Facebook shares fall, also:
It was not an exception though. It also noted that shares in PayPal fell by more than a quarter and Spotify saw its shares fall by 23 per cent in after-hours trade.
There were issues in each case, I admit. But that is not the point. The point is that companies that can see swings in value as sharp as these are not good stores of value, but are being used as such by pension funds.
It also says something else, and that is if entirely foreseeable issues, like competition, can have such a massive impact on the value of these companies then the risk of saving in their shares is not being appropriately priced in these cases.
Man’s never heard of the returns from equity, clearly. There having been no modern – long – period when equities have not outperformed bonds.
Of course, the moron doesn’t know this. Because, in one of his little reports (Finance for the Future, with Colin Hines) he compared bond returns including interest with equities returns not including dividends. That was simply propaganda for his insistence that everyone should save for their retirement in gilts of course. But the man’s stupid enough to actually believe his own proaganda.
“Riley says:
So what should pension funds be investing their money in instead then?
Reply
Richard Murphy says:
Meeting the real needs of society”
Says the man whose wealth is tied up in a mortgage free house. Whose needs does that meet other than his own?
Facebook – according to good and proper research – produces a value of some $800 per user per year in consumer surplus. $800 a year for a couple of billion people is massive, massive, meeting of needs.
Murphy can fuck off ‘n’all.
Murphy signs the virtues of long dated gilts which are also down c 20% over the last few months.. and of course are guaranteed to fall further as they are all trading above par.. and of course with derisory coupons added to a capital loss and rising inflation the real returns are shocking..yet he loves them because they are the state and are guaranteed..of course a guarantee of par and a guaranteed derisory coupon leads to a guaranteed loss… I have tried to point out a few times over the years of duration risk., supposed he thought inflation would be zero for ever as would interest rates.. he is a prick
Ritchie’s prediction for Facebook at IPO…
https://www.t*xresearch.org.uk/Blog/2012/05/30/is-facebook-2012s-lastminute-com/
Andrew C
I’ll try that when the bailiffs come calling – ‘you can’t repossess this because I invested my pension in ‘meeting the real needs of society’’ – might make interesting reality TV to see their reaction….
Just as well for the Biden admin that they haven’t got around to taxing based on share values yet.
The rebates would be hilarious.
Noel, that thread is hilarious. Maybe I’ll try another complaint to officialdom on the basis of him giving investment advice without a licence
“The point is that companies that can see swings in value as sharp as these are not good stores of value, but are being used as such by pension funds.”
They aren’t a store of value and pension funds aren’t using them as such. They are an investment, and the whole point of investments is that the value changes and people want it to change – unlike a store of value, which you want to stay as stable as possible.
@Diogenes
I’ve had a go at pointing out that he’s not an IFA and not licensed to give out investment advice but he chose not to publish that.
And note
“the State has a duty to do something… and if that means directing savings to specific projects that need doing then it should be considered.” from one of his supporters.
Bit like….
“As of August 1st (1938), the great savings programme for the People’s Car “Strength-Through-Joy” will begin. I herewith proclaim the conditions under which every working person, can acquire an automobile.
(i) Each German, without distinction of class, profession, or property can become the purchaser of a Volkswagen.
(ii) The minimum weekly payment, insurance included, will be 5 marks. Regular payment of this amount will guarantee, after a period which is yet to be determined, the acquisition of a Volkswagen. The precise period will be determined upon the beginning of production.
(iii) Application for the Volkswagen savings programme can be made at any office of the German Labour Front and of Strength Through Joy, where further details can also be obtained.”
Robert Ley – Head of the German Labour Front.
We’ll all own a bit of a wind farm or solar panel if Spud has his way.
Is there any evidence that UK* pensions funds have any significant investments in Facebook? They don’t strike me as a company that pensions finds would be interested in, too volatile.
A number of years ago I was talking to the FD of a major UK company that does have serious pension funds investment. They’re an infrastructure company and he was saying that the pension funds put them under a lot of pressure over what risks they take. They were even concerned about the government project they were bidding for.
On a personal level I have my core pension fund that I want a steady return on and then other investments that are in a diversity of funds, some of which may or may be invested in Facebook at any given time.
*Or does he think he has a right to spend Americans’ pensions as well? (For the avoidance of doubt, that’s rhetorical)
@BiND: Haven’t checked for Meta (ie Facebook) specifically, but I have yet to see a pension fund that invests in the US and doesn’t have tech stocks as its largest holding. You could design your pension or to avoid the US but everywhere I’ve worked has had a global fund as the default option.
Can’t speak to drawdown funds that actually provide an income in retirement, but it wouldn’t surprise me if they were. They’d probably get sharp questions about performance if they didn’t hold stocks like Meta.
I want my pension fund to invest in stocks that pay a dividend. I don’t care about the value of the stock, I want an income. A one-second Google tells me that Facebook has never paid any dividends.
If you steal the pension funds, sorry take them and reinvest in The People’s Priorities (a.k.a ‘Pork for Progressives’) then this will solve that problem
The BBC helpfully list their top pension fund equity investments:
On their list
No 3 – Tencent Holdings – £41.3m (evil nasty Chinese technology company)
No 4 – Amazon – £39.7m (evil tax dodging company)
No 6 – Alibaba £43.3m (evil nasty Chinese technology company)
No 8 – Alphabet £48.9m – owner of Google – (evil tax dodging company)
No 11 – Facebook £46.2m* (evil tax dodging company)
Also..Apple, Netflix, Microsoft, Tesla.
*possibly less today.
Ritchie hates equities – perhaps he made some really bad investments in the dotcom boom in the 1990s?
He is 63 and constantly hustling for grants and donations. I suspect he took his own advice and put his own pension into government bonds, and wants everyone else to get the same lousy returns.
Volatility is NOT the same as risk.
Pension funds are interested in long-term returns (three score years and ten …) so short-term volatility verges on the irrelevant.
@ Tim
Depends on your definition of “long” – the ridiculous temporary over-valuation of equities in the dot.com boom of the 90s was followed by a “long” period of equity underperformance vs bonds.
BUT since equities are more risky than bonds the required return for an investor in equities IS, was, and ever will be, higher than that for an investor in bonds so equity prices will reflect this so equity returns will be higher *except when future reality turns out to be far worse than predicted for equity investors*.
“I want my pension fund to invest in stocks that pay a dividend. I don’t care about the value of the stock”
If I might be allowed to say, this is a profoundly dangerous viewpoint. You merely have to look at GSK to see a company that has spent so much of its profits on dividends rather than investment that it is unable to achieve much in the way of future profitable growth and the dividends will dry up
Diogenes,
“If I might be allowed to say, this is a profoundly dangerous viewpoint. You merely have to look at GSK to see a company that has spent so much of its profits on dividends rather than investment that it is unable to achieve much in the way of future profitable growth and the dividends will dry up”
The counter-perspective that I hold is that the company that pays dividends works. It’s a sustainable enterprise.
Sure, you might need to lose money and not pay divvies in the early years. You’re spending huge money on technology and have tiny numbers of customers. But if you have 2 billion regular users and aren’t paying a dividend, when will you ever pay a dividend?
I work in tech, but I don’t get “tech stocks” at all. Why is Snapchat worth $40bn? It loses about $300m/year. It has no moat and limited network effects. And the moment they become profitable, you’ll see a ton of rivals with slight variations challenging them. Building an image share app today really isn’t that hard. The scaling problem is the biggest pain, and that’s largely gone away with massive cloud hosting.