Posted inFSA Spy

The FSA Spy market buzz – 22 April 2022

Battery metals; Ninety-One looks at the big picture; Bank of America’s Singapore job blitz; Cautious, not bearish; Netflix’s fangs; Ark versus Nasdaq; advertising from Vontobel, and much more.

“The world is always in turmoil”, an Australian wealth manager told Spy this week over Zoom. “But the turmoil feels more widespread, more confusing and more dangerous than before.” That conversation took place even before US Fed Chairman, Jay Powell, seemed to confirm US rates would rise 50bps, adding to markets’ woes. The war in Ukraine, inflation raging, China’s crazy zero-covid policy, deflating valuations in tech and Chinese stocks, grumpy tribal geopolitics everywhere, and it is hard not to feel a tad concerned for the outlook. Most alarming of all, the war in Ukraine is creating widespread wheat and barley shortages which are hitting brewers. Spy’s craft beers of choice are going to cost a whole lot more.

If anyone is rather impressed with Tesla’s results this week (a record $3.3bn quarterly profit), but has enough of the stock already or is simply too nervous to buy any more at this current price, there might be an ETP for that, reckons Spy. WisdomTree has launched a new exchange traded product in Europe targeting the metals that are used in electric vehicles, charging stations and energy storage systems. Tesla said it will sell 1.5 million cars this year and every other major auto maker is also predicting jumps in their electric vehicle sales – and they all need these shiny metals. The ETP is linked to a proprietary index developed by WisdomTree, apparently, and is available on the London Stock Exchange among others.

An enormous amount of ink has been spilt writing on the implications of the war in Ukraine by economists, strategists and other pundits. Some insightful, some not so much. Spy particularly enjoyed this one from Ninety-One’s Philip Saunders, co-head of multi-asset growth. He argues, cogently, that the real casualty, may be the US dollar’s hegemony. “At a stroke, the momentum behind de-dollarisation has received a material boost. This is not to deny that the dollar’s dominant position will be supplanted in the near future, as it is too deeply embedded in the world’s trading system for that, but this probably marks the peak of the dollar era and America’s ‘exorbitant privilege’, to use former French President Giscard d’Estaing’s apt expression, of having first call on the world’s savings will progressively be eroded.”

Just last month, Hong Kong’s leader, Carrie Lam, acknowledged that a brain drain was taking place from Hong Kong. The numbers are getting much hard to ignore. Bank of America has posted thirty new jobs on LinkedIn in Singapore and is moving senior bankers to the tropics as Spy writes this. Hong Kong and Shanghai’s zero-Covid strategy may have some supporters left but Spy is hearing from fewer and fewer of them. Government assumptions that people will simply flock back to Hong Kong after it ends may be sorely misguided.

“Cautious, not bearish” is the expression Spy has been reading with increasing frequency. It is often now peppered in long-only equity commentary. Spy has always felt long-only managers have a particular aversion to actually declare a bear market in general because their investors tend to rush for the hills; most inconvenient really. Spy strongly suspects that those “cautious” managers are indeed rather bearish, and investors would do well to hang on to their hats.

It is hard to not feel a touch sorry for Netflix investors. When everyone talked about the FAANGs, they probably did not expect their beloved streaming stock would bare its own fangs! Losing 70% of its value since early November is quite a, eh, bite. Losing a few hundred billion dollars in just six months is scarier than one of its horror flicks.

And talking of tech, the Ark Innovation Fund is not having a great time either. Cathie Wood’s much hyped vehicle is having a nightmare. Yesterday it lost another 5%. Spy takes his hat off to Holger Zschaepitz for sharing this brilliant chart. It shows the Nasdaq boom and bust, 20 odd years ago, plotted against Ark’s performance today. Ark is following a very similar trading pattern. This does not bode well.

Spy tends to think of sovereign wealth funds as being solid, dull and rather unworthy of comment most of the time. Well, not so much this particular quarter for that grandaddy of the industry, Norway. The $1.3trn sovereign fund lost $74bn in in the first quarter after Russia’s invasion of Ukraine, Shanghai lockdowns and inflation spikes have haunted markets. This can’t be the only surprise to come. As Buffet might say, “The tide is going out and some are swimming naked.”

It is an ESG enthusiast’s nightmare. China has said it will add 300 million tons of coal to its capacity this year by expanding operations at some mines and re-opening mothballed ones. China Energy Investment Corp. has predicted that China’s 2022 coal consumption will rise 2.2% to 4.37 billion tons. Offsetting all of that carbon is going to take a lot more than a magic wand and a few green stamps on China equity funds.

A butterfly flaps its wings in the Amazon and causes an earthquake in Canada. Yes, we are all away of Chaos Theory thanks to dinosaur thriller, Jurassic Park. For Spy, the butterfly might just be the results from AJ Bell, a large stockbroker and DIY investment platform in the UK. This week it, and a few other firms, announced that retail investors had slowed down their purchases and taken risk off the table. Are the army of armchair investors taking a break?

Spy’s trusty photographers have spotted this rather natty outdoor campaign in Singapore by Vontobel. Apparently, our fixed income portfolios may be out of shape and need some extra veggies to help.

They also snapped abrdn and Amundi advertising in Hong Kong’s central MTR station.

Until next week…

Part of the Mark Allen Group.