Weekend Reading #59
Photo by Plush Design Studio on Unsplash
What we're thinking.
Three little letters... ETF.
As we have said before (and will again), over the long term ETFs are a sensible way of accessing market returns at low cost. However, this past week has shown for the first time in many years that if you want the market return over long periods then you must also accept it over short periods.
It's all very well when markets are roaring upwards, but the flipside applies too, and fear is generally stronger than greed. Recall how ETFs focus on price rather than value? As a result, price discovery changes. This week’s cascading selloff shows what can happen when everyone rushes for the exit and only one-at-a-time can get through the door.
This thought reminded us of a post that we wrote back in September, The Cult of Passive Investing and the Case for Downside Protection:
"Passive is not quite the holy grail that it has appeared to be, nor ‘safe’ as the 10 year recent history would suggest to unseasoned investors. If you are worried about downside it’s not only delusional to keep your money in ETFs, it’s irresponsible. In life, you get what you pay for. In this case, it’s all the upside (as evidenced more recently) but also all the downside. If you want to be protected from the downside and capture a portion of the upside, then a proper hedge fund is for you."
Food for thought as markets continue on their wild rollercoaster ride. We cannot predict (a reference to this week’s newsletter!) what will happen from here, but a selloff of this magnitude means a plethora of opportunities are at hand, both long and short.
All this means we’re even more excited to launch our fund next month. We have received encouraging feedback and are looking forward to getting started after what seems like an endless preparation period.
What we're doing.
This week we’ve been travelling and meeting partners and investors in Singapore and Indonesia, where sentiment about life, in general, has been rather fluid. On the one hand, a feeling of calm has re-asserted itself with regards to COVID-19, although control measures, such as temperature checks, travel declarations and (for Singapore) quarantines and travel limitations, continue to be the norm.
On the other, the tumult in markets has left many investors distraught. For the first time (in a very long time) we were told that “at least hedge funds have a chance of surviving in these markets”. The complacency of the past decade in passivity, illiquidity and the mantra of “set it and forget it” seems to have fallen away.
We’ve seen it all, from margin calls, to questions about whether “this is the end, to doubts about private investments and the integrity of credit markets. The one silver lining that this week’s turmoil has brought is a refreshing reminder that markets take no prisoners and they are not for the faint-hearted.
What we're reading.
The tidal wave of Coronavirus content that’s breaking over our heads every day is near impossible to filter. Trying to find a signal in this amount of noise is tough, but we’ve done our best to curate a couple of solid sources that we’ve found of use this week.
One great resource is the John Hopkins Coronavirus Research Centre, which is providing an excellent source of truth. Their dashboard collates the statistics you need to keep informed and make decisions in your own life. Also, their daily COVID-19 newsletter is a good distillation of the meaningful strands of this rapidly-evolving story.
We hope and pray that the impact of coronavirus is short lived. But the long term ramifications and changes that it forces upon our society will be interesting to measure. As Seth Godin pointed out this week, one outcome from the coronavirus outbreak could be that it’s the curtain call for handshakes. As Seth says:
“Hat tipping (or perhaps an informal Vulcan salute or simply a smile and a wave) might be making a comeback.”
The sad end of a fine tradition? Or a healthier future and no bad thing?
It’ll be interesting to see – god willing, once this blows over – which of the temporary measures we’re taking today gain permanence in our lives. Even before the outbreak, it was fair to say that society could improve elements of personal hygiene, such as hand washing. Coronaviruses aside, countless other viruses, such as common flu, MRSA and norovirus, are spread thanks in no small part to our laziness and poor hygiene. Perhaps one thing we’ll take from this crisis is that we need to look after ourselves and each other better by paying better attention to some fundamentals. Hand sanitiser could well become a part of everyday life. The chorus of Staying Alive might be sung by those standing at bathrooms sinks all over the world (or Happy Birthday twice as all the kids have been taught now at school here in the UK). Handshakes could be replaced by namaste greetings, fist bumps, foot taps and hat tips. And that will be no bad thing.
Away from the maelstrom of Coronavirus, this week has been a good one to try and find a little escapism. It has been all too easy to chain-listen to relevant podcasts, mainline Twitter or spend hours in the (rapidly emptying) aisles of a local supermarket panic buying tinned tuna and jarred pesto. We all need a break.
This week, we found a little respite in the pages of Sir Michael Dobbs’ original version of House of Cards, the 1989 political thriller that inspired the award-winning Netflix series of the same name. Set in and around a dark and brooding Westminster, it tells the story of Francis Urquhart, the Conservative Party’s Chief Whip, and his plan to become the leader of his party and Prime Minister. Sound familiar?
The novel has real power and magnetism, likely because Dobbs worked for the Conservative Party under PM Margaret Thatcher in the run-up to the 1987 General Election. Hence, the anecdotes dotted throughout the novel and the world that Dobbs creates feels so real because it is likely based firmly on the truth of Thatcher’s government.
It’s a gripping and fast read, more satisfying we must say than Netflix’s over-stylised version, and well worth an afternoon of your time if you’re trying to hide away from the news cycle.
What we're watching.
Travel bans, flight cancellations, self-isolation… Whilst there are way more important things to consider right now, holidays are on the back burner for the foreseeable future. And, if like us, you love to travel and eat well whilst you do it, dreaming about where you might escape to for a gastronomic adventure once we’re through the worst of the pandemic is an exciting proposition.
To help, check out a wonderfully uplifting Netflix travel-and-food show, Somebody Feed Phil, where presenter Phil Rosenthal (the writer and creator behind hit sitcom, Everybody Loves Raymond) travels to some of the world’s finest cities, on the hunt for the most delicious food. Venice, Ho Chi Minh City, Bangkok, Lisbon, Mexico City… watch where Phil goes and get booking for later this year.
Whilst the format is familiar – a smiley presenter travels the world and tells you how delicious the food is – what isn’t familiar is the way Phil presents it. His enthusiasm feels 100% genuine. He is genuinely funny. He seems a terrifically nice guy who seems to bring a smile to the face of everyone who he meets along the way.
The binding ethos for the series is refreshing and uplifting, too, as Phil sets out to show how food, whether it’s a sit-down meal or a roadside bite, is the best way to get to know a country and a people, learning about cultures, traditions and family. It’s this heart and warmth at the centre of the show that makes it such an appealing watch right now. Inspiration for your next holiday and something to lift your spirits.
What we're listening to.
There are some excellent podcasts being produced on the subject of Coronavirus and, as we all try to stay calm, informed and learn more about how we should be behaving, distilling the facts from the fiction is all-important.
The pursuit of the truth is what Sam Harris does on his excellent "Making Sense" podcast series and this week’s episode on the coronavirus, titled Early Thoughts On A Pandemic, is an outstanding summation of where we are with the virus and where we are headed. Sam and his guest, Amesh Adalja, an infectious disease specialist at the Johns Hopkins University Center, offers clarity, foresight and, we must admit, no little reassurance. It’s great minds like these that we must listen to in times like these.
Given the frenetic pace of this week, this weekend must be an opportunity to recharge. Whatever you do for enjoyment, do it. However you find rest, do that too. One way to relax is to listen to an hour or two of Nils Frahm, a German musician and producer, who’s ambient piano-led music is very welcome medicine.
Frahm’s 2012 release, Screws, is his simplest and most powerful album. Using a piano only, it is a beautiful half-hour meditation that will transport you far away from the troubles of the world. Best listened to via a pair of high-quality headphones.