Last year Brexit, and this year the election – what a nightmare this has been for your average DIY investor. Politicians and commentators demonstrated, yet again, that they were never going to be stopped by a lack of facts and accurate information. Perhaps, instead of giving politicians the keys to the country, we would be better off changing the locks!
After the unexpected Brexit result, sterling fell by around 15% and this meant any fund with a high proportion of dollar based investments made very nice gains, whilst your sterling based funds fell back. A few months later the U.K. economy started to show improvement on all fronts, and sterling started to stage a recovery. All change again, the ‘UK Smaller Companies’ and ‘UK All Companies’ sectors were on the move forward making handsome gains, until the turmoil of the recent general election campaigns brought that momentum to a halt. Then along comes the election result, and it is a hung parliament where Theresa May`s Tory government is expected to be kept afloat by the Northern Ireland D.U.P. Unexpectedly, Sterling did not immediately tank, but hiccupped and we all wait with baited breath to see what happens next.
One sector that has been making progress through all this unrest, as we have discussed many times before, is the Technology sector. Until recently we at Saltydog had been looking for those funds that might be investing in the new generation sciences rather than those of the recent ‘Information Age’. Then it dawned on us, that it was those very same companies Amazon, FaceBook, Alphabet, Apple, Microsoft, Alibaba, Netflix and the like, which were hunting down and buying these new technology start–ups. So in fact, the technology funds that we already own were invested into the new sciences, and so were we, but second-hand and by default.
This got me to thinking about how vulnerable we might become in the future. If these enormously wealthy companies can sift through these new tech. businesses, and purchase at will, then are we in danger of seeing them becoming world dominating retail and I.T. monopolies? It would become a similar situation to the Middle Eastern oil countries of the 1970`s who, lacking competition, were able to dictate oil prices to their customers. A take it, or leave it, situation.
Imagine Amazon with another twenty years growth to their warehouses and data centres. They could dominate supply chains across the retail market from food to clothes and everything in-between. They would be able to control prices and freeze any competition out at will. The High Street, and out-of-town, shopping as we know it today will have disappeared. They will have the ability to decide who sells what to whom and at what price. A similar situation could also exist on the Internet where these huge monopolies will decide what we watch and what we learn. I guess this is a bit 1984, but it might take world legislation to prevent it happening.
Back to the real world, and it would seem that those of us at Saltydog who are invested into Technology funds will be able to enjoy the growth of these enormous companies. The p/e. ratios that they carry at the moment may look like bubble prices, but perhaps they are simply reflecting the huge profit opportunity they are creating for the future.