Spy was a rather surprised to read that in Thailand sex toys are, in fact, banned. Wandering down the streets of Bangkok where the the devices are sold openly, a casual observer would never know the ban existed. Apparently, the Democratic Party has vowed to unban the toys and regulate and tax them if it wins the election. It got Spy thinking that this is all too often the same with financial products. Governments, across the world seldom keep up with what people want and they would be far better off regulating and taxing new forms of financial innovation, as people will do what they want to do regardless. From crypto to AI-driven funds, better to get policies in place as quickly as possible than pretend people won’t play with them.
Another week, another energy-related ETF, notes Spy. This time it is Fubon jumping on the battery bandwagon. The Korean asset manager has launched the not-so-snappily named Fubon ICE FactSet Asia Battery and Energy Storage Technology Index ETF here in Hong Kong. It trades under the ticker 3405. The ETF trades in Hong Kong dollars, squarely targeting the fund at a local audience. If you were hoping to find a cheap way to play the battery market, this is probably not it. It has an OCF over a year of 1.2% and invests in relevant battery technology stocks listed in China, Korea, Singapore, Taiwan, Hong Kong and Japan. The fund should have fair underlying liquidity: only stocks with a market cap above $100m and with daily trading volumes above $1m are eligible for inclusion.
Hat tip to Wellington Management for a fascinating thought leadership piece on cybersecurity and cyber attacks. It is worth reading the entire piece here. The authors highlight that they “believe early-stage companies are at the highest risk of a cybersecurity attack right before they go public. This is because a public announcement normally draws the attention of ‘black hat’ hackers who are very aware of a company’s maturity stage and the critical importance of its reputation during an IPO. This can make the business an attractive target for extortion/ransom attacks.” Spy had never thought this logic through before, but it makes perfect sense. On the cusp of a great triumph, management will do anything to keep ship steady, even pay cybercriminals.
It has been tech reporting season and in all fairness big tech is doing rather well. Spy was interested to see this little fact from Amazon. Amazon’s AWS revenue of $83bn over the last year was greater than the revenue of 460 companies in the S&P 500. The business has gone from revenue of “just” $3bn to $83bn in less than a decade. For the quick at maths, that is more than 40% annualised growth. AWS is not the only company having a good season. Meta, owner of Facebook, has rallied to a market cap above $600bn. Just last November, Meta was only worth a mere $235bn.
How rare are unicorns? You know the ones – those start-up companies that become worth more than $1bn? Well, during the ‘easy money era’, not that rare it seems. If we define the easy money era as, say, 2008 to 2022, unicorns were appearing as fast as politicians break their promises. In 2012, nine were created in the US in the venture capital world. That rose steadily to a peak of 344 in 2021. That is more than 1.3 every single business day. According to deal data tracking firm, Pitchbook, the madness has subsided dramatically as people have come to their senses and realised the money gusher has turned off. In 2022, the unicorn number dropped back to 185 and in 2023, up until 9 March 2023, only five unicorns have been created. Every indicator now seems to be flashing caution. Unprofitable tech start-ups are suddenly finding it very chilly to raise money, to IPO and to sell themselves. Watch those mark-to-market valuations in PE and VC funds, cautions Spy.
Spy read a snappy and convincing quote this week: “AI won’t replace people, it’s people who can’t work AI that will be replaced!” With that in mind he went off to investigate finance AI platforms. First up: finchat.io, which bills itself as the “Chat GPT of Markets”. Spy asked it the most basic of all questions, “Which fund performed the best yesterday?” The so-called intelligent response: “Based on the financial data provided, there is no information on which fund performed the best yesterday.” Morningstar must be quaking in its boots. Spy then looked at kavout.com, trendpsider.com and others which all claim to have AI powering them. Spy remains a sceptic that any of this is truly artificial intelligence in an ‘Isaac Asimov’ kind of fashion but rather super smart interfaces combined with fabulous filtering technology and good machine learning programming.
Some charts make one’s jaw drop just a little. Have a look at this one. No, it is not Bitcoin, US federal debt growth or Elon Musk’s Twitter followers. No, this stratospheric chart is luxury goods maker, LVMH. Those of us based in Hong Kong and Singapore who see the number of LV handbags around the place might not be surprised but those calling for a recession might take a pause for thought.
Spy’s quote of the week comes from a chap named FM Alexander, “People do not decide their futures. They decide their habits and their habits decide their futures.”
Until next week…