A: There are periods where the market pays a premium for growth, and then there are market environments where it’s not even about growth—it’s about optionality and acceleration. You see that in multiple dimensions now: Witness the dramatic rise of Bitcoin or the eye-popping valuations of some of the larger companies in technology or alternative energy. Or the whole creation of the SPAC [special purpose acquisition companies] market where, again, people are paying for optionality—they’re paying for the potential to own a business. They don’t even know what it is yet. Things like that make one a little wary.
I’ve also received calls from friends of my children and older people—all wondering how they can make money quickly in some of these emergent fields. I haven’t received such a frequency of calls since the late 1990s. It feels like one of those moments where it’s worth reminding people that the whole point of investing is to preserve purchasing power. If you’re prudent, you hopefully grow your purchasing power in a way that’s resilient.
~ Matthew McLennan, portfolio manager, First Eagle Investment Management, "A Time for Worry - and For Yogurt," Barron's, April 17, 2021
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