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Blain: “We Are Beginning To See Cracks Across The Tech Model”

Irish border? Tech/Disruptive valuations – are they unsustainable? Wake up and put on the coffee.

“The man gave me the news. He said, you must be joking son, where did you get these shoes?”

Extraordinary weather here in London. This is the first time I’ve worn a Panama hat in April since 1976. Just last week I was still wearing my winter Fedora! One ponders just what the cooling Gulf Stream and the renegade Jet Stream are doing to us? Photo of view from office window attached. (Barclays office facilities – please take note.. this morning the world is looking thru your dirty windows..!)

The paucity of real market moving news is demonstrated by the headlines given over to the latest Brexit Spat – the Irish border. There are simple solutions – but no one seems particularly interested when it’s a chance for Brussels to punish Britain, Remoaners to bleat about how it’s never too late to repent, while Exiteers fulminate on the need to discipline Europe. Get real. Call it a free-trade zone or whatever. Does anyone really believe the UK and Yoorp will so diverge that Irish Milk will be different from Northern Irish Milk? Aside from arbing petrol prices either side of the border, (which is only 195-215 miles long, depending which map you use), isn’t it best to be practical? Get on with it.

Back on planet Rest of the World, a very real issue is tech stocks. Their market caps are enormous. 7/10 of the largest companies on the planet fall into the bracket. They dominate global indices, and account for much of ebb and flow of market value activity.

The raises some very big issues, not the least of which is valuations – where me-too investors and investment tourists have piled in. Do the current prices make sense? The conventional wisdom/excuse is you can’t value disruption/paradigm shifts from a conventional perspective. It requires an acknowledgement that extraordinary breakthroughs need to analysed and priced differently. They glitter, they shine, they sound good… so folk buy em – none of which are valid investment reasons!

Amazon has become the proverbial shoe in the retail high street machine (incidentaly the origin of the word “saboteur”). The rise of Amazon conveniently explains the death of the high street and shopping mall, triggers a devaluation of these sectors and expectations the Amazon monopoly can only expand for ever on the basis populations will always consume. Of course its not limitless.

We are beginning to see cracks across the Tech model. Facebook is just one. The implied IP potential of big data collectors was assumed likely to provide annuity-like earnings and rising revenue into perpetuity.. Right up to the moment when it became clear the question of ownership of personal data had never been tested, and now a regulatory threat hangs over the whole sector. Valuations based on free big data no longer apply. Reprice accordingly?  Folk are still thinking of buying opportunities based on what looks a discredited series of expectations.

Or how about the fact i-Phones seem not to obey Boyles law? Although the Iphone “improves” every year, prices are still going up and up and up. Boyles law states “capacity/speed doubles and prices half” every few years. Hmm.. The utility of the iPhone has hardly changed since it became the dominant smart phone. The memory is about the same, but Prices keep rising! Despite the marginally better camera, and slightly shinier shiny white thing, the sum of human happiness has hardly risen as result… and now everyone has one..

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