Thursday, March 22, 2007

deja vue, no cause for alarm

that the NSE has been receding constantly is no news. but today the prices fell like 14 falls and investors are panicking and crying. the people left celebrating are owners of pyramids who are benefiting from the fleeing hunters to their warm embrace.

A number of investors who joined the NSE bandwagon after seeking advice from me have rushed to me asking me to explain why their portfolios are in the red. my quick answer has been that i cant point at one issue. there are many related issues. but bottomw line is that stocks market throughout history are wont to behave this way. there are periods of unexplained rise and periods of unexplained fall and other normal periods when much can be explained. last year most counters appreciated without any good reason at all. this year, even firms which reported historical results have seen their share prices dip. i also say that it takes time to make diamonds. when it comes to investments, time, patience and prudence reign supreme.

A lot of curious happenings though. eg last year, the dailies were full of adverts by equity fund managers like britak, old mutual and the like. they placed adverts detailing the returns they had made per month, per year , 24 months and since inception. those adverts are no more. these just help fuel the panic. why is is that businesses advertise when biashara is brisk and go missing when biashara is scarce, i thought you need to advertise more when its dry. the way farmers cultivate when it is shining.

The other thing is the goings on about brokers who are stealing from their customers. this however gives one the feeling of deja vu. it reminds you of the banking crisis which saw several banks go under in the 90s. greed was squarely to blame and outright theft. when you miss out on regulation, you risk these kind of things. the banks put their act together after realizing that political loans were never paid and that you needed more than just deposits to stay in business. if the slide continues, then brokers and investment banks will be forced to dismiss some of their employees. they will learn that only one worm spoils the broth for all the rest.

currently the brokers cannot be regulated as required. because like i mentioned in my very first post in this blog, the NSE , the brokers and the CMA sleep on the same bed add to that a weak or compromised CBK governor and what you have is a crisis.
However, if you are sure that your investment bank is stable and that your shares are not being sold without your knowledge, then just hold to them or better buy some more now. things will be better next year after a new govt checks in.

Odegle tip of the day -- fear not my son (daughter) cannaan is only months away!


  1. Odegle,
    This might be a hard sell now but, in addition to the explanation on the lack of explanation on the stocks price movement, you could also advice your investment dependants to pick some more share now - especailly those that they have made losses on. this will reduce the average cost (and loss) on them. - \hey, like i said, this may be a hard sell especially if the guys are new to the market and the fear of the market has already been instilled in them.

  2. Apparently some ka-old mzee said of the soko ya shares " be fearful when others are greedy, and greedy when others are fearful". However for the speculators-another also said, "be careful when good things happen to you and you can't explain them, because when bad things happen, you won't be able to explain them either".
    Yenyewe-why isn't Jimnah Mbaru taking out an advert to tell investors to stop panincking?

  3. Stock prices mirror on the future performance of a company.

    When you buy a stock, you are betting that the company will increase its future earnings.

  4. @hisagal, its a hard-sell i tell you. they also got advice never to throw good money after bad!

    @mainaT , you said it, the NSE and even the CMA are rather loudly silent and have shied away from talking to investors to allay their concerns which in my view are real fears. akina mbaru should have said something or even at least condemned those mismanaging investors funds. but this silence... its not helping matters

    @ssembonge ,so how do you explain this, are you saying that the decline is showing that investors have lost confidence in the economy? since all counters are dipping.

  5. Time to buy... Ohlanga Man... we have been telling folks stop going crazy. Many were buying for the sake of buying... like it was "fashionable"... regardless of prices!

    There are some bargains, I say we snap up what we can then retire...

    Yes, people are AFRAID as as WB said... lets be GREEDY...

  6. Mainat,you know that kathing about "you were born alone and you will die alone" well very same thing with the stock market. you get in at your own volution, expose yourself to the risks, and when things are thick, you are on your own. no one cares to request or advice you to stop panicking!! and i guess in the case of jimna, the selling line is that "THEY KNOW----------- WE KNOW"

  7. CT, its buying time for some of the stocks-but I think others will go further down-the herd mentality has now kicked in the other waay i.e. selling at a loss "is the in thing".
    Hisagal-its strange, last year he was taking out ads to defend the NSE, going on marketing tours. Mwaka huu, Jimnah is back in the house counting his moolah. All these IPOs they have lined up will need buyers.
    I keep telling people, the NSE world is not ending in 2007.

  8. Fact that brokers and regulators sleep together is just bad news. What is the possibility that the proposed OTC market will effectively compete with NSE? I see it as an extension of the current market, given that players will be the same people?

  9. Pretty much. Its the same crowd except the companies will be in more of unregulated market if such a thing is possible.

  10. the solution is just to buy now and hold for some time, maybe two years or 3. as long as you keep your broker or banker in check and they don't sell your shares without your knowledge the thing will be good. especially the energy linked stocks.

    I wonder whether all those IPOs will see the light of day. if the firms go ahead with them, they will need some really agressive marketing, more than kengen did to have a full subscription. the confidence of the retail investors have nose dived


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