Julian Knight: Another dotcom bubble about to burst? No, not yet

I'm old enough to have started working as a financial hack at the tail-end of the late Nineties dotcom boom, when bunkum phrases such as "first-mover advantage" and "new economic paradigm" were being banded around by wannabe internet millionaires and their friends in the City, trying to rush any old rubbish to market.

Much of it was built on the economics of the madhouse. I remember one UK fund manager, Neil Woodford at Perpetual, standing up against it; he shunned internet shares and promptly sank to near the bottom of the performance tables. At his nadir, I took an investor in to meet him for an article – a brave thing for Mr Woodford to do under the circumstances. He set out, calmly and clearly, why he thought that internet companies with a turnover smaller than a local pub were overvalued at several hundred million pounds. The investor bought a shedload of Mr Woodford's fund and that proved a smart move indeed.

Now the cosmic broker valuations of Zynga – which created the FarmVille game on Facebook – and Groupon – a group-buying discount website – have led some to question if we are seeing a return of the dotcom bubble. How can Facebook, for instance, really be worth $50bn, around the GDP of a medium-sized African country?

But despite this, I can't see a late-Nineties craziness developing – or if it is, we are surely still a little way from its peak. Sure, we may be experiencing a bull run in the markets, but it's based on some fairly sound fundamentals – earnings are good for companies, most sit on solid cash piles, and, as we explore on pages 86 and 87, where else can cash go to in order to possibly keep pace with inflation other than shares? As for the internet, even the derided Zynga produces $850m a year in revenues. And Groupon has 50 million members in America and has just launched here. I don't know what Mr Woodford thinks about this, but the economics of the internet and the stock market in general look a lot better than at the time of the late Nineties crash.

Clear thinking on regulation

I am confused. Not an unusual state for me. This particular confusion was sparked by the decision by the Treasury to rename the Consumer Protection and Markets Authority (CPMA) the Financial Conduct Authority (FCA). What was it about CPMA that so offended? FCA certainly trips off the tongue a little bit more easily, but did the Treasury not think that it's virtually identical to, yes, the FSA? In fact, perhaps it's a bit of clever cost-saving – staff can just blob some Tipp-Ex on the old FSA stationery.

Whatever the new City watchdog is called, the Treasury's announcement makes clear that it is intended to give it focus and a bit of bite. For a start, the Treasury says the FCA will have a clear set of consumer-protection objectives to fulfil. This is different from the unsuccessful FSA which was charged with squaring the circle of safeguarding consumers while promoting the interest of banks and insurers. To help it achieve its clear goals, the FCA will have the power to ban the sale of certain financial products for a year while it considers whether they are dodgy.

If we had had the type of regulation that is now envisaged by the Treasury we could have avoided, or at least curtailed, the mis-selling of pensions, split-capital investment trusts and loan payment-protection insurance.

I have always feared that the new beefed-up bank of England would get all the Government's time and attention and that the FSA replacement would be left as a powerless rump. Fortunately, Treasury ministers are getting the message that we need a consumer body with real power; all we need now is the right personnel. One area the FCA may want to look at is the sale to older people and low-risk consumers of traded life policies – investigated on page 85 – this has all the hallmarks of yet another slow burner of a mis-selling scandal.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

    £18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

    Ashdown Group: Learning and Development Programme Manager

    £35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

    Guru Careers: .NET Developer / Web Developer

    £60 - 65k + Bonus & Benefits: Guru Careers: We are seeking a .NET Developer / ...

    Recruitment Genius: Claims Administrator

    £16000 - £18000 per annum: Recruitment Genius: A position has arisen within th...

    Day In a Page

    The saffron censorship that governs India: Why national pride and religious sentiment trump freedom of expression

    The saffron censorship that governs India

    Zareer Masani reveals why national pride and religious sentiment trump freedom of expression
    Prince Charles' 'black spider' letters to be published 'within weeks'

    Prince Charles' 'black spider' letters to be published 'within weeks'

    Supreme Court rules Dominic Grieve's ministerial veto was invalid
    Distressed Zayn Malik fans are cutting themselves - how did fandom get so dark?

    How did fandom get so dark?

    Grief over Zayn Malik's exit from One Direction seemed amusing until stories of mass 'cutting' emerged. Experts tell Gillian Orr the distress is real, and the girls need support
    The galaxy collisions that shed light on unseen parallel Universe

    The cosmic collisions that have shed light on unseen parallel Universe

    Dark matter study gives scientists insight into mystery of space
    The Swedes are adding a gender-neutral pronoun to their dictionary

    Swedes introduce gender-neutral pronoun

    Why, asks Simon Usborne, must English still struggle awkwardly with the likes of 's/he' and 'they'?
    Disney's mega money-making formula: 'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan

    Disney's mega money-making formula

    'Human' remakes of cartoon classics are part of a lucrative, long-term creative plan
    Lobster has gone mainstream with supermarket bargains for £10 or less - but is it any good?

    Lobster has gone mainstream

    Anthea Gerrie, raised on meaty specimens from the waters around Maine, reveals how to cook up an affordable feast
    Easter 2015: 14 best decorations

    14 best Easter decorations

    Get into the Easter spirit with our pick of accessories, ornaments and tableware
    Paul Scholes column: Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season

    Paul Scholes column

    Gareth Bale would be a perfect fit at Manchester United and could turn them into serious title contenders next season
    Inside the Kansas greenhouses where Monsanto is 'playing God' with the future of the planet

    The future of GM

    The greenhouses where Monsanto 'plays God' with the future of the planet
    Britain's mild winters could be numbered: why global warming is leaving UK chillier

    Britain's mild winters could be numbered

    Gulf Stream is slowing down faster than ever, scientists say
    Government gives £250,000 to Independent appeal

    Government gives £250,000 to Independent appeal

    Donation brings total raised by Homeless Veterans campaign to at least £1.25m
    Oh dear, the most borrowed book at Bank of England library doesn't inspire confidence

    The most borrowed book at Bank of England library? Oh dear

    The book's fifth edition is used for Edexcel exams
    Cowslips vs honeysuckle: The hunt for the UK’s favourite wildflower

    Cowslips vs honeysuckle

    It's the hunt for UK’s favourite wildflower
    Child abuse scandal: Did a botched blackmail attempt by South African intelligence help Cyril Smith escape justice?

    Did a botched blackmail attempt help Cyril Smith escape justice?

    A fresh twist reveals the Liberal MP was targeted by the notorious South African intelligence agency Boss