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; request a free guide on NISAs from Hargreaves Lansdown

News
peopleHowards' Way actress, and former mistress of Jeffrey Archer, was 60
Sport
Romelu Lukaku puts pen to paper
sport
News
Robyn Lawley
people
Arts and Entertainment
Unhappy days: Resistance spy turned Nobel prize winner Samuel Beckett
books
PROMOTED VIDEO
News
people
Life and Style
Troy Baker and Ashley Johnson voice the show’s heroes
gamingOnce stilted and melodramatic, Hollywood is giving acting in video games a makeover
News
i100
News
people
Extras
indybest
Life and Style
Phones will be able to monitor your health, from blood pressure to heart rate, and even book a doctor’s appointment for you
techCould our smartphones soon be diagnosing diseases via Health Kit and Google Fit?
Travel
Ryan taming: the Celtic Tiger carrier has been trying to improve its image
travelRyanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?
Sport
Usain Bolt confirms he will run in both the heats and the finals of the men's relay at the Commonwealth Games
commonwealth games
Life and Style
Slim pickings: Spanx premium denim collection
fashionBillionaire founder of Spanx launches range of jeans that offers 'thigh-trimming construction'
News
Sabina Altynbekova has said she wants to be famous for playing volleyball, not her looks
people
News
i100
Life and Style
tech'World's first man-made leaves' could use photosynthesis to help astronauts breathe
Finacial products from our partners
Property search
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

    Senior Investment Accounting Change Manager

    £600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

    BA/PM,EMIR/Dodd-Frank,London,£450-650P/D

    £450 - £650 per day + competitive: Orgtel: My client, a leading bank, is curre...

    Senior Analyst - ALM Data - Banking - Halifax

    £350 - £400 per day + competitive: Orgtel: Senior Analyst, ALM Data, Halifax, ...

    Java developer - Banking - London - Up to £600/day

    £500 - £600 per day: Orgtel: Java developer - Banking - London - Up to £600/d...

    Day In a Page

    Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

    The day America’s love of backyard tigers led to a horrific bloodbath

    With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
    Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

    How Samuel Beckett became a French Resistance spy

    As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
    We will remember them: relatives still honour those who fought in the Great War

    We will remember them

    Relatives still honour those who fought in the Great War
    Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

    Kodak's last-ditch bid to keep celluloid alive

    Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
    Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

    Acting in video games gets a makeover

    David Crookes meets two of the genre's most popular voices
    Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

    Could smartphones soon be diagnosing diseases?

    Health Kit and Google Fit have been described as "the beginning of a health revolution"
    Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

    Can we learn to love Ryanair again?

    Four recent travellers give their verdicts on the carrier's improved customer service
    Billionaire founder of Spanx launches range of jeans that offers

    Spanx launches range of jeans

    The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
    10 best over-ear headphones

    Aural pleasure: 10 best over-ear headphones

    Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
    Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

    Commonwealth Games

    David Millar ready to serve up gold for his beloved Scotland in the end
    UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

    UCI Mountain Bike World Cup

    Downhill all the way to the top for the Atherton siblings
    Save the tiger: The animals bred for bones on China’s tiger farms

    The animals bred for bones on China’s tiger farms

    The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
    A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

    A former custard factory, a Midlands bog and a Leeds cemetery

    Introducing the top 50 hidden spots in Britain
    Ebola epidemic: Plagued by fear

    Ebola epidemic: Plagued by fear

    How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
    Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

    From 'Parks and Recreation' to 'Guardians of the Galaxy'

    He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star