Spy is meant to write this column each week with a touch of wit. With this level of distress in the market, it is hard to feel much humour, unless it is the blackest kind. Spy, probably along with hundreds of other portfolio managers, fund sales people, private bankers, financial advisors, wealth managers and fund marketers has been dazed by the sheer viciousness of the sell off and aghast at Trump’s clumsy response to the growing crisis, which has almost certainly added fuel to the flames. For what it is worth, this is Spy’s third global market crisis in his career: 1987, the dot.com crash and the GFC. Each and every one of those felt like the end of the world and yet, somehow, from the ashes the market phoenix would arise and new areas of growth emerge. This shall, no doubt, also happen again. It is pithy to say that opportunities will arise when the dust settles. That is not to say the landscape won’t look very different when it does. In the meantime, Spy is reaching for a 25-year old Highland Park single malt. Desperate times call for rare measures.
The blame game has already begun. Some politicians are blaming central bankers. Active managers are blaming passive investors. The unleveraged are blaming the leveraged. The technology shy are blaming the algo-driven hedge funds. The West is blaming China for being the origin of the virus and Asia is now blaming the West for not adopting their strict measures fast enough. Saudi Arabia is blaming Russia (and to be fair a big chunk of Western intelligence is, too). Greta is probably blaming the climate. Again. The man in the street is blaming his advisor. The financial adviser is blaming his fund manager. Who is really to blame? Spy has no crystal ball but would point out that nobody was blaming anybody when the markets were rising. 11 years of fun and everyone and their dog has been taking the credit for this massive debt-fuelled rally. Is there any consolation? Well, this happened in the 1930’s too. This cartoon was published when the BIG bubble burst and as you can see, nothing has changed. The blame game is an old one, as are bubbles and crashes.
Multi-asset’s star faded somewhat in the last few years as the growth-tech-FANGs juggernaut concentrated returns in such a narrow part of the market. Are we finally going to see MA come back? Funds such as Aberdeen Standard’s GARS, Aviva Investors’ AIMS, Merian Global Investors’ GEAR, with their healthy diversification, will surely remind people of the oldest adage in the book: don’t keep all your eggs in one basket.
According to Spy’s sources, there have been an average of 22 ETF launches on the US exchanges in each of the last 6 months. December had the most at 30 and February had the least, a mere 13. Well, for March, Spy can’t find even one. Not a single measly ETF has been launched and as it is already 13th of the month, this may well be the first month in a very long time that the passive market has not provided another assault on the active market. For active salespeople, that is perhaps the tiniest of silver linings. Spy will be watching the de-listings, too. After this month, those are surely coming in volume.
Spy’s colleagues have spoken to several fund marketeers this week in Hong Kong and Singapore. The common refrain is that “as soon as one market communication is prepared, another is already in the pipeline to replace it the markets are so volatile”. Marketing and PR people are working overtime to share house views with clients. For Spy’s money, nothing works as well as a quick video. It is direct, personable and highly effective as people are not travelling much.
There are a myriad of stats to choose from this week. All of them begin: ABC lowest since XYZ. So, where does Spy choose from within this car crash plethora. How about the most hyped stocks of 2018-19? Tilray, the cannabis unicorn off 98% from its peak. Uber down 50% from its IPO last year. Still, that’s better than Lyft, off 67% from its float. For a full, x-rated horror show look at cruise liner stocks. On the plus side you can now pick up an Apple share for a mere $248 ($1.086tn market cap), Amazon for $1,676.61 ($834bn market cap) and Tesla for $560 ($103bn market cap). Are they bargains? Who knows but they are a lot cheaper than they were a month ago.
Amongst the carnage, the gallows humour is flowing. Spy heard this joke from a PM this week. How do you become a small-cap portfolio manager? You start by being a mid-cap manager in 2020. Many a true word spoken in jest, thinks Spy.
If you are selling funds and feeling gloomy, spare a thought for travel agents. Fund salespeople can always whip out a long/short fund, a hyper conservative moneymarket fund or even dust off an unloved hedge fund brochure. Travel agents can’t sell you a ‘staycation’ in your own home. In asset management, there is always something to sell. For that we should be very grateful.
In January, Spy had several conversations with younger (it must be admitted) wealth managers who were loving the market momentum. You know, the mystery of missing out –
#MOMO. Well, it does not take long for investors’ sentiment to shift and some young wealth managers are getting a rude lesson that momentum can swing both ways. In the last week, Spy feels we have gone from:
#MOMO
#FOMO
#NOMO
#NONO
#OONO
#OOOO
#NOOOOOOO…..
It is often said that leadership is forged in crisis. If so, Spy suspects that Singapore’s prime minister Lee Hsien Loong is becoming the man he could become unhindered by the long shadow of his charismatic father, Kuan Yew. His response to the Covid-19 crisis remains a model of clarity and calm. Hat tip.
Spy’s band of photographers spotted a new outdoor campaign by Pimco this week. It is the tram spot right in the middle of Central. Whilst Pimco seldom promotes anything else, a prominent call to invest in bonds has seemed particularly prescient this week:
Until next week….
