“This is the ultimate global arms race”, said the CEO of a specialist AI company to Spy, over several glasses of half decent Italian Montepulciano reds last night. “AI is not about the A, the ‘artificial’, it is ALL about the I – intelligence. What you are seeing, is the first real race for intelligence. Every government, every large tech firm, every company worth its salt has suddenly realised that there has never been anything quite like this. The government or firm that controls ‘intelligence’, has such an advantage for the future, it is a prize worth throwing the kitchen sink at.” Spy may dispute the drama of this statement but after seeing several AI demos, in particular the music and song generation capabilities of suno.com. it is hard not be astounded and a little afraid.
Every now and then, Spy comes across a fund whose performance has truly kicked its benchmark into the long grass. The Nightview Long Only Equity Growth Strategy is such a beast. It has delivered a whopping annualised return of 24.47% compared with the S&P 500 Total Return Index of 14.12% since 2012. The fund was, until this week, only available in the United States as a mutual fund, but it has just converted itself to an active ETF format, renamed itself the Nightview Fund and listed in New York on the NYSE, under the ticker NITE, making itself available around the world. The fund is a typical “best ideas” strategy and is highly concentrated with only has 15 to 25 stocks. The managers seem to have had more than their fair share of best ideas to date.
Talking of active, according to Morningstar, active ETFs are bringing in cash by the truck load. In the first five months of the year, active ETFs gathered about $100bn. In 2024, 236 ETFs have listed on exchanges and of those, 166 are actively managed structures. This is a big jump from 2023 when by the same time of the year, only 155 had made their debut. The shift from mutual funds to ETFs appears to be accelerating. Although mutual funds hold about $26trn in total in assets, ETFs are, currently, already on $9trn. Mutual funds bled about $150bn in AUM last year. Spy is convinced that the passive industry, which persuaded investors to buy ETFs due to their low costs, are now seeing active strategies, with commensurately higher costs, reap some of the benefits of that mindset.
Hat tip to Eastspring, which has just put out a short new insight piece on Vietnam, which is worth reading in full. The country continues to attract a huge amount of foreign direct investment, $36.6bn last year, and the Asian specialist reports that the “Vietnam Ho Chi Minh Stock Index delivered annualised returns of 8.5% p.a. (in US dollar terms), outperforming both the MSCI Frontier Emerging Markets and MSCI Emerging Markets Indexes.” With the country growing at about 6% and benefitting from global supply chain changes, it is becoming harder to ignore for portfolio managers, despite the lack of ease of making investments.
Natixis has published a large survey into the investment attitudes of Generation X. This is the group of people who were born between 1965 and 1980. These souls arrived after the Baby Boom generation and have, investment wise, taken a few knocks during their lives – notably the dot.com bust in the early 2000s and the GFC in 2008. The report has many surprising anecdotes, but this particularly caught Spy’s eye, “Given a quiz on rates and bonds, Gen Xers were asked to identify what happens to bonds when rates go up. Would the price of the bonds they currently own go up? Or down? Would their income potential go up now? Or in the future? Asked to pick all the right answers, only 2% of Generation X knew that higher rates could lead to a decline in prices for the bonds they own today, and that future income potential would be higher from new bonds purchased at today’s rates. Perhaps most telling was the number-one answer: “I don’t know” (28%).” Spy was convinced 60-year investors would understand this basic fact.
History does not repeat but it rhymes. In the five years leading up to its top of $77 in March 2000, Cisco’s price-to-sales ratio rocketed from seven times to 39 times and it very briefly became the world’s most valuable company. In the five years leading up to its top last week, Nvidia’s price-to-sales ratio rocketed from nine times to 42 times and it briefly became the world’s most valuable firm. Cisco soon got clobbered and the bubble burst; 24 years later, its shares are $47, having never seen that illustrious peak again.
During the Covid lockdowns, Spy read some pretty silly commentary from foolish analysts who claimed the travel habits of the world have changed permanently and people will travel less from now on. Well, in the last week, in the US, the record for the largest number of people flying on a single day was exceeded; 2,996,193 hopped on a plane, on the same day, providing a new all-time high. With Europe and Asia’s skies just as busy, it may be time to fill up on airline and hotel stocks.
Spy, being a rather cuddly Westerner, always thought that Asian people and the Chinese in particular, did not have much of an obesity problem. He was rather surprised to discover, after the Chinese regulator recently approved Novo Nordisk’s weight loss GLP1 drug, that it emerged the country has 175 million overweight people. Increasing affluence and a more westernised diet, it seems, are taking their toll on China’s waistlines.
If anyone was in any doubt whatsoever that Joe Biden will not be President of the United States next year, last night’s debate should have sealed it. Biden’s dithering, doddering and downright incoherence against Trump was not a debate; it seemed more like a medical meltdown. Unless the Democrats magic up someone more appealing, look forward to four more years of the liar-in-chief, reckons Spy.
Until next week…
