Posted inFSA Spy

The FSA Spy market buzz – 10 September 2021

Robeco’s next billion; Schroders’ 50th; BNY Mellon goes ETF active; Fancy that – Blackrock; Solana’s gigantic run; Stock valuations; Used cars; and much more.
Market Spy

“Darling, I am really not tapering off our relationship, I am just recalibrating it. I know I am going to be buying you fewer presents, but I still love you, I promise. It is just a recalibrated, less materialistic kind of love.” No matter how central banks and their desperate chiefs try to sweet talk their way out of it, Spy and the entire market know the game is almost up. Endless buying of bonds with money printed out of thin air to actively suppress interest rates when the global economy is boiling over, is simply not credible anymore. Spy was privy, yesterday, to the sales figures of one of the world’s largest bond managers for the last 12 months – and they are truly terrible. It is absolutely no shock to Spy, whatsoever, that investors are voting with their feet. When a NFT of a laughing monkey at ludicrous sums is, apparently, more attractive than a bond fund yielding negatively in real terms… it might be time to get off the dance floor.

Hat’s off to Robeco for the best teaser campaign for a new fund launch Spy has seen in a while. Titled, the Next Digital Billion, this campaign has a snappy, enthusiastic, I-want-more-of-the-future type of video and a message one instinctively wants to find out more about. Internet users coming specifically from emerging markets across the world, is the next digital billion. “The purpose of this new strategy is to capitalise on the next wave of internet users, the vast majority of whom live in emerging markets, by investing in local high-growth, innovative internet companies.” Simple but highly effective.

Congratulations to Schroders who has just celebrated 50 years in Hong Kong. Countless Western brands have dipped in and out of Asia over the last 50 years, as the political and economic winds have blown in one direction or another. (Spy can think of more than a few asset managers with a yo-yo attitude to Asia, much to their regret.) Spy has no doubt for Schroders, the next 50 will be just as interesting as the five decades to precede it.

Another week, another name joins the active ETF rush. This time it is BNY Mellon IM. The American giant has just launched BNY Mellon Ultra-Short Income ETF, which is managed by its subsidiary Dreyfus Cash Investment Strategies. Spy is not as interested in what the fund actually does, as it is about what the decision to add an active ETF to its range, says about the industry. The key advantage of an exchange-listed product is ease of purchase (and sale) for investors. The cat is truly out of the bag for this trend and to Spy seems utterly unstoppable.

The waiting is almost over. Apparently. Numerous Chinese news sources say the Greater Bay Area wealth connect trial is about to kick off in the next few days, perhaps as early as next week. Consumers in Macao-Hong Kong–Guangdong will be able to easily buy products from each other’s banking institutions, subject to some annual limits. Mainland residents will need at least two years of investment experience and at least RMB1 million of net household financial assets in the most recent three months to be qualified. The Greater Bay Area region now has about 70 million people and an economy worth $1.7m annually, according to Caixin. By contrast, Australia is only worth $1.4tn.

No matter how much an asset manager does, it is not quite enough for some. Blackrock’s Larry Fink must be a tad annoyed at his former CIO for sustainable investing, Tariq Fancy, who has decided to go public in his view that Blackrock is “ducking the fight” in ESG. It is really worth reading it its entirety Fancy claims he has gone from “evangelising ‘sustainable investing’ for the world’s largest investment firm to decrying it as a dangerous placebo that harms the public interest.” With DWS’ regulatory woes, the spotlight is firmly on asset managers and their real ESG credentials. Still, Spy thinks this is a conversation worth having. What does ESG investing really mean for investors?

Heard of Solana? Spy’s ignorance was such that he thought it might be a Spanish holiday resort he wasn’t aware of, when he first heard people talking about it. On January 1st this year, the blockchain infrastructure company was valued at a mere $75m. Since then, in one of those runs for which crypto has become legendary, it has delivered a 75,500% return for its investors. Its current market cap is now $57bn. Is it worth that much money? Spy has absolutely no idea but for what it is worth, many are describing it to Spy as the Microsoft of block chain, ‘the essential plumbing of a whole new industry’.

“Stocks are overvalued. I mean it this time. They are really overvalued.” The problem is, if one looks back over the last decade, this has been the rallying cry of pessimists everywhere. If one was to do a Google search, in say 2012, for “Stocks are overvalued”, something Spy currently hears daily, one would have seen this….

A chart is worth 1,000 words, etc, etc. Trite, but sometimes very true. The average price of a used car for the last nine years or so was more or less about $22,000. In the last year, that has jumped nearly 30%. This speaks of a type of desperation. Inflation? What inflation? Nothing to see here. Move along. Move along.

Spy’s quote of the week: “Want to find a value stock in 2021? Look for anything that is trading below a 50x earnings valuation….” Many a true word spoken in jest, even if it was spoken on Reddit.

Until next week…

Part of the Mark Allen Group.