Bad smell in the City...

Sniff carefully as you walk past the stock exchange Ð there is an unmistakable odour in the air. ItÕs the smell of burning money and rotting companies.

Not since 1987 has the aroma been so strong. That was the last time a group of companies burnt all their cash on stupid technology ideas, then rotted until they disappeared.

History, as it always does, is repeating itself Ð and if you have the slightest doubt, come for a trip down memory lane Ð to a time when technology was booming, cash was plentiful and corporate promoters prowled St GeorgeÕs Terrace.

It was the era of such great, and high-priced stocks, as Vital Technology, Underwater Systems, Dataswitch, Rotair, Kostech and Tectronic.

For readers with memories that do not go back just thirteen years, these were some of the stocks that were going to make millionaires of an earlier generation of speculators.

Briefcase will not be so foolish as to suggest which of todayÕs technology stocks look like those of yesterday Ð just take it as a given that the parallels are eerily precise.

The course of events unfolding today is also the same. Acres of promise, a small pool of capital and impossible development targets for products that no-one seems to want and, if they do, there is no fulfilment capacity (they canÕt deliver the goods).

The result; a cash burn which quickly consumes the capital and a corporate carcass which spins slowly on the afternoon sea breeze blowing down the Terrace.

Proof of what happened, and what is about to happen, can be found with a simple search of ancient files.

LetÕs look at the Perth Stock Exchange quote sheet for 15 May 1987 Ð almost thirteen years ago.

Consider these names, and share prices, and ask: Òwhatever happened to the company and who was the fool who paid that price?Ó

Vital Technology, a Laurie Connell special, was selling on the day for $1.40 a share. Underwater Systems was quoted at buy 45c, sell 48c. Tectronic was 80c and AIM (the fabulous automatic ironing machine) was 35c.

Of the full list, more than half no longer exist Ð just thirteen years on.

This was also the day you could have paid $8.40 for a Bell Group share, $2.60 for Bond Corporation, 20c for Chew Corporation and 40c for Povey Corporation.

Where did all that money go?

ThatÕs an easy one to answer, to the same place todayÕs speculative hot money is headed Ð round the S-bend at the speed of a morning flush.

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