Spring Bounce
On losing streaks , Cliff's beef , joy at work, regret and chasing the Bond King. 🌼
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On our podcast this week we spoke to "rock star" retirement economist Allison Schrager who is annoying everyone by saying Americans should be more like Europeans, contemplating why the biggest risk is risk-free and trying to think of a good title for her new book ("An Economist walks into a brothel" is hard to top ... ) web | apple
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Hello!
What a pleasure it is to be seeing a little sun these days (UK readers) and those early days of spring. 🌼Bellisimo! It seems to me it's been a good couple of weeks for Italians breaking losing streaks : the mens rugby team breaking a 36-game run of 6 Nations tournament defeats (cue Italians celebrating the way Italians do). and we had Scuderia Ferrari F1 team snapping a 45 race winless streak in Bahrain's season opener with Charles Leclerc topping the podium. (more on that below). A good lesson on losing streaks: they can go on for longer than seems feasible, but they do end one way or the other.
📈First, markets: things have been moving out there, and we’re nearly at the end of Q1.
Our favourite equity indices have all seen a little bounce from the March 14 low points, now looking down just 6% for the year, a whisker off all time highs in the big picture, and up slightly since the Russian invasion of Ukraine almost exactly a month ago. Odd? Yes. but then it doesn’t have to make sense. John Authers is on hand with some potential explanations (market sensing market-friendly resolution, market focusing on other things eg Fed, commodities, etc) - none totally convincing.
Now do bonds.
People aren’t used to losing money in bonds, but they have quietly been in their largest drawdown since 2013. Why? because interest rates, that’s why. What’s happened this year in bonds is basically what’s been predicted each year for about the last 8 years, but it finally happened though.
Drawdowns of common corporate and government bonds ETFs:
The US 10 year is up almost a full percent since the start of the year, the UK 10-year is up less but is threatening to hit levels last seen in 2016.
Q1 active manager performance is going to be quite something, from what I’m seeing at the moment global equity managers could be anywhere between up a couple percent to down 20%, and multi-asset performance could be anywhere from -10% to +20%. The last few days will have put a little more shine on some of the worst performers though. It’s really only the energy sector that’s up this quarter, banks and industrials are flattish. Tech and comms are at the bottom performance wise.
Berkshire FTW
The indicator of the moment seems to be the Berkshire Hathaway / ARKK ratio. It’s the new value/growth indicator. These two pretty much bookend the current performance landscape with Berkshire up 17% YTD and ARKK down 30%.
Three things I'm reading
Cliff’s beef 🥩
He doesn’t mince words. It’s been a bad fortnight for the London Metals Exchange (and many of their clients), I’m no PR expert but bring publicly labelled as thieving slimeballs and told to lawyer up by one the the most promient hedge fund managers in the world isn't a great look. The issue was the ex-post cancellation of a whole trading session's activity in order to save Tsingshan - a mega-short Nickel trader (or their banker JP Morgan, we're not sure) (Bloomberg article). Pass the popcorn though, cos this sh** is box office...
Zoom out with Credit Suisse 🔭
If all this Q1 markets talk seems a little short-termist the ideal antidote to all of that is provided by the annual Credit Suisse yearbook. One of the greatest research pieces in the industry and (I'm convinced) one of the most underappreciated. This year: update on stocks in times of inflation (no, they aren't a hedge, but they do perform reasonably well in most environments other than the most extreme). Global diversification isn't what it used to be, but you probably still want it, and bad news for stocks in rate rising cycles). And stock bond correlations: used to be low but positive, been negative for last 20-ish years, could be turning?
Bringing back joy at work [HBR article] 🤩
What brings you joy at work? Simple question really, maybe not asked enough. We've been asked ourselves this at LCP recently, helped by the brilliant Rebecca Newton . Some great insights: Joy doesn’t equal fun. Joy can come through adversity. Joy can come from playing to your strengths (build them intentionally into your day), doing what energises us, confiding and connecting with trusted colleagues. Joy is social. Joy is linked to professional growth and better relationships.
Social isolation and inauthenticity are big inhibitors of joy.
Two things I'm listening to
😞Regrets … we’ve had a few: Dan Pink has a new book out all about regret, and he's doing the podcast circuit. It's good. He has data. He reckons we tend to shy away from regret ("no regrets!"), but we should do the opposite and embrace our regrets, they point the way to the good life in a way that nothing else does. We all have the same basic regrets, he puts them into 4 categories: foundational ("if only I'd done the work" .. exercise, saving, studying) , boldness (" if only I did ... "), moral (right thing or wrong thing: bullying, infidelity) , connection regrets (the biggest category: "if only I'd reached out or kept in touch") Personal agency is important to regret (it's our fault) and that's why regret hurts so much, but is also so powerful.
👑 Chasing the bond King - the Compound and Friends are out with a cracker speaking to author Mary Childs on her 7 year project to write a book about the one and only Bill Gross. This story touches on lots of fascinating areas: content and brand (before it was a thing), power, ego, toxic cultures, succession, insecurity, being early on big trends as well as being a genuine innovator.
I love me a bit of investigative journalism but how great that we live in an era where you can instantly access meticulously researched projects on some of the biggest names in investing and discover decades of history. (Jim Simons, Trillions, Neil Woodford just to name a few). these should be essential reading for anyone in the industry. Also how interesting to see the toxic cultures in many of these “success” stories getting called out more clearly, wouldn’t have seen that a few years ago.
Of course the biggest question is who is playing Gross in the Netflix adaptation. Steve Buscemi, Willem Defoe and even Rob Pattinson all mentioned. I'll let you be the judge.
Bonus froth
The new season of F1 has started already and I don't know how I feel about it. As a Lewis Hamilton fan I don't think I've got over what happened in last season's decider in Abu Dhabi (partly why I haven't yet engaged with season 4 of drive to survive... also not hearing good things about S4, loved S1-3) ... but then again if Lewis has put it behind him then I suppose we all can. There are lots of new rules this year - standardised body components, proper enforcement of the some co,mplex aerodynamiccy stuff. There also running on e10 fuel (mixed feelings - genuine progress or just a marginal gesture?), F1 has a 2030 Net Zero target which seems ambitious to say the least from where they are, but if anyone can innovate their way there ...
And finally …
One thing to brighten your day (sorry welsh rugby fans)
re-live that Capuozzo/Padavani gamebreaking play with Italian commentary (sound on, but not too high)
Have a fantastic end to the week and if you liked this, please subscribe and recommend to a colleague!