Holly's Blog: Black Friday Nonsense and Stock Market Heebie-Jeebies

I hate Black Friday! Everyone has a Black Friday offer! Even the local pest control unit who once got rid of a wasps’ nest for me emailed through a Black Friday offer. Sarah Raven is offering me cheap bulbs but I still haven’t forgiven her for taking 4 months this Spring to deliver my sweet pea seeds. Such is the strength of middle-class middle-aged British anger! I shall veto her Black Friday bulbs. That’ll learn her!!!!

Black Friday first hit our shores in 2010, largely courtesy of Amazon. It quickly became more mainstream as Walmart-owned Asda announced it would be running a Black Friday campaign, and the likes of Tesco, John Lewis and Argos followed.

The uglier facer of Black Friday emerged here in 2014. Police were forced to get involved after fights broke out and people were trampled and assaulted in many shops as bargain hunters went to war over a telly or an iPad. Since 2006, there have been seven reported deaths and 98 injuries throughout the US on Black Friday.

Today it’s a huge focus for online scammers so do just have that lurking in the back of your mind as people shove messages that are ‘too good to be true’ down our consumer throats!

The Nu Virus On The Block

Heebie-jeebies on the stock market as the *%$@~* Nu strain shakes confidence.

The FTSE 100 index fell by over 3% yesterday. The stock market really is a mirror of our world and what people think the future holds. Shares in BA parent IAG fell by about 16%. BP was down by 6% People are worried that we will go back to not flying and not charging about and not using so much oil.

Over in the US and despite short-term nerves, the main indices still look buoyant. I read an interesting piece in the FT this week which observed that it is a few big hitters that are keeping things so dramatically high, whilst under the surface more firms are struggling. If we look at the main 3,000 listed companies in the US (the Russell 3000 index), nearly 10% of these are trading at 52-week lows. A quick look at this list and to this casual observer, it seems to be that they are basically the ‘trendy’ shares – Zoom, Peloton, Bumble, Pinterest, Alibaba, RobinHood, Tencent Music, Virgin Intergalactic – all at least 50% less than their highest value over the last year.

I do think this is an interesting reminder of the danger of investing in things at arguably hyped-up crazy prices because we think something is ‘cool’. Something to consider as more so-called ‘thematic investment’ stories come our way.

Price Earnings Ratios and Mr Musk

I could go on to discuss Tesla and its current valuation which gives it a price/earnings ratio of about 370.

P/E Ratios….? This simply means that the company is worth 370 times the amount it brings in at ‘the tills’ over a year. For example, if you had a business selling cakes which made £1,000 a year – and you valued that business at £370,000. It sounds a bit bonkers, right? No-one is going to pay for this if you simply churn out the usual Victoria Sponges. It will only get this sort of valuation if people believe that you are working on a cake recipe which will make the eater an instant size 8, you have a global deal with Walmart to sell them, and you have a cunning plan to manufacture them in the world’s smallest and cheapest factories. At this point, you have a ‘growth’ business, not a ‘value’ business and people are betting on tomorrow not today. At which point maths and equations simply become a posh cloak worn over the main outfit of belief.

Whether the belief in Tesla justifies the valuation is another blog for another day! I will say as an investor it makes me nervous that this week, a luxury Russian accessory brand melted Tesla car parts into a rather ugly bust of Elon Musk. This takes a brand and a CEO into super crazy territory. These 8-inch beauties are a bargain at just $3,220 a piece on Caviar Global's website and would make the perfect Christmas gift! Just not for me….

Last orders at the bar of our crowdfund

A final note this week. We have been really pleased with our crowdfund which took us over our target in less than 24 hours. Many thanks to all of our readers who have chosen to support us. We have decided to close the round early and so the doors will close on Wednesday 1st December. We don’t have a cake recipe to make you a size 8. But we do have a damn good model to build on this year’s target audience of 1 million people – and continue our work to help millions of Brits to make better choices with their long-term savings.

You can find out more and – if it’s right for you - invest here.

Capital at Risk

Thanks everyone – have a lovely weekend. And any grandparents or parents – remember our next webinar discussing children’s savings with financial planner Carly Dunningham and Andrew Russel, the CEO of robo adviser Wealthify, on Monday night at 6pm. You can join us live here or watch on catch-up to find out more about all things trusts, junior ISAs, cash versus shares, investment options and how to get them to sleep for 12 hours and love broccoli (OK – not those 2 last things!).

Holly