Value versus Exuberance

There is a number of interesting adages which come to mind about certain markets and stocks at the moment. They are old themes of course. However, one says ‘something is worth what someone will pay for it’ and at the moment, the lunatics are running several asylums from Tesla to Bitcoin and many other tech companies’ share prices. Yes, the more people who buy their shares then the higher their prices will rise – simple supply and demand. Well done Elon Musk for tapping the market for yet more money, raising $5billion of new shares at these toppy levels. He knows a good thing there! However, whilst I admire the phenomenal space programme he is also running (SpaceX), the destruction of the rocket with a horrendous landing could just be a portent for what will happen to Tesla’s share price as it too all goes up in smoke.

It reminds me too of the tech bubble in 1999/2000 – companies like Colt Telecom whose share price rose the higher the spending and thus the losses went, as it pointed to even more glorious times ahead (well, theoretically and not actually!). Then there was Bookham Technology where the employees were all given preferential access to the shares at the float and many saw this as their ‘lottery’ moment – mortgaging their homes for big sums to buy the launch shares – the whole company went bust shortly afterwards.

Sadly, I am fearful, very fearful, that instead the adage is the one which goes ‘it is a fool who knows the price of everything but the value of nothing’. This selective, boozy party has been raging at the top of the brash office block for too long and even the wise ones haven’t realised a fire’s licking-up the lower floors and soon their exit will be impossible, or at least at reasonable prices. As for us? We’re concentrating on those companies which are mining their copper for the wires for green energy and should we say, selling water and fire hoses… You can pick these up for a song and the companies will still be around afterwards, internet or not. Will the tech heavy Dow Jones at around the 30,000 level be like Tokyo, (the largest stock market in the world in 1989), which then went all the way down from 39,500 to 8,000 (an 80% drop) at its trough in 2003? We shall watch with interest and meantime focus our attention on opportunities elsewhere with our clients’ money.