Spy was quaffing Old Fashioned’s made with Knob Creek whiskey in a dingy Mid-Levels boozer with an Aussie wealth manager who is back in town for the first time since Covid. “Always good to ignore the doom-filled Australian media; Hong Kong is buzzing again,” he tells me as he orders his third of the evening. “What’s not to love about a little Trump and DeepSeek-induced volatility? Clients get on the phone and get trading. Never let anyone tell you that calm is good for wealth management. If markets aren’t bouncing around, we don’t have a darn thing to do.” Hard to argue with that, especially as he was paying the bill.
Ever had a good late-night chat to an amateur currency trader who has made so much money he has a yacht moored on Sentosa and a home in Phuket for good measure? Spy, neither. Currencies are the graveyard of greedy enthusiasts in Spy’s experience. Eye-popping leverage kills them every time. It did make him smile to a see a new ETF, the Simplify Currency Strategy, launch this week in the US with the ever-so-alluring ticker FOXY. Go baby! These pro managers might do better than the amateurs, but Spy would be awfully surprised if they ever justify their 0.75% expense ratio. “Returns are expected to be generated through the combination of a “carry” strategy applied to emerging market currencies combined with a mean-reversion strategy applied to G10 currencies.” Good luck with that.
Vanguard must have sent a shiver down the asset management industry spine this week with a further round of fee cuts, reckons Spy. Jack Bogle was prone to saying: “You get what you don’t pay for.” The firm announced its largest fee reduction in history this week, lowering costs on 168 share classes across 87 funds, including 53 ETFs. With an average fee reduction of about 20% per share class, the firm estimates investors will save approximately $350m this year. The word, “Darwinian” springs to mind.
Spy has read more manager opinion on Trump’s tariffs this week than he cares to, most of it clear as mud. Take this piece from Alliance Bernstein: “What happens next is unclear. The range of potential outcomes is quite wide; tariffs could be limited in scope and duration, or they could escalate quickly and dramatically in the weeks and months ahead. The only certainty when it comes to the policy environment so far this year has been uncertainty, and that seems likely to be a feature for the foreseeable future.” The ball may be in, it may be out; prices could go up, they could go down, it may rain, it may shine…
Facts that make Spy go hmmm. “China has accounted for more than half of the growth in oil demand since the turn of the century. But the country is undergoing a revolution in the automotive sector, with 11 million electric vehicles sold in China by 2024, representing over 60% of global sales totalising 17.1 million units.” This nugget was from the markets team at Bordier. Some trends can’t be ignored.
Spy was brought up on a steady diet of Star Wars movies and dystopian sci-fi classics. Robots were ubiquitous and seemed millennia away. However, we are unquestionably living in the era of The Rise of Machines. Take Amazon: their “foray into robotics began more than a decade ago when the company acquired Massachusetts-based Kiva Systems in 2012. Since then, Amazon has developed, produced, and deployed more than 750,000 robots across its operations network,” according to its own blurb. Spy had to read that twice. Imagine how many people don’t have a job because of that number. Amazon’s “Sparrow” robot can pick and pack two-thirds of the 100 million products in a typical Amazon warehouse, needing just seconds for each.
A number of firms are peering into the murky crystal balls of the future. Spy was a tad shocked to read this in a piece by Wellington Management. “To this point, it’s worth nothing that today there are [currently] 59 ‘active military conflicts’ around the world — the highest number since WWII. Unsurprisingly, Thomas Mucha, a Wellington geopolitical strategist expects “the global order to continue to splinter into an increasingly fluid “multi-aligned” framework this year as part of this deepening great-power competition. This framework would be more fragmented, less cooperative, more transactional, and structurally more prone to accelerated policy, trade, diplomatic, and, especially, military conflicts.” Hardly a recipe for joy and happiness, but pretty good for defence stocks and companies that supply the military industrial complex.
Spy is happy to get into the annual America ritual of enjoying the Superbowl (the championship game of the National Football League or NFL), which takes place this weekend in New Orleans. The Kansas City Chiefs are taking on the Philadelphia Eagles. It is an advertising fest, of course. In 2000 Pets.com, the epitome of Dot Com folly, took a spot. In 2008 it was e-trade’s turn just as Lehman Brothers and the rest of the financial world was about to crash. This year, which firm is making its Superbowl advertising debut? That would be ChatGPT parent company OpenAI. Spy has no idea who is going to win, but according to ChatGPT itself, the Chiefs have the edge.
Until next week…
