Mind of a  Speculator? Robin Trehan

Question 1. Is it possible that under so much of economic research there can be speculation and a speculation of such an extent with leads to a bubble?

The answer could be the stock market is attractive for people who want to gamble and hope for big windfalls. When the economy is strong, there is a high likelihood of speculation since there is a belief that things are going well and windfall profits are possible. People borrow money to invest and/or they buy on margin. Gamblers are not really rational people, so regardless of the amount of research about speculation or the warnings that are given, these people continue to pursue their goals.

Question 2. Is it possible to escape the eye of experts or everybody is following simple route to make easy money?

The answer is probably not. However, if a person is wise, he or she knows to buy low and sell high without risking too much money. These people make profits in good times and wait for bad times to reinvest. However, even big companies jumped in the wagon. Why did they do it is another question?

Question 3. Is this phenomenon not surprising that a few online and especially social media networking companies are having such a great brand and market value? Is it the next bubble?

Reason 1-Many social networking companies high potential products, but their stock value was much over-priced compared to their profitability.

Reason 2 – for much organization innovation has always meant solving problems for customers in ways that are perceived to be unique. This positioning strategy relies greatly on appealing to customer wants, rather than merely satisfying needs. However, overtime competition develops, as new entrants will try to copy your model. At this time, you need to add value and to the customers demand but no matter how bulletproof your firm’s current business model; new business models will challenge it.

Question 4. Which kind of factors enters?

There are quite a few things, which may be different for a new company entering into a new market. Some of the factors playing a part are:

1. Advertising/revenue – Different companies invested and advertised in companies both online and offline when the markets were booming. This generated revenue for firms but with the slowdown of the economy lots of startup or small players who were advertising on big channels dried up which resulted in squeeze in the money. Advertising was withdrawn to a significant level, which finally created pressure on companies to withdraw some of the free services as they found it hard to provide the same service free.

2. Low barriers to entry- The barriers to entry in e-business or IT field are not very great. Therefore, people rush in as soon as they see or find a new idea or a product, which they think they can sell to meet the needs of the end customer but the biggest problem are

Problem A . A product whose imminent value may seem very much but the actual implementation to bring that product may require many resources.

Problem B. Entrepreneurs in their zeal to implement their idea forget one basic idea of decision-making. Decision-making should involve all factors, which takes into account all cost and benefits of each investment opportunities. Especially when financing the project form debt because every dollar of investment should yield some return as the investment in project is subject to the following factors

Interest loss -For an investor’s point of view deprivation of the use of money for a period also leads to the loss of interest by placing the same amount of money in some other business.

Risk – a) the idea or concept may not go off well as expected leading to loss of investment and to the loss of sales.
b) Sales of the product may be not as buoyant as expected.
c) The life of the product may be shorter than expected.
d) Investment cost turn out to be higher than it was presumed
f) the market is not ready to accept the idea.

Effect of inflation – logical investor while making investment will like to be compensated for the loss of interest and the purchasing power of the money invested.


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