Ice cold ??????

Well hello folks! and welcome to what feels like the 400th day of January 2024 yet somehow we're still ... mid-month?

I went for my first proper run in a few months at the weekend (win!) hopefully a build up to some good events over the summer but since I've hobbled and shuffled around with some ridiculous muscle soreness which seems to only get worse each time. No pain no gain right? Oh, and we reckon our household last had a totally cough/cold-free day in something like October 2023 - anyone else getting that?? Those Oura readiness scores (we're big users) have been in a huge bear market for weeks.

Those puffy puffas and woolly scarves doing all the heavy lifting out there on the commute these days while the chunky knits are out for the Teams calls. Hope you’re all layering up and watching out for those icy patches today. Glorious morning though if you're out and about.

Right grab a coffee and let’s do this - slightly different format today

Markets mumble

Your stocks are down just a touch for the year, with emerging markets the big loser off around 6% continuing a bad few years for EM. Fixed income is worse with a solid bounce up in yields from the low points we reached at the end of the year continuing the remarkable see-saw in long rates of the last year. Bonds funds are down 3-7% so far.

Spot bitcoin ETFs are the big markets story with the approval finally coming through in the US and seemingly a sell-the-news event with the coin slightly down since (although massively up over the last 3 months and year). The most interesting thing for me was where the fees settled at - down at 0.2% for the challenger entrant bitwise, ishares is at 0.25% although there is some complexity around fee waivers in the early days to attract flows. That's what a bit of competition will do for you! The 2% being charged at Greyscale always seemed unsustainable.

Ideas that stuck

I like the "ideas that stuck" framework for reviewing the year and thinking ahead (be honest, out of the hundreds of ideas you were exposed to last year how many did really stick?), so in a change to normal formatting I'm going to talk today about ten ideas that stuck for me in 2023, and the big questions I think asset owners will be grappling with in 2024.

Here's the link to full piece

1. Drop the recency bias The world has changed post 2022 vs prior decade, but what's different, what's the same?
2. Keep it simple in investing when everyone knows everything

From JP Morgan's Jan Loeys, he thinks you only really need two investments. But what really are the consequences of "everyone knows everything" - others have argued today's noise just confuses the average investor

3. The cusp of history fallacy

Our brains break at the intersection of history and geopolitics, so we are always biased to think we're on the cusp of witnessing big change

4. Apply economics, not gut feel to ESG

From the work of Alex Edmans (link ) - just because ESG challenges existing models and rightly demands new ways of looking at the world, some existing thinking models are still relevant and give useful conclusions.

5. Confidence

From the work of Michael Mauboussin (link ). How often do we truly assess our confidence in our forecasts or outcomes? The author provides a usable framework to think about it.

Related: same authors wrote a brilliant piece on shareholder return including the concept of Present Value of Growth Opportunities

6. The much lamented decline of the UK

UK capital market declinism was much-covered in the year of the coronation. And not always well. Simon French's twitter thread was one of the more informed comment pieces I've seen.

7. Deep Time.

From the work of Jennifer Odell (book ). It's time away from the clock, in nature, zoning out, it's special, try to get more of it.

8. Our lives are in their portfolios

From the work of Brett Christophers (book ). What are the consequences of the creeping asset management ownership of some asset crucial to lives and livelihoods? A challenging read.

9. "It's ok to have opinions, not ok to behave as if they are correct"

-Howard Marks the GOAT of quotes to live by. 'nuff said

10. Reassess our relationship with profit

I didn't think a podcast by an England rugby legend would be among the most insightful things on economics I saw all year but here we are ... (podcast on web apple )

And in the year that looks set to be dominated by headlines on elections, geopolitics, AI and the olympics, the real questions I'm thinking about in 2024 -

1. Can US stockmarket exceptionalism continue?

Lots of arguments for and against. Is it priced for perfection here? The discount of non-US markets just keeps getting larger and larger (latest view from JP Morgan's guide to markets). Related: how is the market pricing AI, what happens if Apple launches the AI store? Do we care about market concentration?

2. Will Emerging markets perform?

A big laggard in last year's market rally and have been for the best part of a decade - partly because stock earning per share have gone nowhere. but what now. And a related point, how to even approach EM with China being such a big part. Interesting chart below (Schroders) showing that EM-ex China performed the same as World-ex US last year

3. Are we in a different inflation regime or not?

It sure seemed like it for a while there, but we could be heading right back down to target. It has consequences - high and volatile inflation demands different structural risk premia

4. What's the long-run level of interest rates?

Market wrestling with that question pretty hard in the last 6 months, matters for allocators. This is where things were on the 16th Jan from JPM

5. Have real assets adequately priced in the re-rating of cost of capital over the last 18 months?

Listed market discounts don't seem to think so.

6. Where are we in the credit default cycle ?

Corporate bonds have taken a back seat as government bond yields grabbed the headlines but spreads here don’t seem to price a recession or default cycle.

7. What is the long-run stock/bond correlation?

8. Has the pandemic permanently broken some of the dataseries used for forecasting?

9. Is Taylor Swift about to get married to Travis Kelce?

ok ok ... let's leave it there shall we?

Grab bag

What are we all watching right now?? Great to see Succession winning all the awards - some people still haven't seen it apparently! We've been into binging The Diplomat and more recently Fool Me Once (no spoilers please we're not there yet). I'm also stocking up the popcorn in anticipation of the Netflix 6-nations series coming next week.

Have you ever wondered how you could introduce yourself better, describe what you do, and your journey? Of course you have, we all have. You have to listen to the first 5 mins of this podcast with Stacy Havener and Daniel Crosby. It’s a 5-min master class in why we keep telling boring stories about ourselves and how it could be better.

Stay warm folks ... till next time