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Global Matters Weekly – Experts’ view on China

When you invest with so many high-quality fund managers, it’s only natural to pick their brains every now and then. We have spoken to a few of them and collected their thoughts on the current situation in China. As a background, around nine months ago, in November 2020, Ant Financial (Alibaba’s fintech business) was ready to break records with a $37 billion IPO and an estimated valuation close to $300 billion. However, the Chinese regulators pulled the plug on it, officially because of risks around financial security. Since then, the clampdown has extended more broadly, reaching the wider internet and e-commerce sector, property developers, the ride-sharing company Didi Chuxing and the entire private education sector. Markets and more broadly investor sentiment has been under pressure and Chinese stocks are now trading at around 30% below their February peak.

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Global Matters Weekly – Jassy: Jeff’s Fresh Prince

You will likely be aware that last month Amazon founder, Jeff Bezos, was blasted to the edge of space aboard New Shepard, a rocket designed to give fare paying customers an out of this world – and out of their seats – experience. His flight came just days after that of fellow billionaire businessman Sir Richard Branson whose company Virgin Galactic is also opening up a commercial venture. Surely Elon Musk can’t also resist the ultimate ride? What fewer readers will know is that just a few weeks before Mr Bezos’s pioneering flight he stepped down as CEO of Amazon, handing the reins to Andy Jassy, a 23-year Amazon veteran who in 2003 founded Amazon Web Services (AWS), its cloud computing business, and has grown it into arguably the biggest profit centre under the Amazon banner today. These two events were not directly linked, and Mr Bezos stays on as Executive Chairman, but it does shine a light on an important aspect of business operations and corporate governance: succession planning.

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Global Matters Weekly – Value is in the Eye of the Beholder

“Beauty is in the eyes of the beholder” is a phrase I’ve often found myself replying in retort – we are sadly not all blessed with looks that appeal to the masses! The concept of beauty has been a topic for debate preceding Christ and almost certainly precedes value investing, but I would suggest that it is not just beauty that is in the eyes of the beholder, but also value.

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Global Matters Weekly – All eyes on the US

“Should you be over or underweight the US equity market?” is surely one of the most asked asset allocation questions of the past 5-10 years. Over the 10 years to June end in US dollar terms, the US equity market outperformed the UK, Europe and Japan markets by 255%, 202% and 194%, respectively. There are good reasons for this outperformance. Most recently of course, the technology giants that dominate the US equity index were the chief beneficiaries from lockdowns as we all became dependent on, and some maybe addicted to, their services. However, it really has been a trend since the financial crisis that US companies have delivered sustained stronger earnings growth and better profitability than their developed market peers.

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Global Matters Weekly – Value Investing Redux

Having been in consistent print since its first publication in 1949, Benjamin Graham’s ‘Intelligent Investor’ has, along with ‘Security Analysis’, provided the philosophical foundation to thousands of successful investment practitioners over the decades. However, as Mark Twain said, “A classic is something that everybody wants to have read, and nobody wants to read”.

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Global Matters Weekly – A black swan passes by

As a casual football fan and long-suffering supporter of the English national team, there was only ever one topic I could write about today. No, not the merits of the latest ECB strategy review (perhaps one for another time) but instead last night’s dramatic European Championship Final between Italy and England. Given this was the first time the England men’s team has reached a final for 55 years, it’s been a pretty memorable tournament, despite them falling short at the final hurdle. Since their last footballing success, we’ve seen nine US bear markets, ten UK Prime Ministers and both multi-century highs and lows for US 10 year government bond yields. In that context, the prospect of victory at a major tournament looks like somewhat of a Black Swan event.

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Global Matters Weekly – Past performance is not indicative of future results

“Past performance is not indicative of future results” is a regulatory risk warning on most investment oriented material that everyone knows but not many people seem to actually implement into their decision making. A Fund Managers performance can dictate whether they become a hero or villain in the eyes of the public and the press. This then influences investment flows and ultimately determines whether the fund thrives or is liquidated.

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Global Matters Weekly – Patience is a Virtue

Patience is essential to daily life and even more so if you are parents to young kids. When I was a child, I was often told to “be patient”, which meant staying calm in the face of delay, frustration or adversity. We all have many opportunities in life to practice this virtue; being stuck in traffic, the ups and down of parenthood, or indeed, managing one’s investments. By understanding the importance of having patience, we can maintain our focus on our long-term goals, and not let short term noise push us into taking unnecessary action. Time in the market is better than timing the market, as they say, as it allows investors to benefit from the power of compounding, which Albert Einstein once referred to as the 8th wonder of the world.

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Global Matters Weekly – For what it’s worth

What is it worth then? This is a question investors should be asking themselves all the time. However, the true answer is not always obvious. There are many ways to approach it and there is of course an easy “short cut” to establishing an answer; the stock market price. However, relying on such a public pricing mechanism implies a high level of faith on efficient markets and to believe there is no such thing as “the madness of crowds”.

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Global Matters Weekly – This time may be different

“As violent as a mugger, as frightening as an armed robber and as deadly as a hit man.” Ronald Reagan’s caricature of inflation in 1978 reflects a degree of fear at the time about this pernicious thief that is largely absent amongst today’s policymakers. After several decades of low inflation, policymakers and investors have potentially become too complacent about the risks of higher inflation. Although there remains a wide range of potential outcomes in the coming years, we see a return of higher inflation as the biggest risk factor in markets; it would erode purchasing power, damage the real value of savings and wealth, and would have far-reaching implications for the construction of portfolios.

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