Posted inFSA Spy

The FSA Spy market buzz – 10 December 2021

Fund flows by name; Spac horrors; Hedge funds’ short-lived dip; Supply chain excitement; Apple’s improbable returns; The three Cs of investing; J.P. Morgan’s advertising, and much more.

One of the things Spy has always loved about Hong Kong is the fact that the stock market closes for lunch. The one-hour break, which used to be even more leisurely, provides the chance to catch up with market participants and enjoy a sensible imbibing session filled with gossip. It seems to Spy that since most trading takes place near the open or close, extended trading is not entirely necessary. With this in mind, Spy read this week, rather sadly, about a startup company in the US that is trying to become the world’s first consolidated 24-hour trading venue. 24 Exchange is in negotiations with the SEC to provide an exchange for all manner of securities that will trade 24 hours a day, similar to the way crypto does.  The old idea that one could only buy or sell mutual funds once a day is becoming a total anachronism. Spy, for one, will not be toasting this new development.

In the realms of investment fund raising, which word is the biggest puller? In the US, “climate” is the stand-out choice by a country mile. This chart below, caught Spy’s eye. It seems the investing public really has got the climate message this year. Spy is reminded that what goes up, must come down. No doubt there will be another rush of climate funds launched in 2022 just as the public starts to look elsewhere.

A few weeks ago, ETF specialist Van Eck listed Australia’s first Global Listed Private Equity ETF on the ASX. If one feels locking up money in private equity (PE) is a touch too long-term, but one fancies those PE returns, this fund gives investors the chance to back fifty of the world’s largest PE players and ride on their own profits. Since its debut in late November, the fund has trended slightly down, giving new investors a discounted entry point.

Readers of Spy in 2021 know that your humble scribe has been following the extraordinary amount of money raised for Spacs this year. As we head into the final weeks of the year, the numbers remain, well, extraordinary. The total raised for Spacss in the year-to-date is $156bn. That is nearly double last year’s $83bn and 156 times 2013’s number. The S&P 500 has returned 27% this year. The SPAC ETF (SPAK) is, by contrast, down 20%. Spy’s predictions are notoriously hopeless, but he is rather certain the returns for Spacs will be even more dire in 2022.

November has not been a great time to be a hedge fund, according to data from HFRI. The index which follows all hedge funds fell 2.2%, which is the largest drop since March 2020. Still, this might have been a very temporary, tiny wobble as the researcher indicated that already in December, the bullish trend for all types of hedge fund, including long/shorts, was already back in positive territory. It seems that “buy the dip” is just as true for hedgies, as it is for the general market at the moment.

Is the global chip shortage which has caused so much supply chain misery beginning to abate? Is it time to start thinking about that shiny new Tesla or Mercedes EQS 580? The China Passenger Car Association said this week: “The darkest days of automotive chip supply passed in the third quarter.” To add to the good news, production jumped 14% month-on-month in November. No doubt portfolio managers, of every hue, will be watching stats like these like hawks. If 2021 has been characterized by seemingly insatiable demand with constrained supply, perhaps this is the first sign that supply is finally ramping up…

When Apple hit a $1trn valuation in August 2018, Spy can remember countless analysts saying: “The easy money is now done and dusted now, one should probably look elsewhere.” Yet, Apple has gone on to hit a near $3trn valuation.  Over the last six months, just four stocks, including Apple (the others being Microsoft, Nvidia and Alphabet) have generated almost 70% of the S&P 500’s return. It is truly the era of whales we are living through.

In Singapore, the chatterati have always spoken about the aspirational fives Cs: car, condo, credit card, cash and country club membership. This past year, in the markets, it seems one should have been in the three Cs: crude, coffee, but above all else, carbon. Crude (oil) is up about 70% over the last year, coffee has doubled. But carbon is the clear run-away winner – it is up, 173% since the start of the year. Bubble, what bubble?

In one of the most sobering, heartfelt articles Spy has read for a long time, a young “trader” who blew his lifetime savings trading options on Robinhood, tells his story. Spy recommends the whole article, which is published on Vice. Spy reckons there must be hundreds of people out there with similar stories after the last eighteen months of market crazy The rather unfashionable argument for professional investors to look after a client’s money, in a sensibly run fund, has never seemed stronger to Spy.

Spy gets the distinct impression the holiday spirit is descending on the market. People are putting up the virtual “out of office” signs. The shops are filled, for better or worse, with Christmas tunes. And, even if one was living in a darkened room and not leaving the house at all, Spy could not help but notice that even the market was looking rather Christmassy this week…

Spy’s photographers have been looking out for new consumer campaigns. J.P. Morgan Asset Management seems to be going slightly against the current trend with its new bond campaign running in Singapore.

Until next week…

Part of the Mark Allen Group.