Spy wishes all of his readers a very happy Lunar New Year. May your Hong Bao’s be full to the brim with crisp notes and family harmony, your firework displays be spectacular, your decorations enchant, your relatives go easy on the unmarried and your homes sparkle with cleanliness.
Watching Donald Trump, with a stiff Talisker single malt in hand, and the world’s reaction to him this week, Spy was reminded of former British prime minister, Margaret Thatcher. She once quipped, “Power is like being a lady. If you have to tell people you are, you aren’t.” The Donald is not telling anyone; the politicians, the businessmen, the multi-lateral organisation chiefs, the bank CEOs, the asset management leaders and all the others falling over themselves to bend the knee, tell the rest of us and him, everything. Perhaps we should all be grateful for Don’s candour to the assembled Davos crowd, “My message to every business in the world is very simple. Come make your product in America, and we will give you among the lowest taxes of any nation on earth. But if you don’t make your product in America, you will have to pay a tariff.” Nobody can claim that they don’t know exactly where he stands.
What’s in a name, wonders Spy? The most unexpected asset management name, spotted by Spy in a while, is surely, Militia Investments. According to Spy’s trusty dictionary: ‘militia, noun, a military force that is raised from the civil population to supplement a regular army in an emergency’. No, the manager is not building some new civil defence-focused thematic, it has, in fact, launched a simple long-short ETF (150% long, 50% short), that mirrors some of the CIO, David Orr’s, better known hedge fund investments, but with more liquidity. The website gives no history of its brand, but the Militia Long/Short Equity ETF is now trading under the ticker ORR on the Nasdaq for the adventurous of spirit.
Hang Seng’s most sold funds list tends to change as slowly as plate tectonics, reckons Spy. He was rather surprised to spot that one of the bestselling ETFs is the rather daring Hang Seng HSI Daily (1.5x) Leveraged Fund Class (A (HKD)). The animal spirits must be back! The fund has had a dismal run, down 4.7% in 2020, down 19.55% in ‘21, down 23.1% in ’22, down 20.9% in ’23 but a juicy come-back in 2024, up 26.6%. All of-a-sudden, the buyers are pouring in. Whether this good performance lasts, or is a flash in the pan, is anyone’s guess.
J.P. Morgan Private Bank, like many other banks and managers, is trying to make head or tail of President Trump’s flurry of executive orders. Michael Cembalest, chairman of market and investment strategy at JP Morgan’s asset & wealth management business, noted, “There’s not a lot of room for error at a time of elevated equity valuation multiples…It looks like it’s going to be a volatile year based on changes so far in the 10-year [US Treasury yield], but there’s not enough negative information that we’ve got at this point to justify any change in portfolios that are positioned for continued US growth and outperformance, particularly since the tariff rollout so far has been somewhat benign.” So, it is a case of hold onto your hats and hold on to your positions, too.
Spy was rather delighted to see that Abrdn, after a torrid few years, reported a 3% uptick in flows in 2024, with overall AUM reaching £511bn ($631bn). It is notable, however, that Abrdn’s total AUM is still smaller than the amount BlackRock brought in during 2024 alone, which was $641bn. That is rather staggering, if Spy thinks about it for too long.
Penny for your thoughts, Elon? Apparently, Musk, with his new DOGE, or Department of Government Efficiency, is looking to either eliminate the US one penny coin or, at least, to make it another way. Currently, the penny, which is mostly made of zinc, costs three cents to make with only a once cent face value. Spy can imagine governments around the world wondering if the eccentric space and EV genius can solve a conundrum that has been dogging the US Mint since the 1970s.
Thoughts that make Spy go hmmm. During last the decade, US Federal government tax revenue has increased by 58% while government spending has increased by a whopping 93%. The inescapable outcome: a doubling in the US national debt from ‘just’ $18trn to $36trn.
Spy’s quote of the week comes from Dima Gutzeit, an fintech entrepreneur, “Market conditions shape the game. In good markets, you can sell dreams. In tough markets, it’s all about delivering results here and now. Nothing else matters.” That is as true of asset management as it is of anything else.
Until next week…
