US subprime woes: Can you be responsible?

 

Even various funds were motivated by greed. These weren't lay investors who could get conned into making bad investments, but qualified, experienced professionals. Surely, they didn't forget the basic principle of finance - high rate means higher risk! They too were more concerned about short-term profits and their annual bonuses.

 

Aren't we doing the same thing? Aren't we expecting to earn 40-50% pa returns? Don't we demand that companies deliver better and better results, quarter on quarter? Are not managers pressurised to look for short-term profits rather than long-term growth? Aren't we punishing companies like Tata, Birla etc. who are acquiring companies abroad for their long-term growth? Is our vision of tomorrow's profits more important than Ratan Tata's or Kumaramangalam Birla's long term vision?

 

Next few years, not next day

As Warren Buffet says, it would be much better if we stopped looking at the stock tickers day-in and day-out. If there we no market quotations we would not be affected by the daily movement of stock prices and let our investment grow with time.

 

But I think we have either forgotten his philosophy or simply find outdated in today's world. And if that's how we think, we will have to pay for it.

 

We are paying the price in the form of subprime problem today. We have paid this price for greed many times in the past whether - be it the Harshad Mehta/ Ketan Parekh scam, the dotcom mania, the plantation companies or the vanishing companies or the Enron/ Worldcomm etc.

 

The lesson is very clear. But unfortunately we have very short memories. Some time from now we will be back to our greedy ways and again pay the price in some different form. As is commonly said if we forget the history, we will be condemned to repeat it.