“China does not want a cold war,” it assures us, and then promptly pushes forward a security law for Hong Kong that triggers global concern and almost certain chilly US sanctions. Trump is all for championing the brilliance of US tech and then promptly has a legal go at Twitter when it fact-checks one of his increasingly lunatic tweets. Boris Johnson says he wants a Brexit deal with the EU and promptly threatens to walk away with an Australian style arrangement giving the UK as much trade with the Continent as the Outback has water. Central Bankers tell us we are in for a V-shaped recovery but feel the need to print trillions of dollars just to keep the ship on an even keel. Is it just Spy or have we finally reached peak political insanity across the world? We are used to politicians telling the odd white lie or a least being a bit flexible with the truth. It seems, however, that we have now entered the Olympics of public deception, doublespeak, chicanery and hoodwinking and it is hard to work out who the winners of this dubious race are. Spy is concerned that the real culprit for all this was the beer industry: the day zero % alcohol beers were introduced, it signalled the end of world as we know it. And Spy does not feel fine.
It seems there is a change coming up at Capital Group, note Spy. Veronica Dekrey-Kwong, head of public relations for the American giant in Asia, is stepping down from the firm. Today is her last day with the business. Veronica was coy on where her next move is, but Spy believes she is staying within the industry and will soon reappear. Spy has no news on who is replacing her. Capital has had success in the last twelve months with its, European Growth and Income Fund, which is up more than 20%.
Citibank has added to its ranks of Senior Vice Presidents. Citi recently pinched Adrian Chan from Canadian fund group, BMO Global Asset Management. Adrian was previously vice president for sales at the asset manager and based in Hong Kong, where he remains. Spy has is not aware of who has replaced Adrian at the firm. BMO’s Balanced Fund is up nearly 5% over the last year.
As equity markets have rallied as if there is not a care in the world, Spy has been looking for sensible insight from saner sources. This week, M&G’s ever-reliable Bond Vigilantes, had some stark reminders that all is not as hunky-dory as it seems. The whole piece, by Wolfgang Bauer, is worth reading, but this section really stuck out for Spy:
“Away from bond valuations, it is genuinely worrying for credit investors that so many companies are currently bingeing on gluttonous amounts of debt. Conventional wisdom has it that a bond issuer, when adding financial leverage through debt-financing, becomes more vulnerable, which in turn increases the riskiness of its debt instruments and puts downward pressure on its credit rating. The new issue glut is also a profoundly bearish signal. What companies are effectively telling us is that they need to borrow money to boost their liquidity profile to compensate for precipitous revenue declines due to COVID-19. Needless to say, this is not a sustainable business model that can go on forever.” Quite. “Bingeing on gluttonous amounts of debt” may just be Spy’s favourite line of the week, nay, year.
The is no question in Spy’s mind that exchanged-traded active funds are going to play a much bigger role in the market going forward. This week, Legg Mason added to the fun by launching the ClearBridge Focus Value ETF. This large-cap value strategy is using a “semi-transparent” structure from Precidian Investments. That is surely the key for active: the ability to provide a liquid, easily tradable ETF, but keep the holding and underlying stock information mostly private. Spy will watch with interest.
Standard Chartered’s ever-reliable fund selection team can smile a little smile at the performance of some of its top picks in its Focus Selection. Top of the leader pack is Allianz Global’s Artificial Intelligence AT Fund. In the last year, that strategy is up more 30%. A fairly stunning result considering the turmoil the world has been in. More than 90% of its portfolio is based in the US with just a smattering of companies elsewhere.
Incidentally, Spy has come had a number of conversations about AI recently, in particular with private equity investors who can’t get enough of the stuff. One PE manager told Spy investors were falling over themselves to throw money at companies with even the faintest whiff of AI in their prospectus. Spy could not help be reminded of the immortal line from Monty Python’s Galaxy Song, “And pray that there’s intelligent life somewhere out in space, ‘Cause there’s bugger all down here on Earth!” Perhaps the techies will prove those iconic British comedians wrong.
These days everything needs a gimmicky brand, even government budgets it would seem. Singapore recently had a “Solidarity Budget” and this week delivered another one (it’s 4th of the year) which it named, with a certain panache, the “Fortitude Budget”. How much longer before we get the “Saving us from utter doom budget”? Hong Kong could learn a thing or two. Perhaps Ms Lam could give us the “Don’t Panic Budget” or the “It’s Going To Be Alright Budget”. May Spy, humbly, suggests, she should avoid the “Increased Security Budget”.
Hat tip to maverick Elon Musk. He has earned his performance-based bonus of $700m for keeping the stock at a market cap above $100bn. This must be galling for his myriad detractors.
Until next week…
