Beware. Once again experts are prowling for their prey. People are being given tips to make easy money. FII flows are coming to the equity market and market is zooming targetting new highs as if there was no problem last year. Sensex crossed 17000 and new targets were set on business news channels luring people to again invest in the stocks. Mutual fund sales pitch increased and new schemes are being launched. But does the situation is so goody- goody?
In my personal opinion, again this is exuberance and experts are betting on greater fool theory.The greater fool theory (sometimes the bigger fool theory, also called survivor investing) is the belief held by one who makes a questionable investment, with the assumption that they will be able to sell it later to "a bigger fool"; in other words, buying something not because you believe that it is worth the price, but rather because you believe that you will be able to sell it to someone else for an even better price. Today most of the people in the market are not buying stocks because they perceive some value in the stock/ company, but because they are relying on tips given by some brokers/ market experts/TV news channels. All these people were silent when market was going southwards. But as soon as there was some buying seen in the market, all these people started their old game because they earn only on giving tips when market is inching upwards. They do it so smartly that people often get what is called "left out syndrome".
But if we look in a broader view, is these type of activities are in the interest of the nation and people at large. Today's world economic conditions are changing very fast and on of the major reason is trading and speculation in almost everything that is possible to trade. The great Credit Crisis of 2008 was mainly due to trading in home loan mortgages and Credit Default Swaps. But has the leaders and regulators learnt anything from the crisis? Every effort was made by infusing trillions of dollars to institutions that were the cause of the crisis. But did they changed the way they were doing business? I think "No". Again free flow of cheap capital is coming to the emerging markets and they are not here to stay. It is all hot money that will evaporate as soon as their profit targets are reached. Its impact will be seen in the days to come.
In my personal opinion, again this is exuberance and experts are betting on greater fool theory.The greater fool theory (sometimes the bigger fool theory, also called survivor investing) is the belief held by one who makes a questionable investment, with the assumption that they will be able to sell it later to "a bigger fool"; in other words, buying something not because you believe that it is worth the price, but rather because you believe that you will be able to sell it to someone else for an even better price. Today most of the people in the market are not buying stocks because they perceive some value in the stock/ company, but because they are relying on tips given by some brokers/ market experts/TV news channels. All these people were silent when market was going southwards. But as soon as there was some buying seen in the market, all these people started their old game because they earn only on giving tips when market is inching upwards. They do it so smartly that people often get what is called "left out syndrome".
But if we look in a broader view, is these type of activities are in the interest of the nation and people at large. Today's world economic conditions are changing very fast and on of the major reason is trading and speculation in almost everything that is possible to trade. The great Credit Crisis of 2008 was mainly due to trading in home loan mortgages and Credit Default Swaps. But has the leaders and regulators learnt anything from the crisis? Every effort was made by infusing trillions of dollars to institutions that were the cause of the crisis. But did they changed the way they were doing business? I think "No". Again free flow of cheap capital is coming to the emerging markets and they are not here to stay. It is all hot money that will evaporate as soon as their profit targets are reached. Its impact will be seen in the days to come.
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