“Everyone wants a quick win,” said a veteran Hong Kong wealth manager to Spy this week over steak and a nameless Aussie red. “Slow and steady is alien to most of my clients.” It is not just Hong Kong-based investors who have this enthusiasm, it would seem. Spy was staggered to read that Americans spent more than $113bn on lottery tickets in the last twelve months. That is more than they spent on books, concert and sports tickets, and movies – combined. “The thing is, somebody has to get lucky – why not him?” Indeed, why not?
Mankind’s favourite sport seems to be: “Bash your neighbour”, reckons Spy. Our ridiculously intelligent, creative and remarkable species still can’t help itself: we have a penchant for conflict. In fact, since 2000, by some estimates, as many as 35 wars have been fought and a further 100 conflicts or insurgencies have taken place. BlackRock is allowing investors to easily profit from the military/industrial complex with its latest fund launch: the iShares Defense Industrials Active ETF. As the names implies, the fund will “Pursue growth opportunities by investing in companies that may benefit from increased government spending on defence and security amid geopolitical fragmentation and economic competition.” It is very hard for Spy to argue this is not in keeping with the zeitgeist. The fund is not exactly cheap, by ETF standards: 0.55%, but then again, neither is war.
JP Morgan Private Bank has been thinking about AI, and in keeping with much of JPM’s brain machine, it is useful stuff. In a report, worth reading in full, their analysts, point out that, “The ultimate winners of the AI race may not yet exist. The rise of cloud computing and the transition to mobile phones in the 2010s created more than 30 companies with greater than $1bn in annual revenues (accounting for over $1.9trn in public market capitalisation). The total addressable market for AI-related applications could surpass both the cloud and mobile transitions, largely because the ultimate target is employee compensation costs.” The market may be generating less noise than it did a year ago, but the idea that some AI companies won’t become extraordinary winners, is fanciful at best, reckons Spy. As JPM points out, “Microsoft’s cloud computing unit, and the company processed over 100 trillion AI tokens in the first quarter.”
What is the most crowded trade at the moment? Apparently, it is gold. According to Bank of America’s Global Fund Manager Survey, a record 45% of fund managers now view gold as overvalued—the highest reading in the survey’s 17-year history. For anyone wanting to short the shiny metal, Keynes’s wise words ring in Spy’s ear: “The market can stay irrational, for longer than you can stay solvent.”
With Bitcoin reaching new highs this week of $110,000, Spy can’t help but feel central banks are truly losing control of the inflation narrative. At this point, Spy would like to observe a moment’s silence for Laszlo Hanyecz. Laszlo was the chap who, in 2010, spent 10,000 (yes, ten thousand) bitcoins buying two Papa John’s pizzas. Those coins would now be worth approximately $1.1bn. Papa John is a listed company, which has a market cap of $1.3bn.
For anyone living outside the US who wants to add, “Harvard Alumnus” to their LinkedIn profile, that has just become a little harder. The Trump administration is revoking Harvard’s authorisation to enrol international students, marking a significant escalation in its ongoing campaign against the university. Harvard, where international students make up more than 25% of the student body—approximately 7,000 students—relies heavily on the tuition revenue they provide, often paying full fees. In addition to this move, the administration has already withdrawn billions of dollars in federal research funding and has threatened to revoke the university’s tax-exempt status, citing concerns related to antisemitism and diversity, equity, and inclusion (DEI) initiatives. Luckily Harvard still has $53bn in its endowment fund.
The most intriguing announcement of the week, especially for any shareholder in Apple, was the fact that OpenAI is acquiring the device startup io—a company that CEO, Sam Altman, and renowned former Apple iPhone and iPad designer, Jony Ive, have been developing privately during the past two years. It is an all-equity deal that values the startup at $6.5bn, first reported by the Wall Street Journal. New physical products using AI at their heart will now, surely, make their debut, sooner or later. Considering Apple’s shambolic recent AI attempts, this must make the leaders in Cupertino a touch nervous.
With summer holidays just around the corner, Spy is sure his loyal, and very intelligent readers will be hunting out something to read on the beach. Spy loved Life in Three Dimensions: How Curiosity, Exploration, and Experience Make a Fuller, Better Life by Japanese psychologist, Shigehiro Oishi. The idea is that the Good Life is not just about purpose and meaning but also includes a third dimension: curiosity, exploration and a variety of experiences. We might instinctively know this is true, but Oishi does a great job, through books, people, even film, of helping us all understand it. Well recommended.
Until next week…
