In July 2020, four years ago, Spy first wrote about a shiny new thematic strategy, the Direxion Work From Home ETF. This was, of course, launched in light of Covid and everyone was suddenly working from home (WFH) and would be forever. Over a few mildly satisfying glasses of summer lager, Spy had a peek at how at that strategy is working out, four years later. Since inception, it has done a measly 3% annualised, with some pretty juicy volatility. The S&P 500, by contrast is up about 80% in the same time period. Is there a lesson in this small history lesson? Yes, but you might have to come into the office to find out what it is.
Spy half wondered if he had entered a dystopian asset management future this week. He stumbled across a new ETF that has launched named the SMI 3Fourteen Full-Cycle Trend (FCT) ETF. Immediately the Terminator’s voice popped into Spy’s head. Try it for yourself. It even has a futuristic ticker, FCT. All that is missing is the number 3000. If you have overcome the cyborg sounding name, “The ETF is actively managed and typically owns 20 domestic stocks drawn from within the S&P 500 Index constituents.” So far, so unoriginal. The blurb then adds, with Schwarzenegger-ish tones, “The stocks are chosen using a full-cycle trend (FCT) strategy. The FCT model uses a proprietary quality screen to narrow the potential universe, then applies a variety of proprietary trend and momentum screens to select the ETF’s portfolio.” All that is missing, is, ‘In 2027 it will become self-aware…’
Spy felt a pang of sadness this week when it was announced that Open AI, the firm behind ChatGPT, is not going to make its API service available in China or Hong Kong any longer. API access is necessary to build unique services on the back of Open AI’s groundbreaking large language models. A sad result of the current geopolitical tension between the US and China, those of us who rather like using ChatGPT-driven tools to improve Dim Sum recipes, will be a touch bereft. The real consequence? China’s domestic generative AI services such as Baidu’s Ernie, Alibaba’s Qwen or Moonshot will grab a larger slice of the pie.
Milton Friedman used to quip that “nothing was so permanent as a temporary government programme.” Of course, he was absolutely correct. Remember, Britain’s income tax was introduced as “a temporary measure to help fight the war against Napoleon” in 1799. It wasn’t much, only six pence in the pound and only applied to incomes over £60 ($77), nearly £9,000 in today’s money. How is that working out? So, next time you see a government, anywhere, tell you they need to top up the coffers for a bit, adjust your tax budgeting, permanently.
Spy spotted a headline, “Pepsi Warns US Snack Demand ‘Subdued’ As Consumer Slowdown Worsens.” With all due respect to our American friends, a slowdown in consumption of Pepsi’s obesity-inducing foods might not be a bad thing for America’s health and waistlines, if not its investors’ pockets. On a more serious note, Pepsi is a bellwether for the vast American middle to lower income consumer. If they have stopped buying their “chips and soda”, perhaps the real economy, beyond the world of AI-hype, is significantly worse than expected.
Spy is of an age when going to the pub with your mates after a tough week, was all the emotional support most blokes ever got. Now we have emotional support dogs, cuddly toys and, apparently, the latest gimmick is water bottles. Yes, emotional support water bottles. Perhaps the asset management industry can get in on the act and offer “emotional support funds”. The idea would be to have a fund that has a high chance of going up regularly so that when a sad and stressed unit holder looked at their quarterly statement, they feel remarkably emotionally supported. Nah, it would probably never take off.
“To be, or not to be, that is the question: Whether ’tis nobler in the mind to suffer, The slings and arrows of outrageous fortune, Or to take arms against a sea of troubles”, thus spoke Hamlet. Those haunting words of Shakespeare repeat down the years to us all because when the great dilemmas of kings, presidents or indeed the common man arise, they are always poignant. As Joe Biden contemplates his fate, he too must be wondering: to be the nominee, or not to be the nominee. If he chooses “to be” he is guaranteed a “sea of troubles” in the five months ahead.
Spy’s quote of the week comes from Michel de Montaigne, the French philosopher, “My life has been full of terrible misfortunes, most of which, never happened.” Or as we might say, “Don’t worry, be happy.”
It has been hard to miss T Rowe Price’s massive new outdoor campaign in Hong Kong’s Central. The American firm is promoting its Diversified Income Bond Strategy and showcasing T Rowe Price’s expertise in fixed income generally. The same campaign is coming to Singapore later this month.
Until next week…
