Digitising thoughts

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Reliance on Power?

Posted by Sathyamurthy www.sathyamurthy.com on January 12, 2008

The markets seem to be powering ahead and attaining the pinnacle of glory from the Reliance Power issue.

The market is being electrified by such powerful issues. Companies with nothing in their books of accounts issue paper (well in demat times, not even paper) for big prices and the electrified investors queue up to gobble the shares on offer.

I read in one of the websites dedicated to stock markets that it is not worthwhile to apply for the impending high priced public issue of Reliance Power as it will get obscenely oversubscribed. So there will be no value in subscribing. (Don’t know if they intended pun as regards the “value”).

In these charged up times, it is difficult to find or hear sane voices. However, I heard one. Thanks to http://www.equitymaster.com for echoing the voice of the master, as below:

Buffett in his 2000 letter to shareholders mentions “Investors, mesmerized by soaring stock prices and ignoring all else, piled into these enterprises. It was as if some virus, racing wildly among investment professionals as well as amateurs, induced hallucinations in which the values of stocks in certain sectors became decoupled from the values of the businesses that underlay them. This surreal scene was accompanied by much loose talk about “value creation.” What actually occurs in these cases is wealth transfer, often on a massive scale. But a pin lies in wait for every bubble. And when the two eventually meet, a new wave of investors learns some very old lessons: First, many in Wall Street- a community in which quality control is not prized-will sell investors anything they will buy. Second, speculation is most dangerous when it looks easiest.”

That was at the height of the previous great boom.

Do we see history repeating itself?

Have you seen my other blog?

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