Neil Woodford losing count of the ‘lights flashing red’

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  • Britain’s most famous investment fund manager issues a warning on the markets 
  • Woodford says situation has similarities with the ‘dot com bubble’ of late 90’s
  • The famous fund manager also took a swipe at bitcoin 

Alex Sebastian For This Is Money

Britain’s highest profile fund manager Neil Woodford has warned financial markets now have ‘many flashing red lights’ – with what he sees as a widespread bubble in place.

With share prices fuelled by the unprecedented central bank action taken in the years since the 2008 financial crisis, Woodford drew parallels with the ‘dot com bubble’ of the late nineties.

The dot com boom saw technology company share prices rise rapidly, as investors rushed to jump on the bandwagon of the internet’s early adoption, only to crash in 2000 once it dawned on investors that gains had massively outweighed the real financial performance of the companies.

Woodford says markets are in a similar position to the 'dot com bubble' of the late nineties.

Woodford says markets are in a similar position to the ‘dot com bubble’ of the late nineties.

‘Ten years on from the global financial crisis, we are witnessing the product of the biggest monetary policy experiment in history,’ Woodford said in an interview with the Financial Times

‘Investors have forgotten about risk and this is playing out in inflated asset prices and inflated valuations.’

‘Whether it’s bitcoin going through $10,000, European junk bonds yielding less than US Treasuries, historic low levels of volatility or triple-leveraged exchange traded funds attracting gigantic inflows — there are so many lights flashing red that I am losing count.’

Woodford, who built his name on outperforming the market and his competitors, has endured a difficult past year. 

His huge £8billion flagship Woodford Equity Income has struggled to match its peers after it was hit by a number of share price falls, most notably in subprime lender Provident Financial.

There are so many lights flashing red that I am losing count 

However, rather than being a reason for Woodford to worry, he indicated he sees the present situation as potentially presenting an opportunity to turn his recent bad run around and put him back on top of the pack.

‘Obviously, the late-nineties dot com bubble was a painful period of performance for me but, in the context of history, it was a brief dislocation,’ Woodford said.

‘By focusing resolutely on fundamentals, my funds enjoyed a meaningful period of positive performance when the bubble burst, continuing to rise in value as the market plummeted in 2000 and 2001.’

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