1991-1992: Harshad mehta boom
1994 – IPO boom
1999-2000: IT stock boom
2003 – ? : The india story .
‘India will grow at above average rates ( > 6 %) for the next few years and more. India has the requisite demographics, savings rate and the right condition for growth’
The underlying idea behind each boom was true and maybe sound. But typically the idea got carried too far. I am reminded of this quote from benjamin graham (paraphrased)
‘ It is not the bad idea which does you in, it is the good idea carried too far’
So you have a boom in the stock market, the commodities market, gold market, real estate market. Read somewhere that property in mumbai is more expensive than manhattan !!
Maybe it is ‘different’ this time …who knows ?
I am reminded of the following statement from warren buffett
The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large dosesof effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities – that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands.
— warren buffett , letter to shareholders 2000
So maybe there are people who are smart to know when the market will turn. I don’t think I can do that. Better to hold back or if the froth in the market increases, start selling.
another indicator of the bull market – in any party or evening out with friends and family, i keep hearing of the fantastic real estate, IPO or stock tips which should not be missed. prefer to keep my mouth shut in such groups. Who wants to listen to a party pooper ! surprising bit is that no one talked about stocks in 2002-2003 .