The great and the good are gathering in Davos next week. China’s own premier, Li Qiang, will be the most senior Beijing official to join the annual Davos retreat in person since 2017. Apart from enjoying some snowy weather, will policy makers actually agree on anything useful at this mountainous jamboree? Over a few drinks this week, one highly cynical portfolio manager recommended to Spy, “Davos Man” a brutal book by former New York Times columnist, Peter Goodman. It is an evisceration of the Davos elite and top-down policy making. For optimists, however, a private banker sharing wine, astutely asked Spy, “Is it not better to at least talk things through and see if there is a chance for more co-operation than endless geopolitics?”
Those hoping the approval of the spot Bitcoin ETFs would spark a massive rally may be a tad disappointed this far reckons Spy. Nonetheless, the easiest method of all to buy into the exotic asset class has finally arrived and a flurry of funds are available to choose from. There are some wild numbers being thrown about by Bitcoin evangelists. Cathie Wood of ARK fame, reckons Bitcoin could hit $1.5m per coin in a bullish case and $600k in the normal run of things. The SEC seems to have held its nose while approving the new funds and tried every possible way to dampen enthusiasm for the ETFs. Bear the following in mind: at the time of writing, the total number of Bitcoin in existence is 19,594,212.5. The total left to be mined is 1,405,787.5. That means, 93.306% of the total available have already by mined. About 900 new coins arrive per day. It is the scarcity that makes it interesting. Spy strongly suspects that if governments around the world keep on printing money like drunken sailors, Bitcoin is likely to find support.
Federated Hermes seems to be accelerating the roll out of ETFs. The Anglo-American firm has launched the Federated Hermes Total Return Bond ETF on NYSE’s Arca with the ticker, FTRB. This is run by the same team, senior portfolio managers Donald Ellenberger, Nathan Kehm, and Jerome Conner, that manages Federated Hermes’s mutual fund equivalent, the Federated Hermes Total Return Bond Fund which has more than $13bn in assets. The question is: will the original fund be entirely converted to the ETF structure in time? This is Federated Hermes’s fourth ETF.
Alliance Bernstein released its results yesterday. The firm has gone through the $700bn mark for assets, reaching $725 billion at the end of December. That was a 4% rise in a single month, largely driven by market movement. What caught Spy’s eye was that passive equity assets at AB have now reached $63bn, just over 20% of the firm’s $310bn in equity AUM. Whilst it is still less than 21% of the firm’s AUM total, not that long ago, that number was close to zero.
The slowdown in China and the rise of India has been the story of the last few years for Asia and emerging market investors, reckons Spy. Eastspring has some juicy stats this week in an insight piece that should make online retailers get excited. “As of January 2023, there are 692 million internet users in India. This number is expected to reach more than a billion by 2030, greater than the populations of Europe and North America combined… There are an estimated 289 million of online buyers in India in 2021 and this number is forecasted to rise to 400-450 million by 2027.” Further, Eastspring adds, “According to a report by Accenture, e-commerce spending in India is expected to grow by nearly sixfold from $38bn in 2021 to $200bn by 2030.” If someone is looking for growth, it is not hard to see why the India story continues to look so alluring.
Where is the battle ground being fought with AI? In the use of intellectual property that drives so much of the required machine learning. Pinebridge Investments make an incredibly good point worth considering in this piece here: The rise of artificial intelligence is coming on much faster than expected and has the possibility to bring about structurally higher productivity. While obstacles will appear (particularly on intellectual property grounds), its adoption curve nonetheless is expected to advance far more rapidly than the internet’s (where browsers overcame many of the same IP issues).” This fact that browser technology, ultimately, overcame earlier IP issues and AI will do so in this era, is probably spot on. While it may be mucky for a bit, IP is not an insurmountable barrier to the AI juggernaut.
Who owns the US stock market? According to a report from Axios, “While it’s true that a record high 58% of American households do own stocks via mutual funds or as individual shares, in the aggregate the amount of stock most of these folks own is tiny. The wealthiest 10% of US households now own nearly 93% of the stock market.” Ouch!
Spy’s quote of the week is an oldie but a goodie from William F. Buckley, Jr. “I’d rather entrust the government of the United States to the first 400 people listed in the Boston telephone directory than to the faculty of Harvard University.” In Spy’s experience this applies to most governments and most universities.
Until next week…
