There was lively discussion in the pub this week. Over cold lagers Spy chatted to several wealth advisers who were all ringing alarm bells – loudly. China’s property woes, inflation headlines, gas shortages, chip shortages, transport shortages and diplomatic spats: the list of worries was as long as Spy’s travel wish-list. “Is Evergrande China’s Lehman Brothers moment?” asked Spy?. “No, it is China’s Evergrande moment”, retorted one. “The businesses are fundamentally different. But I can tell you one thing, I am glad I am not a China high yield fund salesman at the moment.”. Never a truer word spoken, thought Spy.
We have all been there, reckons Spy. Travelling to work on the train, one can’t help but notice that the fellow next to you is watching his portfolio on his phone. We see the flashing numbers, as security prices jump around, indicating the shortest of short-terms changes in your fellow traveler’s implied wallet thickness. You might even watch the chap place a trade or two between Admiralty and Central stations, just for laughs. Now comes along an ETF that is allowing you to get in on the action and buy a strategy that invests in a basket of these shiny new brokerages that treat investments like a mobile game for the millennial generation. Amplify ETFs has launched this week Digital & Online Trading ETF with the excellent ticker, BIDS. The fund covers the usual suspects: RobinHood, Coinbase, etc. Spy is not exactly sure why one needs a fund for this, though.
Choosing the best accompanying image to an investment insight piece is an art, reckons Spy. Most asset managers are, tragically, fairly dull in their choices. Hat-tip, therefore, to Vontobel Asset Management. Spy loved their piercing wolf to accompany their “Who’s afraid of the Inﬂation Wolf of Wall Street?” strategy piece. It almost sent shivers down the spine, just as inflation is doing in the real world. For what it is worth, Vontobel is not convinced one should jump into cyclicals just because the short-term inflation headlines make one jumpy. Instead, it wants you to focus on “quality growth equity.”
Looking at LinkedIn on any typical day and Spy usually has to endure the inanest office and company self-boosterism. You know the drill: “So pleased hook up with colleagues in XX doing YY” [Cue: awkward team photo] or “I am running 25 kilometers and raising money for X charity. Feeling pumped.” [Subtext: aren’t I an all-round modern-day hero, please buy some more insurance from me]. Or, Spy’s worst, “I know this should be for Facebook, but I just need to give a big shout out to my niece who has just learned to ride a tricycle” [Real truth: I have nothing to say, but have to say something anyway]. This week has been distinctly different. Evergrande’s spectacular implosion has got asset manager investor relation teams out in force. Almost every second LinkedIn posting is advice or a strategy piece on what to do about this catastrophic credit development. The one thing most of the posts have in common, is that the wealth manager or asset manager in question claims to not hold Evergrande debt or equity, but still wants to have their say. Spy will save you a lot of reading, the general response is “get out as quickly as you can…”
Hong Kong’s MPF investors generally get a relatively poor choice for their hard-earned pension money in Spy’s opinion. Spy took a peek at the performance stats to date for the year. What was interesting was the gap between US-focused funds and all the other asset classes or geographies. The average US-focused fund is up 275% over a decade. (Mass Mutual’s offering is best at 354%). The next best geographic class is global at 142% and then China at 120%. All other asset classes offered, bar none, have not even managed to double in a decade! Not exactly the most comforting thought for retirees in such an expensive city. Btw: just buying an S&P 500 tracker would have outperformed them all. It has returned about 400% in past ten years.
If you think the US markets are having a heck of a run, your gut is absolutely right. Thanks to Charlie Bilello at Compound Advisers for this chart. The S&P 500 ETF has not closed below its 200-day moving average since May 2020. This is the fifth longest streak since its inception in 1993, according to him. The market continues to power ahead like a steam powered mega-train. How much longer can this last? Your guess is as good as Spy’s.
Politicians are usually fairly good at talking a lot and saying absolutely nothing at all. The mask truly fell for a moment this week. Nancy Pelosi, the Democratic Speaker of the House of Representatives was talking about the US debt ceiling – the legal borrowing limit of the American Federal Government. The personally wealthy, but fairly economically illiterate senator (in Spy’s humble opinion) said the debate about the debt ceiling was a “tradition”, which both sides argue about for a bit and then always raise in the end. What she then said was: “There’s some doubt as to whether that should be the case.” In other words, scrap the ceiling. American politicians seldom feel constrained to spend money at the best of times, but at least the debt ceiling gives them a pause, albeit for a few weeks of the debating “tradition”. If Ms Pelosi has her way, the spending spigot will gush as never before and America’s creditworthiness may resemble Evergrande sooner rather than later.
Spy’s photographers came across a new consumer campaign for Schroders in Singapore. The manager is pushing hard on its sustainability credentials.
Until next week…