Do you know anyone who has borrowed to buy bitcoin? I asked this question on Twitter earlier this week, rather assuming that the answer would be no. Instead I got several replies from people who do, and another pointing out that IG Index often has bitcoin at “unlongable” – meaning that they are at their capacity for people betting on margin. People are borrowing to bet, and the price of a bitcoin has gone parabolic (up 14 times in the last 12 months).
That should make you feel nervous. However you feel about cryptocurrencies and blockchain technology, there are few historical examples of assets that have risen that much in price in such a short time and not come back down again pretty fast too. But the mini-mania that is bitcoin is just one of many signals knocking around in the markets that should make you nervous. Valuations are high (or as the Bank of International Settlements says “frothy”); Donald Trump’s tax plans could well be about to crash the greatest bond bubble in centuries; there is a high level of complacency about, despite very high political volatility; and the economic growth we need to keep earnings going looks as elusive as ever. You don’t have to be naturally bearish to see that there is almost definitely trouble ahead.
What should you do? Stay simple; stay diversifed; and outside a core defensive portfolio, keep an eye open for sectors with genuine organic growth potential. Look at our update to the MoneyWeek investment trust portfolio (it is going well). And see our cover story for a sector where there is a chance of seeing real growth, regardless of the political noise around us – the drug companies trying to figure out cures for some of our nastiest neurological diseases: Alzheimer’s, Parkinson’s and MS. There is as yet no cure for any of them, but there will be huge rewards for the first to find one. Dr Mike Tubbs runs through the contenders and picks the stocks he reckons will be the winners.
Finally, there is one more thing you can do with any spare cash you might have (perhaps from selling that bitcoin). You can bid to have lunch with me in London (on the Financial Times) at private members’ club George. I can’t promise it will do miracles for your finances, but I can promise that it will be entertaining (we can argue about bitcoin and Brexit) and that it might help with a miracle or two for Alzheimer’s suffers: all proceeds go to Alzheimer’s Research. You can bid using this link. I look forward to meeting one of you at George.