Learning, Science and Society is not an investment advice column-don’t read this if you want to get rich. But as citizens of the globe, and with the advice of persons far wiser than ourselves, we feel entitled to observe the trends in world markets, much as we observe those in science or the weather-because they affect each and every one of us.
In our opinion one of the wisest of those persons is Larry Elliott of the Guardian. An inveterate Brexiteer on a staunchly Remain newspaper, he’s very much his own man, and so when he speaks, we sit up and listen. And Larry is troubled. In his piece Are soaring house prices and house prices an epic bubble about to pop?,* he points to some troubling signs. History fans will recognise the eerie similarities with the spring of 2007 or even the uneasy summer of 1929. Firstly, the real economy is shrinking, and employment is falling in the US. Meanwhile asset prices in things like homes and shares are roaring away-with new tech equities like Tesla being singled out for scrutiny. Eyebrows are starting to rise on wise heads. Elliott cites investment sage Jeremy Grantham. But he’s not the only one, as we found elsewhere.
New entrants to the markets are always the most open to volatility. There’s nothing inherently wrong in this; once upon a time, steels and automobiles were new stocks! So we have nothing against crptocurrencies per se, it’s just that anything new will jump around until it finds its true price. So we see news that the FCA has issued risk advice to cryptocurrency investors as actually a sign that markets overall may indeed be starting to overheat. As evidence of this, the piece by Kalyeena Markotoff* notes that Bitcoin has already gone down to $35,000. This could be a blip on an upward march, of course. Bitcoin has been around for eleven years now. But does it trade in a world where assets generally are overpriced, as they were in 1929? We can’t help but be reminded of one of those cartoon characters who runs off of a cliff and keeps running, until he looks down-when the fall begins. And this goes for holders of everything, not just cryptos.
To be sure: we are not investors, much less advisers. But the straws in the wind seem to indicate caution, a little reigning in of exuberant spirits, at least until we see how the new Covid-19 vaccines really play out.
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