As the year winds down, Spy has been contemplating a conversation he had this week over a pint of Guinness. A respected fund distribution head said, “I have put 100% of my pension into Tesla. I did so before the American election.” Well, unless you live under a rock, you will realise that was a good call. He followed up, “I am certain the future is owned by Tesla: robotics, EVs, autonomous vehicles, solar and more. I am going to let it run and run.” It is hard to argue against the logic when Tesla has done so well of late. But that is partly a problem of the way our brains are hardwired: we find it difficult to conceive of other outcomes. When Japan was dominant at the end of the 1980s, most people could not conceive it would enter a 30-year bear market. Spy’s distribution friend may well be right, Tesla has a very bright future indeed, but whenever someone says the word “certain”, Murphy and his eponymous law is waiting around the corner, usually with a pint of Guinness in his hand.
No doubt many wealth and investment managers are planning for, and considering, the outlook for the next twelve months. Spy was impressed with the lack of fence sitting by the M&G team. “Looking ahead to 2025, with overall market valuations having reached new post-Covid highs, the question that investors are most likely to ask is: “Does Wall Street still have room to run?” And with a clarity that Spy seldom sees these days, the team writes, “The answer is yes in our view, but not all stocks have the ability to perform equally well” It is, according to them, time to broaden out the search beyond the ‘magnificent seven’ and also, to look beyond the tech sector. Get searching.
Spy had a penny-drop moment this week listening to a Value Perspective podcast by Schroders, This insight, although derived from a military situation, applies to so many other things in life: “You want systems that work at 80% capacity, 100% of the time; rather than systems that work 100% of capacity, 80% of the time – because you’re dead, if that downtime happens just as the bad guys show up.” The analogy applies to tech, medical and probably life in general.
Most of the time, asset managers put out insight pieces covering companies or economics. Spy was intrigued by a quite extraordinary fact from Alliance Bernstein examining the power of curiosity. “Human beings are neurologically hardwired to enjoy talking about themselves. If you are authentically curious about whom you are speaking with and ask thoughtful questions, that person will automatically experience pleasure. In fact, a study published in 2012 showed that talking about oneself can trigger the same sensation of pleasure as food, because it sparks the primary rewards centre of the brain.” Herein lies a lesson for every person in sales, everywhere.
It is probably the most challenging question of the AI era: how does one deploy AI responsibly? Spy enjoyed this thought piece by Janus Henderson which is worth reading in full: “When considering responsible AI, it is crucial to start with the understanding that AI is merely a technology, inherently neither good nor bad. It is poised to have a wide range of both positive and negative impacts on humans, which can often be seen as two sides of the same coin. For instance, in the healthcare sector, AI holds the potential to significantly advance early disease detection. However, if the resulting data is not adequately protected, it might subsequently make obtaining health insurance more challenging. Similarly, while AI promises to enhance the workplace by eliminating tedious tasks, there are legitimate concerns about its capacity to displace entire careers.” The concerns are real, but it is not beyond the wit of man to safely adopt it, reckons Spy.
Is a revolution brewing? Not the insurrectionist kind, but an investment kind, wonders Spy. China is reportedly, close to rolling out its private retirement account program nationwide. Trials have been taking place in various areas and cities across the country. This could prove a boon for banks and asset managers serving the China market. China, like many other countries, faces a rapidly aging population and needs investment tools to provide for its population beyond state provision. The American 401K plan and the British Sipp, are western examples that have accumulated trillions in assets and this model could be good news for China’s beleaguered stock market in the long term.
When was the last time you sat in a coffee shop and did not see an ocean of MacBooks and iPhones? Apple’s recent run has pushed it to its highest valuation in history: $3.75trn at the time of writing, which happens to be over 10x sales, the highest valuation level in the company’s history. It was not that long ago that investors were spooked at the death of Apple co-founder and CEO, Steve Jobs. After its near-death experience in 1990s, Apple’s rise has been relentless and a massive inspiration to entrepreneurs everywhere.
Spy’s quote of the week is worth a reminder as we all start to look to 2025. Charles Darwin observed, “It is not the most intellectual of the species that survives; it is not the strongest that survives; but the species that survives is the one that is able best to adapt and adjust to the changing environment in which it finds itself.” For everyone grappling with the consequences of crypto boom or the AI revolution, this is surely one to ponder.
Until next week…
