Spy was lucky enough to have had a lunch this week with a portfolio manager who has had more than fifty years of investing experience. Over several glasses of Dashwood Rose from New Zealand, Spy was given a brief, but valuable, history lesson in the financial markets by someone who has seen more than his fair share of crises, disasters, shocks and bubbles. This PM told Spy that one of the best lines ever from a business leader, was Bill Gates’s: “We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.” This PM reckoned this was as true of tech, as it is of investing. He felt the world was on the brink of the most profound change we have experienced in decades and underestimating the change over the next decade will be the most costly mistake of all. Incidentally, the PM told Spy, Gates added to his line, “Don’t let yourself be lulled into inaction.” Well, precisely.
Spy periodically looks at the lists of funds available on various bank platforms. On Standard Chartered’s platform in Singapore, one can rank its best and worst performing funds. What is truly surprising, to Spy anyway, is that the best five-year annualised return of any fund is the United Gold and General Fund (SGD Share Class). Over the last year, the fund is up a healthy 42% — no shocker there. But over five years, it has delivered nearly 24% annualised. That is a stunning return. Spy would have expected technology to have delivered that sort of excitement. Admittedly, Franklin Templeton’s Tech Fund has posted 22% over five years annualised and is up 33% to date. But, dull gold and its associated miners have shone brightest of all in a sea of volatility. That tells Spy something.
For those people out there thinking hard about what is really going on in the world, energy is probably a good place to start. Aberdeen Standard’s always enjoyable Thinking Aloud blog has a great piece on energy this month that has the kind of stats that make one sit up and go ‘hmmm’. It is worth reading the whole thing in full, but a few snippets caught Spy’s eye, such as that the “International Energy Agency projects global electricity consumption to decline by 5% in 2020 compared with 2019. This would represent the largest annual decline since the Great Depression and is eight times greater than the demand drop-off experienced in 2009 following the Global Financial Crisis.” This is a simply jaw dropping stat and must give bullish investors a pause. For those who want a greener world there is something to get excited about in the article too: “Costs for solar and wind projects have fallen to $20-30 per megawatt hour compared with a decade earlier when costs exceeded $100.” And we have not even mentioned Tesla yet.
For anyone hunting for evidence that things are getting a little scary, economy wise, Spy has spotted a few things this week that made him sit up and take notice. Bloomberg reported that US corporate executives have been rushing to sell shares of their own companies at the highest pace compared to buyers since 2017. Many of these investors also bought at the March bottom. They seem to think the market has gone too far. Add to that little anecdote the fact that gold is rising rapidly – heading back to near its all-time high in US dollars. However, the final clincher for Spy would be the sheer number of companies that have issued stock or done an IPO. It is hard to keep up with the amount of debt and equity issues in the last quarter, but this feels frothier than a badly poured lager. Take China’s Star Market, the equivalent of the Nasdaq. It has held 54 IPOs since 1 January, then add 36 on the SME Board, 29 in Shanghai and 17 in Shenzhen and that is a whole lot of insider money cashing out. What do they know?
Economic growth in Europe has been dull for years. A few weeks ago, the Nasdaq reached a milestone that should make European policy makers shudder to their cores. The value of the Nasdaq market, about $18tn now, exceeds the annual GDP of the EU-27. This does, of course, exclude the UK. European growth fund anyone?
Spy’s quote of the week comes from Value Perspective team at Schroders: “We have said it before and we will say it again – the moment you think something is certain in investment, you have lost your objectivity.” Spy could not have put it better himself. There may be a few tech investors out there who may wish to ponder on this bit of pithy wisdom.
Financial analysts love a snappy invented word. Spy heard a talking-head describe things as “re-declining”. Spy is expecting to hear this inelegant, compound verb pop up with monotony. After all, it sounds better than “we’re falling off a cliff”.
Spy is beginning to wonder if a time machine has taken us all back to the 1970s. We have gold rising. A cold war building between China, Russia and assorted other countries and the United States and its allies. Dislocation in energy markets. Spies being kicked out of consulates. If one is lucky enough to be spending time on a beach this summer, perhaps Spy can be so bold as to recommend a John le Carré novel to pass the time? The Honourable Schoolboy remains one of his best and sums up the idiocy and paranoia of the period. It is also largely set in a slightly vanished Asia.
Until next week…
