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Doom scrolling and the next financial crash!
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AI isn't nothing, but is it worth the amount of current and proposed investment? My conclusion is that while AI might be useful for some end users, it isn't worth its true cost and it will be a short to mid term bad investment.
And so we beat on, boats against the current, borne back ceaselessly into the past.1 -
Very obviously, BT was not a dotcom company. It existed long before the web, and most of its business was not internet based. But if the largest of any company in 2000 is what you're interested in, then Microsoft peaked at around $600 bn at the start of 2000, reached that again in Oct 2017, and is $3.59 tn now. Among the companies that were pure internet, Cisco stands out - 4th largest in the world in March 2000, after multiplying 10 times in the previous two and a half years, and having recently finally got back to that (in sterling terms, but not quite in dollars), making it now the 29th largest company.
Microsoft (MSFT) - Market capitalization
List of public corporations by market capitalization - Wikipedia
Cisco (CSCO) - Market capitalization
The FT listed Amazon at $28 bn in April 2000:
and the other site puts it at $26 bn at the end of 1999:
Amazon (AMZN) - Market capitalization
Market cap isn't directly tied to share price, of course - it depends on if shares were issued with further investment, or bought back.
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For me the issue with tech comes down to its level of current borrowing and its dominance of major indexes. I became an indexer to give me a diversified portfolio…I didn't want to pick a sector etc that I thought would "outperform". That indexing strategy has now become a bet on the tech sector so I looked for some indexes built on factors other than market capitalization and went to value as it underweights technology relative to S&P500. I've ended up with 20% of my stock allocation being in tech so I'm not writing it off entirely, I just don't want the 40% that I get with an S&P500 index.
And so we beat on, boats against the current, borne back ceaselessly into the past.0 -
Here is an interesting video:
The main message here is that pretty much the whole US economy is dependent on the success of AI. He suggests overweighting Europe. I am already overweight UK, which has been described as the anti-tech index. Euro Zone investors often have a European bias. Perhaps I would be better to replace some of my Vanguard Developed World ex UK with VERX rather than VSML.
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European stocks are often positioned as "Value" especially given the price to earnings ratios of many US equities. I now have half my stock portfolio outside the USA in VTIAX (Vanguard International Stock Index) and VTMGX (Vanguard Developed Markets Index). Both funds have large European allocations and tech forms under 20% of each. However, the single largest holdings of both are Samsung, ASML and SK Hynix.
And so we beat on, boats against the current, borne back ceaselessly into the past.0 -
I did a bit of rebalancing in my SIPP the other day. Switched some money in the L&G Global 100 to SWDA to reduce my exposure to US tech companies. I left some money in L&G, just in case it continues performing well. Also switched some funds from a global bond fund to a global short term bond fund, in anticipation of increasing interest rates. Currently we are around 35% equities, 35% cash and MMF funds, 25% bonds and 5% other including gold, and property. We are heavy on cash at the moment, as looking at helping our son trade up his property, and once that is done, will move some cash in to equities and bonds.
For us, the name of the game is wealth preservation first and then growth second, so aren’t worried about chasing every % of growth by taking excess risks, subjective of course, but we don’t do anything exotic like crypto. As our day to day costs are covered by pensions, interest and dividends, drops in capital values are far less important in the short term than drops in income. We remain well diversified, and if the worst happens, will live off the cash savings to fund anything that the regular income streams don’t cover. It’s a good position to be in, and I recognise we are lucky in that respect.0 -
Perhaps I would be better to replace some of my Vanguard Developed World ex UK with VERX rather than VSML.
I have looked at the portfolio data for the various funds. I do not see a good case for overweighting Europe ex UK. A market weight of small cap looks more sensible to be, but I am not an active investor and do not have a case of the AI jitters anyway.
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Remember Sun Microsystems though?…….the self proclaimed . in dot.com. The darling of what became the dot.com bubble and good example of what can happen in the tech world…..for any number of reasons.
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The are a number of videos on YouTube about the rise and fall of Sun and most other formerly great tech companies. Sun was clobbered by Intel and Linux. Its business model ceased to exist, and it failed to reinvent itself.
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When you have finished helping your son’s property move what % do you expect to be in equities and how much of that is geared to growth (as you refer to dividends as part of your income)?
Do you refer to wealth preservation as long term ‘steady’ growth or reduced short term volatility?
We are looking to help our 4 children getting onto the property ladder (1 down 3 to go!) especially after the change to pensions and IHT. We are fortunate to have more than enough for our retirement requirements (and OH continues to work as she enjoys it and being self employed has implemented a plan to get a work/life balance she likes) however the speeding up of the wealth transition has focused my mind on how we achieve our goals. Once complete we will end up 80% equities and 20% cash. Our necessary spending plus some discretionary will be covered by SP, 3 x small DBs and a reducing cash pot covering OH’s time gap to SPA. Equities figure does include income focused ITs (30% of total pot).
When we parted from our IFA I put on paper a plan which I have tweaked around the edges however it basically works on the basis that when my global ETFs reach X I cash a % in and buy more ITs. I will need to look at the plan if the markets continue to defy the headlines. Bizarrely a crash/correction might actually help passing on wealth (smaller gifts that the children then invest in the same funds we sold).1
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