Carriages at midnight: Is the stock market about to tank?

Veteran stock broker Charlie Green warns it may be batten down the hatches time for the stock market, channelling JRR Tolkien to warn of a possible tough year for equities.

Market set for a tough year?

Veteran stock broker Charlie Green warns it may be batten down the hatches time for the stock market, saying it’s “carriages at midnight and possibly ambulances at 2am” for equities.

Green, the founder of local investment shop Hunter Green IB, says CBA is among the companies where valuations “have been thrown out the window.” Green says we may well be in a market bubble with 2025 set to be a tough year for investors.

He told the annual HLB Mann Judd market update at the Brisbane Convention and Exhibition Centre this week that “carriages at midnight” is a famous reference to an invitation sent by author JRR Tolkien to guests at his son’s 21st, in 1945.

“The invitation stated it was carriages at midnight but if you stayed after midnight, it was ambulances at 2am and hearses at daybreak,” Green says. “It’s my way of saying perhaps it’s time to leave the equities party.”

Green points to a comparison between CBA and UK high street bank Lloyds to show the bubble we may be approaching with Australian shares.

The CBA has surged a massive 34 per cent to $156.22 in the past year.

“Lloyds makes about 80 per cent of the annual profit of CBA,” says Green. “But Lloyds is only about 25 per cent of the price of CBA so which would you rather own?

“There’s no doubt CBA is a good company, but valuations have gone out the window. Put another way: You could buy a new BMW X5 for say $100k or a slightly less powerful but still new Lexus RX350 for $25k. What do you choose?”

Charlie Green says ASX set for tough year.

Fake investments

Green also points out the plethora of fake investments as another red flag that we are in a bubble. “The government moneysmart website lists crypto, banking scams and Ponzi schemes as ones to watch out for,” he says.

“I’m old fashioned enough to believe that for something to qualify as an ‘investment’, its needs to either have a yield, or a measurable future payback, and while crypto undeniably has its place in the economy, and while it might be a ‘money maker,’ it does not qualify as an investment.”

Bubbles and busts

Green says he has experienced three bubbles in his career, the first being “Black Monday” in 1980s, the second the “Tech Wreck” in early 2000 and the third during the sub prime meltdown in 2007 and 2008, which triggered the Global Financial Crisis.

“Based on my experience, I believe the common theme in all bubbles is when valuations get thrown out the window which is why I believe that 2025 will be a tough year for shares,” he says. Green believes the voices of small investors will in the long run resonate stronger than the so-called investing élites who populate the upper echelons of industry super funds and global index funds.

“They are often flying their polluting private jets around the world lecturing our boards on what’s good and not good for shareholders. And the worst of it is, that many of our board members end up kowtowing to these élites, to preserve their cushy jobs.” Ouch!

Charlie Green