This feels like the dot-com bubble; we're holding 50% cash, no FOMO: Billionaire Michael Lee-Chin
Billionaire investor and philanthropist Michael Lee-Chin is sitting on a veritable mountain of dry powder on expectations sky-high equity market valuations will take a tumble and present significant buying opportunities.
In a television interview Thursday, Lee-Chin, the founder and chairman of privately-held investment firm Portland Holdings, said he’s allocated a massive portion of his fund to cash in anticipation that markets will fall precipitously.
“In the fund I manage today, we have over 50 per cent cash, and we’ve been holding that 50 per cent cash notwithstanding the fear of missing out,” he said. “We have no fear of missing out. We are confident that this too will eventually regress to the mean.”
Lee-Chin, who made much of his estimated US$1.5-billion fortune investing in financial services and mutual fund firms instead of chasing frothy tech stocks in the late 1990s, said the current market conditions remind him of the run-up to the dot-com bubble burst of the early aughts.
“This really feels to me like 1999, the dot-com era, which we lived through. As a money manager, it was painful because we were the largest shareholder of companies like TD Bank, CI Financial, Invesco, money management firms -- and we were being lambasted because I just would not sell those securities to buy the new thing, the dot-com [stocks],” he said.
While Lee-Chin’s funds underperformed in the late stages of that dot-com bubble, his strategy was ultimately exonerated when high-flying tech stocks were decimated by the crash.
During this protracted run higher in markets, a number of fresh bubble concerns have emerged, particularly among stocks favoured by retail investors.
Earlier this year, shares of beleaguered companies including GameStop Corp. and AMC Entertainment Holdings Inc., as well as former technology stalwart BlackBerry Ltd., were sent surging as a horde of retail investors piled into the names.
Lee-Chin said he has no interest in those types of speculators or their investment targets, instead preferring stable companies with long-term investors aligned with the corporate goal rather than the quick-money crowd.
“Those people who are trading are not investors. Let us take the most simplistic definition of an investor: a person who owns shares and who sees the ownership of those shares as a percentage interest in a business, versus someone who owns shares and sees the shares as pieces of paper to be traded,” he said.
“We today have a plethora, an abundance of the latter: people who just see stocks as pieces of paper to be traded. And nobody makes money doing that.”