Do Not Sell Your Nest For A Joy Ride

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This news article appeared recently in many leading Indian publications. Lifestyle Holidays, a Mumbai (India) based tour operator is offering vacations in exchange for your blue-chip stocks.

Here’s the link to the report titled: ‘Sell stocks, travel abroad…’- http://www.business-standard.com/india/news/sell-stocks-travel-abroad/353984/

On the part of the operator it seems to be a new way to bring in business in a waning economy. But as an investor this very offer is an anathema. It is like giving away your future safety and plan for some impulsive shopping and leisure.

Perhaps it needs to be reminded that the famous saying is ‘Live in the moment’ and not ‘Live for the moment’.

However, if one looks deeply into the investor psyche (Graham, Dodd and Buffet would chastise me for using the word investor so carelessly and not distinguishing speculators from investors) present in the markets, this offer may not actually sound that bad for the speculators amongst us. It might sound that getting a 10% gain over the current market price is a good thing and might be the way to encash in (Actually it is not encashing because you have to spend it on a holiday provided by the tour operator).

Does the word ‘UTILITY’ ring bell in some of the investors with regards to the exchange in discussion?

Here’s my solution to the offer:
If you are a speculator or hold a part of your portfolio as a speculation – As the stock is nothing but a blip on the charts for the speculators, do go ahead and enjoy the offer because the stock was not anyway related to your plans in the future and the money tied to the scrip is possibly free money that can find utilization elsewhere (Actually finding a better utilization than a vacation is definitely better for the speculator as well).

If you are an investor – Lifestyle holidays will provide a 10% premium on the current market price of the script, but the seller would not get the money back. In case you can find a buyer for the vacation and resell it to him/her, go ahead ? exchange your stocks, resell it to the buyer you find, buy your stock again from the market and pocket the 10% difference. However, it is critical that you find and do all of these together to cash in the arbitrage opportunity. The only catch is that you have to create the market (finding the buyer and doing the transactions at the same time).

This is one news article which impresses me about human ingenuity (in part of the Tour operator) because even though the operator might not have been right about investors and equity, he definitely knows the different participants in the share market. Unknowingly the tour operator also aligned some investors to its purpose because of the arbitrage opportunity.

And for investors like me: Well, I would need more than a 10% premium to act on the arbitrage. So I will sit pretty with my shares.

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