Member Info for sageoflondon

Per the Telegraph the bank is already preparing and emergency intervention....rates up again?

SMT is likely up as a considerable portion of it's assets are denominated in dollars I would guess.

You seriously think there will be a slowing of rate rises given where the pound is? I see the rate rises now accelerating to stem the fall in the pound - it likely won't work, but the government certainly won't have the reserves to intervene (which would be foolish anyway). Current value of the pound will add more broad based inflation regardless of gas prices.

In this instance I agree re general pullback market wide with a flight to relative safety - and decent cash returns from dividends. High beta stocks, stocks with no profitability and no guarantee of long run profitability will struggle for a good while, this could head lower, I have no idea. People less willing to back an idea that might be commercially viable someway down the line. Steph - you are welcome to take a punt on Cazoo. Personally for me I don't think it will exist in 5 years, it certainly won't unless it can make a real profit. It doesn't have the same growth ambitions now, it's retreated from Europe, so essentially it's a UK used car dealer - plenty of those around - quoted ones that already make money and pay a dividend, with an online offering - and in some cases a large property portfolio to support the valuation when things get tricky over the next couple of years. What is it offering that others aren't ? Nothing as far as I can see. Others will let you buy online, deliver the car etc, but also let you view it / drive it in advance of purchasing it. Others offer more than Cazoo - and don't spend a fortune sponsoring football teams, the Epsom Derby etc.

My personal take - very few similar vehicles (as far as I am aware) are purchasing their own shares. Given the investment flow and follow on investments that are likely to be required, I would imagine that they don't have the free funds to purchase their own shares as such. In this environment access to capital will be crucial for a lot of the portfolio. I am also not as positive as you on the portfolio. There is going to be a realisation here at some point - both in NAV terms and outlook terms. No way Grow will be immune to the pullback in valuations, that is exactly what the market is saying, just as it did for Chrysalis in a big way.

Plus the decline in the pound will also result in more imported inflation......

Plus in reality the tax cuts will be breakeven at best when considered alongside the increase in interest rates and the impact that will have. The market is pricing in a considerable recession - at some point this has to hit house prices, regardless of the stamp duty cut. The whole premise of the removal of the 45% rate is to prevent this I believe. Dangerous times. The housing market (particularly in the UK) looks particularly slow at present, compared to the frenzy 3-9 months ago.

That was meant to say 'supply' constrained

Sure inflation will come back under control, somewhere in the 2-3% banding eventually. That won't stop rates in the 3-5% banding at the same time. That's a good thing overall though, savers need a positive return and money isn't free - that's not what I would call high by historical standards. Energy is falling due to expectations of a fall in demand due to recession - always does in a recession, even where demand constrained etc. Markets (and individuals) have got too used to abnormally low rates.

This isn't falling on anything specific to Grow. This is falling in line with similar shares (i.e. shares with a similar risk profile). I'm not sure this is the end of things. Markets could fall a fair bit from here. Part of that is getting used to the more 'normal' interest rate environment. In reality 4% interest rates aren't that high in historical terms - market is struggling to adjust. Has to be positive that we get back to something a little more normal in terms of interest rates.

Steph - I agree re you are invested across a range of companies in line with the Grow portfolio diversification. Important to recognise however that Grow is itself a company and with that comes with specific risk that is not diversified away by the portfolio spread - i.e. those risks that are specific to the operation of the company itself. The Woodford debacle was one example of how that can crystallise, but there are also many other examples - the primary one of those being fraud. mis-reporting, accounting scandal etc. That can't be diversified away when investing in a single quoted investment.

and then she will likely drive it up further with the NIC cut. We have had a pay increase, cost of living one off payment and now an NIC cut, plus potentially a Corporation Tax reduction (which will increase dividend returns at some point). Not sure we need everything like that - we will as a family be significantly better off as a result of all of these things - but in all honesty we aren't struggling. Most of it will just increase our savings rate. Just see the government intervention (at that level - of course the poorest and lower income need help) as potentially inflationary and that means interest rates could potentially end up higher. I hope they don't. I don't bother looking at short term moves in gas and oil prices - I certainly don't invest on the basis of that. Any energy investments I have are profitably way below where they are at present and I have held for years. Good returns overall with dividends included. Regardless of energy prices or inflation I don't see this returning to highs for a very long time. Until investors get an idea of exit valuations etc this isn't going to shoot the lights out. It stands to reason that any valuation that increases (as an example) 5 fold in 12-18 months like Revolut can also do the same in the opposite direction. I want to see some real business growth in our core portfolio. Some of those have been running for a good while now - Graphcore etc, but progress a little muted.

But where do they currently make most of their money ?

To me the THG results indicate a business that is in reality not really a technology company - selling online isn't really a tech business - John Lewis and everyone else does that. They have suffered due to the price of whey quite badly - that's a consumer facing online retail business with a lack of pricing power that should never have traded at the multiple it floated at. Even Softbank weren't willing to pay up for the stake in ingenuity - which is saying something as Softbank have been more than willing to pay top prices for many other stakes they have purchased. I don't think the THG share price looks like great value now, loads of competition particularly on the platform front. I find it difficult to think of things like Allplants as a technology company - if it is, then so is Cook! They aren't really advancing anything, just doing what is already done elsewhere already. Amazon was a pioneer, Tesla a pioneer, Graphcore a pioneer (but need to establish demand and opportunity to profit given copycats etc). A lot of what is being touted as tech isn't really technology - how can it be if it doesn't change anything, do something truly different with a primary emphasis on technology. I don't really think Cazoo is tech - there are also lots of others doing what they do, but better. Ui Path - clearly tech.

I don't believe Cazoo will exist in 5 years full stop.

Just look at THG. That is an absolute disaster from an investor perspective. I wouldn't touch it now, despite the fact the 52 week high was 606.50p, today 42.5p. Again huge destruction of wealth if you were an investor, it was allowed to float at a value that bore little relevance to reality. Buyer beware. The Grow portfolio constituents will need to show robust profitability at the relevant stage, ever increasing revenues are pointless (and for me a very questionable way of valuing an investment) without a pathway to/or clear current profitability. Only in an overly exuberant market will we ever see a return to those sorts of numbers that gave us Klarna, Revolut, THG, Cazoo we aren't talking about one off scenarios. There was wide spread over-valuation on a huge scale right the way across the technology space, with the exception of the already dominant and hugely profitably - which were overvalued but not to the same extent. It's clear in hindsight, it was a bubble.

This has a lot further to play out. Defensive cash generative companies the order of the day in this environment. A lot of what we refer to as technology stocks won't make it to the other side - of course there will be some big successes, but for everyone of those there will be 10 failures, or something of that magnitude. Not sure where things go from here, but it's going to be very bumpy indeed.

Fast growth is only good if it is sustainable - i.e. it's profitable in real terms, rather than growing off of the back of continuous and ever inflated fundraisings. It's not that difficult to grow if you're willing to do it at an overall loss. History is full of companies that have adopted this practice (likely the majority of the airline industry if you take the industry as a whole). Whilst I don't believe interest rates will go really high, I think they will stay at a higher level of normal. It's very probably we will see 3-4.5% here in the UK (and likely the US too) with average mortgage rates somewhere around the 6% mark. Not what I would call high by historical standards. Oil is already back to pre-Ukraine levels, gas higher yes. De-globalisation also likely to have a considerable impact on inflation, move away from China. If Taiwan happens then all bets are off - that would make the Ukraine look like a side show purely from an economic impact perspective. Grow has to prove it can exit successfully - by that I don't just mean they make a bit of cash before the share price plummets, that model only works so many times. The companies brought to market need to have a sustainable business model - Ui Path does but it was overpriced for the stage it was at when it came to market - but that was the market at the time. At some point some of our investments will come back to the market for more cash - some likely sooner than others. That will give a much better perspective on the real value of those investments.

I have some PEY as well - won't shoot the lights out, but decent dividend on top of any capital gain. Decent discount on it at present too.

A small token profit at such an early stage will do nothing whatsoever to persuade me Revolut is worth $33bn. That's all it will be at best - a small token profit. Before it's realistically valued at such a valuation it needs to show serious potential - it hasn't for me. Natwest has a similar valuation. That is producing around £3bn of profits - net. I'm not expecting that, but anything less than multiple billions of revenue and serious profitability won't cut it. That last valuation was purely what a few large investors were willing to pay - now the company is worth that much on our BS. They need articles to try and persuade as most people don't buy the investment valuation - I certainly don't.