Spy is not immune to the allure of a glass of Champagne or two, especially when somebody else is picking up the tab. This was such a week, when hospitality was flowing from a few over-resourced private equity (PE) funds that were splashing around the love and bubbles. Beyond the smiles of several private bankers enjoying the largesse, Spy could sense the palpable worry from those present about how PE is going to dispose of some of the larger assets that have been hanging around, especially those in the China parts of their portfolios, and reveal the true value of some of their very richly valued possessions.
An old timer said to Spy once, “The great thing about the markets, is that they are an extraordinary insight into people’s future ambitions and their immediate fears.” Spy was reminded of this reading a fascinating insight piece from Lombard Odier Asset Management (LOAM), out this week. The manager speculates that the rapid rise in the price of gold, of late, can’t be fully explained by traditional factors: inflation, fears of market downside and concerns over real yields. LOAM posits that central bank buying (possibly on the quiet) is the “missing link”. Or, at the least one of the missing links, that explains the recent price rise. Their strategists suggest, further, “While stocks are near all-time highs, the gold market might be reflecting a temporary aversion to stocks among the broader investment community.” If gold is the canary in the investment gold mine, it is alluring canary.
It was Earth Day earlier this week and the Earth Day foundation put out some pretty frightening statistics. For example, more plastic was produced in the last ten years than was produced during the entire one hundred years of the 20th century. The world’s seemingly insatiable appetite for synthetics and cheap plastics is doing tragic harm to our environment, our oceans and even our bodies as we are all eating micro-plastics, if one enjoys seafood. What can be done? Apart from changing our own personal habits, there are a number of funds investing in the so-called “circular economy” which focus on companies which aim to help all of us reuse, recycle and adopt more sustainable practises – while making some cash along the way. Take a look at the Pictet Global Environmental Opportunities fund and Goldman Sachs Global Environmental Impact Equity.
Are the Magnificent Seven coming to the end? Tesla is now down 36% so far this year and an even more dramatic 61% off its 2021 peak. Nvidia has now tumbled about 20% off its high. Netflix is 21% below its high of 2021. Apple is not as weak but is still down about 15%. Microsoft, Amazon and Alphabet remain lofty but it is hard to think of the pack together when four of the seven are not exactly pulling their weight. Those 20%-ish falls are relevant, because it is about there that investors’ behaviour starts to change. They start to fantasise about the upside a whole lot less and then they start to worry about the downside a whole lot more.
Spy was invited to, quite possibly, the dreariest fund presentation he has endured in a very long time this week. Spy’s reaction, was probably best summed up by principal from the 1980s comedy, Billy Madison: “What you’ve just said is one of the most insanely idiotic things I have ever heard. At no point in your rambling, incoherent response were you even close to anything that could be considered a rational thought. Everyone in this room is now dumber for having listened to it. I award you no points, and may God have mercy on your soul.” Or perhaps, the immortal Bard, Will Shakespeare, “You speak an infinite deal of nothing.” Note to marketers, if you are going to go to the effort of putting a manager on tour, please make sure they can actually speak.
Spy has been amused by the rather public spat between Britain’s venerable The Economist magazine and Singapore’s Law and Home Affairs Minister, K Shanmugam, regarding the imminent retirement of Prime Minister, Lee Hsien Leung. Shanmugam rightly pointed out that on numerous metrics – the economy, public safety and governance – Singapore is outdoing its former colonial master, thank you very much. The kicker, Singapore’s per capita gross domestic product now stands at over $80,000 and is now the fifth highest globally, in purchasing power parity terms, which just happens to be, “well ahead of the UK”. Ouch.
Until next week…
