Irrational Exuberance

Sensex crossed 16K! Fed rate cut led jubilous traders to trade lock stock and barrel! Well are we yet at the peak of the bull run or what? many think we are yet to reach those unchartered heights and as far as economy is robust in growth, we need not worry. ..

To each, his own. I have mixed feelings on this. I’ll elaborate on this for sure, but for the timebeing, let me just quote certain figures: Sensex was just 1000 odd in 1990. Post reforms, there has been a constant rise, though not steady. Reached 6000 in 2000. Thats 10 years to gain 5000 points. Now at past 16k, its taken 7 years to gain 10000 points. Reason: even a layman will quote: the India Story. OOOkaaaaay!!

Now looking at recent gains of 1k. It tool less than 3 months to reach 16k from 15k. It took almost 7 months to reach from 14k to 15k. Again it took only 1.5 month to reach 14k from 13K. So to analyse: What exactly happened last year that prompted zoom in December, which again slowed down in Jan-Feb-Mar-April-May etc? Nothing of great import that I can remember. June and thereafter was attributed to global impacts and subprime crisis having spill-obver effect on all types of markets. So yeah there is some excuse for uncertainty post June in the markets. So all of a sudden fed cuts rate by 50 bps and sensex zooms past 16k. Now, Fed wants to salvage America from recession, increase consumption, give a boom to economy etc etc etc. But its subprime crisis hasnt averted yet. 2 major subprime lending banks have filed for bankruptcy and a lot it perhaps yet tobe discovered.

The point I am trying to drive at with such very-brief arguement is that these days its more of Irrational Exuberance than any real stuff happening around here. Overrated, overreacted, overjustified! Thats what the markets are. Oh, and OVERHEATED!!

I cant be as articulate has Prof. Shiller is, but if you look at any number of market outlooks being published, its always a mix of bullish and cautious. Which simply translated means: Gajarachi Pungi vajli tar vajvaychi . So currently, everybody’s busy making money, making hay while the sunshine lasts (a.k.a tava garam aseparyant poli bhajun ghene) (YT included) coz nobody really knows whats happening in the markets these days.


About pradsword

My posts will reveal the most about my nature and my thoughts...all in all, this is an attempt to figure out my thoughts!

Posted on September 19, 2007, in BSE 30, Bull Run, Irrational Exuberance, Robert J Shiller, Sensex, Stock Markets. Bookmark the permalink. Leave a comment.

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