“But nobody pays for anything in Bitcoin!”, opined Spy to a digital assets fund manager in New York this week over a Teams call, arguing that its utility it still wanting. “Have you heard of Gresham’s Law? It states that bad money will always drive out good money. When central bankers or authorities debase their money, people smell it a mile off and act accordingly. The Roman leaders learned this the hard way. They “clipped” their coins and reduced the amount of silver in the denarii. People quickly hoarded their “old” silver coins and spent the less valuable ones quickly. This is what you are seeing now: people are not spending their gold sovereigns or their Bitcoin but they will happily hand over their dollars, pounds or euros.” Point taken, says Spy.
Another week, another AI-driven ETF for investors to get excited about; the managers certainly are. According to the breathless press release, “We are excited to partner with CORE16 to bring the CORE16 Best of Breed Premier Index ETF (BOBP) to the US market,” says J. Garrett Stevens, CEO of Exchange Traded Concepts. Equally, South Korean firm, Core16, says, “With great enthusiasm, we announce the introduction of the CORE16 Best of Breed Premier Index to the US market.” With all that excitement and enthusiasm, Spy ploughed on to learn that BOBP is “a systematic index built to identify optimal buying and selling points within US large-cap equities…The ETF seeks to track the index, which aims to identify 50 securities with favourable near- to medium-term capital appreciation potential based on their equity skewness.” Which apparently means “likely to go up”, since you ask. It all sounds terribly exciting; Spy will watch this space with enthusiasm, too.
Nvidia has settled market nerves this week with stellar results and cemented itself as the world’s most valuable company. Jensen Huang, the CEO, spoke total sense this week, reckons Spy. “The question is not whether China will have AI – it already does. The question is whether one of the world’s largest AI markets will run on American platforms…AI export controls should strengthen US platforms, not drive half of the world’s AI talent to rivals.” Trump and his export-control minded policy makers should take note. Huang also added, “The era of robotics is here. Billions of robots, hundreds of millions of autonomous vehicles, and hundreds of thousands of robotic factories and warehouses will be developed.” The future is unfolding, fast.
Active managers are finally having a good year, according to Goldman Sachs. 50% of large-cap US equity mutual funds have outperformed their benchmarks so far this year. That’s a significant improvement over last year’s disappointing 29% and well above the long-term average of 37%. If this trend continues, 2025 could rank among the strongest years for active management in the past 20 years. Notably, 67% of large-cap growth funds are outperforming their indices, compared with 46% of core funds and just 38% of value funds. Does this make an argument for active instead of passive? Detractors might argue: a stopped clock is right twice a day, reckons Spy.
How much money are the top ten ETFs by assets managing? It is a whopping $3.46trn. These funds accumulate money monthly as the retail investors and institutions alike allocate with simplicity. Using simple maths on the expense ratios, Spy calculates that these ten gargantuan funds generate less than $2bn in total fees. In asset management, having a fund that one can actually charge a decent fee for, is the industry’s holy grail, believes Spy.
It was Ferris Bueller who said, “Life moves pretty fast. If you don’t stop and look around once in a while, you could miss it.” On Thursday afternoon, the press was full of the news that Trump’s tariffs had been put on hold by a judge, suggesting he had used the wrong legislation to implement them. Within a few hours, another judge had decided the tariffs could remain in place during the administration’s appeal. Markets see-sawed as they digested the news. The British monarch, Henry II, nearly 1000 years ago reputedly said, “Will no one rid me of this meddlesome priest?”. Spy would imagine Trump feels the same about judges.
Spy is used to hearing fund managers talk about eliminating risk. Wealth managers do the same. Yet, the reality is, that life is a risk. It was a risk the day you were conceived, the day you were born, the day you took your first step. Eliminating risk and having a risk-free life turns out to be no life at all. For Spy’s money, we should be talking about embracing risk and live a little. This is as true with investments as it is for life in general.
Fun Friday fact: Currently, nine American companies boast a market cap exceeding $1trn: Microsoft, Nvidia, Apple, Amazon, Google, Meta, Tesla, Broadcom and Berkshire Hathaway. Ten years ago, Apple held the title of the largest US company, with a market cap of a mere $750bn.
Spy’s quote of the week comes from Paul Newman, “If you’re playing a poker game and you look around the table and can’t tell who the sucker is, it’s you.”
Until next week…
