Frothy Markets

So, is it a ‘bubble’? There are plenty of signs – almost incessantly. Last month an online dating app floated in the US. I have to say I had not heard of it – ‘Bumble’ – a company which reported a loss of $117million in the first nine months of last year on income of $417million. The shares, already pretty dear when floated, fed the online ‘FOMO’ investor frenzy (fear of missing out) and the shares rocketed 77% higher still. So, what total value would you place on a company which reported losses of $117million? $140million? $1.4billion? No, after raising $2.2bllion from new investors the day before (at $43), the figure at the close of business was $14billion. It reminds me of the Dot.com/TMT bubble when the mobile licences went for such a colossal sum that instead you could have bought all the supermarkets or, oh well, what does it matter… the same sort of people won’t want to be listening today but guess what, we’ll bumble along with our supermarkets now, all the same. I think the canary in the mine died long ago and the poor bird was stuffed and fitted with a robotic mechanism… hey, that reminds me, have you invested in the latest AI and robotic technology stocks (especially those refitting deceased canaries) as they are the place to be (fulfilling the ESG ‘ethical’ criteria neutrally – no dead canaries used in their production)… only kidding… Apparently only 13% of investors think that US shares are in a bubble (Bank of America Merrill Lynch ‘sentiment test’) and most have been piling out of cash into shares. Do I become more contrarian (independently-minded and not ‘opposite’ for its sake alone) the older I become or the more experienced I wonder? The trouble is, whilst I am not perfect, I have form… but I know instead what we are doing to try to protect our clients anyway. The ‘Sweet Shop’ has plenty of unloved jars on the shelves with great value regardless of ‘that’ should I be proven right. If Tesla shares drop by 75% will it affect us? No (well possibly positively as the same sorts of investors all look to exit to buy our sort of ‘value’ instead). And not necessarily talking High Street interest rates but did you know that long-dated UK Government Bond yields have crept-up from 0.75% at the turn of the year to 1.24% now. (That will start to have a negative impact on those thinking of unlocking final salary pension transfers too don’t forget! That is a move of two-thirds in one key factor used by actuaries! If you have big deferred pensions it may be time to look at that transfer value quickly). Check US inflation rates too – the portents may be there.