Han Dieperink: Warning about the winners
This column was originally written in Dutch. This is an English translation.
By Han Dieperink, written in a personal capacity
The Dutch Central Bank (DNB) is sounding the alarm. Again. This time, the warning concerns technology stocks in the portfolios of pension funds, insurers and investment institutions. Together, these holdings amount to more than €200 billion, almost half of which is invested in the so-called Magnificent Seven. DNB is concerned about high valuations and the risk of an abrupt correction.
It is a curious warning. After all, what exactly is DNB concerned about? Pension funds investing in the most innovative and profitable companies in the world. Companies that are leading the AI revolution, that are growing structurally, and that, despite their size, are still delivering double-digit earnings growth. The real concern should be with institutions that are not investing in this transformation.
The shaky track record of central bankers
Central bankers do not have a particularly impressive track record when it comes to market warnings. The most famous example is Alan Greenspan, then Chairman of the Federal Reserve, who warned in December 1996 of “irrational exuberance” in the equity markets. The world listened with bated breath. And what happened? Equity markets rose by another 105 per cent over the following four years. Anyone who sold after Greenspan’s speech missed the biggest rally of the 1990s.
The pattern repeats itself with striking regularity. In 2014, the Bank of England, through Governor Mark Carney, warned of an overheating UK housing market. The central bank even introduced new mortgage rules to cool the market. The result? House prices in London continued to rise in the years that followed, by double digits per year. The warning proved not only premature, but cost potential buyers who stayed on the sidelines tens of thousands of pounds in missed entry opportunities.
The European Central Bank has also had its moments. In 2011, under the leadership of Jean-Claude Trichet, the ECB raised interest rates twice out of fear of inflation. It proved to be a historic misjudgement. Europe slid into a debt crisis and deflation, and the ECB was forced to completely reverse its policy. Mario Draghi, Trichet’s successor, would need years to repair the damage with his “whatever it takes”.
People in glass houses
Closer to home, DNB has its own blunders. In 2011, the supervisor forced the Pensioenfonds Vereenigde Glasfabrieken to reduce its gold allocation from 13 per cent to 3 per cent. The gold had to be sold within two months — DNB deemed the position too risky. The timing could hardly have been worse: the gold price subsequently rose to record highs. A court in Rotterdam later ruled that DNB had wrongly compelled the fund to act.
What is striking? That same DNB holds more than 44 per cent of its own reserves in gold. Too risky for pension funds, but apparently not for the central bank itself. DNB even calls gold “the ultimate insurance”. But evidently only when it owns it itself.
The real blind spot
There is a much larger blind spot in DNB’s supervision: the Dutch saver. More than €400 billion is languishing in savings accounts. The average savings rate is structurally below inflation. Add wealth taxes on top of that, and Dutch savers are guaranteed to go backwards. This is not a risk; it is a certainty.
Yet DNB does not warn about this guaranteed destruction of value. No press releases about the risks of excessive saving. No concern about long-term savers watching their wealth erode while equity markets move from record to record.
The real message
Technology is no longer a sector; it is a layer that runs across the entire economy. The Magnificent Seven are not a speculative hype, but companies with dominant market positions, explosive cash flows, and the means to finance the next technological wave. Of course diversification matters. But a concentration in the most valuable and innovative companies in the world is not an existential risk. It is common sense.
DNB would do better to warn about the real risks: institutions that miss the boat, savers who see their wealth evaporate, and a supervisor that itself — as in the case of the Glass Fund — misses the mark. Only when the central bank recognises its own blind spots can its warnings be taken seriously.
Until then, what has always held true still applies: the best protection against uncertainty is investing in quality. And that quality today is called Alphabet, Amazon, Apple, Meta, Microsoft and Nvidia.