Spy caught up earlier in the week with an economist who, in a younger life, had been a US college sprinter. Unsurprisingly, for such a sporty fellow, he declined Spy’s offer of a Tuesday night tipple. He is off to Paris this weekend as the quadrennial jamboree of the Olympics is arriving with the opening ceremony being held this evening. From what Spy has read, the Parisians are rather unenthusiastic about the event, which has caused untold disruption in the French capital. Restaurant and hotel bookings are, unexpectedly, down compared with a normal year. Most Parisians are asking what is the point of paying billions to host something so costly and distracting, when France is already the world’s most visited country? To compound their misery, Louis Vuitton Moët Hennesy (LVMH), France’s star stock, is at a nearly one year low, down 20% this year. The contrarian in Spy wonders if the pessimism for both the Olympics and LVMH respectively, are overdone?
With its unions, higher base wages, medical and pension obligations and interfering politicians, is the United States really going to be become a manufacturing powerhouse again? According to BlackRock, the answer is “yes” and they are putting their money where their mouth is. The giant has launched a thematic equity ETF designed to capitalise on resurgent US manufacturing driven by policies such as the Infrastructure Investment and Jobs Act, the Inflation Reduction Act, and the Chips and Science Act. The ticker is MADE, which admittedly made Spy smile. Jay Jacobs, US head of thematic and active ETFs at BlackRock commented, “MADE is designed to capture these long-term themes by providing targeted access to companies that could be poised to benefit from supportive policies and secular trends, enabling investors to potentially capture the renaissance in American manufacturing in the convenience of an ETF.” Listed in the US, of course, with an expense ratio of just 0.4%.
There has been much discussion, of late, on the rotation out of mega cap tech stocks, with investors flirting with small caps after a long absence. Spy took a peek at the best performing US small cap funds available in Hong Kong according to Morningstar. T. Rowe Price’s US Smaller Companies is up 12.25% over the last year, while Janus Henderson’s US Venture Fund is up 12.30%. Franklin Templeton Royce’s US Small Cap Opportunity leads the lot with 13%. How does that compare with the S&P 500 over the same 12 months? The S&P has managed a healthy 18%, even after the recent falls. It sure is hard to beat large and mega cap.
Entropy is considered a measure of unpredictability, disorder or randomness in various contexts. In investment and business, ultimately, life is never stable, despite apparent moments of calm, reckons Spy. Google has for so long been the default search option for most people that it became almost inconceivable that anything could replace it. And then, out of the blue, ChatGPT arrives and threatens, almost overnight, Google’s revenue engine. OpenAI, ChatGPT’s parent, is gunning for Google’s search crown and announced a search prototype driven by its proprietary AI – Google’s share price took a hit yesterday over the news. Unsurprisingly, Sundar Pichai, Google’s CEO said this week, “The risk of underinvesting [in AI] is dramatically greater than the risk of overinvesting.” Spy does not think he is wrong and for the moment, Google is playing catch up. It is events like these that makes equity investing utterly compelling.
Spy has always had a soft spot for gold bugs. They speak of their investment thesis with passion, often bordering on swivel-eyed fanaticism. This week Spy had a silver bug in his office. “Unlike gold, silver is actually used,” he opined with all the enthusiasm of a teenager in love. “For example: jewellery, electronics, photography, medical, solar panels, mirrors, batteries, catalyst, coins, water purification, musical instruments, textiles, engine bearings, dental alloys, electric contacts and coatings, RFID tags, chemical production, antibacterial applications and nuclear reactors!” Silver is just over half the price it was at its peak in March 2011. If all these myriad uses are true, the question Spy asks is: why?
In January, the China Electricity Council, in a yearly report said grid-connected wind and solar would make up around 40% of installed power generation capacity by the end of 2024, compared with coal’s expected 37%. Well, hats off to China. This month, China has already achieved its goal of wind and solar energy exceeding that produced by coal.
Spy spotted this cartoon doing the rounds. There is a modicum of truth in this. How do we ever balance saving enough with enjoying life’s rich opportunities, too?
Spy’s quote of the week is anonymous; it is probably based on an old proverb. “If you want to make the wrong decision, ask everyone.” Spy is old and ugly enough to recognise the simple truth in these words.
Spy’s photographers have been out and about in Singapore. Spy is used to seeing advertising on the sides of trams, busses, taxis and various outdoor billboards. This M&G plastered truck was the first time Spy has seen such a vehicle carrying an asset management message. M&G is pushing its longevity and its intelligence.
Until next week…
