There is a joke...
A minister dies and is waiting in line at the Pearly Gates. Ahead of him is a guy who’s dressed in sunglasses, a loud shirt, leather jacket, and jeans.
Saint Peter addresses this guy, “Who are you, so that I may know whether or not to admit you to the Kingdom of Heaven?”
The guy replies, “I’m Nirmit Pothia, stockbroker of Mumbai.”
Saint Peter consults his list. He smiles and says to the stockbroker, “Take this silken robe and golden staff and enter the Kingdom of Heaven.”
The stockbroker goes into Heaven with his robe and staff, and it’s the minister’s turn. He stands erect and booms out, “I am Simon Chacko, pastor of Saint Mary’s Church for the last forty-three years.”
Saint Peter consults his list. He says to the minister, “Take this cotton robe and wooden staff and enter the Kingdom of Heaven.”
“Just a minute,” says the minister. “That man was a stockbroker– he gets a silken robe and golden staff but I, a minister, only get a cotton robe and wooden staff? How can this be?”
“Up here, we work by results,” says Saint Peter. “While you preached, people slept; his clients, they prayed.”
An overview of the markets for the calendar year 2011 will show you that IPOs were the greatest wealth destroyers. Did you broker ask you to subscribe to any of the year’s IPOs? Well, if he did, you better say goodbye to him before the year is out.
I would like to introduce to you all another game player who can possibly a part of this con job. It is not really surprising to note that many of the 39 IPOs in India this year had very high ratings. Well, what does this tell you – the rating agencies are in on this.
There are a zillion ways in which figures can be adjusted, manipulated and reinterpreted so as to obtain a rating of an undeservedly higher level. It’s not just a computer that calculates and summarizes a credit rating – there are people who feed the data in.
An IPO process begins very early – at least three years before the subscription date. The order book is cooked, the sales are arranged, the balance sheet ratios are first determined and the books are arranged from that perspective, the contracts are timed etc.
If your broker is smart, he should know this. However, your broker may have another “strategy” in place. He will know the listing premium and ask you to make some clean money during the first minutes of the listing. I don’t deny that you can make money this way. However, what cannot be done repeatedly cannot be done even once. And this is something a good broker must do – prevent his clients from ruining their own potential.
But your broker has a dinner to host. Remember?
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