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Of Bulls & Bears

Friday 14th July 2000

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Investors inflate GDC's bubble

GDC Communications' share price has been looking distinctly bubble-like lately. The reseller of Telecom network services came to the market after issuing new shares in April at $1.50 and quickly rose to $2-$2.20, a band in which it stayed for several weeks. Ferdinand assumed that was because the company's prospectus had revealed its expected revenues for the next two years. Investors presumably had valued the shares according to those forecasts and a price change would only occur when information became available that showed the company was doing better or worse than expected. A result is still several months away, so there is no obvious reason why the shares should have moved from $2.20 or so a month ago to $3.98 on Monday, a gain of 82% in little over a month. The most likely explanation is that investors have decided GDC is the next hot technology share and are paying any price for its shares in the belief someone else will pay even more in the near future. However, since Monday, GDC's share price has come down about 8%, so those who bought at the top will already be out of pocket. Some people never learn.

Northland beats Tauranga

Port of Tauranga seems to have lost its unofficial title with investors as New Zealand's hottest port investment. From around $2.70 two years ago it rocketed up to $6.48 late last year as investors got carried away with enthusiasm for the Port's innovative "Metroport," a processing and handling area in South Auckland. However, since trumpeting the arrival of major freight customer New Zealand Direct Line (ANZDL) in April last year, there have no more announcements of major customers. There is nothing to suggest that the land port is not doing well but it is possible investors have moved on to some other investment judging by the Port of Tauranga's shares decline by 20% from their yearly high. The hot new port investment appears to be Northland Port, which is working with Port of Tauranga to build a $65m deepwater port at Marsden Point. Its price has jumped from $1.20 in late April to around $1.53 now, a gain of 27%.

A lesson in economics

According to a well placed source in Wellington, a senior Reserve Bank economist recently returned to his university as guest of honour. After the formalities, the economist visited his favourite economics lecturer, who happened to be marking exam papers. The visitor finds to his surprise that the questions were exactly the same as those he had answered many years before. When he asks about this the lecturer is said to have answered: "That's the thing about economics, the questions are always the same - only the answers change!"

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