This is a recent (2 days ago) blogpost by Steve Johnson from forager funds-
Nothing so undermines your financial judgement as the sight of your neighbour getting rich.” – John Pierpont Morgan
Although it has been more than a century since Morgan’s words, little has changed about human nature. The main difference being that, in our digitally connected world, we have a lot more neighbours.
I’m seeing more of my “neighbours” apparently making fortunes. And increasing signs of impaired financial judgement as a result.
Granted, this is a bull market that is now more than eight years old. For most of that period, however, it has been a reluctant and nervous bull market.
The arguments between bulls and bears have been grounded in logic. The bears have argued that company earnings are unsustainably high and that multiples are well above long-term averages. The bulls countered that interest rates were lower than historical averages, likely to stay that way and that equities were relatively cheap as a result.
Both of those arguments have merit and you could have a well-considered reason for being on either side of the fence (or, in my case, sitting on top of it).
The back half of 2017, however, saw an increase in something more common in previous bull markets: mania. Crypto-currencies are the most obvious manifestation. Not since the 2000 tech bubble have I seen so many people talking about and speculating in something they know absolutely nothing about.
But it is becoming increasingly prevalent in the stock market too.
Get wary of GetSwift
ASX-listed GetSwift is a logistics software startup with a fully-diluted market capitalisation of roughly half a billion dollars.
Despite generating less than $1 million of revenue last year, a flurry of ASX announcements has investors excited.
In September GetSwift announced an “exclusive 5 year agreement with N.A. Williams” that, once up and running, is expected to generate $138m per annum of revenue. The only problem being that N.A. Williams doesn’t seem to be a company of any significance. Even Google doesn’t know much about it and the only financial information I could find suggested US$23m of revenue and 90 employees.
The ensuing months saw a flurry of other deals announced and then, in November, the big daddy of them all: “GetSwift is pleased to announce that it has signed a global master services agreement with Amazon.”
Even the bulls of yesteryear would have been sceptical. One can only assume this is the same Amazon that built the world’s most sophisticated cloud computing service because it couldn’t find an offering that met its requirements. The same Amazon that already offers same day delivery to more than 8,000 cities and towns. The same Amazon that spent US$21 billion on research and development in the past 12 months.
I will be very surprised if Amazon buys logistics software off anyone. Let alone an Australian minnow with less than $1m of revenue.
In the mania of late 2017, however, it is being lapped up. The GetSwift share price has rocketed from $0.25 at listing to $4.00 at the time of a recent capital raising. It was up 84% on the day of the Amazon announcement.
Picking on GetSwift is possibly unfair. It is but one of at least a dozen small companies I could have chosen. It is emblematic, however, of the frenzy that has taken hold at the speculative end of the market.
Apologies if this has already been posted somewhere here.
