Diary of a Fund Manager - All in - 4.5.2021

In this week’s Diary, more news from the business world and in particular some extraordinary results from the world’s largest companies. Another huge stimulus package from the new US administration and the blurred line between politics and entertainment.
Those tracking indices could have given last week a miss as the averages that we use to describe financial markets continue to dance on the pinhead of little change. Beneath the surface, however, the quarterly results season not only kept analysts working late into the night, but more importantly illuminated the way things are in this pandemic-affected world. For the record, equities ended the week mixed with this side of the Atlantic doing slightly better than over there, bonds edged fractionally higher, gold was down and the US dollar unchanged.
But what a week it was. Not content with two $2 trillion packages designed to aid the US economy, the new US President announced a third, this one designed to help American families. Tax and spend policies designed to flatten the peaks and troughs of inequality have been tried before, but nonetheless the ambition is breath-taking. With control of the Senate, House of Representatives and the White House residing with one party, ‘sleepy Joe’ has woken up in a big way. Given that this ownership of the system could be lost in late 2022 at the time of the mid-term elections, the political calculation seems to be that now is the time to be bold. Not that I am a poker player, but the phrase ‘all in’ springs to mind. Turning ideas into action will be a challenge with the end result hard to predict, but what I can say is that there will be global consequences far beyond who paid for a bit of Downing Street bling.
Notes form the business frontline cascaded in during the week. Those supplying materials to the building industry reported shortages and higher prices. McDonald’s has resorted to sign-up bonuses in an attempt to hire enough new staff, and fund manager Aberdeen Standard Investments generated huge amounts of free publicity by renaming itself Abrdn (pronounced Aberdeen). The rebrand is designed to make the company more modern, agile and digitally enabled. Watch this space.
The biggest stories of the week came from the technology sector giants commonly known as the FAANGs in pre-pandemic days and now perhaps once again. Whilst our attention has been elsewhere, these companies have become even more dominant. Not that we don’t know, because it’s what we do collectively, not what we say, that matters. Amazon reported 44% growth including advertising revenue +73% and video streaming +70%. Facebook revenue is up by a similar amount, whilst Alphabet (formerly known as Google) managed only a paltry 32%. Apple, currently the largest company in the world now with clearwater between it and Saudi Aramco, came out on top with +54%. Untroubled by being excluded from the FAANG elite, the Microsoft renaissance continued with earnings up over 30%. That these companies are on recognisable ratings dissociates them from bland talk of bubbles and comparisons with the 1999/2000 boom and bust. Concerns about regulation and taxation remain, but for another day. Monopolies, benign or not, are liked by investors.
All of which brings me to the line between politics and entertainment which is blurred at the best of times. In The West Wing, first broadcast over 20 years ago, the White House was populated by rational people working for a rational, well-educated and sensitive President trying hard to do the right thing. The Obama years showed that the real world is a lot tougher. Setting aside the darker story lines, House of Cards had a ring of truth to it when it focussed on the political trade-offs necessary to get things done in Washington, whilst the Trump years were beyond fiction. Fire & Fury by Michael Wolff was a bestseller as we grappled with the implications of government by reality TV.
Less well known was Siege, his follow up, which I have just finished reading. Now that President Trump is history, the chaos has become entertaining and, in some places, very funny. So far the Biden script seems to be cherry picking the best parts of The West Wing and House of Cards with a bias to the former. Whether he succeeds or not is for future episodes.
Remaining with entertainment, but also returning to the importance of observing what we do rather than say, it was interesting to note that 45 million watched the Oscars in 2015, but only 10 million this year. Rather like the comparison between tabloid newspaper sales and the more serious broadsheets, fair doesn’t sell as well as fun.

Written by

David Miller
Investment Director

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Winner, Outstanding Achievement – City of London Wealth Management Awards 2016