Trustnet Magazine 56 November 2019 | Page 30

Your portfolio 30 / 31 [ FADS ] Anthony Luzio finds out how to separate long-term megatrends from fads that can blow up in your face Bubble trouble A s a fund manager, Scott Spencer of BMO is used to his friends and family asking him about the world of investment. Every once in a while, however, they manage to teach him something about the subject, which was the case in December 2017. Following a 20- fold increase in the value of Bitcoin over the preceding 12 months, accompanied by a similar surge in press coverage, he received a phone call from his mother-in-law asking him “if this was the sort of thing she should be getting involved with”. This told Spencer one thing: “She called the top of the market,” he says. And was it? “She was out by four days.” Fads and bubbles are almost as old as stock markets themselves. While the trajectory of Bitcoin may remind readers of the dotcom bubble, this followed a similar pattern of boom and bust seen as far back as 1637 with Tulipmania in the Netherlands when TRUSTNET some of these flowers were sold for more than the annual salary of a skilled worker. Losing when you win Mike Fox, head of UK sustainable investment, says one phrase that helps him to separate a fad from a megatrend is “a solution looking for a problem”, pointing out a lot of new technology is invented without a purpose. While the trajectory of Bitcoin may remind readers of the dotcom bubble, this followed a similar pattern of boom and bust seen as far back as 1637 with Tulipmania in the Netherlands trustnet.com