Spy has taken advantage of this week’s Dragon Boat festival holiday to escape the city heat and retreat to the tropical island of Phuket, enjoy some cold Singha beers and ignore the humdrum markets. Resting under a palm tree with his Panama hat covering his eyes, thoughts of wealth management are far away…his musings may be shorter than usual this week.
Everybody is looking for someone (or something) to blame for this year’s anaemic stock market performance. China is culprit number one in Asia, Brexit if you are in Europe or the UK and The Donald if you are stateside. Spy thinks it is more prosaic than that – overcapacity, plain and simple. Strolling along the white squeaky sands of Karon Beach, Spy is overwhelmed by the number of people all selling the same thing: t-shirts, beer holders, sun cream: hawker after hawker, the same goods chasing the same limited consumers. That’s a microcosm of the world – too many undifferentiated products looking for a buyer. So, too, with our funds industry. Many of the products look identical - even the top ten holdings are often interchangeable. If you are looking for a solution, you won’t find it in Spy’s beer-clouded thoughts, and you probably won’t find it in a lecture by an MBA student who has studied what everyone has studied too. It is going take more thought that that.
Which funds are having a good run this month? Glancing over ANZ’s top performing funds list, Spy gets the feeling biotech and tech itself are back in favour after a dismal start to the year. Franklin Templeton’s Franklin Biotechnology Discovery Fund A (acc) USD is up 8.49% in the last month, while Fidelity’s Global Technology Fund A EUR is up 7.96% and Henderson Global Technology Fund is up a 7.59%. All very impressive, unless of course you look back to the start of the year and realise that even those results are not enough to make a single one of those funds positive year-to-date. This investing lark, not easy, is it?
When Spy is on the beach, he often asks himself, what is the worst performing sector for funds available in Asia over the last ten years? The first guess would be energy, the second commodities. Both are wrong. It is emerging Europe, with a sector average return of -3.78% over the last ten years, according to FE's database.
Legendary investor, George Soros, is “getting hands on” again according to several reports, including one on Bloomberg. And what is he investing in? Gold, and plenty of it. He has been buying the miners, the ETFs and anything else he can get his hands on. Sounding a note of gloom, “the man who broke the Bank of England”, is shorting stocks too just for good measure. Soros is arguing that negative rates are doing the world economy untold harm and he is preparing for trouble. Is this this the ravings of a past it, paranoid old man, or years of experience being brought to bear with excellent foresight, wonders Spy?
Spy thinks Blackrock’s blog nailed it this week with insight from Russ Koesterich, head of asset allocation for Blackrock’s Global Allocation Fund, who was trying to work out whether consumers will spend: “Income matters more than confidence. Pay less attention to what consumers say and more to what they’re earning. The best predictor of household consumption is income growth, with wages being the most important component of income. Historically, changes in personal income have been the biggest driver of changes to retail sales. Surprisingly, consumer confidence has had a much weaker relationship with retail spending. Outside of the 2008 recession, the level of consumer confidence has told us very little about spending. The lesson being: Consumers will spend if their income is rising, regardless of how they answer polls.” Too true!
Finally, Spy’s favourite quote of the week, courtesy of ZeroHedge, “The greed of the government can never be overstated”. Understand and accept that truth and your life will be a whole lot easier.
Until next week, when Spy will back in the real world, away from the palm trees and coral waters…