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The kibitzers of the investing in RCS&RDS

Published at: 03-08-2018

Posted on: August 3rd, 2018 by RaduC No Comments

Managing portfolio investments is a job in itself. One for which professionals study hard a highly complex field which is not within everybody`s reach. There are no shortcuts and the responsibility is huge as these people deal with other people`s money and not their own. Moreover, more often than not, they operate under the scrutiny of a supervising authority.

They are shadowed by kibitzers. The likes of people who know what a soccer coach should do despite of never having played on an actual field. They are those claiming to know how investment professionals should proceed without having the faintest idea of how to put together an investment portfolio. Furthermore, they are always good at making “predictions” only after the fact. Never will you hear them announce current investment opportunities. They have no comments on future profits and losses as they do not know what those are. They only venture comments on the ups and downs of the past which in the meanwhile have become facts and consequently can conveniently claim having been able to see it coming as they could have easily been expected.

How many times have you read in …ironically, financial newpapers: should you have put your money in company X`s shares one year ago, you would have enjoyed a yield 10 times higher than that of a bank deposit. As if the two types of investments were comparable or as if someone urged you to invest one year ago and you refused.

Or more recently: the pension funds lost RON 34 Bn of taxpayer money following the Digi (RCS&RDS) investments. Without considering that the money would have been truly lost if the stock had been sold. To put it differently, the loss would have been “realized”, which is yet to be the case. At the end of the day the fact that the price of your house has dropped temporarily below its acquisition price does not mean that you have lost money. In actual fact we are seeing a temporary drop in stock prices while there are brokers who talk about a significant growth potential of the shares in the future.

Another way of offering unsolicited advice about investments and demonstrate that you top the experts is to look at a portfolio made up of tens of stocks, pick one that registered losses and start going on post factum about the portfolio managers` lack of talent as they have been unable to foresee what was coming. As if all the stocks in a portfolio have to go up, and up alone. As if it is not the setting up of a diversified portfolio the art of getting protection against surprises and achieve performance. What matters at the end of the day is how the investment portfolio performs as a whole. And indeed, an upward trend may be the result of some stocks going up while others go down. (Do you realize that by this measure all asset managers having invested in Facebook and Twitter are incompetent losers given the plunge in their shares over the past week?).

There are also those kibitzers who talk just to remain in the public eye at the risk of becoming  a laughing stock. Such as the well-known attorney who said that RCS&RDS stock had been sold through a private placement around which he then “concocted” scenarios with unethical implications. Assuming that the statement was made out of the kibitzer`s ignorance, we should nevertheless enlighten him and say that RCS&RDS shares were sold through a public offering for everyone to see. Under no circumstances was it made through secretive talks in the late hours of the night between cabals holding privileged information.

The kibitzers` impact is gradual and depends on their visibility and position. The impact of the anonymous remains confined to their circle of friends. The next kibitzers to have an impact are those writing in the press with largely increased visibility, boosted by the credibility they enjoy. And, finally, the risk of a significant impact comes from high-profile kibitzers who issue opinions on publicly traded companies from a high position in government. Unfortunately, the plethora of statements aimed at public companies for political reasons starts in the US and ends on the banks of the Dambovita River. I am referring here to high-ranking officials who would comment as mere spectators on future negative trends of some companies which, what do you know!, become self-fulfilling prophecies punishing investors and issuers by dropping share prices. Such actions dig at the very foundations of the stock exchanges, which are transformed from financing vehicles into political vendettas vehicles. And this can be lethal for an underdeveloped stock market such as as the Romanian one.

Given the risk of being perceived as professionals by an uninformed public, we are left with only one option. Uncover kibitzers!

As the principle that seems to guide them is: Keep slandering and something will come out of it!

Have a nice weekend!

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