Another Irrational Exuberance

For many people of my age ,the best way to keep in touch with old pals is orkut.com. Finding friends after all these years is indeed a delight. But it was recently after meeting a few old school friends, that I pondered over a very disturbing trend which has strongly integrated into the way many young people think. And this is the topic for my first blog.

Contrary to what you might think ,I am not talking about call centres as its a very cliche subject about which a lot of talking has been done and even more stuff has been written. And above all I dont find anything wrong with that. What i am talking about is the large number of people who are taking up the so called "financial jobs". To be precise,people who are wanting to become or have already become a 'stock market analyst' like my friend, without taking any formal education for this . This applies more to students from the commerce background.

As we are all aware, there is a very strong positive sentiment regarding the Indian economy all over the world .The financial scenario is like never before when the stock market has quadrupled in the last three years and there may be a lot more to come. The big Indian companies are delivering the best results continually, quarter after quarter and their balance sheets reflect the same. This has led to an obvious escalation in their valuations. Seeing others making quick bucks around themselves, there are many people who want to join this bandwagon. The easiest way they find to make money is the bse where they can 'double their money' in every few months.

Everyone knows that this kind of growth is not going to continue forever. While the economy may continue to boom, the same cannot be said for the stock market. There are many small triggers which can lead to a reversal of fortune on the Dalal street or even the Wall street for that matter. For instance, god forbid, if we have another terrorist attack in any of the big economies,the stocks of all the big IT companies will fall like a house of cards. The retail investors will be disinterested and many such analysts will lose their jobs. Many people who have strong equity investments will have to face the obvious consequences.

You might think that I am a hardcore pessimist who holds a very negative view of such a booming economy. The only thing which I want to state is that a good market does not translate into a good stock market all the time.And without proper knowledge in this sector,people can do well only when the market is in an upswing mode.The only thing which always stays with an individual is the money which is made by his own hands. If one wants to take proper advantage of this scenario,it should be through hard work in the manufacturing or services sector. After all the only materialistic thing which stays on with a professional is the assets created in the form of his work experience. While i certainly do not rule out an investment in sound companies, a full time career for so many people in the stock market, without any formal education in this sector, and just to make quick money, seems to have a bleak future, not for the market but for these individuals.