No Sign Of Wall Street Blues

Happy Blue Monday but crikey! It’s tough enough these days without Father Time slapping you with a big number. Was it really 40 years ago this week when the TV crime series, Hill Street Blues, first hit our screens? Think back to Mike Post’s instrumental theme music, grimy urban scenes, innovative shaky hand-held cameras, multiple storylines and the steady din of background noise.

The Hill Street precinct was breaking new ground in TV-land but who can remember Wall Street almost breaking the economy? More specifically, the cost of money for business was approaching nose-bleed levels of 20% interest rates. Grim days. Not so these days. Despite a global pandemic and ‘a real and present danger’ sitting in the Oval Office, financial markets are experiencing pockets of euphoria. Let’s take a look at three headlines over the last week.

Affirm Stock Rockets More Than 90% After IPO – MarketWatch

Bank share prices still wallow at historic low valuations but it seems that Affirm’s buy now/pay later financing facility is ground-breaking. Hmmm. Lots to think about here on top of the $24 billion valuation attributed to a financing option which has been around since 1157, according to the history of Venice.

Signal Advance Has Soared 11,708% Since An Elon Musk Tweet – Business Insider

A personal favourite this one. The world’s richest man, Elon Musk, tweeted “use Signal” to his 42 million followers last week. The background to this was a privacy revolt against Facebook’s WhatsApp messaging service. Sure enough, the Signal messaging app signed up millions of new users and the valuation of Signal Advance soared from a tiny $6 million to $300 million in just a few days. As Captain Blackadder might say, there was a tiny flaw in that investment strategy. Signal Advance has zero commercial connection to Signal, the encrypted messaging platform. Thousands of investors have bought the wrong stock.

SPAC Mania Gives Early Investors Steady Returns With Little Risk – Wall Street Journal

It is difficult to believe this is a WSJ headline. “Early” and “Mania” might be the operative words in this gem. As a brief explainer, a SPAC is a “blank cheque” investment vehicle which raises money via IPO on a promise to acquire companies in a specific(usually) sector or with an identifiable theme eg. Start-ups, hydrogen fuel, social media etc. In 2020 there were 248 SPAC IPOs. In the first 2 weeks of 2021 there have already been 40 listings on the public markets. SPACs are not new. They come into vogue when multiple “hot” sectors appear and investors look for swift access to these themes. Previous incarnations have included shipping, banking and energy exploration. The track record of these is mixed to put it mildly. Anyway, this is the early giddy expectation bit – enjoy the IPO excitement before the funds are spent and often wasted.

Please do not take this as a blanket statement that financial markets are in a bubble. In fact, there are large parts of the market which are only just breaking out of multi-year slumps. Think smaller companies, European equities, banks and emerging markets which have all had a very tough decade. However, it would be remiss of us not to take on board the iconic daily cautionary words of Sergeant Esterhaus at the Hill Street precinct – “Let’s be careful out there”.

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