Posted inFSA Spy

The FSA Spy market buzz –19 August 2022

M&G is hiring, BlackRock’s new megatrend, ESG scrutiny is not holding up, Volcker’s wisdom is undiminished, The big asset manager short, Housing bubbles and much more.
Market Spy

Has the world gone mad?  Or was Billy Joel right when he sang in 1989, “We didn’t start the fire, it was always burning, since the world’s been turning…” It is not an entirely unfair question, reckons Spy. This week, Japan’s national tax agency has been encouraging the Japanese to drink more alcohol because, apparently, its tax revenues are down! Spy loves a good tipple as much as the next bloke but has never had the taxman begging him to drink more. Meanwhile, here in Hong Kong, we have dropped to three days of quarantine, which still does absolutely nothing to persuade people to visit our benighted city. The rest of the world has simply moved on. And yet, our leaders just rub their hands and make small talk.

It may be August, but the hiring goes on it would seem. Spy came across a job advert from M&G Investments. They are hiring for their wholesale distribution team in Singapore. The ad states, the “role holder will be responsible for developing, enhancing and retaining client relationships/assets, focused on private banking channels, family offices and external asset managers in Singapore. You will work very closely with the regional team to deliver quality services to our clients and prospects.” Spy noted that the “key work level accountabilities” was described as “Manager or Expert”. One has to wonder a little at the ‘or’ in that sentence.

It is not just a trend; it is a megatrend. The idea of megatrends has been kicking around for a while. BlackRock is getting in on the act and has added another active ETF to its range supporting this overall theme. This time it is all about finance and the way technology is transforming the way the industry works. The BlackRock Future Financial and Technology ETF (BPAY) has listed on New York’s ARCA. “Through BPAY, investors are granted direct access to global companies that are driving the next leg of growth and leading the digital revolution in areas across the entire value chain such as payment systems, banking, investments, lending, and insurance and software.” said Vasco Moreno, lead portfolio manager.

Someone has finally done it and has the research to back it up. Util, a sustainable investment data specialist, has put a report out this week that makes, what is surely the most obvious point of all about the UN’s Sustainable Development Goals: there is no investment that is “all good” and one that is “all bad”. After analysing 6000 funds, it concludes “Almost every company, industry and fund impacts some goals positively, others negatively.” This has been screamingly clear to Spy. An oil or tobacco company could, for example, pay its staff really well and provide amazing benefits. Sounds like a plus. Pity about the environmental or social impact of oil or cigarettes. Tesla is ridding us of oil-based cars; sounds like a plus, too. Oops, cobalt mining to make those batteries does huge and long-term environmental damage. Damn, sounds like a negative! And so it goes on. Time for a rethink on ESG, reckons Util, and does Spy.

People won’t want to hear this, but they should take note, reckons Spy. “There were so many feeble efforts to deal with inflation in the 1970s, they said ´don’t tighten monetary policy too aggressively, you will get some unemployment´ so we went a decade that way, and we ended up with more inflation and more unemployment.” Wise words from former Fed Chairman, Paul Volcker.

The asset management industry is typically characterised by the co-operative nature of asset managers. They often share conference platforms, they work with similar data providers, they exchange ideas all the time. But what if one manager thinks another manager is a good short? All is fair in love and war and markets, it seems. Asset managers Abrdn and Ashmore Investments are wearing an unenviable crown at the moment. They are amongst Britain’s 10 most-shorted stocks. GLG Partners, BlackRock and Point 72 are among the big investment names that are betting heavily against those two. Get out the popcorn.

The rally since early June has unleashed the animal spirits, especially in ‘meme stocks’, and it seems the retail investor is now getting involved. The Bed, Bathroom and Beyond $110m quick profit story springs to mind. Spy may be a touch too cynical, but he can’t help worry that a property crash and energy price rises may arrive soon to ruin the new party. Consider this: US housing affordability is at its lowest level in 33 years, below the July 2006 low, which was at the peak of the last housing bubble. Back then, national home prices subsequently fell 25% to their low in December 2011. Today, the price declines have only just begun. Couple that with soaring energy prices in Europe, and Spy truly wonders how consumers can remain buoyant heading into winter.

Long-time readers of this column will know that Spy had a particularly jaundiced view of the SPAC phenomenon. Just 18 months after going public via a SPAC,, has filed for bankruptcy with fraud allegations swirling around like monsoon winds. At its peak, the shares traded at $17.50, they are now below $1. In Singapore and Hong Kong, SPACs also seem to be deflating fast. There is a lot more pain to come from this sector.

Spy’s quote of the week is from Fidelity Investments legend, Peter Lynch. “Owning stocks is like having children. Don’t get involved with more than you can handle.”

Until next week…

Part of the Mark Allen Group.