Change at Federated Hermes; JP Morgan’s bullishness; China’s wealth management rules; Another innovation fund; The Dow turns 125; Housing madness; Advertising from Ninety-one and much more.
Spy was treated to a Talisker, 25 year-old single malt whisky this week, matured for that quarter-century in American oak barrels. The largesse came from an independent financial adviser in Hong Kong who has, as he puts it, “made a small fortune from Dogecoin.” Spy will gladly share in the adviser’s good fortune, after all, the fellow admits: “It is unlikely to last and next time it will be the cheap stuff.” The last year has been the era of truly surprising fortunes made with extraordinary speed, something the patient Talisker distillers can only dream of. It reminded spy of John McAfee’s prescient quote: “Making money is easy. The difficult thing in life, is keeping it.”
News reaches Spy that there has been a change at Federated Hermes in Singapore. Spy understands that Tai Watanabe, who has been doing business development for the Anglo-American firm, has stepped down. He had been in the role for four years and previously was with JP Morgan in Tokyo. Spy has no news on who is replacing Tai. Jake Nilsson remains in charge of the business in the region. Federated Hermes has had success in the last 12 months with its Asia ex-Japan strategy, which is up a healthy 40%.
What a difference a few months make. JP Morgan Asset Management is positively exuberant. In a research note published earlier this month, the firm argued that company results will be 10% higher than pre-Covid 19 levels. “Our latest forecast of $2.6trn for 2021 profits across developed markets is almost $200bnon higher than three months ago. Upward revisions are very broad-based, but industrial-cyclical companies (experiencing robust demand and higher energy prices) and financials (benefiting from lower loss reserves and buoyant capital markets) stand out as particular areas of strength.” The firm is selective on where the next gains are going to come from, however, as this Word Map shows.
What China gives with one hand, it takes away with the other? The banking regulator has issued its final rules for wealth management product marketing and foreign-owned asset managers are not spared the tough regulations. Providers will be prohibited from using, or highlighting, absolute values or interval values to compare performance among wealth management products. The providers will also be banned from advertising expected returns in “disguised ways” and on marketing the products as investments that can guarantee certain returns. Spy has no issue with the guarantee bit, but wonders how the regulator is going to assess these disguised ways? One would think Spy, being a master of disguise, would have a clue, but he doesn’t.
Innovation as a theme is not going away any time soon. Spy spotted another me-too active ETF that promises to invest in innovation. The breathless press release from First Trust Advisors reads: “The fund aims to outperform the broader markets by having outsized exposure to themes that are growing faster than the underlying economy.” Spy is shocked by the insight and imagines most growth funds for the last 50 years have used almost identical language. Still, if you have lost faith in Cathie Wood and Ark…
The asset management industry globally loves indexes and literally can’t do without them. This week marked the 125th anniversary of one of the world’s most famous ones: The Dow Jones Industrial Average. In the beginning it had just twelve stocks, all of which were “smokestack” companies. It now has 30, of course, and is a snapshot of American commercial prowess. Spy has often argued that the Dow is the best argument for active management. It is a highly concentrated, idiosyncratic selection that has outperformed for years and years. The index has risen on average 7.69% every year since inception and notched 1,464 record closes in history.
The global housing boom that is being fuelled by a change in work venue dynamics and ultra-low interest rates is having bizarre effects. The CEO of Redfin, a US real estate firm based in Seattle, shared this week on Twitter just how bizarre things have become. He wrote, “A Bethesda, Maryland homebuyer working with Redfin included in her written offer a pledge to name her first-born child after the seller. She lost.” He adds, “there are now more realtors [estate agents or brokers] than there are listings of homes for sale.” This is the insanity of central banks out of control, in Spy’s humble opinion.
As the debate rages about the future of crypto, Spy has sympathy with the crowd that says the single biggest problem that Bitcoin, Ether etc have, in the long term, is that central banks don’t like them one little bit. When you have a nice monopoly on your country’s money and some shiny upstart comes along, you are unlikely to give up that privileged position lightly. The SEC has been remarkably slow to authorise a Bitcoin ETF, citing all sorts of concerns, mostly about volatility and the inability to value its worth. Considering market volatility and GameStop’s excitement, that argument wears a little thin after a while.
Do you remember the Greek debt crisis? It was all the rage to worry that Greek debt would blow up the Euro, the EU, the world! The Greek 10 year-risk spread over German sovereign debt has just fallen to its narrowest level since 2008. It does not seem to bother the market at all that Greek government debt is now more than 200% of GDP and shows no signs of slowing down, according to Deutsche Bank. Spy’sunwanted advice, buy Feta cheese, it offers far tastier returns.
In Central Hong Kong, Anglo-South African asset management, Ninety One has been out promoting its environmental fund. There is something about the masked, real people, that makes the message even more poignant, reckons Spy.
Until next week…
