Isle of Man based entrepreneur Jim Mellon has sounded warnings for investors about what he sees as a ’precarious’ situation.

And he says he is ’wary’ of the immediate outlook for the major stock markets of the world.

He believes the ’next lurch down is on its way.’

Mr Mellon makes his feelings known in an article for the respected online business magazine Master Investor.

His views are sought by many business people and investors around the world and he will be speaking next Saturday at the annual Master Investor show in London, which is always attended by thousands of people.

He says he will be outlining a plan which he thinks can weather the storm ahead at the show in London.

He writes: ’Our world is awash in a sea of debt - and that is not a good place to be.

’Yes, there is synchronised economic growth going on; and yes there is a productivity gain that is coming due to automation; and yes there are wonderful things happening in longevity.

’But central banks (so far, with the exception of China) are putting on the brakes (rather belatedly so), inflation is rising fast, yields are going up, and that is never a good place for equity investors.’

Jim, who the Sunday Times Rich List estimates as being worth £920m, is one of the largest employers in the island.

He is the owner of the Claremont Hotel and executive chairman of Manx Financial Group PLC which includes Conister Bank and Edgewater Associates.

Jim says: ’The mini collapse in shares earlier in February must surely presage something more serious.

’In my excessively long experience of markets, the first shudder is rarely the last.

’Emollient words from inexperienced market commentators should be roundly ignored.

’This bull market is approaching the shadows of its duration and investors should make use of the current phoney war to reallocate and reshuffle their portfolios. From now on, it’s pass the parcel.’

Jim writes of how, as a young fund manager, ’with an optimism bordering on the fanatical, I came back to the house I had just bought in London (at the time, I lived in Hong Kong), switched on the TV and saw on Teletext (ancient history) that the US market had fallen by a quarter or so. Luckily, I had been fortified by Chianti in a nearby hostelry, or the shock to the system might have been too much!

’Since then, there have been many ups and downs, but mostly ups, and I have become used to them.

’But I have to say, the situation today strikes me as precarious.’ He says: ’The next lurch down is on its way.’

Mr Mellon says: ’To my mind, the upsurge in the VIX fear index (a volatility index calculated by the Chicago Board Options Exchange) was an omen; the collapse of the whole ludicrous crypto-complex was another; and the tweeting of stock market bullishness as a personal validation by President Trump, a further negative augury. Since then, normal service has been resumed.

’But, mark my words, the real blitz has not yet started in earnest - but it will.’

Mr Mellon says that unlike in 1987, ’when the first frisson of bear market blues hit me, valuations have expanded to ludicrous levels, the likes of which were last seen in 1929.

’Stock prices have been manipulated by ultra-low interest rates (which are going to soon be a thing of the past), by share buy-backs and by an accumulation of "stories", which when retold in the cold light of day, two or three years out, will look considerably less alluring.

’This makes me feel that the next lurch down is coming - and coming soon.

’This doesn’t mean that I am not a raging bull on all the good things happening in the world (longevity, medicine, tech, etc) but it does make me wary of the immediate outlook for the major stock markets of the world.’

’I think that the broad indices could fall by 25 per cent or so peak to trough, and while some will do better than others (e.g. Japan vs the US), normally even the good girls go down with the bad.

’From now on, it’s pass the parcel.’

Mr Mellon said that in his talk at Master Investor onSaturday he will be ’outlining a portfolio which I think can weather the storm that is coming.

’It will include some banks that will benefit from higher interest rates and the reduction in so-called "misconduct" charges, some dividend-yielding companies that look secure in their earnings, and some blue-sky tech and biotech companies that have the potential to change the world.’

He added: ’My call - until very recently an appalling one - that the big internet platforms of Google (Alphabet) (NASDAQ:GOOGL) and Facebook (NASDAQ:FB) would soon be getting some comeuppance seems to be coming modestly right.’

lThe full article can be seen online at Master Investor. https://masterinvestor.co.uk/economics/mellon-markets-16-3/

Jim Mellon warns: ’Mark my words, the real blitz has not yet started in earnest - but it will’