Julian Knight: Another dotcom bubble about to burst? No, not yet
Sunday 20 February 2011
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; request a free guide on NISAs from Hargreaves Lansdown
- 1 Rihanna 'nude pictures' claims emerge on 4Chan as hacking scandal continues
- 2 Kim Kardashian 'nude photos' leaked on 4chan weeks after Jennifer Lawrence scandal
- 3 'F*ck it, I quit': KTVA reporter Charlo Greene quits live on air in spectacular fashion
- 4 Free U2 album: How the most generous giveaway in music history turned PR disaster
- 5 Scotland could still declare independence – even without referendum, says Alex Salmond
Scotland could still declare independence – even without referendum, says Alex Salmond
Scottish referendum results: Cross-party consensus collapses amid Tory-Labour spat on the 'English question'
Hilary Mantel 'should be investigated by police' over Margaret Thatcher assassination story, says Lord Bell
Scottish independence: David Cameron is becoming the 'George Bush of Britain'
Plebgate MP Andrew Mitchell called officer a 'little s**t', claim court documents 'exposing ex-Chief Whip's 'record of abusing police'
Archbishop of Canterbury admits doubts about existence of God
iJobs Money & Business
£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...
£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...
£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...
£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...
Day In a Page
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize