1/ Thread: Despite being a bull, why I never ridicule the permabears
I was born and brought up in a middle-class family in a sub-urban district in Bangladesh.
When I was in college, I first read Buffett’s quote on “Ovarian Lottery”. It was not a happy moment.
I was born and brought up in a middle-class family in a sub-urban district in Bangladesh.
When I was in college, I first read Buffett’s quote on “Ovarian Lottery”. It was not a happy moment.
2/ While I did not win the ovarian lottery, life was kind to me, and I came to the US for my MBA.
As it is the case for many things in life, even bad luck can turn out to be incredible opportunity in hindsight.
As it is the case for many things in life, even bad luck can turn out to be incredible opportunity in hindsight.
3/ My Bangladeshi roots allow me to experience two countries at vastly different country life cycle.
It also helps me instill in myself why the risk you truly care about cannot be measured.
Let me elaborate what shareholders in Bangladesh are going through to make my point.
It also helps me instill in myself why the risk you truly care about cannot be measured.
Let me elaborate what shareholders in Bangladesh are going through to make my point.
4/ On the surface, Bangladesh has outperformed India, Pakistan, and Sri Lanka by ~350-700 bps on YTD basis.
Why did Bangladesh outperform all the regional countries?
Why did Bangladesh outperform all the regional countries?
5/ Bangladesh took two very “thoughtful” approaches to ensure market does not fall.
1. All the stocks were given a floor price below which prices cannot fall. The floor price was determined by calculating average closing price of previous five trading days...
1. All the stocks were given a floor price below which prices cannot fall. The floor price was determined by calculating average closing price of previous five trading days...
6/ ...Almost all stocks trade at floor price with extremely thin liquidity. Liquidity has dropped by ~80-90%.
But hey, at least market doesn’t fall.
2. After following this floor price rule for a few days, they thought market was “non-essential”...
But hey, at least market doesn’t fall.
2. After following this floor price rule for a few days, they thought market was “non-essential”...
7/ ... (hard to argue otherwise given the liquidity), so they closed the market for more than two months.
The market finally re-opened in the beginning of June. But the floor price rule still exists.
The market finally re-opened in the beginning of June. But the floor price rule still exists.
8/ It is difficult to overstate the value of strong institutions.
Like Buffett, I am bullish on America. But I am very very sympathetic to permabears even in the US.
Like Buffett, I am bullish on America. But I am very very sympathetic to permabears even in the US.
9/ Yes, “pessimists sound smart, and the optimists make money”, but permabears I believe at times appreciate the core thesis of US bull case better than most bulls.
10/ America is America because of its institutions. Its openness and commitment to freedom of expression is stronger than perhaps anywhere in the world even now.
Anything that damages this core thesis may matter much more than your valuation multiples or any short-term noises.
Anything that damages this core thesis may matter much more than your valuation multiples or any short-term noises.
End/ This long-term US bull thesis is certainly being tested in recent times.
Looking at Bangladesh, I know what happens when you don't have the core elements of the LT bull case.
So, while I haven’t acted on any of permabears warnings, I am never too eager to ridicule them.
Looking at Bangladesh, I know what happens when you don't have the core elements of the LT bull case.
So, while I haven’t acted on any of permabears warnings, I am never too eager to ridicule them.
