As summer has arrived and Hong Kong is getting back to normal, Spy shared a Tanqueray Martini in one of Soho’s better bars with an old friend who is an economist at a private bank. The novelty of seeing a talented bartender mixing drinks effortlessly has not worn off. It seems, sadly, the novelty of street protest in Hong Kong has not worn off during lockdown, either. If there is one thing Spy and this rather contrarian economist could agree on, it is this: the rest of 2020 is going to test the resolve of Hong Kong optimists to the limit, as Beijing seeks to reign in any further democracy agitation. As if Covid had not given us enough problems to deal with.
Spy has been reading the insight and commentary pieces put out by asset managers for years. There are, it must be said, relatively few managers who do this well. For too many, their commentary is infrequent, inconsistent and plain dull. During the virus crisis, the problem has been exacerbated. Finding good commentary has been as hard as a real discount in Park ’n Shop. It has felt like a brown desert wasteland with the occasional cactus for colour. It was thus a pleasure to read the weekly piece being written by Hendrik Du Toit, CEO, of Ninety One Asset Management (Formerly Investec AM). I recommend a look. His latest piece shares insights from other professionals who are, by necessity, expected to endure isolation: astronauts, Antarctic scientists, etc. There is something utterly genuine about Hendrik’s thoughts: compassionate, enthusiastic and reassuring.
This time it is different. Yes, Spy really means that. We are dominated by tech in 2020 like never before. Look at the returns in 2008 of big tech:
MSFT: -44%, AAPL: -57%, GOOGL: -56%, AMZN: -45%, Nasdaq100: -42%
And now, 2020 year-to-date:
MSFT: +17%, AAPL: +9%, GOOGL: +5%, AMZN: +32%, Nasdaq100: +8%
Amazon is now so valuable it is worth more than the entire market cap of the German Dax 30. The total value of the FAANGS is now greater than the annual GDP of Germany and Italy, combined! That is $6.1tn in real money. These are staggering stats and pretty frightening, to be honest.
China has shocked absolutely nobody this week by abandoning its decades old annual GDP growth target for 2020, notes Spy. Many asset managers and economists have considered China’s official GDP numbers to be as reliable as a lowcost airline’s departure schedule. This change will have one advantage: It allows analysts to make up their own mind about Chinese GDP without having to justify the difference with Beijing for once…
For anyone who is rather afraid of a machine controlled, cybernetic, hyper computerised future, Spy has bad news for you. The coronavirus has provided governments and corporates the perfect opportunity to introduce mechanical, eh, colleagues. In Singapore, the government is trialling a ‘robot dog’ that roams parks ‘helping’ people to social distance. Meanwhile, here in Hong Kong, Citibank has introduced the Cleanbot to its offices. The automatic cleaner, which seems to be channeling a Star Wars droid, is now in action. Expect a whole lot more of this to come. And they don’t need salaries.
ETF launches are back again. May has seen a flurry of new strategies listed. Few get Spy’s attention, although one offered by Redwood Investment Management did make Spy a touch nostalgic. The strategy, LeaderShares Equity SKEW, (Ticker: SQEW) is a, wait for it…fund of ETFs. Fund of funds used to be all the rage in the early 2000s when asset managers could get away with piling fees upon fees. SQEW, according to the blurb is “built on the common sense goal to buy low and sell high…[using a] quantitate model that demonstrates a higher statistical return opportunity”. Sounds like a cracker. Count Spy out.
Are you hunting around for yield? Don’t look at the UK, which has joined the rest of Europe in negative rate territory. Income investors in UK stocks have had £30bn of dividends removed since the virus began. Worldwide, 78 central banks have cut rates in 2020; some of them by huge amounts. Emerging markets are looking positively low yield for 2020 and beyond. Pension fund managers must be out of places to hunt.
Coronavirus has proven a scammer’s paradise, if messages from Spy’s bank are to be believed. Almost daily warnings have been sent to him reminding that phishing remains all the rage. Spy was thus reminded of the immortal comment by Leonard Lauder, “When a person with experience meets a person with money, the person with experience will get the money and the person with the money will get some experience.”
Did you hear about the hedge fund that had the world’s most sophisticated strategy? Spy found more than a grain of truth is this cartoon doing the rounds:
If an advert rolls past on a tram during Covid conditions and nobody sees it, does it count as advertising? Now that Spy and his photographers are allowed out again, asset manager adverts are being spotted here, there and everywhere. The question is: are these new ones or old trams that have not had their colours changed?
Axa is still looking at tomorrow:
Pimco has a tram-based branding exercise, reassuring investors of its experience navigating through all markets good and bad:
Finally, State Street has had its Hang Seng Index Tracker for 20 years and is reminding everyone of that fact:
Until next week…