MyPrivateBanking Blog
Daily Comments on the World of Wealth Management

Posts Tagged ‘bubble’

Find the Bubble

Monday, June 13th, 2011

People are wondering whether the social media hype we are witnessing is a new bubble in the making. Facebook, LinkedIn, Twitter, Groupon, Skype - you name it. Valuations seem like pie in the sky again and i-bankers are cashing in handsomely. But are there some truely objective measures to spot the bubble?  Here is a 10-point-checklist to find out about the bubble-grade of the latest stock market fad…whatever it may be.


Why You Should be Cautious When Your Private Banker Suggests Investing in China

Tuesday, December 14th, 2010

Over the last months we have seen an avalanche of emerging markets investment products. Especially China funds are hustled to private investors. Is this a good idea?

Evidence is mounting that a huge bubble is building up in China. A recent article in the New York Times presents the China skeptic’s case quite succinctly:

“They increased the money supply to stimulate the economy. Now land prices have jumped 20 times in some places, 100 times in others. Inflation is broad-based. Go into a supermarket. Milk is more expensive in China than it is in the U.S.”


The Herd is on the Run Again

Tuesday, October 12th, 2010

Reuters titles “Emerging markets rush turning into secular move”. I am just wondering how long “secular” is for Reuters? Seculum is commonly defined as “a generation, an age, a century”. I suspect that the emerging markets seculum will face a much shorter life span - at least in the sense of the outrageous valuations that many emerging market stocks, real estate and some bonds have already reached.

“It has become almost indiscriminate. It used to be Growth At the Right Price. Now it’s almost Growth At Any Price. We’re moving from emerging markets as an option to a permanent feature in asset allocation portfolio.” says Michael Power, global strategist at Investec Asset Management.

If you had the opportunity to listen to global strategists in the year 2000 or 2006 you can easily replace emerging markets with tech or real estate in southern California.I also love the word SEISMIC with respect to the latest investor fad:

“Market capitalization remains small and the majority of global investors have only a fraction of EM exposure within their portfolios, despite the fact most major indices generated very little in the way of returns over the past decade,” said Craig Farley, investment manager at Ashburton. “We believe we are witnessing the start of a seismic shift in the other direction.”

Can please somebody stand up and spell the word BUBBLE  to these gentlemen?


Back To The Future: Chinese Internet Funds

Tuesday, July 21st, 2009

One of the last developments of the crazy tech stocks boom in 2000 was that banks started to launch very exotic funds on internet stocks. After stocks in traditional markets already went up tenfold and more a new “story” had to be invented: That of still “undervalued” tech stocks in “undervalued” regions. Shortly after the world of triple digit price/earnings-valuations collapsed these funds vanished for almost a decade.

However, just in time for the ten year anniversary of the Deutsche Bank launched last week an ETF on Chinese internet stocks. It is correct that neither internet stocks nor China are for investors a foreign territory as they used to be 10 years ago. Because of this familiarity with internet stocks investors nowadays do not accept missing of business models. Consequently, the upside of internet stocks is limited in many cases anyways. But unlike in 2000 this fund is launched in the middle of one of the world’s worst economic crises and not at the end of a bubble.

What does this tell me? Stock markets show cycles and these are about to be repeated. I cannot predict when and in which area the next bubble will build up, but I sure will look out carefully for the launch of funds on “Vietnamese e-commerce stocks”, “Bolivian coffee farms” or “Namibian solar parks”…

PS: With an annual 1.5% management fee the Chinese internet ETF is very expensive. Looks like the bankers thought an exotic ETF can demand an exotic pricing as well. Anohter indication that ETF does not automatically mean low fees.