Oscar Wilde, the Irish/English playwright, once wrote, “People know the price of everything and the value of nothing.” This pithy line popped back into Spy’s head this week as he sunk a glass of soothing Tanqueray 10 and Fever Tree tonic. Spac investors, tech investors, crypto investors, property investors and others are all beginning to understand (again) that price is what you pay, but value is what you get. With interest rates rising rapidly, old certainties are being washed away in a flood worry. Well and truly the music has stopped and people are rushing off the dance floor. Have we reached “capitulation”? Spy doubts it, if only because there are too many in the press asking that very question. Real capitulation arrives when people say, “I will never buy again” not when they are asking about the bottom.
News reaches Spy that Ray Chow has joined Fidelity International in Singapore to focus on intermediary sales in Southeast Asia with the title, Senior Sales Manager. Ray was previously at Schroders for six years and focussed on business development. Despite the market turmoil, Fidelity’s America Fund is still up more than 9% in the past 12 months. Impressive.
How tough are things? Very. Spy can see evidence everywhere, but an interesting starting point is Standard Chartered’s Singapore fund list. At the time of writing, SC has 831 funds available on its consumer wealth platform. Of those, a mere 37 funds are positive over the last year. The Focus section of the list, which comprises a subset of 299 funds, has only four funds in positive territory. Spy warned a while ago that comparisons were going to get harder after such a stellar run up. Incidentally, the best performer remains BlackRock’s World Energy Fund priced in Euros. It’s up 60%. It might just help you to fill the car with petrol.
Spy has been a long-time admirer of M&G’s Bond Vigilantes blog and insight team, which is usually interesting, accessible and perceptive. The term ‘bond vigilantes’ is a rather old fashioned one that had, at times, over the past decade or so, felt more than a touch obsolete. Bond markets were not really holding central bank profligates to account. 2022 has changed all that. Dramatically. Bond investors have stopped being cuddly pussy cats and have shown their sharpened claws. It turns out that printing trillions of dollars or euros or pounds of free money does, in fact, cause raging inflation. While Madam Lagarde, the ECB chair, may call the action in European sovereign debt markets (strong Germany, weak Italy), “irrational”, Spy would argue the bond vigilantes are telling her the exact opposite. People want the value of their money steady and if you have too much debt, your chance of paying it back reduces.
The news from the markets is rather brutal. The S&P 500 is now having the third worst performance of the first 115 trading days of the year, in its history. As of last night, the market was down a whopping 23% since the start of the year. How to express the magnitude of this sell off? How about GDP? The destruction of value equates to a massive 43% of current US GDP.
With markets getting caned, one would hope that Long/Short funds are having their day in the sun. Spy had a look at the Long/Short universe using Data from FE fundinfo. He was pleasantly surprised to see some hedged strategies doing rather well. AB’s Alternative Risk Premia portfolio is up 14% in the last year. AllSpring’s Worldwide Global Long/Short Equity Fund is up 20% over the past 12 months. Neuberger Berman has done even better. Its Uncorrelated Strategies Fund is up 32%. There must be some disappointed investors though: 15 out of 32 funds in FE’s ‘hedged’ universe are not even positive. Some hedging!
Asset managers are wondering aloud if the crypto meltdown is a symptom, or, a cause? Financial News quoted Guillaume Paillat of Aviva Investors worrying about contagion from the crypto market seeping into other asset classes. The Financial Times has reported today that a crypto hedge fund, Three Arrows, which had $400m in redemptions earlier in the week, has now failed to meet a margin call. If this proves to be true, expect even more volatility ahead and in crypto traders to sell what they can. This chart from Statista should give real world investors a little shiver.
The UK has announced is it is changing some of its data rules allowing websites to stop asking for permission to drop cookies into one’s browser. Spy’s humble experience of asset management websites is that they have a very poor track record of remembering what you told them, cookie or not. The sites always ask for your type of investor, preferred region and if you will accept their cookies. Go back a week later and they ask for the preferences all over again. Ad nauseum. In light of this, Spy will take the UK’s announcement as a win for common sense. Whether any other country will take notice will be another matter.
Earlier this week, Julius Baer put out a report on the world’s most expensive cities. Shanghai, London, Taipei, Hong Kong and Singapore, in that order. This will come as no surprise to Spy’s long-suffering readers. Try and find a reasonably priced apartment in Sing or Hong Kong. Ain’t gonna happen.
Spy’s quote of the week: “Good investments outperform regardless of promotion. Poor investments outperform because of promotion.” ~ Jack Raines. Spy has no idea who Jack Raines is, but he is not entirely wrong.
Until next week…
