons for being bearish which you will find a little exaggerated and at times really convoluted. But the trick is to know why he is doing it?
In reality he is invested up to his nose and is enjoying the returns he has made in the last few weeks. What he really wants from you is the assurance that the bull run is intact and healthy and that he has done the right thing. So basically it’s an argument you can’t lose, because he REALLY REALLY wants you to win.
Specie # 3: The Angry Bear (not to be confused with The Worried Bear)
When the benchmark index was at 102, he thought the attractive entry point was 100. The market corrected to 101 but he stuck to what his fundamental valuation models told him. In fact, the correction from 102 to 101 reiterated his belief in his model. But sadly for him, the market rebounded from 101 and is now trading at 120. He hates the market for it and all the imbalances, flaws, manipulation and speculation that have led to the unrelenting rally from 101 to 120. He is grumpy and dismissive of bulls. However his most outstanding trait is that the minute market will correct from 120 to 115, he will jump head first into the manipulated, speculative, flawed and imbalanced bull market and turn into Species # 4, i.e. Tarzan
Specie # 4: The Tarzan Bull
There are bullish investors, there are very bullish investors and then there are Tarzan Bulls. In bull markets, they literally swing from tree to tree with their trademark cry, spreading their bullish ideas to anyone who cares to listen or even to those who don’t care to listen. All the third tier stocks that rally like crazy in bull markets, should thank Tarzan for their day in the sun.
Specie # 5: Last but not the least….. The Brokers
For brokers, bull market weddings are like a session at the gym. You do occasionally stop and nod to your fellow gym mates (read brokers) but you are really just concentrated on your run-and-weights routine which goes like this:
Run – stop at fund manager 1- Do some weights (depending on fund size)
Run – stop at fund manager 2 – Do some more weights
Run – stop at fund manager 3 – Further weights
Repeat till you have done the full circle
If the number of fund managers is limited, do the above routine twice
Just like a late night gym work out can feel very nice the next morning, doing this ‘lifting’ session right can feel very good next morning, once the market opens and the brokerage income starts to flow.
Disclaimer: I am still a sell-side guy at heart, so count me as a broker but in my last year on the buy side, I have been all the above species. So I hope it’s taken in the way it is meant to be i.e. humor.