Good morning, it's Paul here!

A theme which I keep coming back to, is the remarkable changes (mainly driven by technology) which are occurring across multiple sectors. This is causing a lot of problems (and creating opportunities) for investors. How do we pick the winners? Anything that looks like a future winner is probably already extremely expensive, because we're in a roaring bull market for growth companies. So that opens up a lot of downside risk, if sentiment on a particular share, or the whole market, suddenly falls.

Last night I read Howard Marks' latest memo, which (as usual) is utterly brilliant. He sounds the usual warning signals, which he is well known for. It's well worth a read, highly recommended. There seems little doubt to me that we're probably now in the euphoria stage of this bull market - i.e. near the end. However, that stage could go on for a while yet, and it's when the biggest profits are often made. Nobody knows when the bubble will burst.

Also, I see differences between now, and 1998-2000, when we had a massive bubble in tech, media & telecoms shares. Back then, all sorts of rubbish blue sky stocks soared to mad valuations. However, this time round, a lot of the very expensive stocks are actually fantastic, highly disruptive businesses (e.g. Amazon). We can argue about valuation all we like, but there's little doubt that once-in-a-lifetime changes are happening across multiple sectors. Just look at the difficulties retailers are facing from online competition, and the trail of destruction that Amazon and Google are leaving in their wakes.


In the past, once certain sectors became really cheap, you could buy them with the reasonable expectation that they would recover - mean reversion. However, that's no longer the case. With, say, struggling retailers, and whole sectors (e.g. car dealers) - lots of investors are wondering if those businesses will still exist in 10 years' time?

Take a look at Dixons Carphone (LON:DC.) which warned on profits today. The share is currently down 24% today, but was down 30% earlier. This is the latest in an increasing long list of big companies which are surprising on the downside.

The company said something very interesting about mobile phone handsets, and I'm wondering what other companies this may have read-across to?


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