Veteran investors are correct to doubt the exuberance of capital markets


A wise old investor with an outstanding record of stopping crazy stock market exaggerations, Jeremy Grantham chose the right moment this week to warn that on Wall Street a “full-blown, epic bubble” had formed. Stock prices around the world reached new highs out of nowhere as investors seemed to have looked beyond the pandemic and concluded that all would go very well. Expectations for a U.S. Democratic reelection Before the results of the Georgia Senate elections were even certified, Congress had been priced in. There is now talk of a major “reflation” trade, serious U.S. government spending to stimulate economic growth, combined with a comfortable degree of inflation (but not enough to panic the Federal Reserve). Even the FTSE 100, during the pandemic and Brexit, joined the crowd, the ugly duckling of international stock market indices. In the U.K. On Wednesday, as the previously unloved array of banks and oil firms came into view, the blue-chip index grew 3.5 percent or 230 points. Banks love the whiff of higher long-term interest rates, and life is simpler for oil majors as a barrel of Brent costs more than $50. Since early November, just before the big vaccine announcement from Pfizer and BioNTech, the FTSE 100 has gained an astonishing 20 percent. So what is Grantham complaining about? There are a few of the co-founders of Boston-based investment manager GMO: “Extreme overvaluation, explosive price increases, frenzied issuance and hysterically speculative investor behavior.” He compares the mood to the 1929 South Sea bubble, the 1929 Wall Street crash, and the dot-com mania at the turn of the millennium. To be specific, Grantham’s sights are mainly on U.S. stocks, and many of his examples of excellence.

However, his general argument should still be noted: it is that the widespread acceptance of vaccinations may be counterintuitive as investors are forced to rethink: “Market participants will breathe a sigh of relief, look around and immediately realize that the economy is still in bad shape, stimulus is about to be withdrawn with the end of the covid crisis and values are absurd,” he says. Put another way, “Great bull markets typically turn when market conditions are very favorable, just subtly less favorable than yesterday. “It’s one view, at the moment, and obviously not the common one.

Grantham, however, is a serious student of markets.

Beware tales of the musical youth of Hipgnosis advisor “I bought my first Neil Young album at the age of seven,” said Merck Mercuriadis, as music publisher Hipgnosis, the FTSE 250 royalty fund he advises, bought 50 percent of the back catalog of the songwriter. The sound of investors seems bizarrely excited. He made similar comments Monday when Hipgnosis acquired the catalog of worldwide producer royalties of super-producer Jimmy Iovine.

“when I was just in my teens. “These cute tales seem to mask the utter lack of financial information in the deal reports from Hipgnosis. How much is Young paid by the fund? Investors can’t know because, obviously, the big man won’t tell. At last count in December, Hipgnosis’ “blended acquisition multiple” for its entire rights catalog, which now covers some 60,000 tracks, was 14.7 times “historical net income”

It was 12.8 times before that. At what stage are rates getting too frothy? For Hignosis investors, sober commercial research may be more beneficial than tales of the musical youth of Mercuriadis. After all, he wants to ask them for another £ 1 billion to begin the investment spree – and probably hopes to continue receiving the 0.8 percent annual consultancy fee that goes to his private management firm. The ties of the next BBC chairman to Philip Green could raise a few eyesbrowsRichard Sharp, the next BBC chairman of the government, is generally referred to as the former boss of Rishi Sunak when bot

But it was not the most noteworthy moment of Sharp’s tenure at the U.S. investment bank to have a potential chancellor as a subordinate. Retail observers will remember that Sharp, as head of the European private equity fund of Goldman, was the banker willing to support the attempt by Sir Philip Green to z z


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