Spy was a drinking a cheap glass of red wine (if a glass of wine can ever be considered cheap in Hong Kong) contemplating the frenzy that is Black Friday: the annual homage to over-indulgent consumption and vast sales. This year, retail sales are expected, in the US, to reach $10.8bn but that is dwarfed by so called “Cyber Monday” when sales are anticipated to reach a whopping $13.2bn. No doubt some sensible souls have waited patiently to snap up a bargain on some much-needed item, but Spy can’t help but feel that yet more worthless junk will be filling up people’s bulging cupboards and soon their off-site home storage facilities, too. It is a triumph of marketing and salesmanship but is it what people really need? Ah, there’s the rub.
Is anyone sick of the AI story yet? Apparently not at First Trust Advisors. The manager has just launched their First Trust Bloomberg Artificial Intelligence ETF on the NYSE. Spy has to tip his hat to the manger for finding a few hard-to-find companies in their top ten. For example, such mysterious firms as Nvidia, Amazon, Microsoft, Alphabet, Meta, Palantir Technologies and Oracle. Spy really needs to look those ones up and see what they all do! More than 45% of the exposure is to these major players who are already probably represented by most portfolios. Perhaps another AI fund truly is needed but it is hard to make the case right now. According to First Trust, “While it’s challenging to pinpoint the exact winners and losers at this early juncture, the fund aims to strike a balance between focused selectivity and diversification.”
Competition is a wonderful thing, reckons Spy. It keeps people, firms and countries nimble. Hong Kong seems to have got the message that it needs to make itself more attractive after a few years of poor perception. A proposal from the government this week has suggested that tax is one area it plans to keep competitive. For example, it has indicated that private equity funds, hedge funds and certain private investment vehicles targeting the super wealthy could be exempted from tax related to crypto and private credit investments. This is all designed to keep Hong Kong as a leading offshore hub. Bring it on, says Spy.
Spy loves the froth on the top of a pint of beer, but when the frothiness extends to markets, it may feel like a hangover is coming sooner rather than later. Take a look at Exhibit A. The Direxion S&P 500 Bull 3x ETF is gathering assets at a very healthy pace. Very healthy. Punters are throwing money at the tripled-leveraged strategy like teenagers in a casino with dad’s credit card. Leverage is always fun on the way up. It is the way down that things get scary.
Elon Musk’s James Bondian empire of Tesla, SpaceX and Neuralink gets all the buzz over self-driving vehicles. In a rather healthy change of narrative, China’s Pony.ai has just listed its ADRs on the Nasdaq, bringing the innovative Chinese firm to the attention of a much wider audience. Pony has become a leader in China of autonomous vehicles and already has cars, taxis and vans driving themselves everywhere. According to the firm, “Pony.ai is among the first in China to obtain licenses to operate fully driverless vehicles in all four Tier-1 cities in China (Beijing, Guangzhou, Shanghai, Shenzhen) and has begun to offer public-facing, fare-charging robotaxi services without safety drivers in Beijing, Guangzhou and Shenzhen.” The future is arriving all around us.
Amundi, along with plenty of other managers, has recently put out its investment outlook for 2025. Spy was pleased to see that the French giant remains positive on Asia and emerging markets, “Robust and broad-based growth, with a substantial premium, still favours emerging markets. Asia will continue to be a major driver of growth.” With war raging in the Middle East, Spy was surprised to pick up on this snippet: “16 out of 20 oil-shocks since the 60s only had a temporary effect on supply, with exceptions in the late 70s and early-80s”. This is what Spy observes time and time again – geopolitics, seldom, has much of a long-term effect. Companies find a way around the problem.
The EV revolution in China is resulting in some truly staggering changes. According to UBS, Chinese fuel consumption peaked five years ago and is now dropping by 3 to 5% per year and is expected to do something similar all the way to 2030. Considering that China accounts for nearly a fifth of worldwide demand oil demand and petrol a quarter of that, the dynamics are going to be dramatic.
Spy’s quote of the day comes from Charlie Billelo, “To reap the biggest rewards you must be able to take the painful hits and keep moving forward. Which is why the ultimate superpower in investing is being good at suffering.” Spy may just print this and stick it on his study wall.
Until next week…
