Posted inFSA Spy

The FSA Spy market buzz – 12 May 2023

DOGG investments, Kaiskorn might not be selling, Dancing on debt ceilings, Abrdn ditches a Co-Ceo, A bucket load of funds to choose, Peak Economist, Metaverse nothingburger and much more.

“There is no money on the side-lines”, an emerging markets fixed income manager said to Spy over a very satisfying glass of Montrachet this week. “That is one of the most useless myths at the moment. That money is making a juicy 5% in money market funds and is not ‘sitting’ on the side-lines, rather it is earning returns.” His point is a well-made one. People allocate and when better opportunities arise, they reallocate. Getting 5% right now, when a year ago you got nothing, seems like a decent deal to many investors. They have allocated and only when a better deal arrives, will they change tack.

Buy low, sell high. It is the oldest advice in the markets and yet so very hard to do reckons Spy. A new ETF out this week is trying to help investors do that more easily. It is named DJIA Dogs 10 Target Income ETF, with the delightful ticker, DOGG. The fund, by First Trust, is income generating and targets the highest-yielding stocks in the venerable, idiosyncratic Dow Jones Industrial Average index. The key is that it focuses on the ten stocks which have fallen in value the most in the last year, but which continue to yield a decent income. The old, “buying what has performed badly but still have decent revenues” play. Not the worst idea Spy has seen.

Has the Thai bank, Kasikorn, got cold feet about selling a stake in its asset management unit? Media reports seem to suggest so. Apparently Amundi and several high-profile private equity players were hoping to get in on the action. The asset manager has about 1.5 trillion baht ($44bn) in assets under management. Whilst a “final decision” has not been made, the implication is that a high enough price was not in the offing.

Ageing crooner Lionel Richie was spotted singing at King Charles III’s coronation last weekend, for those who cared. His 1980’s hit, Dancing on the Ceiling, sprung to Spy’s mind this week with the US Debt Ceiling shenanigans. Whilst we all know the US won’t actually default, this annual circus reminder of how indebted the US is, remains useful. Each year the USA is spending nearly $2 trillion more than it takes in tax receipts. The orange bombastic lunatic, former president Donald Trump, positively seemed to encourage a default in his CNN townhall, while J.P. Morgan’s Jamie Dimon wisely said it would be a “disaster”. Spy knows which expert he believes. At times like this Spy is reminded of the William Shakespeare line, “Neither a borrower, nor a lender be. For loan oft loses both itself and friend. And borrower dulls the edge of husbandry.”

The news that abrdn is ditching its co-chief executive structure of its investment unit, came as no surprise to Spy. Rene Buehlmann is now the sole boss, looking after every region. One would think that very smart firms would realise quickly that two heads is a recipe for conflict and tension. Spy is not much of a bible fellow, but can remember this pithy line from Sunday school, “No man can serve two masters: for, either he will hate the one, and love the other; or else, he will hold to the one, and despise the other.” True then and true now.

How many ETFs do you have to choose from? A lot. In the US alone there are now 3,100 different funds, according to research firm CFRA. Whilst most of those are passives, the active portion is growing quickly, too. “Just buy me an ETF and be done with it” is hardly an investment strategy these days. Fund selection is just as important as ever. The most important thing people need to appreciate with ETFs, is what is the underlying benchmark or index. That is where all the difference is made, reckons Spy.

Contrarians on China investment rejoice. The Economist magazine has asked if we have reached “Peak China” in its latest issue. With the well-known phenomenon of individuals reaching their personal heights the moment they are featured positively on the cover of Time Magazine, Forbes or The Economist, perhaps this heralds good news. If The Economist thinks one thing, maybe the opposite is the truth?

Has anyone spoken to you about the metaverse of late? Not to Spy either. The novelty seems to have well and truly worn off as the idea becomes a ‘nothingburger’. Spy would hazard a guess that in hundreds of thousands of kids’ rooms there are now Oculus headsets gathering dust in drawers, just as there are metaverse business plans, which have not been read in months. Yet another shiny tech thing whose utility is outweighed by its novelty. All those Metaverse thematic strategies are probably growing dusty and unloved, too.

The biggest launch of the year is not a fund. No, the thing millions of people have been waiting for is finally here: the new Zelda game. After six years of development, the Japanese games legend delivers in the form of Tears of the Kingdom. Expect Nintendo shares to have a decent pop now, and for the rest of the year, as the company sells millions of licenses for people to wander around Hyrule trying to save a princess. Much better than invading Ukraine, and cheaper too.

Spy’s quote of the week comes from the comedian, Groucho Marx, “Money frees you from doing things you dislike. Since I dislike doing nearly everything, money is handy.”

Until next week…

P.S. With reference to the US’s 2 trillion overspend, it is worth noting, that a trillion seconds ago, there was no written history. The pyramids had not yet been built. It would be 10,000 years before the cave paintings in France were begun, and sabre-toothed tigers were still prowling the planet…2 trillion is a very big number.

Part of the Mark Allen Group.