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Posted: 25/Dec/2009 at 12:12pm
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Joined: 15/Jun/2009
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Posted: 25/Dec/2009 at 6:27pm
Any idea on how to detect bubbles which are forming in a particular sector/stock?
I had the feeling that some sort of bubble was forming in the stock of educomp when it was quoting at around 1000 and was at around 40-50 times discounting, and still people were justifying the price quoting the immense opportunities in the education sector and other positives.
Another bubble which could be in its infancy phase seems to be the power generation stories where almost every steel company wants to generate power and besides these there are huge ipos coming in to tap public money for setting up thousands of megawatts of power capacities. This story has a long way to go before it assumes bubble proportions but has to be kept in mind. The rush of IPOs from such companies reminds me of the rush of IPOs from property/real estate stocks some time back and now very few people want to own real estate stocks which are still way below their all time highs.
Stockmarket is a weird place. For every person who buys a stock there is a person who sells it and both think they are very smart.
Joined: 07/Sep/2008
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Posted: 25/Dec/2009 at 7:22pm
Perhaps, one of the best texts on bubbles is available in Charles Mackay's popular book Extraordinary Popular Delusions and the Madness of Crowds.
But, typically a bubble is for a group of stocks or the market in whole. Movement of prices of any one stock is usually not termed as a bubble. That is typically a valuation issue.
Originally posted by hit2710
Any idea on how to detect bubbles which are forming in a particular sector/stock?
I had the feeling that some sort of bubble was forming in the stock of educomp when it was quoting at around 1000 and was at around 40-50 times discounting, and still people were justifying the price quoting the immense opportunities in the education sector and other positives.
Another bubble which could be in its infancy phase seems to be the power generation stories where almost every steel company wants to generate power and besides these there are huge ipos coming in to tap public money for setting up thousands of megawatts of power capacities. This story has a long way to go before it assumes bubble proportions but has to be kept in mind. The rush of IPOs from such companies reminds me of the rush of IPOs from property/real estate stocks some time back and now very few people want to own real estate stocks which are still way below their all time highs.
Another bubble which could be in its infancy phase seems to be the power generation stories where almost every steel company wants to generate power and besides these there are huge ipos coming in to tap public money for setting up thousands of megawatts of power capacities.
I can't agree more.
I think most companies which have production start dates 3-4 years from now will experience much lower stock prices during a correction.
But then who is to say the prices will not double somewhere in the middle
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