Investment & Investing

Ok, thanks.

Edit - to be clear, clearly I have no idea either and would not wish to make out that I do.

My Feb 2020 comment was light-hearted.

I have previously posted my views on market timing (I don't believe it can be done reliably or repeatably).

I just thought it would be interesting to have a bit of conversation about these mad times we find ourselves in.

CINE Cineworld Group plc
52.94
+11.89 on the day. An increase of 28.96%. In one day.

I agree with you (and I just bought a 4bed in Leyton - funny).
I think in the current situation unlimited liquidity makes asset prices not meaningful anymore.
Crisis will hit hard during winter I presume.
No matter what house prices are tricky: even during a crisis you better have a place to stay.

I belive markets are being pushed up by the Emporor's new clothes.

If everyone 'believes' it'll keep going up,it'll stay up. Turn a blind eye bubble. If you have enough money and ppl to keep forcing it to move up, it'll move. Things are only worth what ppl are willing to pay.

Because the alternative is too scary to even concider.

Soon or later reality kicks in and someone will have to pay the bill

I’ve always been sceptical of the idea that the financial system inevitably exhibits certain regular patterns. Minsky’s bubble theory seems to rest on that idea. I say seems to because I’ve never read him in the original so I can’t be sure.

Some of the most egregious failures in the recent history of finance have come from smart people assuming some form of regularity must hold and finding they were wrong. LTCM was the first example I studied in depth. I still have ‘Inventing Money’ on my bookshelf somewhere.

Your earlier point about Wirecard is well made. It shakes one’s confidence in one’s ability to know what is really going on. The comments pages on the FT web site are a good source of information about where the next Wirecard might come from, though few people are willing to name names directly.

And now on its way back down...

The UK economy suffered its biggest slump on record between April and June as coronavirus lockdown measures pushed the country officially into recession.

Very new to any investment, but looking move one kids Cash ISA to S&S ISA and set another one up, on the basis that it's definitely going to be a long term investment, so seems to make sense (every piece of advice I've seen is think long term). Planning to use it as a way to test out an automated platform and ideally want to look at 'ethical' funds.

I've been looking at Wealthify but know others are out there. Anyone have any experience/pointers?

In a similar vein to the above, what's a good way to save for kids?

I'm vaguely aware that there are various kids and lifetime ISAs which do some kind of bonus but is that going to be better than a simple tracker or similar?

And how do you open these things for kids given they have no ID, etc. Do you just do it as the parent or is there a better way to do it?

Lifetime isa is a good idea for the 25% bonus of £1000 on 4k.
Might work, dependent on time frame
Not sure if you can open it in kids name but of its yours then you must be under 40 years of age, to open an account.
Remember that you will loose 25% if you withdraw before 60, you can also use it for first house deposit, and all gains are tax free.

I’ve been sent another referral link for Nutmeg. Think you get six months of no fees and I get a bonus. Here if anyone wants it:

https://nutmeg.mention-me.com/m/ol/qq8jf-matthew-sparkes

What do we think is going to happen with this recession then? Managed funds seem to have mostly recovered from their post-Covid crash and are continuing to grow, albeit at a slower rate now. Individual shares are a bit of a mixed bag, but most looked like they recovered a bit and are now slumping again. Exceptions are the likes of Amazon who are continuing to grow but I think are now way over-inflated.

I think private equity is set to be the next global horror story. The entire industry is built on the predication that there will be a bigger PE fund to come exit you or an IPO. Both options are getting rarer and rarer.

Their investments are all in high risk and high growth businesses where the route to growth is moving money from business X to Google/Facebook. I think it's something like 53% of all PE money ends up there.

Fine in theory, let them lose it, but when you follow the money back up the chain it gets a bit murky. There are too many people with too much skin in the game for these things to not continue to proliferate and collapse, but I have a feeling it will.

PE is basically operating the entire lower runs of business investment and taking these away will be problematic. It'll spread quickly up the chain IMO.

My knowledge in this area is very limited though. These are just my musings.

the route to growth is moving money from business X to Google/Facebook

could you explain this a bit? interested in what you are getting at.

I agree that many investments seem to be based on the "bigger fool" theory, and the likes of Vision Fund have kept this moving along nicely, so far at least.

Sure. I'm saying that huge amounts of new private equity money (50%+) ends up going to Facebook and Google for advertising to grow the business through customer acquisition. But acquisition costs have been steadily rising for years as consumers mature and become desensitised to advertising. This creates an unsustainable situation for businesses and this means they need to raise larger and more frequently, and from my limited experience the bottom has properly fallen out of that market.

Combine this with the fact that there are a shitload of businesses that should be at their exit point by now, who are nowhere near it, and you can see how a liquidity crisis in PE might cripple businesses that can't access capital.

A good example might be challenger banks.

Massively funded, massively loss making, no path to profit (or even utility). Who is going to bear those losses when e.g. Monzo goes bang with £500M in equity debt. They just raised £60M on a down round FFS.

I'm gonna go out on a limb and say that all of them will be at risk of going pop in the next 5 years and maybe 1 or 2 survive.

Might be a bit #tinfoilhat

Happy to be wrong

I'm saying that huge amounts of new private equity money (50%+) ends up going to Facebook and Google for advertising to grow the business through customer acquisition.

Ah, right. Yes I can see what you mean.

It's a new breed of "zombie" company that instead of being kept afloat by low interest rates, are being kept going by huge injections of private capital when they in all likelihood have no route to profit.

It's a pretty unjust situation for a trad business when a PE funded monster start up arrives in your area and buys your customers by offering services at significantly below cost, in order to make you go bust, and then take advantage of a monopolistic situation.

But it's an allegedly free market, so all it's all fine...

Whilst I agree that a big bust up in PE will have significant consequences for the wider economy, I won't be able to avoid a bit of schadenfreude if it does happen.

This is a better summary than I could do
https://seekingalpha.com/article/4321491-private-equity-cause-next-liquidity-crisis

Also good to read.
https://www.google.com/amp/s/amp.ft.com/content/860d5448-5cfb-11e9-9dde-7aedca0a081a
And
https://www.google.com/amp/s/www.forbes.com/sites/jimcollins/2019/11/06/softbanks-bad-bets-are-a-sign-that-private-equity-will-lead-the-next-meltdown/amp/

Sucks but around the world legal and financial systems have been built to allow it, likely to benefit the powerful interests who are profiting right now. It’s a story as old as government itself, but the heights for the fall now are pretty scary.

Without meaning to rain on your eventual schadenfreude, I’m reminded that many of the Bernie Madoff‘s victims were elderly pensioners whose fund managers were greedy fucks and gladly jumped at the 20% gains without telling their customers it looks suspicious. Sadly, it doesn’t seem we’ve built many safeguards against that since 2008z