In politics and big corporate life Spy has become inured to incessant euphemisms and doublespeak. “Rightsizing” instead of “layoffs”, “socialise the idea” instead of “get some more opinions”, “the Inflation Reduction Act” instead of “massive government subsidies” and so on. While enjoying a chilled glass of Snake & Herring Tough Love Chardonnay from Margaret River last night, Spy reflected on possibly the most ludicrous corporate babble yet that came from Elon Musk’s SpaceX yesterday. “While the rocket successfully launched and its Super Heavy booster was recovered, the upper stage experienced a ‘rapid unscheduled disassembly’.” That rapid, unscheduled disassembly was, err, a catastrophic explosion.
Spy has always been intrigued how, over time, the stock market is a place that can reflect society’s big debates, passions and preferences. The advent of the ETF has made it easier than ever to reflect a particular view. The end of February saw another religiously inspired strategy come to market. This time it is the Jewish faith in the spotlight, amid a rise in antisemitism around the world. The fund is named the JLens 500 Jewish Advocacy US ETF. It has chosen the ticker “TOV”, which is the word for ‘good’ in Hebrew. JLens is a non-profit that “empowers investors to align their capital with Jewish values and advocates for Jewish communal priorities in the corporate arena”. London has been home to the iShares MSCI World Islamic UCITS ETF since 2007 for the Muslim community. Meanwhile, the Christian-themed, Inspire 100 ETF, with the ticker BIBL, has been trading in New York since 2017. Each to their own, thinks Spy.
It is hard to be a contrarian; it means running in the other direction to the crowd, reckons Spy. This insight piece by Fidelity International’s Andrew Oxlade, caught Spy’s eye this week. “There is a potential hotspot of contrarian opportunity among car makers. Most have been a poor investment in modern times bar one: Tesla. Devotees believe the superiority of its electric cars could wipe out old world rivals. Mercedes-Benz, which has made cars for nearly 140 years, a brand so premium that it prompted singer Janis Joplin to ask God for one, is one of those “dying” brands, according to this story. Throw in the threat of US tariffs on German car makers and you have the perfect storm. The valuations reflect these highly polarised stories. Tesla shares stand on a stratospheric P/E ratio of 133, having recently risen above 200. Mercedes shares trade on P/E of 5.5. Tesla offers no yield; Mercedes is forecast to pay 9%. The valuation inspired me to buy Mercedes shares last year.” Spy has no idea whether this trade will work out, but the extreme difference definitively makes one pause for thought.
The world is a topsy-turvy place, muses Spy. Currently, free trading America is throwing a tantrum and upping trade barriers left, right and centre and, in contrast, notionally communist China, the opposite appears to be happening. Matthews Asia reports that “a February 17 speech by President Xi to China’s leading entrepreneurs may be the confidence-restoring step we’ve been waiting for to revitalise domestic demand. Addressing an audience which included Alibaba’s Jack Ma, as well as leaders of DeepSeek, CATL, BYD, Tencent, Xiaomi, Huawei and Unitree Robotics, Xi is reported to have said, ‘It is time for private enterprises and private entrepreneurs to show their talents’ and that his government ‘must resolutely remove various obstacles’ faced by private firms.” Bring it on, says Spy.
S&P Global has been tracking the performance of fund managers against their benchmarks and released its annual SPIVA scorecard. Unsurprisingly, once again, large cap players have lagged in 2024. According to the firm, “65% of all active large-cap US equity funds underperformed the S&P 500, worse than the 60% rate observed in 2023 and slightly above the 64% average annual rate reported over the 24-year history of our SPIVA scorecards.” What is fairly damning is the difficulty of outperformance over the longer term: “Across asset classes, underperformance rates typically rose as time horizons lengthened. At the one-year horizon, seven of 22 equity categories and 11 of 16 fixed income categories saw majority outperformance. Over the 15-year period ending December 2024, there were no categories in which a majority of active managers outperformed.” Ouch!
Notwithstanding the report above, Ninety One makes a rather passionate argument for why active is the right approach in emerging markets. The manager points out, correctly, in Spy’s opinion, “EM stock markets tend to have a larger proportion of retail investors, who are generally more reactive to short-term news and speculative trends. This dynamic often leads to exaggerated price swings, as seen during the 2023 rally in small-cap stocks in China, where retail speculation caused extreme volatility before a sharp correction.” Being in some passive vehicle is going to mean investors are subject to the capriciousness of the volatile crowd.
The IPO market in the US is certainly rather lively, notes Spy. There have been 57 IPOs on different American exchanges already in 2025. As of the 6 March, this number is 72.73% more than at the same time in 2024, which had only had 33 IPOs. Whether anyone has taken any notice of Skycorp Solar Group, LZ Technology Holdings, Webus International or Aardvark Therapeutics to name but a few, is anyone’s guess.
Spy’s quote of the week comes from former US President, Thomas Jefferson, “Be assured it gives much more pain to the mind to be in debt, than to do without any article we may seem to want.” Some wisdom never gets old.
Until next week…
