Well, this is another way of looking at it. As we have mentioned in our earlier articles, fraud is always behind every bull market. Satyam may have been at one extreme end, but is there any doubt that it made money for the early investors. Is there any doubt that the dotcom fraud, in which both the entrepreneurs and analysts and big investment bankers were equally involved, was a windfall for the investors who got in early. The commodities boom, especially the last stage in which the fraud was perpetrated by the analysts and investment bankers, was also a windfall for the early investors. The real estate story was another joint effort of the promoters and the market players. Promoters used shady accounting practices and market players invented new models to justify crazy valuations.
Greed is at the core of capital markets and that's why frauds are an intrinisc part. In an earlier piece, we had warned readers to wait for frauds to get uneartherd during bear markets. when the abitlity to carry on the fraud becomes increasingly difficult.
During bull markets it's very normal for promoters to fudge numbers to show fantastic growth and profits. That's when they want to sell shares, either from personal account or from the company - most of them don't care whether the money comes into their account or into the company. It's theirs - that's how they view it.
And now the reverse will happen. You can see promoters buying back shares, or companies buying back shares. To make investors sell them, they will now deflate the profits and even show losses for the next few quarters. That's the cycle that keeps repeating. As long as you work in this cycle, you will make money. The names keep changing, the investors become wise to old names, but new ones keep coming. These are the companies that give you maximum returns on the way up and take away everything from you on the way down.
So fraud, from any quarter - be it a company or a market player - will help you make super returns as long as you can recognize them for what they are. Atleast 500 companies would have gone public from Hyderabad alone over the last 15-20 years. How many good ones are there now?
Bear markets give you the opportunity to pick and choose the good ones at your own value and in your own time - so make the best use of it. This is where you can pick up good multi-baggers, but have patience. We are not yet through with the bear market.
Vivek Bhargava
Greed is at the core of capital markets and that's why frauds are an intrinisc part. In an earlier piece, we had warned readers to wait for frauds to get uneartherd during bear markets. when the abitlity to carry on the fraud becomes increasingly difficult.
During bull markets it's very normal for promoters to fudge numbers to show fantastic growth and profits. That's when they want to sell shares, either from personal account or from the company - most of them don't care whether the money comes into their account or into the company. It's theirs - that's how they view it.
And now the reverse will happen. You can see promoters buying back shares, or companies buying back shares. To make investors sell them, they will now deflate the profits and even show losses for the next few quarters. That's the cycle that keeps repeating. As long as you work in this cycle, you will make money. The names keep changing, the investors become wise to old names, but new ones keep coming. These are the companies that give you maximum returns on the way up and take away everything from you on the way down.
So fraud, from any quarter - be it a company or a market player - will help you make super returns as long as you can recognize them for what they are. Atleast 500 companies would have gone public from Hyderabad alone over the last 15-20 years. How many good ones are there now?
Bear markets give you the opportunity to pick and choose the good ones at your own value and in your own time - so make the best use of it. This is where you can pick up good multi-baggers, but have patience. We are not yet through with the bear market.
Vivek Bhargava
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