Forum Archive Index - October 2001

["Ralph Redfern" <redrad1@xtra.co.nz>]

----- Original Message -----
From: Viewpoint . <viewpoint_@hotmail.com>
To: <sharechat@sharechat.co.nz>
Sent: Thursday, October 11, 2001 7:27 PM
Subject: [sharechat] Air New Zealand - owners or punters


> An investment in a company by way of share ownership is no more than
> speculation on the future performance of that company, in a game played
> against other speculators.
>
> Because very little, if any, of this invested cash goes directly to the
> company any investment in the share market is essentially no different
from
> picking horse 3 to win race 4 (or whatever form of gambling tickles your
> fancy)
>
> The difference being you read share market form with P/E ratios, yields,
> growth rates and all those sort of things and your sharebroker is no
> different from your local bookie or the TAB.
>
> I said above that very little of this invested cash goes directly to the
> company involved.  Except for capital raisings through the likes of public
> issues and the occasional rights issues this is true. Over the past few
> years, with many share buy backs, there probably has been a net flow of
> equity capital out of the market. This cash has joined the other cash
> floating around in the market as speculative cash betting on the future
> fortunes of companies.
>
> As little of the invested cash actually goes to the company any emotional
> attachment to the company is based on how they are going to perform in
> future (just like hoping that horse 3 in race 4 will win) and not on a "I
> own a part of that company" basis.
>
> Only those investors who have made an actual investment in the equity
> capital of a company have a right (real or emotional) to say they own part
> of a business.
>
> One case in point is Air New Zealand. There were many investors in Air New
> Zealand who prior to November last year were speculating on the future
> prospects of the company.  However most of these investors did front up
with
> a total of $285M in the rights issue. That money went to Air New Zealand
and
> as such these investors can claim to have a real ownership interest in the
> company.
>
> It is only those investors who can rightfully say that they 'own a part of
> Air New Zealand'
>
> That added emotional attachment (of real ownership and not just a
> speculative punt on the future) probably explains, as has been reported in
> the press, what sharebrokers call the 'stupid' behaviour of the small
> investor in the recent large buy up of Air New Zealand shares.
>
> Maybe buying an interest in Air New Zealand at $1.50 previously has made
> them think that a further interest at 30 cents odd is a bargain - they see
> it as an opportunity to increase their ownership of Air New Zealand.
>
> Or maybe it is a set of new punters speculating on the future fortunes of
> Air New Zealand - just like betting on horse 3 in race 4.
>
> All I can say is that horse 3 in race 4 is likely to have a better trainer
> than those preparing Air New Zealand for the future. But then did the
racing
> editor of the NZ Herald pick horse 3 in race 4 as a certainty like Helen
> Clark picked Air New Zealand in the Recovery Stakes.
>
>
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>
> I dont agree that share investing is the same as horse betting.With horse
betting
if you lose the race you lose all your money. With stock investing unless
the company goes
completely belly up , you will usually come out with some of your original
investment intact.

Ralph Redfern.
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