Sunday, September 6, 2009

Make a fortune with Lehman Brothers !

Yes that’s right. Lehman brothers. The same company that went bankrupt. You could have made a profit of 600% in a couple of months. Welcome to the insanity that sometimes grips markets. And trust the finance world to dignify the madness with a high sounding name. Its called the “lottery ticket rally”.

Lehman Brothers shares were languishing at 5 cents for most of the year. Last week, they touched 32 cents. If you bought at 5 and sold at 32 , you could have multiplied your money 6 times. They ended the week at 14 cents. Even if you missed the 32 and sold at 14, you multiplied your money a respectful 3 times.

Never mind the underlying economics. Big parts of Lehman’s erstwhile businesses have been bought by Barclays and Nomura. What’s left is all sorts of losses being unwound. Most certainly the rump left has negative net worth. By all laws of economics their shares must be worth nothing. And there’s nothing secretive about this – the travails of Lehman have been well documented. And yet, its stock has zoomed.

This is just mad speculation. People punting with complete irrationality. Apparently the same is happening with shares of other bankrupt companies as well.

Sure the punters who make 600% also lose 1200%. But that’s besides the point. A society that rewards insane risk taking over an honest day’s work needs some navel gazing. This isn’t socialist claptrap. Some introspection is called for, even amongst die hard capitalists.