“Never forget, one week you are the rooster, the next week a feather duster,” said an extremely pugnacious Aussie bond fund manager to Spy this week over two cheap bottles of Napa Valley red. “I have never seen job certainty in the markets seem so fragile. Mergers, buyouts, cost cuts and good old tech progress have put a target on everyone’s back in traditional firms. Half my team are gibbering wrecks thinking they are going to get binned.” Luckily, before he got too gloomy, he added with a wry smile, “Don’t worry, we will all end up in a family office somewhere, slave to some young tech billionaire. They are ones with all the cash, after all.” With Deloitte predicting that before the decade is out, family offices will have more assets than the hedge fund industry, he might even be right.
With thousands upon thousands of funds to choose from, how does an ETF manager possibly stand out? Spy has always been sucker for a decent ticker, so to speak. A company named Themes ETFs has a great knack of choosing memorable ones, if you are the invest-by-numbers kind of person. Want to invest in US infrastructure, for example, choose HWAY. Cybersecurity: SPAM. Robotics and automation: BOTT. Companies with a natural monopoly: CZAR. European luxury companies: FINE. Generative AI: WISE and so on. Themes funds are all passive and have the rather tasty benefit of very low fees, too. They are typically about 0.35%. Their most recent fund launched this week is focused on Lithium & Battery Metal Miners with the not-so-snappy ticker, LIMI.
China has clearly decided it has had enough of sluggish growth and has reached for the big bazooka this week, proffers Spy. The scale of the stimulus seems to have come as very pleasant surprise to the markets, which obligingly jumped after a lacklustre year. Spy can’t help but think any concerns over “moral hazard” have been replaced by Beijing’s concerns that any further deepening gloom may become a political problem. Andrew Mattock, a portfolio manager with Matthews Asia, put it: “In terms of the success of this package, we will have to wait and see. It would seem to us that the government is showing more determination to turn things around. For us, it is the broadest, most aggressive set of moves that we’ve seen in three and a half years… we don’t think drastic improvements in the economy are needed for the market to do quite well. Going forward, we believe a lot of these measures have the potential to aid China’s recovery and provide positive support to its equities.”
A contact of Spy, who has been attending Climate Week in New York, said one of the best lines she heard at the sustainability jamboree, came from Ben Way, group head of Macquarie Asset Management. He posited that during the period of ultra-low rates investors had “lost the art of investing” as fundamentals were too often overlooked. Rising rates had made investors far more thoughtful. The question for Spy is, will this short-lived period of elevated rates mean the lesson will quickly be forgotten if rates carry on their downward trajectory?
Friday afternoon pub quiz! How much have the combined US stock markets gained in value this year? A rather tasty $8trn, according to Brew Markets. They put out his rather nifty chart that is showing a lot of green.
There is an incredibly good lesson that everyone eventually learns, reckons Spy. Watch what people do, rather than what they say. Last year, Sam Altman, the CEO of OpenAI, the not-for-profit company behind ChatGPT, said, “I have no equity in OpenAI. I’m doing this because I love it.” He reportedly only took enough money to ensure he got healthcare coverage. Fast forward a year and what headline do we wake up to? “Sam Altman poised for $10.5bn payday as OpenAl transitions to for-profit model with $150bn valuation on the horizon.” What a difference a year makes.
Talking of AI, Spy can’t but help think an awful lot of venture capital money is going to end up very disappointed. In the last 12 months, in the US, AI-focused investments took 32% of all the money. Venture Capital has high failure rates under normal circumstances, and no doubt the managers throwing money around like drunken sailors are hoping for the best. The winners are going to have to perform very well indeed if they are going to cover the concentrated failures. And lest anyone get too carried away, Spy asked Meta AI, the simplest question of all and the answer was underwhelming, to say the least. Artificial intelligence has a little way to go.
Chatting to investors, Spy is often struck by the impossible desire of investors to have a sure thing. People about to risk their money, could do worse than heed the founder of Oaktree Capital, Howard Marks’s observation, “There simply is no place for certainty in fields that are influenced by psychological fluctuations, irrationality, and randomness. Politics and economics are two such fields, and investing is another. No one can predict reliably what the future holds in these fields, but many people overrate their ability and attempt to do so nevertheless. Eschewing certainty can keep you out of trouble.” Nailed it.
With gold reaching new highs this week and, it must be said, silver making some healthy running too, Spy was reminded of these wise words from John Pierpont Morgan, “Gold is money. Everything else is credit”
Until next week…
