Will Technology Companies bring about a New "Roaring Twenties?"
Monthly Market Commentary: February 1, 2021
At high school in the early 1960s, we learned about the merits of democracies, the freedom of people, the ability to participate in the government through the right to vote, and of course about the unrestricted freedom of speech and expression, which we in Western democracies enjoyed. What we read in the newspapers or what we heard on the Radio or saw on TV was considered the "Truth."
We constantly made jokes about the Russian Pravda and Radio Yeravan (capital of Armenia now) when we talked about falsehoods or fake news.
What I want to say is that when I grew up, an unquestionable truth was that democracies such as we had in the West were good, and that the Soviet Union and China were evil. Period.
The other feature about my youth, and I often ruminate about it, is the fact that until I was about twenty and already at university, I had never heard my parents or anyone else talk about stocks and bonds. When people had some savings, they put them on deposits with banks or in saving accounts. And if they had large savings, the first thing they did was to buy a house – not for speculative purposes but to live in it.
Stocks were neither widely owned nor were they popular. In fact, during the 1960s, most European stock markets hardly moved up. My readers may find this hard to believe: although I had studied economics, it is only when I wrote my thesis in London in 1968/69 that I became aware of stocks and the profit opportunities which the stock market offered.
Similarly, I only started to focus on commodities and bonds after I had begun to work on Wall Street in 1970. Remembering these times, I now find it interesting (almost embarrassing) how financially uneducated we were.
Furthermore, since communist countries and most emerging economies had no stock exchanges I can say that close to 98% of the world's population was not involved in any type of financial speculation.
By contrast, we currently live in an age of unprecedented speculation on a global scale. Phases of great speculative activities did usually not lead to a sustainable upturn up-turn in the business cycle but coincided with a temporary peak in economic activity, corporate profits, stock prices, and incomes per capita.
There is another observation I want to make about the current trading frenzy by the chartroom communities. From the time I began working for Wall Street in 1970 to the present, I have experienced about 20 different investment bubbles. I have also read extensively about previous bubbles such as we had in the 18th and 19th century, and in the 1920s. No bubble ever ended with small investors making money and the "Big Boys" getting hurt. The big loser was in each instance the small guy.
Also, never ever think that regulators were created to protect the small guy. After imposing restrictions on chatrooms and on trading of the stocks that burned their hedge fund bodies, the financial regulators had their media accomplices print headlines like the following: "GameStop’s Plunge Triggers Halts as Platforms Restrict Trades."
The truth, however, is that the restrictions imposed on chatrooms and on trading GameStop triggered the plunge and not vice versa.
But the shady nature of the Media is nothing new. In a letter to G.K. van Hogendorp in 1785, Thomas Jefferson wrote: "You know well that government always kept a kind of standing army of news-writers who, without any regard to truth or to what should be like truth, invented and put into the papers whatever might serve the ministers. This suffices with the mass of the people who have no means of distinguishing the false from the true paragraphs of a newspaper."