Tim Price: How to survive the crash of the ‘everything bubble’

It’s one of the most pertinent investor notes from a Fund Manager that the Asia Markets team has come across in recent times – “When the everything bubble burst”.

Penned by Tim Price, a down-to-earth money manager who’s watched in bemusement as multiple dispersion in U.S. stock markets reached dot com bubble levels in recent years.

Tim is also the author of a great read, titled, “Investing through the Looking Glass: a rational guide to irrational financial markets”.

In the new note, Price provides a response to the biggest question on the minds of investors the world over right now – what the hell should I invest in?

With inflation soaring, interest rates rising, and geopolitical uncertainty griping the world, you can understand why investors are perplexed. In the risk-off environment the NASDAQ is down around 30% year-to-date, the S&P 500 down 18% and the Dow off 15%.

Still, relative to history headline stock market valuations remain high, following a multi-decade QE-fuelled bull market.

So, what happens if the unravelling continues and the stock market crash intensifies?

Why this stock market crash is different

Despite many drawing parallels between the current market and the dot com bubble, Price is unequivocal in his view that the current market (Bubble 2.0), is different.

In fact, he believes it’s worse.

“The reason why the market environment is now so much scarier than early 2000 from the vantage point of June 2022 is simple. Whereas the millennial bubble was in dotcom stocks and almost nothing else, Bubble 2.0 is in just about everything,” he says.

“It is universal. It goes beyond a segment of the stock market (technology) to take in virtually all of the US stock market, and those of most other developed economies, too. Worse still, it transcends the asset class of listed equities and has managed to infect global debt markets, and many property markets, as well.”

everything bubbel Everything bubble
Image: Price Value Partners

So, how do investors survive the prospect of the collapse of the everything bubble? Price makes 4 key suggestions:

  1. There is no single magic bullet to surviving the crash of the everything bubble
  2. Diversify as far and wide as possible
  3. The starting valuation of any investment should be of paramount importance
  4. Value investing, trend-following, and gold may be viable solutions

A time for value investors to shine

Above all, Price suggests value investing could be the best way to navigate the bursting of the everything bubble – and generate alpha along the way.

This, of course, is no surprise – he runs a value-focussed asset management firm. However, he’s not holding back on his current conviction.

“We humbly submit this may soon be one of the best times in history to be a value investor – whether in relative, or absolute terms,” says Price.

We may be wrong – QE and ZIRP have been with us for over 10 whole years now – but we sense a disturbance in the force, as the Fed continues to hike, and bond yields and stocks creak and fragment under the accumulated pressure of an at least decade-long foray into absurdity.

You can read the full investor note by Tim Price here.

Related: Inflation hedge: Could Asian stocks be the answer?