“It is really very simple” said a US equity portfolio manager to Spy this week while enjoying a few glasses of a particularly yummy New Zealand pinot noir in one of Hong Kong’s finer establishments in Central, “A stock’s bottom is when it stops falling on bad news. Conversely, it peaks when it stops rising on good news. It has always been like this.” Spy retorted, “Buy the rumour, sell the fact?” Spy’s wise drinking companion smiled and added, “When prices are rising, investors wish for a bear market. When a bear market appears, investors wish for it to end.” And that, in a nutshell folks, is the investment mindset.
Fun fact: oil was discovered in western Pennsylvania in 1859, and the black gold was destined to overtake coal as the world’s top energy source 100 years later during the 1960s. Yet, that did not mean that the absolute amount of coal used globally was falling. In fact, in 2024, it was three times higher than it had been in the 1960s! With that in mind and despite the incessant talk of renewable energy investment and development, Spy was not surprised to see Invesco bring its SteelPath MLP & Energy Infrastructure strategy into an ETF structure this week. “The fund seeks to maximize income potential by investing in a portfolio of energy infrastructure securities that provide the critical link in the energy value chain by processing, storing, and transporting hydrocarbons…[the fund] seeks energy infrastructure investments that can exhibit cash flow durability across a variety of commodity-price environments.” Oil is not going anywhere anytime soon. The ticker, Spy is amused to report, is PIPE.
The full danger of an asset manager having a star fund manager in its ranks was on display this week. Jupiter’s full-year results, released yesterday, revealed that investors withdrew £10.3bn ($13bn) over the twelve months ending in December, coinciding with the departure of highly regarded fund manager Ben Whitmore. Ouch! Every asset manager faces a similar dilemma if they have a particularly talented person running a fund, it is certainly not unique to Jupiter.
The team at Federated Hermes has never, in Spy’s experienced, been a greenwashing outfit. Their commitment to sustainability is baked into everything they do. They have just put out their Biodiversity – A Year in Review report and it makes for rather depressing reading. “Increasing resource use is the main driver of a triple planetary crisis: climate change, biodiversity loss and pollution. Unfortunately, we as humans have failed to manage our global portfolio of assets sustainably. Estimates show that between 1992 and 2014, produced capital per person doubled, and human capital per person increased by about 13% globally; but that the stock of natural capital per person declined by nearly 40%.” Painful.
If anyone wants to worry a little more, BlackRock has conveniently put out its Geopolitical Risk Dashboard. It is a smorgasbord of current anxieties across the world. It covers global trade protectionism, Middle East war, US- China strategic competition, global technology decoupling, major cyber attack(s), major terror attack(s), Russia-Nato conflict, emerging markets political crisis, North Korea conflict and for good measure, European fragmentation. It is one of those reads which could encourage Spy to stay in bed for the weekend and remind him not to read the news. Luckily, in Spy’s rather long experience most of these geopolitical concerns seldom materialise in the way experts predict. They make good dinner party talk but the world muddles through, nonetheless.
Nvidia, the AI chip darling, has been in the spotlight this week, with its stock plunging 14%. Janus Henderson has a good summary of its earnings. This particularly caught Spy’s eye. “After significant angst around a problematic initial ramp of a very complex and inaugural rack level system, the company delivered $11bn of Blackwell [ultra chip] sales last quarter (ending 26 January 2025) well ahead of guidance of ‘several billion’. For context, 350 plants are producing the 1.5 million components in each single Blackwell rack. A more aggressive supply ramp through 2025 to meet ‘extraordinary’ demand for Blackwell can be expected.” If anyone thinks the AI run is over, this should reassure them.
Bitcoin enthusiasts are having one of their periodic moments of doubt. The crypto has taken an absolute hammering in the last month, now down nearly 25%. It will have the gold bugs quietly chortling into their afternoon cups of tea. It is either a great buying opportunity or another sign that the Trump election trades are running out of steam, rapidly.
Do you want a free lunch? Harry Markowitz, the father of modern portfolio theory, once said: “Diversification is the only free lunch in investing.”
Until next week…
