My all-time favourite movie is Silver Bears, starring Michael Caine. It is hilarious. It is purported to be a true (or true-ish) story where a New York mob ‘family’ was in cahoots with a Swiss bank. Investors were sought to develop a silver mine, except...there wasn’t one. There was plenty of silver but no actual mine – they just obtained scrap silver, melted it down, turned it into ingots, sold them and told investors how profitable the (ahem) mine was.
It reminds me of the share markets of the world today and why I am increasingly concerned.
Let’s say you were a notable fund manager with hundreds of billions of dollars of investor money at your disposal. Let’s say you were also part of a toxic cabal of corrupt swamp dwellers who are all so guilty of so many crimes they are terrified of a Trump presidency and an Attorney-General hellbent on sending corrupt swamp dwellers to prison. You’ve long since sold your soul.
In desperation you put forth a proposal to various ‘tech billionaires’, on behalf of the Democrat/globalist/elitist toxic swamp, which goes something like this: ‘How’d you like to be 30 billion dollars richer?’ Needless to say they are all ears; all they need to do is keep manipulating those algorithms. You, as a fund manager, start not only buying their shares but are prepared to pay any price for their shares – ever increasing share prices and ever increasing records apparently being set. The billionaire founders of these companies are delighted their own shares are worth $30 billion (or whatever) more than a couple of years ago. Oh, and the tech billionaires aren’t quite the muppets everyone thinks because they required put options – guaranteed by you, the fund manager. In other words, you agree to buy their shareholding at today’s prices if things go tits up.
There is just one little problem with all of this: it isn’t real.
In reality there are a large number of companies – many well-known brand names – who have seen their share price down 20 per cent or 30 per cent (or more!) in the last year, whereas tech stocks are immune from any normative market behaviour. If you look at the US share market, or others around the world, the underlying economy nowhere near justifies its current levels: the entire market is being propped up by a handful of tech companies because certain fund managers will pay any price for the shares. And it doesn’t take a genius to see what is going on.
Even worse is that here in New Zealand it’s has been ramped up. Your friendly, nondescript, ‘walk shorts and cardigan’ fund manager at your KiwiSaver provider may have got a call from New York, suggesting they operate in a partnership (‘You’ve made it, pal!’), and the rest is history. Suddenly they have New Zealand investor money being used to buy ever-increasing share prices. Ask your KiwiSaver fund manager how many tech shares they own and you’ll see what I mean. Sales of physical products go down, but the share price rises 15 per cent. Does that make sense to you?
Add in such things as guaranteeing the breathtaking losses at failing cable news companies, and newspapers of record (ahem), and you see what is happening in technicolor. Except it isn’t their money being used: it is yours and you get to wear the day of reckoning (oh, and pay them their annual fee).
