Print Page | Close Window

Bubbles

Printed From: The Equity Desk
Category: Market Strategies
Forum Name: Fundamental
Forum Discription: Discuss the operations and finances of any of your companies.Make the other participants aware on the investment opportunities available in a stock on PE free cash flow etc
URL: http://www.theequitydesk.com/forum/forum_posts.asp?TID=2297
Printed Date: 15/Apr/2025 at 6:57am


Topic: Bubbles
Posted By: subu76
Subject: Bubbles
Date Posted: 15/Aug/2009 at 12:02pm
I am starting this thread to chronicle bubble stories....please add with content you come across.
 
It will be nice if you could add interesting data points like:
 
During Japan's real estate boom the price of the land of their King's palace was more than the price of entire California's land.
 
Please let me know if such a thread already exists.


Replies:
Posted By: basant
Date Posted: 15/Aug/2009 at 12:09pm
http://www.theequitydesk.com/manias.asp - http://www.theequitydesk.com/manias.asp
 
 


-------------
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in

Posted By: subu76
Date Posted: 15/Aug/2009 at 12:12pm

September 1989. The shares of the Spain
Fund, Inc., a closed-end mutual fund investing in publicly
traded Spanish securities, were bid up in price from approximately
net asset value (NAV)-the combined market value of
the underlying investments divided by the number of shares
outstanding-to more than twice that level. Much of the buying
emanated from Japan, where underlying value was evidently
less important to investors than other considerations. Although
an identical portfolio to that owned by the Spain Fund could
have been freely purchased on the Spanish stock market for half
the price of Spain Fund shares, these Japanese speculators were
not deterred. The Spain Fund priced at twice net asset value
was another example of trading sardines; the only possible reason
for buying the Spain Fund rather than the underlying securities
was the belief that its shares would appreciate to an even
more overpriced leveL Within months of the speculative
advance the share price plunged back to prerally levels, once
again approximating the NA\1, which itself had never significantly
fluctuated.

Posted By: subu76
Date Posted: 15/Aug/2009 at 12:15pm

Real estate prices in Japan have never touched the price they saw in late 1980s.

Posted By: subu76
Date Posted: 15/Aug/2009 at 12:16pm
Right in India:
 
Pentamedia was a bubble which tumbled from Rs 2,109 to Rs 20 in 17 months.

Posted By: basant
Date Posted: 15/Aug/2009 at 12:19pm
Mastershare tarded at multiple times its NAV along with SBI Magnum and Masterplus in the HArshad Mehta Boom.


-------------
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in

Posted By: subu76
Date Posted: 15/Aug/2009 at 12:23pm
Originally posted by subu76

Right in India:
 
Pentamedia was a bubble which tumbled from Rs 2,109 to Rs 20 in 17 months.
 
There after it went down to 50 p.Tongue

Posted By: kulman
Date Posted: 15/Aug/2009 at 1:45pm
http://thelaalstreetjournal.blogspot.com/2009/08/blog-post_6436.html -

http://www.blogger.com/post-edit.g?blogID=5617997523894619316&postID=8805369122348529125 -


-------------
Life can only be understood backwards—but it must be lived forwards

Posted By: Hitesh Shah
Date Posted: 15/Aug/2009 at 2:22pm
MJ had a simian pet called Bubbles. That's all I can contribute. Oh, and there was a song sung by the now rarely seen Anglo-Indians titled, "I'm for ever blowing bubbles". 

-------------

Posted By: subu76
Date Posted: 15/Aug/2009 at 2:30pm
PE Ratios of popular companies during/post bull market
 
Company            dec 99 p/e           march 2003 p/e
GE                         48.1                       15.7
Home Depot          97.4                       14.3
Sun Microsystems  123.3  Tongue               N/A

Posted By: subu76
Date Posted: 15/Aug/2009 at 2:35pm
Quick question:
 
Do you know of a 40 p/e stock of a non - cylical company?
 
If yes, do post here...... (no extraordinary event stocks please)
It'll be interesting to track their prices.
 

Posted By: subu76
Date Posted: 15/Aug/2009 at 5:52pm
A quote from a guru during 1960s go go year
 

“short-term investing may actually be safer than long-term investing sometimes, and the price action of the stocks may be more important than the ‘fundamentals’ on which most research is based . . . portfolio managers buy stocks, they do not ‘invest’ in corporations.”

Posted By: subu76
Date Posted: 15/Aug/2009 at 5:56pm
Prices of some of the favorite stocks of 1960s go go year
 
Name                                    High   Low
National Student Marketing      36    1.5
Four Seasons nursing homes     91      0
Commonwealth United              25      1
Management Assistance            46      2

Posted By: Hitesh Shah
Date Posted: 15/Aug/2009 at 6:00pm
The mind is quite malleable. It is possible to rationalise anything. Short term, long term, concentrated, diversified, growth, value.

As some other guru said, "Enjoy what you do".



-------------

Posted By: subu76
Date Posted: 15/Aug/2009 at 6:14pm

When there is a gap between perception and reality, it is only a matter of time until the gap is reconciled.

Posted By: basant
Date Posted: 15/Aug/2009 at 6:30pm
Check on Polaroid,Xerox and carpet companies of the late 50's.
 
Originally posted by subu76

Prices of some of the favorite stocks of 1960s go go year
 
Name                                    High   Low
National Student Marketing      36    1.5
Four Seasons nursing homes     91      0
Commonwealth United              25      1
Management Assistance            46      2


-------------
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in

Posted By: leo2007
Date Posted: 16/Aug/2009 at 12:18pm
Originally posted by Hitesh Shah


As some other guru said, "Enjoy what you do".

 
Was this guru from Pune ?Wink

Posted By: subu76
Date Posted: 16/Aug/2009 at 12:27pm
P/E of top  20 Nifty fifty stocks in 1972 and returns thereafter till 2001.
 
The nice thing is that some stocks did give decent returns even post these prices.
 

1972 P/E

Annualized Return
Polaroid
90.7
-14.68
McDonald's
85.7
10.50
MGIC Investment
83.3
-6.84
(1.41)
Walt Disney
81.6
8.97
Baxter Travenol
78.5
10.10
Intl Flavors & Fragrances
75.8
5.66

Avon Products
65.4
6.04

Emery Air Freight
62.1
-1.37
(-0.16)
Johnson & Johnson
61.9
13.35
Digital Equipment
60.0
0.93
(7.14)
Kresge (now Kmart)
54.3
-1.07
Simplicity Pattern
53.1
-1.47
(-1.32)
AMP
51.8
11.17
(11.92)

Black & Decker
50.5
2.45
Schering
50.4
13.19
American Hospital Supply
50.0
12.36
(5.16)
Schlumberger
49.5
10.37
Burroughs
48.8
-1.64
Xerox
48.8
0.89
Eastman Kodak
48.2
1.72

Posted By: subu76
Date Posted: 16/Aug/2009 at 12:41pm
Quotes around late 1999 to early 2000
 
On Dec 1999, portfolio mgr of a mutual fund: On telecom stock
It's not a mania. Look at the outright growth, the absolute value of growth. It's big.
 
On Jan 2000, Robert Froelich (a bug guy on wall street) in WSJ:
"It's a new world order."
 

Posted By: subu76
Date Posted: 16/Aug/2009 at 1:17pm

deleted

Posted By: subu76
Date Posted: 16/Aug/2009 at 9:19pm
IPOs of 2007.....
Checked out only the last 10 IPOs...
 
Name                                  IPO P  current P
Aries Agro Limited                130.00 54
Manaksia Limited                 160.00 46.95
Brigade Enterprises Limited   390.00 94.3
Bgr Energy Systems Limited 480.00 367.1
Transformers And Rectifiers  465.00 281.3
Eclerx Services Limited         315.00 328.75
Jyothy Laboratories Limited  690.00 118
Edelweiss Capital Limited      825.00 429
Mundra Port And SEZ           440.00 553
 
 
Beware of bull market IPOs

Posted By: Hitesh Shah
Date Posted: 16/Aug/2009 at 10:39pm
Any particular reason for leaving out Powergrid & REC?

-------------

Posted By: Hitesh Shah
Date Posted: 16/Aug/2009 at 10:44pm
Originally posted by subu76

IPOs of 2007.....
Checked out only the last 10 IPOs...
 
Name                                  IPO P  current P
Aries Agro Limited                130.00 54
Manaksia Limited                 160.00 46.95
Brigade Enterprises Limited   390.00 94.3
Bgr Energy Systems Limited 480.00 367.1
Transformers And Rectifiers  465.00 281.3
Eclerx Services Limited         315.00 328.75
Jyothy Laboratories Limited  690.00 118
Edelweiss Capital Limited      825.00 429
Mundra Port And SEZ           440.00 553
 
 
Beware of bull market IPOs


Re. Jyothy Labs, http://myiris.com/shares/company/chartShow.php?icode=JYOLABOR&cSelect=2 - check this out please.


-------------

Posted By: Hitesh Shah
Date Posted: 16/Aug/2009 at 10:46pm
Originally posted by Hitesh Shah

Any particular reason for leaving out Powergrid & REC?


Sorry, didn't see you restricted to last 10 IPO's of 2007 for some reason.


-------------

Posted By: Hitesh Shah
Date Posted: 16/Aug/2009 at 11:05pm
This what I got from the NSE site:

Sr. No. Name of the issue LTP (Rs) Issue Price (Rs.) Date of Listing
1 Precision Pipes and Profiles Company Limited 49.45 150 01/11/08
2 PORWAL AUTO COMPONENTS LIMITED - 75 *
3 MANAKSIA LIMITED 46.95 160 01/08/08
4 ARIES AGRO LIMITED 55.15 130 01/11/08
5 BRIGADE ENTERPRISES LIMITED 94 390 12/31/07
6 Transformers And Rectifiers (India) Limited 279.65 465 12/28/07
7 BGR ENERGY SYSTEMS LIMITED 368.75 480 01/03/08
8 ECLERX SERVICES LIMITED 326.4 315 12/31/07
9 JYOTHY LABORATORIES LIMITED 119.05 690 12/19/07
10 KAUSHALYA INFRASTRUCTURE DEVELOPMENT CORPORATION LIMITED 21.05 60 12/14/07

For jyothy Labs, figure in a change in the face value.

Edelweiss is 13th and Mundra Port figures as 14th according to NSE.



-------------

Posted By: subu76
Date Posted: 16/Aug/2009 at 11:56pm
Hitesh, thanks for making various corrections.
 
Man!! this list looks really sad....but expected i guess.
 
History does not repeat in the market....but i guess there's no harm in reemphasizing lessons once in a while

Posted By: subu76
Date Posted: 27/Aug/2009 at 2:53pm
Buffet articles just prior to the dot com bubble collapse..
(culled from Hitesh's link on another thread)
 
http://money.cnn.com/magazines/fortune/fortune_archive/1999/11/22/269071/index.htm - Why stocks can't meet the public expectations
 

Posted By: valuepicks
Date Posted: 27/Aug/2009 at 3:29pm
If we can say cyclical bull market started in 1992, post liberalization, by this year in 2009, we completed 17 years. Did we complete one cycle in buffet's observation of marathon trends? Smile
 
Originally posted by subu76

Buffet articles just prior to the dot com bubble collapse..
(culled from Hitesh's link on another thread)
 
http://money.cnn.com/magazines/fortune/fortune_archive/1999/11/22/269071/index.htm - Why stocks can't meet the public expectations
 

Posted By: chimak10
Date Posted: 27/Aug/2009 at 3:34pm
I like bubbles!!!!

Posted By: subu76
Date Posted: 27/Aug/2009 at 3:34pm
He He.....Nobody except Bejan daruwala knows it...we know it only in hindsight Smile
 

Posted By: Monkey
Date Posted: 27/Aug/2009 at 10:13pm
Well, I agree that this all is just guess work. But, here is my take.
 
We had our first secular bull market from 1979 to 1992. During this time period sensex rose from 100 in 1979 to 4500 in 1992. (45 times in 13 years, that too for Index!!)
 
After this 13 years of secular bull market, we expereince secular bear market from 1992 to 2003. During this 11 years of bear market, sensex went from 4500 to 3000 at bottom in April 2003.
 
From 2003 onwards, we are on to next secular bull market. If you ask Eliot wave theories, this second bull market will be stronger and longer than first bull market.
 
If so, this bull market will last much more than 13 years which would take us the time frame of 2016 to 2019 for the peak of this secular bull market.
 
Also, if this bull market is stronger than last one, return should be more that 45 times which wa achieved last time. Take a number of 70 times and with starting point of 3000, it gives us sensex number of 2,10,000 (Two lacs ten thousand)
 
Well, as I said, all this is guess work only. Hence, please do not feel offended.
 

Posted By: subu76
Date Posted: 16/Sep/2009 at 12:07pm
Scott McNealy, co-founder of Sun trashing his own company's dot com era prices in a 2002 interview.... http://www.businessweek.com/magazine/content/02_13/b3776087.htm - Link
 
But two years ago we were selling at 10 times revenues when we were at $64. At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don't need any transparency. You don't need any footnotes. What were you thinking?

Posted By: subu76
Date Posted: 16/Sep/2009 at 12:14pm
One bubble prediction that was proved wrong....A 2005 article
 
http://www.guardian.co.uk/technology/2005/jun/10/city.newmedia - Google shares are a bubble waiting to pop ... as it was selling at 25X revenues.
 
Google has doubled since then.
However it's revenues grew 7 times in the meantime.

Posted By: subu76
Date Posted: 16/Sep/2009 at 12:24pm

http://www.thestreet.com/story/10002197/statement-shock-10-questions-with-tech-skeptic-robert-sanborn.html - Interview of a value fund manager who got fired during the dot com bubble  Points to the kind of pressures faced by institutional investors

Posted By: subu76
Date Posted: 24/Dec/2009 at 11:04am
The woes of buying an IPO during a bubble.
 
Sycamore Networks
 
Jan 2000 - Market cap on the dayof IPO = 15 billion
 
Market cap today - 600 million.
 
After 10 years the company is at 4% of it's IPO day market cap.
And this is a clean company...they just listed at an opportune time.

Posted By: basant
Date Posted: 25/Dec/2009 at 12:12pm
Promoter is the brother in law of Nr Nayan MurthyOuch

-------------
'The Thoughtful Investor: A Journey to Financial Freedom Through Stock Market Investing' - A Book on Equity Investing especially for Indian Investors. Book your copy now: www.thethoughtfulinvestor.in

Posted By: subu76
Date Posted: 25/Dec/2009 at 2:37pm
Also, one of his other companies.... Tejas Networks will probabily get listed in India sometime.... I am sure he used to have a big stake in this one.

Posted By: hit2710
Date 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.

Posted By: abhishekbasu
Date 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.


-------------

Posted By: subu76
Date Posted: 25/Dec/2009 at 7:52pm
Originally posted by hit2710

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 middleSmile

Posted By: Kautilya
Date Posted: 12/Aug/2012 at 9:13am
The rise and fall of http://www.thehindu.com/news/national/article3759135.ece - Emu Farming

-------------
My indecision is final.


Print Page | Close Window