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Macro View: Covid Moved Tech 10 years forwards in 10 months

Last updated on December 21, 2021

Right now there seems to be two overbearing messages driving a unpredictable and volatile market.

One is that the Federal Exchange are winding down bond purchases which is essentially letting interest rates on company borrowing rise. As background the Fed were buying bonds and as such (with a very active buyer) kept the prices of the bonds high. If the price of a bond is high then the interest rate as a part of that equation is lower. By removing an insatiable buyer from the market then prices go down and interest returns go up. This is to be followed by interest rate rises and that means future earnings from companies will be lower in real terms unless they have pricing power.

Second is the virus that seems to be less lethal but could swamp hospitals with patients.

So what are our thoughts?

We focus on tech and hold the majority of the portfolio in them. We continue to believe that tech will be one of the best long term bets.

We can consider many techs now to be utilities. Back in the 1880s Thomas Edison brought a few homes on to electric for lights. 50 years on only half still had electric. This shows how broadband, fibre, netflix and their supply chain of sech suppliers (data centers, processors, Microsoft, inference engines) all will be “utilities”. So we remain solid on these thru the uncertainties.

Tech moves forwards – remember floppy disks and micro disks. Or cameras with film in them, or not being connected 24×7. These are all changes in 15 years or so. THERE WILL BE MORE CHANGE as we go forwards. That nice shiny iPhone will be seen just like a Nokia 6810 does now.

Tech moves forwards relentlessly – remember floppy disks and micro disks. Or cameras with film in them, or not being connected 24×7. These are all changes in 15 years or so. THERE WILL BE MORE CHANGE as we go forwards. That nice shiny iPhone will be seen just like a Nokia 6810 does now

Also, some of the nascent stocks in tech enabled everything, from cars to pharmaceutical must grow. It’s like considering a 1990s office without email or web….. Unthinkable.

So amongst bedlam, we hold our nerve and believe in the macro. Stocks are an “investment” not a bank account!

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