Why the RBA is wrong about retail

Livewire Exclusive

Even the RBA has now weighed into the debate on Amazon, with a bearish view on the potential effect to retail. However, Paul Taylor, Portfolio Manager of the Fidelity Australian Equities Fund, had a cautionary tale for the bears based on his experiences through the late 90’s tech bubble.

At that time, Taylor was a banks analyst in London, and watched the tech bubble build and then burst. Dreams were running ahead of reality as investors predicted the possibilities of the young internet.

One idea that got traction was that the internet would connect borrowers and lenders directly, thus disintermediating the banks. Investors anticipated a wave of companies equivalent to today’s peer-to-peer lenders like Society One, Bigstone and Ratesetter.

Banks in the late 90’s sold off as the market anticipated a loss of market share. Paul Taylor told the Livewire audience:

“Back in the late 90’s, I was a banks analyst based in our London office. And at the time that the internet was really taking off, and you had a whole lot of internet firms expanding their businesses, basically the banks were going ‘to end’. So they got very, very cheap, because was going to be the end of a bank.”

But as history testifies, what transpired was quite different, with 98% of tech bubble companies going bust, and banks going on to rally for next ten years.

In this short clip, Paul Taylor recounts his experience of that period, and explains why things can pan out completely differently to expected, and why it's not just ‘the first’ derivative’ that you need to stay on top of.

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