Spy was mournfully looking at his alcohol-free sparkling water with lemon slice last night; the dull drink the result of Spy’s domestic commander-in-chief having placed him on a strict diet for the foreseeable future until his blood pressure comes down...tough times indeed! Apparently, that sparkling water is going to be more expensive than oil soon, if the doomsters are correct. Spy takes solace in the fact they seldom are.
Digging in his archives, Spy finds a report from May 2008 in which Goldman analyst, Arjun N. Murti makes a call for imminent $200 per barrel oil. Since that prediction, oil has gone below $33 twice and back above $100 in the intervening cycle. Spy thinks it is Malthusian to think the line of anything, let alone oil prices, is straight. When prices are high, look for cheerleaders to call for more gains; when prices are low the bears will growl their apocalyptic scenarios. Remember, the trend is your friend, except when it isn’t.
Speaking of friends, who needs enemies when we have friends like these? Spy reckons every private bank and wealth manager in town must be annoyed with J.P. Morgan and RBS with their ultra-bearish calls this week. “Sell everything” and “Sell the rallies” does not much confidence make, and is probably making investment councillors, fund selectors and CIOs as confused as ever when you have Goldman’s veteran analyst Abbey Joseph Cohen calling for investors to buy and ignore “this emotional market”.
At least some firms are blatantly admitting their confusion in this peculiar start to the year, notes Spy. Highly successful London-based hedge fund, Nevsky Capital, distributed in Asia by Peak Capital, admitted it was closing down this week. For a fund that was making 18.4% average annual returns since 2000, throwing in the towel must come as a shock to its loyal supporters. Nevsky’s final newsletter to investors did contain several eyebrow-raising assertions, including, “Currently stated Chinese real GDP growth is 7.1% and India’s is 7.4%. Both are substantially over stated. This obfuscation and distortion of data, whether deliberate or inadvertent, makes it increasingly difficult to forecast macro and hence micro as well for an ever growing share of our investment universe”. The newsletter is worth reading in full.
Columbia Threadneedle has named Jon Allen as head of institutional sales for Asia-Pacific and has poached Dennis Quah from Amundi to be head of wholesale distribution for Southeast Asia. APAC chairman Raymundo Yu mentioned a number of hires the firm has made recently, “despite the volatile and challenging market conditions...” The Spy has found at least one optimist!
Spy has been wondering how to get the commander-in-chief to unlock his drinks cabinet. Perhaps the gift of a Hermès Birkin bag is the answer? According to analysis by Baghunter, a Birkin has outperformed the value of the S&P 500 and gold for the last 35 years (even accounting for inflation) with a 14.2% per year return versus 8.7% for the S&P and an awful -1.5% for gold. The problem is the six-year waitlist for the bag, if you can get on it…Spy can’t wait that long for a glass of cold Chablis, no matter what his doctor thinks.
Aberdeen’s recent woes are too familiar to recount, but Spy is reminded of why Aberdeen was so successful, particularly in Asia, in the first place and why there is every reason to believe they will be again. Hugh Young’s folksy and sensible wisdom is captured in a booklet called “Hugh Young’s Ten Golden Rules of Equity Investing”, which is worth reading again at times like these.
Hugh’s Golden Rules:
- [Consider] treatment of minority shareholders
- Remember that companies are about people not assets
- Balance sheet strength is critical
- Understand what you’re buying
- Be wary of the overambitious
- Think long term
- Benchmarks are measuring devices, not portfolio construction tools
- Take advantage of irrational behaviour
- Do your own research
- Focus on industries in which it is possible to have a sustainable competitive advantage
Spy’s spies have seen the first evidence of Manulife and DBS’s recent love affair. Supposedly, Manulife’s $1bn distribution deal with DBS is going to “secure a safer, better future” for all of us. No mention of how Manu will earn back its substantial dowry, Spy notes.
AXA IM is all over Hong Kong on buses and tram stops promoting their property fund.
NNIP is still doing its best to influence UBS under Raffles Quay.
Finally, Spy thinks there might be some wisdom in this internet meme doing the rounds….
Until next week...