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[ 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
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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
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