Lorna Tilbian Columnist The view from the city T Thats if anyone is listening while the party is in full swing. owards the top of every economic cycle, red flags The man on the Clapham omnibus has only just arrived at the emerge that indicate an increasingly tenuous grasp party and hes determined to have a great time. Conveniently, between economic reality and inflated asset prices. along comes Robinhood with its meme stocks and an IPO in In short, the net present value of money diminishes July 2021 at $38 per share, which peaked at $85 in August and and future growing assets suddenly command stratospheric prices, collapsed to $12 by January. With lots of free money from based on highly optimistic expectations of future growth. This gap furlough payments and lots of free time from WFH, every betting between value and growth is the eternal push/pull between present man starts punting the market. After all, with lockdowns, the (cheap) value and future (expensive) growth. Until, that is, the usual gambling and sporting events, from footie to horse racing spectre of rising inflation leads to a rotation from growth to value, and the dogs, have been absent. These new retail punters where a bird in the bush is worth two in the hand. gravitate towards the go-go growth stocks and so-called Covid Legal settlements are made for sums that seem beyond the beneficiaries, those online businesses such as Zoom for work, dreams of avarice. For example, a Spanish court awarded former Peleton for workouts, Ocado for groceries and Netflix for UBS banker Andrea Orcel 68m compensation for Santander entertainment dominating in lockdown. reneging on an oer to become its next chief executive, while Inevitably, as the ugly spectre of inflation raises its head, $105m was clawed back from Steve Easterbrook, the former CEO The Fed and Bank of England start to pull away the punch bowl of McDonalds, for his failure to disclose the breaking of internal and, overnight, these stocks company rules on resignation. became Covid-casualties, with Princess Haya of Jordan, meanwhile, faltering share prices. received a 554m divorce settlement In response to the pandemic, The from her former husband, the ruler of Big-ticket settlements endorse Fed provided a wall of liquidity to Dubai. These big-ticket settlements the mood in the public mind incentivise risk-taking behaviour in endorse the mood in the public mind of limitless financial assets and the markets. Ark Innovation ETF, the of limitless financial assets and a a diminishing grasp of reality flagship fund of disruptive new diminishing grasp of reality. technologies cheerleader Cathie In the background, there are often Wood, skyrocketed more than 150% wild gyrations in markets, from in 2020, vying with Elon Musks SpaceX on a journey to Mars cryptocurrency to developing market currencies. For example, before duly collapsing to Earth last year. cryptocurrencies such as Bitcoin and Ethereum halved in Frenzied stock market activity is a sure sign of turbulent times December 2021, with a total of $1.3tn or 6% of US ahead. The frenetic buying in late November 2021, with economic output vaporised, while emerging market currencies NASDAQ hitting daily record highs, was followed by furious such as the Turkish lira (TRY) hit a low of TRY18.4/$1, a huge volatility in late January. Wild market gyrations occur when depreciation from the average of TRY7.0/$1 in 2020. theres a crisis afoot, as in the run-up to the 2008 financial crisis. Meanwhile, Jim Anderson, a fted investment manager To underscore the impending doom, financial results in early who oversaw the greatest transfer of value in history from February caused ructions among the FAANGs: Meta recorded a traditional businesses to the FAANGs, chose to leave the $200bn loss in market capitalisation, the biggest in stock market party early and retire from Baillie Giord and the Scottish history, while, in contrast, Amazon recorded the biggest gain of Mortgage Trust. Similarly, respected retail industry veterans $250bn. The FAANGs have grown to represent 25% of the US such as Terry Leahy and Tom Hunter, early backers of The Hut market, yet Metas share price collapsed by 20% like a penny Group, took their money o the table on its IPO, despite the stock. A cautionary tale of untrammelled greed and unrestrained company being marketed as the future of e-commerce. capitalism coming home to roost. The resounding message here is its as good as it gets. 39 Impact ISSUE 37 2022_pp38-39_Lorna_Tilbian.indd 39 28/03/2022 15:17