Speculation:Not So Humble Pie

Speculation:Not So Humble Pie

In a far off country,one of the biggest Initial Public Ofers took off yesterday.You can imagine the preceding rush by old and prospective investors to get their hands on this "home baked pie". The "pie" is actually delicious.The firm rakes a lot of profits,is finacially acclaimed in the region.The government hopes that by selling its 25% stock to the puublic,well,it would be credited favourably as being socially responsible.

Qouting a company in the stock exchange offers the organisation achance to become better recogonised by prospective investorsboth locally and internationally.Shareholders get to bear the risks associted with the firm.True ,but what does the investor get in return?Sure you may stock,wealth but how many realise how the stock market operate?How many have done reserch on the firm,on the ooffer at hand,on the process.

Many would be investors at times of offering IPOS or Rights Issues will rush headon.They are encouraged by stock brokers to buy ,and promised to sell two days after buying,because of the higher prospects.At times they are encouraged to buy on margin.Regardless of this person not knowing how to follow  the trends as indicated by the price indices of the market,even.Redgardless of this person not knowing that it's actually cheaper to have his money in stock rather than liquid form,he quickly wants to sell.The investor is drived by speculation,which the broker fuels.

The result is what happened in the 1929.The severe depression caused America to recover their losses onl;y after 26 years.It was then that the people came to realise how derugalion and transparency of the market was important for their benefit.

Patrick L.Young ,in his book,The Capital Markets Revolution He says "disintermediation the firmament of every single existing marketplace".It is true we need brokers .But all the same some of them out there are rogue,if one of the examples is indicated above.Others have taken upon it themselves to trading on their clients' shares without authorisation in order to increase their operating capital.

I think the money market is a sensitive industry,requiring trust.If a stock broker realises that they are mediators/chief link between the lay people and the Stock Market,why not use trust positively to make both parties gain,including himself?

Let me know what you think.