DEJA VU?

Of the thousands of words written recently about the downturn in world economies, I recall story suggesting that the 1990s will go down as the decade when the world discovered shares.
Hmm, I thought, what about the crash of ’87?
Weren’t the mid-1980s period when lots of new investors jumped into the share market, got badly burned and lost their hard-earned savings?
Adding insult to injury, weren’t these investors subsequently criticised for being too greedy, for jumping on the get-rich-quick bandwagon, and abandoning sensible advice about long-term gains?
In New Zealand in the ’80s, most of these novices put their money in property development firms that took the full brunt of the market wipe-out. Many never returned to the share market.
But the story I was reading was about the globalisation of share markets – the mass consumption of shares worldwide.
Share crazy
It suggested that during the ’90s the biggest market ever was created by new investors all over the world who were attracted by the glamorous tech stocks born in the Internet age.
But the bigger the market the harder it falls. And it has.
The Economist crunched some numbers. In the past year sum equivalent to 40 percent of the US GDP was wiped off the value of American shares alone. By comparison, in 1987 the drop in value was equivalent to 20 percent of GDP in that country.
Out of all the analysis comes the fundamental lesson – that shares ought to reflect the underlying profitability of company you’re investing in.
Yes – it’s the same lesson preached in the aftermath of the ’87 crash.
Magazines count
In the age of the Internet, there’s no doubt that magazines have their work cut out for them. What’s been encouraging is to learn from our latest survey by Research International that business magazines are still seen as reliable sources of information. (See story in Insight section, page 12.)
In fact, Management’s audited circulation as at December 2000 increased 8.1 percent over the same period last year.

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