CLOSE-UP PERSPECTIVE: Beware of the bull market, as history could repeat itself

When bulls are rampant, there’s no money in being a bear. If you don’t believe this seconds-old wisdom you could ask Phillips & Drew, the fund manager that has famously underperformed all its rivals by cleaving bearishly to the belief that the market would go pear-shaped. Or Julian Robertson, who last week closed down part of his vast Tiger hedge funds because the markets have become illogical; or Warren Buffett, who nearly lost his decades-old reputation before a Damascene conversion to new-tech stocks last year.

When bulls are rampant, there’s no money in being a bear. If you

don’t believe this seconds-old wisdom you could ask Phillips & Drew, the

fund manager that has famously underperformed all its rivals by cleaving

bearishly to the belief that the market would go pear-shaped. Or Julian

Robertson, who last week closed down part of his vast Tiger hedge funds

because the markets have become illogical; or Warren Buffett, who nearly

lost his decades-old reputation before a Damascene conversion to

new-tech stocks last year.



Even the press has become bullish about the ad business. Not in the UK

of course - it’s only a bull market, not Disneyland - but in countries

as culturally dissonant as France and the US. The recent expensive

forays into the US by monsieurs Levy and de Pouzilhac have found favour

with the Paris Bourse and media. This, despite the huge sums being paid

for some sellers that manifestly needed to sell.



In the US, the major quoted stocks - Omnicom, Interpublic, Young &

Rubicam and True North - have all produced sterling figures for 1999

(IPG’s are coloured by a one-off charge for the Lowe-Lintas merger). The

UK’s WPP performed equally well. Advertising, as the Wall Street Journal

acknowledged in an exceptionally positive feature this week, is on a

roll.



The WSJ quotes Competitive Media Reporting data suggesting that dotcom

spending accounts for only 2 per cent of the major advertising groups’

total revenues. World adspend is tipped to rise by more than 7 per cent

this year. Why does all this good news leave me uneasy?



The problem lies with the idea that advertising has won the

effectiveness battle around the world. I don’t mean in the US. There,

major big-spending clients believe in advertising. Many US agency chiefs

will say that it’s a daily battle to get interesting creative work out,

but they start with a huge advantage; most US clients don’t question the

benefits of advertising. They just call it selling.



In much of Europe and most of Asia, belief in advertising is more

fragile, despite increasing spend figures - much of which can be put

down to rampant media inflation. European and Asian economies are firing

again.



Clients are advertising because they believe consumers will buy again -

not because they believe in branding through recessions or that

advertising can kick-start consumer-spending. The industry shows

worrying signs of repeating the excesses of the 80s (crazy prices for

acquisitions, massive salaries, a rush for short-term client bonanzas -

in this case dotcom).



It only takes a few thousand nervous online investors to desert

Microsoft and it could all come tumbling down. But in a world where B

COM3 passes for a brand name for a branding specialist, what do I know?



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