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Subject: Re: UKNM: More overvalued stocks
From: Duncan Clubb
Date: Wed, 28 Jul 1999 10:53:28 +0100

Clay Shirky wrote:

> > Doesn't anybody believe in the theory of efficient markets any more?
> Markets are efficient *over time*. The moment of least perfect
> information is the day of the IPO, and it is possible to manipulate
> that moment of imperfect information in several ways which stop just
> short of fraud, one being to intentionally undervalue the asking price
> and two to create illiquidity, thus making the stock seem to be worth
> a premium of its opening price and ending up with a spike while
> preventing short-sellers from getting in on the action.
> The efficient markets hypothesis - over the long haul you can't beat
> the market - not only doesn't say that there aren't short term
> imbalances, it specifically says that the bets on these short-term
> imbalances is the very thing that forces the values to converge on the
> markets version of truth. The perfect price for freeserve is the price
> at which for everyone who thinks it will do better in the long haul,
> someone else thinks it will do worse. As long as there are more people
> in the former camp, the price will rise, and as long as there are more
> people in the latter camp, it will fall.

Quite right - the most basic tenet of economics is that anything is worth what
someone else is prepared to pay for it. Don't forget too, that the real
drivers behind IPOs (banks, etc.) are the ones who will earn their commission
no matter what happens. As long as people are trading, they earn, no matter
if prices are going up or down. The most important factor for any trade
broker is volatility - stability kills them.
Read 'Burn Rate' by Michael Wolff!

> -clay

Duncan Clubb
e-mail: duncan [dot] clubbatoffworld [dot] net Offworld Industries,
http: www.offworld.net Britannia House,
Tel: (44)(0)171 278 3464 4-24 Britannia Street,
FAX: (44)(0)171 278 5820 London WC1X 9JD

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  Re: UKNM: More overvalued stocks, Clay Shirky

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