The stock market serves as a nexus where millions of buyers and sellers converge to engage in transactions. At its core, each transaction represents an agreement between a buyer and a seller, with the central element being the price. This price is not static; it fluctuates continuously, reflecting the equilibrium between supply and demand.

The conventional belief posits that the interplay of supply and demand in the stock market is predominantly influenced by the fundamental factors inherent to individual companies. These factors encompass a range of critical aspects, including profitability, stability, future strategic plans, and the competency of management teams.

Consequently, share prices and index levels serve as barometers of the collective sentiment and expectations of market participants regarding the future trajectory of companies and the broader market. These prices are not mere numbers; rather, they represent a synthesis of myriad factors, including investors’ perceptions, assessments, and anticipations.

Expectations and perceptions

When buyers and sellers converge in the stock market, each transaction reflects not only the current value of a company but also the perceived future potential. As investors assess various factors, such as company performance, industry trends, economic indicators, and geopolitical events, they form expectations about how these factors will impact future earnings and growth prospects. And these perceptions often vary widely, reflecting diverse interpretations of available information and differing outlooks on the potential outcomes.

These perceptions are then manifested in the bids and asks that drive share prices and index levels. If investors anticipate robust growth and profitability for a company, they may bid up its share price, reflecting optimism and confidence in its future prospects. Conversely, perceived negative sentiment or concerns about the company’s outlook may lead to downward pressure on its share price.

Share prices and index levels, such as All Share Price Index (ASPI), serve as indicators of how investors collectively view the market. As they consider factors like the economy and global events, their expectations for future market performance are reflected in these measures. Essentially, they represent the combined opinions and outlooks of investors, incorporating both current information and future predictions. This consensus is always changing as new data emerges and sentiment shifts. Therefore, these indicators are not fixed but rather reflect ongoing discussions and reactions among market participants.

Long-term investing in the stock market entails placing perceived confidence in a company’s prospects over time. However, whether driven by past performance, societal concerns like climate change or political stability, or sheer speculative sentiment (short-term focused), buyers anticipate that share prices will increase.

However, these perceived expectations are not always realized, potentially prompting investors to become sellers. This decision, too, is often driven by the perception that anticipated prospects may not materialize as expected.

Future expectations serve as the linchpin for daily market activities, shaping the equilibrium of opinions on a company’s trajectory. Yet, share prices are not isolated from external influences; they reflect investors’ perceptions relative to the company’s performance and broader market sentiments. The pervasive fear of missing out often prompts investors to make impulsive decisions, chasing returns and disregarding rational assessments. However, smaller markets, like the Colombo Stock Exchange, have often been susceptible to manipulation by a select few prominent players, as noted by stock brokers, fund managers, and investment advisors.

When to enter the market

Interestingly, shares often rally ahead of economic upturns, creating a dissonance between market performance and day-to-day economic realities. Perception may paint a rosy picture, making investment decisions seem obvious in retrospect. However, market timing remains an arduous task, requiring foresight and conviction amid prevailing sentiments.

Learning from investment mistakes is pivotal for personal growth and financial success. Detaching ego from errors fosters introspection and prevents recurrence. Avoiding perception bias is imperative, as it distorts learnings of past decisions. Writing down experiences facilitates reflection and rational analysis, aiding in the development of effective investment strategies centered on disciplined processes.

Diversification; Risk management

Diversification, as advocated by Warren Buffett, offers protection against ignorance but remains a contentious subject. While concentrating investments in a single promising asset theoretically maximizes returns, it also heightens risks. Notably, founders or controlling shareholders wield informational advantages, contrasting with minority investors subject to regulatory disclosures. Hence, inherent risks accompany stock trading. The late Dr. Lalith Kotelawela, for instance, refrained from stock market involvement for himself and his companies, equating share trading with gambling.

Instances like Enron’s collapse underscore the multifaceted risks inherent in investing, from fraud to unforeseen macroeconomic upheavals. Diversification mitigates single-security risks, safeguarding portfolios against adverse events. However, ignoring diversification in pursuit of concentrated gains poses perilous consequences.

Overtrading, driven by short-term fixations and market noise, undermines long-term investment success. Emphasizing present circumstances overlooks the enduring impact of macroeconomic trends on market performance. Maintaining perspective and focusing on long-term fundamentals are crucial for navigating market volatilities and achieving sustainable growth.

Therefore, the stock market embodies the amalgamation of perceptions on expectations, sentiments, and uncertainties. Investors must recognize the transient nature of market dynamics, learning from past mistakes and adhering to disciplined investment strategies. While concentration may offer lucrative prospects, diversification remains a prudent risk management approach. Ultimately, maintaining a long-term perspective amidst short-term fluctuations is paramount for realizing enduring investment success.

Bear and Bull markets

The stock market, a bustling arena where investors and speculators converge, showcases a remarkable sensitivity to short-term stimuli. In pivotal market years, investors frequently succumb to timing mistakes, selling in the aftermath of bear markets and buying amid bull markets. Selling in bear markets and buying amid bull markets refers to a common behavioral pattern observed among investors.

During bear markets, characterized by declining stock prices and widespread pessimism, investors often feel compelled to sell their holdings out of fear of further losses. This behaviour is driven by a desire to mitigate losses and preserve capital. However, selling during bear markets can lead to missed opportunities for future gains, as markets often rebound after periods of decline.

Conversely, in bull markets, where stock prices are rising, investor perceptions tends to be optimistic, and confidence in the market is high. During these periods, investors are more inclined to buy stocks in anticipation of further price appreciation. This behaviour is driven by a fear of missing out on potential gains and a belief that the upward trend will continue. However, buying in bull markets can also be risky, as it may result in purchasing stocks at inflated prices.

Conclusions

Overall, the tendency to sell during bear markets and buy during bull markets can be attributed to emotional responses to market conditions, rather than rational decision-making based on fundamental analysis. As a result, investors may inadvertently buy high and sell low, thereby underperforming the market over the long term.

Furthermore, understanding the direct link between investment strategies and long-term goals is paramount. Properly defining goals enhances the alignment between assets and objectives, reinforcing the resilience of investment portfolios against short-term fluctuations.

Ultimately, gaining perspective on economic data and market movements is essential. While short-term fluctuations may induce anxiety, their significance in the grand scheme of long-term financial goals is often negligible. Just as recalling the minutiae of Central Bank actions from a decade ago holds little relevance today, current market gyrations are unlikely to alter the trajectory of well-defined investment strategies over the long term.

Finally, navigating the intricacies of the stock market demands a steadfast commitment to long-term investing principles. By transcending short-term noise and anchoring decisions on fundamental values and overarching goals, investors can weather market volatility and chart a course towards enduring financial success.

(The writer, a senior Chartered Accountant and professional banker, is Professor at SLIIT University, Malabe. He is also the author of the “Doing Social Research and Publishing Results”, a Springer publication (Singapore), and “Samaja Gaveshakaya (in Sinhala). The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the official policy or position of the institution he works for. He can be contacted at saliya.a@slit.lk and www.researcher.com)

by Jehan Perera

On April 21, the country passed the fifth year anniversary of the Easter Sunday bombing that took the lives of about 300 persons and injured and maimed many more. The bombers targeted Catholic and Christian churches on Easter Day, sacred to Christians, which were filled with devotees at the time of the attacks. The bombers had emerged out of the blue as it were, there were questions whether Sri Lanka had become a site of a global battle and uncertainty that others might strike again. For two months, the capital city of Colombo almost shut down as people lived in fear. The bombing also changed the course of national politics. It paved the way for nationalist politicians whose promise was the guarantee of national security and the rightful place of the ethnic and religious majority.

Today, the memory of those events has receded from the consciousness of most people. But the impact of the bombing has been lasting. The economic setback due to foreign investors and tourists giving Sri Lanka a wide berth was to pave the way to the economic bankruptcy due to the corruption and mis-management of those who won the elections that the country is yet to overcome. Equally lasting, and perhaps more destructive has been the erosion of trust in the present and past government leaderships in the face of its unwillingness to find the truth and hold to account those who planned the attacks and those who chose not to defend against the attacks even when forewarned by foreign and local intelligence services. There is a widespread feeling in the country today that the wrongdoers are being protected.

The effort of the Catholic Church in the country to canonize those who died, to either elevate them to sainthood or martyrdom is an attempt to keep the issue of the mass killing alive both nationally and internationally. There have been international precedents for this. Examples are the Vietnamese Martyrs or the Japanese Martyrs of the 16th century which became internationalised through the Catholic Church. Cardinal Malcolm Ranjith said the Church will take the first step to collect signatures from the Catholic community countrywide to be sent for to Rome for Papal recognition. “Because once we declare them as ‘Heroes of faith’, the international community will come to recognise them more and more and it will become an international matter.” Cardinal Malcolm Ranjith has been resolute in being up there in front, voicing the sentiments of the bereaved families for justice in public protest on the road or by lobbying with national leaders and the international community.

WITHHOLDING INFORMATION

There have been several official inquiries into the trail of events that led to the Easter bombings. A couple of those who held senior positions in the security establishment even had to go to prison for a while and others have been subjected to heavy fines for their dereliction of duties. But still the sense that there has been a cover up is strong. The passage of time has brought forth more evidence of a cover up. There are objective facts that can be verified and cannot be hidden. Members of the intelligence community and the police in Sri Lanka whose investigative capacities have been seen on innumerable occasions would surely have evidence of what truly happened. It is therefore only a matter of time when the truth comes to light.

It was only two weeks ago that the Catholic Church was provided the full report of the presidential commission that investigated the bombing. The report they had previously been given, and that too after a long delay had an estimated 1500 pages removed from it. The next phase of the quest for justice will need to await a new government. The direction to ascertain the truth does not require a people’s mandate in the same way that deciding on a new economic direction might require. Justice is fundamentally concerned with the fair and equitable treatment that is not dependent upon popular opinion or electoral mandates but is grounded in universal ethical norms and legal standards. The reason that a new government is needed is when those in the government have vested interests in not disclosing the truth and not rocking the boat they are in.

Following his visit to the police Criminal Investigation Department for questioning, Fr Cyril Gamini Fernando, the spokesperson of the Archdiocese of Colombo openly said uncovering the truth behind the Easter Sunday attacks depends on a change in the political system. He mentioned that he has appeared before the CID on multiple occasions and has provided detailed statements. Despite this, there was a lack of a substantial investigation based on the information he has shared. He expressed scepticism about the government’s commitment to uncovering the masterminds behind the Easter Sunday attacks, which led to his conclusion about the need for a change in the political system.

NEW GOVERNMENT

The events of Easter 2019 are sharpest in the memory of the Christian community in Colombo and Batticaloa where the churches were bombed. At the same time, it needs to be kept in mind that the loss of life that took place that day is dwarfed by the events that took place elsewhere and at other times. If the Christians and their leadership keep on remembering and not giving up on the quest for justice, it can be imagined that those who have lost even more would also be determined to remember and not give up on their quest for justice. In May 2009, the three decade long internal war ended very bloodily on the battlefields of the north with the defeat of the LTTE and killing of its leaders in circumstances that are not fully known to most people to this day.

The events of May 2009 are not the only ones in which mass killings took place. Twenty years earlier in 1989, the JVP was defeated and its leadership was also killed. There was an orgy of violence in which tens of thousands of people were killed. As in the case of the LTTE, the decimation of the JVP took place in circumstances that were kept beneath the surface and in which the killings took place not only on one side but on multiple sides. Many novels have been written about those periods of large scale violence, about the torments of the victims and their families and the ghouls who put them to death. This is the reason why those who seek to promote the reconciliation process urge that there should be a process of transitional justice, in which truth, accountability, reparation and a political solution are brought to bear.

Last week the National NGO Secretariat organised a meeting between civil society organisations engaged in the national reconciliation process and government mechanisms. There was a spirit of positive engagement and problem solving in the discussions with the Office on Missing Persons, the Office for Reparations, the Office for National Unity and Reconciliation and the interim secretariat for the Commission on Truth, Unity and Reconciliation that is being formed. The draft of the Truth Commission law does not yet deal with issues of the JVP period and the Easter bombing which are lacunas. There is a need for a system change that the Catholic Church and Fr Fernando have openly called for, which would come through elections to get rid of the blocks to the quest for justice and the national reconciliation process.

by Dr. Justice Chandradasa Nanayakkara

Nyanaponika Thera in his Buddhist writings states: “unshakable deliverance of the mind is the highest goal in Buddha’s doctrine. Here deliverance means; the freeing of the the mind from all limitations, fetters, and bonds that tie it to the Wheel of Suffering, to the Circle of Rebirth. It means cleansing the mind of all defilements that mar its purity; removing all obstructions that impede its progress from the mundane (lokiya) to the supermundane consciousness (lokuttara citta) that is, to Arahatship.

Life’s spiritual path is paved with many hindrances and obstacles. Out of those many obstacles, Buddhism stresses five recurring hindrances (Nivaranas) that impede a person’s spiritual progress. They are (1) Sensual desires (Kamachanda) derived from gratification from the five senses of sight, sound, smell, taste, and physical sensation. (2), Ill will (Vyapada) feelings of hostility, resentment, hatred, and bitterness. (3), Sloth and Torpor (Thina Middha) halfhearted action with little or no effort or concentration (4), Restlessness and Worry (Uddachha Kukucha) inability to have a composed mind and focus one’s energy. (5), Skeptical Doubt or Indecision (vickiiccha) lack of conviction or trust in one’s abilities. These five hindrances are potent negative forces in the mind that make a person lose mindfulness, hinder his ability to see things as they are and become mentally focused and concentrated. Moreover, the five negative states of mind prevent a person from seeing clearly and making the right decisions and derail him from his spiritual path to liberation. These hindrances are forces of distraction encountered by a person engaged in meditative practice and his daily life. They prevent the development of concentration (Samadhi) which is a cornerstone of the path to liberation from suffering. It is only by constant and earnest efforts that the harmful influence of the five hindrances could be avoided. The Buddha using analogy stated that the mind with five mental hindrances is comparable to gold contaminated with five impurities such as iron, copper, tin, lead, and silver which make the gold not pliant, wieldy, or luminous but brittle and cannot be wrought well. But the mind that is free from such hindrances will be malleable wieldy, luminous, and pliant and be able to concentrate properly by eradicating mental impurities and attain wisdom. It is believed the five mental defilements (kileses) are not inherently wrong as they can provide opportunities for deeper insights into the nature of life’s suffering, compassion, and deliverance. The hindrances occur to a greater or lesser extent in every person.

The first hindrance, sensual desire is the craving derived from the gratification of our five senses: sight, sound, smell taste, and touch. It is normal for an average person to get tempted by alluring sensual objects. Lack of self-control results in the inevitable arising of passions. They arise from positive emotions associated with our senses but tend to cause us to lose track of our goals.

It is in the very nature of sensual desires that they can never be satisfied as the mind is constantly detecting objects that are coming in through our five senses. There is no end to the seeking of our enjoyment of pleasurable objects and their sensation. These sensual objects arise and disappear as do all other phenomena. Once you enjoy them you are left with the same unsatiated desires for more gratification. As soon as a person experiences one object of sensual delight rather than finding contentment and satisfaction from it, he becomes obsessed with new desires. A person who is obsessed with sensual pleasures assumes that happiness consists in submitting to the dictates of sensual desires but real happiness eludes him as craving for sensual pleasures becomes insatiable. This drives him to ceaseless pursuit of new sensual gratification. When the mind is attached to sensory experience it gives rise to too many attachments in the world and it becomes completely entangled in worldly ways and you become so trapped in delusion that you cannot see things in their true perspective. Attachments to sensual objects increase our greed, clinging and grasping, and keep us bound to the wheel of samsara. Although the five hindrances cannot be eradicated before achieving stages of Awakening they can be lessened to a great extent through mindfulness. The misconception that buddhism gives an unfair valuation to sensual pleasures, to the neglect of their positive aspects is not sustainable as the Buddha never dismissed sensual desires outright but admitted that sensuality can give a person a certain measure of happiness and satisfaction. But he declared that happiness based purely on sensuality is ephemeral and shortlived. It is the constant pursuit of sensory pleasures that bars inner peace, and mindfulness distracting us from our spiritual goals. that Buddhism does not approve of. Seeking pleasure is natural but excessive craving can tether us to the wheel of samsara preventing deeper spiritual fulfillment. When that happens the hope of reaching the end of suffering would become dismal until you overcome the sensual desires that cloud your mind.

Antidotes to sensual desires include renunciation turning away from distracting stimuli, and investing the experience of desire with mindfulness that clouds our mind and prevents us from seeing the true nature of things. Similarly, when we are overcome by sensual desires we should reflect and meditate on the true nature of our life and its ephemerality, and one day we are all going to end up as decaying corpses. This kind of reflection weakens lustful thinking as we realize the imminence of our death (Joseph Goldstein). Regarding sensual desires arising out of taste, a person is expected to indulge in moderate consumption of food solely for maintaining and sustaining the body not for enjoyment, beautifying, or adorning the body. Association and maintaining friendships with wise and noble friends also tend to mitigate sensual desires.

The second hindrance ill-will is characterised by negative emotion towards a person, object, or situation. It refers to feelings of resentment, anger, and hostility. it is an unwholesome mental state that wishes harm and misfortune on others. It clouds our judgment, prevents us from looking at situations from their true perspective, and hampers our ability to feel compassion and empathy. A specific way of dealing with ill will when it is overpowering is to generate loving thoughts, wishing happiness, and love to all beings everywhere and the specific person towards whom you direct your anger. Although, initially, you may find it difficult to cultivate those wholesome thoughts eventually anger is bound to dissipate and the mind becomes calm and collected. Another insightful way of dealing with anger and aversion is to reflect upon the law of karma and understand that we are all heirs to our actions. Kamma is an immutable law of cause and effect and we cannot avoid the consequences. The underlying intentions behind our actions determine the nature of their results.

The third hindrance is sloth and torpor are a compound word that combines both the emotional and somatic aspects of excessively low energy. It is a morbid state of the mind that refers to physical laxity, mental dullness, and callous indifference. It can manifest as sleepiness, a lack of motivation, and depression. It should not be understood as bodily drowsiness, because Arahhants who have conquered these two states, also experience bodily fatigue. (Narada). An antidote for strong sloth and torpor would be refreshing the body by giving it a rest so that our mind becomes clear-headed and focused. Engaging in walking meditation and vigorous bodily movement will also act as an antidote.

The fourth hindrance is restlessness and worry. It is another impediment to spiritual progress. Here the restless mind is likened to flustered bees in a shaken hive so that the mind cannot concentrate and focus on wholesome things. Moreover, an agitated and flustered mind prevents calmness and blocks the spiritual path. Similarly, worry is just as detrimental. People who worry over one thing and another, over things done or left undone, and over misfortunes, are unable to have peace of mind. These unwholesome states of mind prevent concentration.

The fifth and last hindrance is skeptical doubt. It refers to a loss of trust and faith in Dhamma. There are two types of doubt. An unhealthy and unwholesome doubt that undermines a person’s spiritual practice, and a healthy doubt that informs the spiritual practice. A person entertaining healthy doubt should seek intelligent clarification and investigation of Dhamma as Buddha expounded in Kalama Sutta, while a person nursing unhealthy doubt is so prejudiced and cannot be convinced by any reasoning. A person engaged in meditative practice sometimes tends to evaluate his practice pondering constantly whether any benefit would accrue to him by it. Any doubt and lack of confidence entertained by a person in this regard is bound to impede his spiritual practice. When a doubt arises in a person, it is important to recognise it as a doubt and realise that it is constantly changing. Another way to resolve a doubt concerning meditative practice is to seek clarification from a knowledgeable teacher. Any doubt entertained about any person or matter can evidence itself in a person’s behaviour and conduct, as a result of his unsettled state of mind.

In brief, to subdue the hindrances a person has to develop five psychic factors known as jhana. Sense desire is subdued by ekagatta one-pointedness or unification of the mind. Ill will by joy (piti) sloth and torpor by applied thought (vittakka) restlessness and worry by happiness (sukha) and doubt by sustained thought (vicara) Psychic factors raise a meditative person from lower to higher levels of mental purity (Piyadassi).