Posted inFSA Spy

The FSA Spy market buzz – 23 June 2023

abrdn buys healthcare, lessons from Caeser and Odey, State Street is still resisting the Bitcoin bandwagon, the dollar perma-bear bores, Europeans firms are finding China hard and much more.

Those people hoping for a soft landing in interest rates are in for a world of pain reckons Spy. In the UK, the US and Europe, rates simply keep rising. The discussions on rates have moved from the Bloomberg talking heads to London, New York and Paris dinner parties. Over-leveraged homeowners and wannabe landlords are facing one heck of a reckoning as it dawns on people that higher rates are here to stay. Spy spoke to a property fund manager this week who specialises in commercial property, especially focusing on logistics infrastructure in Europe and he was as gloomy as can be. Will this spread to Asia? Spy would not be against it. Better keep a close eye on property funds.

Thematic equity still gets an active manager’s juices running, it seems. This week abrdn has acquired American manager Tekka Capital. The firm specialises in healthcare asset management. The Boston-based manager has about $2bn in AuM and runs biotech and healthcare strategies, a number of them closed-ended vehicles. Spy, happily, notes that healthcare has had an enduring thematic appeal for investors and this may well prove an astute acquisition. The caveat comes in the fact that abrdn’s acquisition track record has not been super value generative for its shareholders in the last decade. Perhaps this time will be different.

BlackRock and JP Morgan may be getting on the Bitcoin bandwagon, but one American giant is still refusing to play the crypto game. State Street said this week it still sees no value in the crypto universe or, at least, “no investment case”. With new products and manias, Spy is reminded of the Rudyard Kipling line from his poem, If, “If you can keep your head when all about you, are losing theirs…” Is this the case of keeping your head or sticking one’s head in the sand? Buyers of Bitcoin, last year, at nearly $60k may well think State Street is playing a wise game.

Julius Caesar, the great Roman general and dictator. divorced his wife, Pompeia, after a whiff of scandal, with the famous epithet, “Caesar’s wife should be above suspicion”. Anyone running a finance firm would do well to remember these wise words. If the fallout from Odey Asset Management in London is anything to go by, the asset management world is truly in a new era. No more “bad boy” behaviour will be tolerated in asset management. Full stop. The allegations of sexual impropriety or harassment levelled against eponymous founder, Crispin, have led to a rapid unravelling of his firm. Spy has no problem whatsoever with it, as long as the allegations are proven to be true, of course. The real problem is deciding what are grudges and what is real, unacceptable behaviour.

Spy has an industry friend who is a perma-bear over the US dollar, despite that fact that by one estimate, the dollar is a part of 88% of all international financial transactions. Drinks are an almost tedious experience as he waffles on about the imminent death of the mighty greenback. In all fairness, Spy has heard this kind of talk from more than the usual tin-hatted, bunker-preparing suspects, of late. For those thinking of jumping on this train, may Spy point out a classic printed in the 1973 with the alarming title, The Day the Dollar Dies by Willard Cantelon. Well, Willard, the Dollar Index was 102 in Feb 1974, today it is, er, 102.42.  In 50 years, it is has gone precisely nowhere.

Is it harder for European companies to do business in China these days? Spy certainly hears anecdotal evidence from bar chat and the conference circuit talk. This week, a survey out by the European Union Chamber of Commerce surveying its own member firms seemed to confirm the anecdotal discussions. One third of European companies reported falling revenue in China in 2022, which is a record going back to 2011. Far more alarmingly, 64% of respondents reported that doing business grew more difficult in 2022. This is up four percentage points. Spy would not be surprised in the slightest if these figures were mirrored for Chinese firms in Europe. The world has taken a protectionist turn and everyone will pay a higher price.

Looking for a summer read? Spy enjoyed this recommendation from one of the best sales people he has ever met. It is titled, Never Split the Difference: Negotiating as If Your Life Depended on it. The book was written by Chris Voss. As the blurb says, “Reaching the pinnacle of his profession, Chris became the FBI’s lead international kidnapping negotiator. Never Split the Difference takes you inside the world of high-stakes negotiations and into Voss’s head, revealing the skills that helped him and his colleagues succeed where it mattered most: saving lives.” And it does just that but teaches a thousand more lessons on how close deals.

Until next week…

Part of the Mark Allen Group.