Back in early 2003, it was difficult to get anyone to buy a share let alone anything speculative. "Too risky," they said. Yet in early 2000, it was dotcom or nothing. Value portfolios were thrown out for the blue sky vapour trails of dotcoms.
In 2000, the sceptics (like me) were saying the dotcom. boom looked like a resource boom. Now, of course, the great wheel has turned and we are four years into a rampant Australian bull market with a resource boom of resource booms well under way.
And in the language of the stock market comic, pigmies are casting long shadows and the sky is getting even darker with the flocks of turkeys flying. The comic book pictures are those conjured up when a stock market player says the bull market is maturing, for then speculative stocks notch up huge market capitalisations - like over $2 billion and more.
What's a speculative stock you ask? One with no revenues and no earnings, and just prospects. Or little of the first two, and heaps of promise on the third. You would have paid a few cents a share early 2003, or a market cap of less than $20 million at most for the same companies now in the $100 million, $1 billion-plus range. For specs, read pigmies and turkeys.
Now what is risk, you ask, pesky person as you are. Don't you have a sense of humour, can't you take a loss with a smile?
Just think of these lines:
* "Risk is what you thought you would never pay."
* "Risk always migrates to the hands least competent to handle it."
* "The mercantile community will have been unusually fortunate if during the period of rising prices it has not made great mistakes." (Walter Bagehot, 1873.)
These quotes come from a bearish article on the American housing market by American Enterprise Institute resident fellow Alex J Pollock, a former CEO of the Federal Homes Loan Bank of Chicago.
I would think a book could be written about each quote. But just think about the current speculative stock boom, just who is buying them now? People who thought they would never pay? The hands least competent to handle it?
It will also be interesting when this great Australian expansion of some 16 years finally enters a downturn, just how Bagehot's comment will apply. Not being a professional bear, I would also point out that each downturn ushers in a greater bull market, where all the same lessons apply yet again.
As I write, the latest set of economic statistics on building approvals and retail indicates that an April interest rate hike is a certainty. The market was down 50 points on that dour prospect, plus concerns about a tsunami developing off the Solomon Islands and headed for NSW, and yet another ruction over Chinese-American trade.
I share what I am afraid is quite popular opinion and that is we are in a bull market with some legs in it yet. I would prefer it if I was a relative outcast, as contra cyclical thinking usually pays off, as shown by careful reading of my first few sentences. But I do feel that if I was investing super fund monies as a result of the Government largesse towards that sector this year, I would take my time, waiting for good downturns to find opportunity. They come.
I also think it is suitable to use the current good times to squirrel away some cash and pay down debt, for debt now appears to be as common as the rabbit once was.
