Spy, sipping a Jura Rum cask-finished single malt whisky, was amused to see Fed Chairman, Jerome Powell, say with regards to cutting interest rates, “We’re balancing the risk of going too soon versus too late. There’s no guarantee in this. It is a very difficult judgment call.” Spy, perhaps uncharitably, thought, surely that is what you and your highly paid team are meant to work out. If the best that the Fed’s brightest brains can offer investors is a mere coin toss, perhaps we should let a monkey do the coin toss and save the taxpayer a bunch of salaries.
ESG is dead. Long live ESG. Or something like that, suspects Spy. The ESG bubble may have well and truly popped for all sorts of political reasons but investors wanting something sustainable, still have plenty of options. Recently, KraneShares launched a Sustainable Ultra Short Duration Index ETF in the US. It is based on a Solactive Index which, hopes “to measure the performance of US dollar-denominated, investment-grade corporate debt with a maturity of up to one year with a concentration on socially and climate conscious companies.” Whether a firm’s carbon emissions reduction and adherence to the Paris Agreement’s 1.5°C ambitions, make it more likely to repay its debts, Spy cannot say.
Which performs better, gold or bonds? Blokland has put out a fascinating chart showing that the shiny metal, or “useless relic” as John Maynard Keynes once called it, has, in fact, done better over the last fifty years. Before gold bugs get too excited, it must be said that for a significant portion of that time, bonds were the clear winner. Not too many people have a 50-year investment horizon.
If mergers and acquisitions were reported in Facebook-speak, it would appear that BNP Paribas Asset Management and Axa Investment Management are “now in a relationship”. Spy reported a month ago that negotiations were taking place for BNP Paribas to buy Axa IM; those talks have now gone “exclusive”. Spy strongly suspects that the deal will eventually be concluded. Apparently, BNP Paribas is paying €5.1bn ($5.5bn) for the company. BNP will get to increase the scale of its asset management business while Axa gets to do some hefty share buybacks. As it is notoriously difficult to make redundancies in France, Spy suspects that rationalisation of the combined workforce will fall in markets outside, such as Asia, the US and UK.
Schroders reported its results yesterday and announced that its AUM had reached a record high of £773.7bn ($984.5bn). Peter Harrison, the group CEO gave a very perky update on the asset and wealth management firm’s progress. Very little was said about Schroders’ Asia business on the update, but one nugget did emerge. Harrison commented: “We’ve seen a good return to asset growth in some of our JVs, particularly in China.” While many firms are retreating from China, it seems Schroders’ patience and effort in the region are paying off.
Spy is a big believer in education. It is important and useful. But a rather pernicious view has germinated around the world in the last twenty-five years that it is university and university alone where that must take place. American and British universities have excelled at selling themselves and their courses at home and abroad. The costs have been rocketing. Spy was staggered to read that more than 1 million Americans now owe $200,000+ in federal student loan debt (it was only 600,000 Americans in 2017) despite the fact that about 4 million people had seen their federal student debt cancelled by the Biden administration. There are a large number of people, typically doctors, who owe the federal government over $2m in federal student loans. It is food for thought, for those saving for their kids’ university degrees.
A 1946 essay, Confessions of a Book Reviewer, by George Orwell asserts about books: In much more than nine cases out of ten, the only objectively truthful criticism would be “This book is worthless …” Luckily, Scary Smart by Mo Gowdat, former chief business officer of Google X, is not one of them. If you want to understand more about the direction of AI, and how, by “2049, AI will be a billion times more intelligent than humans” this is an insightful and important read. One line caught Spy’s eye, in particular: “The code we now write no longer dictates the choices and decisions our machines make; the data we feed them does”. Hard to disagree with that.
The markets have had a bouncy week. Chip maker Nvidia’s market cap increased by $331bn on Wednesday, the largest single-day gain for any company in history. That impressive gain was bigger than the market cap of 479 companies in the S&P 500. Then US stocks took a tumble yesterday and the rest of the world was wobbling at the time of writing. Japan’s Nikkei was down 5% as the yen’s strength hammered exporters. Is this nothing more than thinner trading in the slow August period, or signs that the next six months, running up to the US election are going to be rather volatile? Spy suspects it is a bit of both.
Ending off where this column began, Spy’s quote of the week: “I have never liked the letters ESG. I think they have been so misused and abused that it wouldn’t harm for them to quietly go away,” Leon Kamhi, head of responsibility at Federated Hermes was reported as saying in London’s Financial News.
Until next week…
