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The "bear" rally! - Views on News from Equitymaster
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  • Apr 5, 2007

    The "bear" rally!

    Nope, this is not a comment on why the markets have bounced back from Monday's 600 point decline. And nor is it any sort of comment on the global rally in equities. We will leave that for another day, dear reader. This story is about a bear in the Berlin Zoo in Berlin, Germany.

    There is a baby bear in Berlin zoo called "Knut" who was born on December 5 and has been rejected by his mother bear. An animal rights activist Frank Albrecht - no, we dont know him but did read about him - wanted to, well, put little Knut to rest. The baby bear was apparently struggling with the bottled milk (maybe they should have tried the milk from India, diluted with tap water) and the zoo keepers and the activists were afraid that the healthy baby bear would turn into a sick baby. All of this was caried in the newspapers and the TV channels. (this they will not carry on the business TV channels - it is dangerous for their health - click here to see our reports)

    And guess what happened? Hundreds of school children from across Germany wrote letters pleading that the life of Knut be spared. And he, dear Lord, has been saved!

    (I tried to encourage my school-going kids and their friends to write such supportive letters for our poor Klutz - the Indian cricket team - but they threw me out of their room.)

    So getting back to Knut, the bear. When he made his first public appearance in Berlin Zoo on March 23, apparantly 400 visitors came to see him. Extrapolating from that successful "launch", everyone now believes that Knut will now be one of the most popular bears on the planet earth. Knut is destined, some predict, to occupy the same throne as Winnie the Pooh and Paddington Bears - two very succesful bears who have books, movies, clothes, stationary, bedroom stuff, shoes, key chains, and a host of other items branded around them. The royalties from the sale of these products feed straight through to the creator of the characters. Knut is on his way to fame and fortune, is the prediction. The International Herald Tribune wrote: "With a professional brand management, Knut's brand value would certainly amount to €10 million or $13 million," said Björn Sander, a partner at BBDO Consulting in Düsseldorf.

    And to top it all, do you know what the best peforming stock in Germany is? More from the Tribune on this revelation: "Shares of Zoologischer Garten Berlin, a nonprofit entity that does not pay dividends to shareholders, added 33 percent to close at €4,660 (Rs 2.7 lakhs per share) in Berlin Tuesday. The stock, which rarely trades, has rallied 112 percent this year.

    Well, before you call your friendly broker and ask him to buy you that Bear stock (click here to see our research on Indian stocks) please note that the Berlin zoo has lost money every year from 1997 to 2005. Though there are no financials avaliable for 2006 as yet, but a loss is probably what it was. That has not slowed the stock which has galloped in value on a princely volume of 8 shares on April 3 - yes, 8 shares, there are no zeros missing.

    "We have secured some licensing rights," Heiner Klös, a spokesman for the zoo, told the Tribune. "The question is how we can benefit from them." A value of €10 (Rs 57 crores) million to €13 million (Rs 75 crores) "seems to be a little overstated to us," the zoo-keeper boss was quoted as saying.

    The world, we are convinced, has gone mad! Out of control. 400 school children with an attention span of probably a few seconds and the zoo stock zooms up. If Indian TV channels start covering all the famished cows on the streets of Bombay and if the 4 million people who use the Bombay train system stop by to see those cows, the BMC cows will have a market value of tens of thousands of crores. Forget this Mistry report on making Bombay into some global financial centre, just create a cow story and list "Chappu the Cow" on the NSE and the BSE and Bombay will have a market cap larger than Europe (US$ 15 trillion - that is 18x the value of the Indian markets)

    And here are the other lessons, which we shall define as The Knut Principles:

    1. madness is not an Indian right, it is a global phenomena

    2. And this for all the property companies that have split their shares, given rights, and bonus shares all with a view to making their stock look more attractive (and more fool-able to the public): you don't need to split your shares to mislead investors, the Berlin stock trades at Rs 2.7 lakhs per share. And the stock still has a following among fools. Your investment bankers took your fees for nothing.

    3. And this for all the portfolio managers out there who buy the Z1 and Z2 stocks and, with a little bit of volume can influence the prices of those stocks, show higher NAVs and better performance to their clients and get higher fees - move to Berlin, there seems to be a lot of action out there.



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