Celebrating Tet with a BANG

The markets here reopened Monday with a BANG!

The market leapt past the 1100 mark to 1129, up 4.23% for the day. Many stocks were up their 5% limit. Advancers beat decliners since there were no decliners.

The worst performing stocks of the day, of which there were 5, simply stood still.

There were NO decliners.

So no doubt about it, this market is in the grips of speculative frenzy, irrational exuberance, bubble, call it what you will.

What produced this shockingly one-sided, indiscriminate buying binge?

Everyone and their brother (literally) has spent the last 10 days boasting to their friends and relatives about the killings to be made in the stock market and trading stock tips over tea (or beer or Black Label or XO or snake wine, take your pick).

So Monday morning FLOODS of people charged to their brokers to buy, BUY, BUY!

Look no further. There is no rhyme or reason for why EVERY STOCK suddenly went up.

Here is a typical account from the Vietnam News:

Business Beat (26-02-2007)

Everyone’s talking about the stock market

by Hong Van

Most of my Tet (Lunar New Year) conversations ended on the topic of stocks after all the usual blessings. Everyone I know, from housewives, pho sellers, cab drivers and even middle school students who bought shares last year, said they had made a huge profit.

My 15-year-old cousin, after listening to her mother’s phone conversations, asked her mother to use all of her Tet lucky money over the years to buy stocks in some companies my cousin selected.

After less than a month, her investment of VND20 million (US$1,250) has increased to almost VND100 million ($6,250).

An aunt of mine, who is in her mid-70s, was surprised to learn that I’ve never bought any shares. She said that she had only VND50 million ($3,100) in late 2005 and now she has nearly VND2 billion ($125,000) in a local bank.

Meanwhile, several others said they preferred investing money in real estate, which is more tangible, to spending money on stocks. They said that despite the quick profits of the local stock market, it was too risky.

An uncle said he knew several stock market lecturers, who had spent a lot of time studying the system overseas, had the same concerns.

The uncle said that these professors compared the Vietnamese stock market with the overseas market and refrained from buying stocks because of the risks they predicted.

"And in the end, they are losing because people are making quick cash at a high return," he said.

While financial experts are developing policies to regulate the market in a safe manner, many people like my acquaintances and relatives are gathering money for what they see as another successful year.

http://vietnamnews.vnanet.vn/showarticle.php?num=01BUS260207

So, a 15 year old made five times her money in less than a month... hmmm... what's wrong with this picture, besides the 15-year old idiot savant investor myth.

Let's see. The daily limit for listed stocks is 5% x 20 days (4 weeks) is 100%. So best case, you can double your money in listed stocks on the Saigon exchange in a month. In Hanoi with a 10% limit you could triple it. And no I do not believe this 15 year old was wheeling and dealing OTC either.

So fasten your seatbelts folks, because this market is set to soar, that is, of course, until the bubble inevitably bursts and we all crash and burn together.

Lookout, or the greater fool may be you!

So keep a close eye on the exits, cause when the herd realizes they are all penned in, chasing each others tails and the stampede starts, things are gonna get real ugly, real fast.

Chuc Mung Nam Moi... NOT!