• Christopher Hall

This time is different; but it really isn’t...

Markets keep going up and at higher valuations than ever before.


We’ve never seen a bull market start like this.


The fundamentals state that it can’t keep going up.


We've heard 'this has never happened before', many times.


In the 60’s, we were told that companies ‘couldn’t’ just keep issuing shares to acquire new companies. But they did, and they became known as conglomerates, with fingers in lots of pies across many different industries.


It hadn’t happened before, until it did. They led the market higher and that was the new normal. It took some 20-50 years for those conglomerates to unwind, but we had already moved on from them through technology and innovation, which then eclipsed what the conglomerates had added and created.


This was similar to the industrial changes in London brought on by the invention of sewing machines. Sewing machines led to fashion and shopping centres and department stores such as Harrods in the UK, and eventually ones like Myer today, across the globe.


Sewing machines took the manufacturing time of a man’s business shirt, from 14.5 hours to 1 hour. Clothing became affordable and fashion became an option. This innovation changed consumer behaviour forever, to the point where families would spend their spare time sewing rather than visiting friends.


In the 50’s, we’d never consumed as much as we did before. Consumerism through innovation was the new normal - cheaper cars, manufactured clothing, washing machines, microwaves, televisions and the mass consumer goods which we all hoard today.


Around the same time as the 60’s mass consumerism, birth rates in the Western World exploded post-World War II. The Baby Boomer generation. This generation consumed music in new way which, in turn, created and evolved celebrities and icons in ways never seen before.


These examples are similar to the deregulation of banks, which enabled mass adoption of consumer credit. This enabled the average citizens of many nations to apply for loans and purchase their own home. From the late 70’s to the mid 2000’s, the amount of credit exploded and at the same time, accelerated the retail trades through fast-moving consumable goods.


We can find many more examples of ‘game changers’ in our recent history, from the Panama Canal to the production of steel. In all of these examples the world had not seen these changes before, and all previous measures used to forecast economic growth and productivity became redundant or grossly off course. New measures were added to adjust forecasting models and justify the economic growth.


I’m not trying to justify the speed of these climbing markets, just the notion that countries have copied what the US did out of the GFC, and printed more money and stimulus than ever before. It's at the point where today, the Covid-19 fortnightly US stimulus amount equates to the entire post-GFC US stimulus packages (Quantitative Easing). This spending dwarfs anything that we’ve ever seen before, and not just by the US, but the UK, EU, Australia, NZ - almost every developed nation on the globe and to lesser extents, the developing nations too.


If inflation occurs, it's possible that we will look back 30 years from now and describe this as the era of global debt debasement, which subsequently dwarfed the amount of debt in comparison to hard assets.


If so, then history says the countries that can:


- Print their own currency,

- Hold their purchasing power with their peers

- Maintain civil stability and

- Maintain stable political leadership

will come out of this mass fiscal spending better than others. Within those countries, the investors with high debt and ownership of real assets, or consistent income-producing assets, are disproportionately benefited than those without.


If any of this history is repeated in any way, then the roaring share markets that we’re seeing now are not yet at their peak. Not every company will keep climbing in price, but there will be new leaders claiming the lead, overtaking the old leaders and the market will continue higher.

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