Economic Bubble at Tea Stall near Pancharatna – Part 2

This is continuation of earlier blog “Economic Bubble at Tea Stall near Pancharatna – Part 1” If you have not read Part 1 – you will not get this post.

Week later – there are rumors in market that scientist from Nasa did research on Tea masala and found it can be used in space for Astronaut diet. Now everyone else who didn’t buy shares yet – are ready to buy it. If Japanese company likes it, NASA likes it – there must be something extra ordinary about this Proprietary tea masala.

Bubble Burst

Next day market opens – shares reach – 120 rupees – Now we have people who are buying a business-share worth rupees 12 for 120 rupees. It will take 10 years to break even since annual earnings are 12 rupees.

3rd week – Ramdeo Baba tells on Astha channel that Tea masala from “Shree Bhavani Tea Multinational” has 5000 years old ancient ayurvedic qualities and everyone should use it.

Next day shares reach 200 rupees.

4th week – there is breaking news on NDTV – Barkha Dutt reports that Walmart executives were seen at the tea stall and from her sources she got khabar that Walmart is planning to buy distribution rights of Tea masala for multi million dollars.

Next day – stock reaches high of 400 rupees. Around afternoon there are rumors in market that Health Minister are going to review Tea Masala, if found unhealthy, masala will be banned. Stock starts falling, people panic and start selling – that day stock closes at 200 rupees. People who bought stock above 200 rupees are scared to death.

Next morning – State Health minister and State Agriculture Minister – calls all media channel and declares that “overnight study was done in laboratory and tea masala seems to be perfectly healthy” Agriculture minister declares – “100 Acre of jungle near Lonavala mountains will be used for cultivation of herbs used in  Tea masala and this will create job opportunity for 1000 of villagers”

Next day – stock reaches all time high of 600 rupees [now stock is at 600/12 = 50 price per earning] It simply means with present earnings – if you bought stock at 600 rupees, it will take 50 years to reach break-even. But people do not notice any inflated prices – everyone are putting in their life savings and buying shares. This is a once in a lifetime golden opportunity.

Bhavani Shankar decides this to be right time and starts selling his 50 thousand shares. BS sells 10 thousand shares every day and within 5 days he is out of market.

He makes 50 thousand x 600 rupees = 3 crores.

He keeps 1 crore and distributes remaining money to people who helped him create Bubble.

Month later people realize that there is no Japanese company interested in buying Masala; Walmart has never heard of any such masala; Stock falls; People panic and sell stock; Stock is worth less than 10 rupees now; People who bought stock for 600 rupees hold on to their share thinking stock price will come back to 600 someday;

Its proved by now that there was some hidden conspiracy. Opposition party raises questions in Parliament on this fraud case. A joint committee is formed to inquire in to fraud. A notice is sent to Tea company and asked to reply within 60 days. 60 days later – Tea company asks for 120 days of extension to collect proof. Year later tea company submits report on research it had conducted on Tea masala. Tea company still thinks masala has health benefits and asks permission to send sample to laboratory in USA.

Months and years pass – eventually people forget about this company. Only those who took part in bubble towards the end (bought share at 600 rupees) remember this company for rest of their life.

3 years later – a new company goes IPO – this time – a Vada Pav company claiming that their proprietary chutney can help one to loose weight. “Eat chutney for 10 days and loose more then 30 pounds” And of course you read this in one of the leading newspaper.

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