Spring ???? ??

Hi folks!

Happy World Book Day. We packed a happy little Spiderman off to nursery this morning but not before a minor breakdown over not being allowed "all the melons" for breakfast ... toddlers! Hey so we're already into March and just like that the daffodils are here, the evenings are drawing out, and England are about to beat Ireland in the rugby. Wonderful!

Had a rather busy week up in Edinburgh at the PLSA conference last week, if you didn't catch my earlier posts on it (where have you been???) you can see some of my thoughts here. It was a real career highlight to be up on the stage for the CIO panel so thank you for having me. I did my best to throw out a few zingers on the panel and it was good to see some comment get picked up in media. TWO scrambles up Arthur's seat was a record for me.

Needless to say my views on private equity made me particularly interested in this piece in the FT from Robin Wigglesworth which is quite the Tour de Force of assimilating the various key arguments and academic works on this.

As you can maybe tell from my LinkedIn activity it's been a busy week on the work front too with one of a few big projects on the go delivering a big milestone earlier in the week more detail here. Lots lots more to come keep an eye out, we're building.

Thanks for the tip on Rosslyn being the best coffee spot in the city, I'm inclined to agree. Love what they've done there, nice aesthetic great efficiency at work and you feel like they've captured some of the energy of the City coffee shops of old.

Markets mumble

Stock markets around the world have been hitting new highs over the last couple of weeks, it's still a good start to the year for markets, global stocks up about 5-6%, US stocks leading the way with the UK market pretty flat. Chinese stocks staged a bit of a rebound over the last month after the kicking they took to start the year.

Ray Dalio says the stockmarket isn't a bubble (Linkedin). A thoughtful framework here from Ray which is well worth a read if you're worried about this question.

"Bonds can do great things" was the strapline on the conference exhibition stand of a large global bond manager. Trouble is although yields are higher that troublesome duration risk is giving bond fund holders a bit of heartburn. Long dated rates have fallen a little bit last couple weeks so bond fund performance is up over these last few weeks having taken a big hit earlier and the year as aggressive cuts were priced out. The direction of interest rates over the medium term is still much debated at this pivotal moment in the cycle, how many rate cuts and when is a key variable into fixed income asset allocations, which is causing all the volatility for bond investors.

What I've been reading

1. UBS Global Returns Yearbook Global Investment Returns Yearbook 2024 | UBS Global

UBS have swallowed up this former Credit Suisse publication and look to have been slightly stingier this year in what they've shared for free in the preview. But one good takeaway was the work around the long-term corporate bond premium over government bonds - comes out about 0.8-1% over 100+ years of data net of defaults etc, making them a much bigger wealth builder over the long term than government bonds.

2. Is Working From Home about to spur a real estate crisis asks the Economist - link

Between the lines - this seems like a legit worry and occasionally rocks markets a little as smaller US banks change the markings of their commercial real estate lending books, although comparisons to a 2008-style crisis seem overblown.

A very related question is how are direct real estate markets around the world pricing in the re-rating of cost-of-capital, and the prospects for real estate. And the answer (Schroders Real Estate Lens) seems to be, it varies, with London a potential standout for NOT pricing in the re-rating, with property yields below those of government bonds. US property on the other hand seems to have taken the performance hit already.

At those levels you'd have to question some of the valuations. Current discounts in the REITs market and secondaries would seem to disagree.

3. New Choices, Big Decisions: Unravelling the cost of living crisis - People's Partnership and SSGA (link)

In a world of spreadsheets, models and formulae a research project that focuses on the real stories of 85 people I find pretty refreshing. And some of the conclusions here you just wouldn't get out of a spreadsheet. Having seen some of the video interviews that go behind this there's a fascinating background of changing risk appetite, attitude to inflation and changing cognitive abilities even over the 8 years so far of the study. A real challenge for folks tasked with retirement income investment strategies!

I was hoping to get to the new Mauboussin paper on ROIC, but that'll have to be for next time link.

Things I've been listening to

1. Mike Green on the dangers of passive - Excess Returns podcast (apple)

This was so good I had to instantly re-wind and listen again. A great follow-up to the David Einhorn "passive has broken the market" conversation. It's possible to be a big advocate of the benefits of passive strategies AND question its potential impacts on markets I think.

2. Why the private debt markets have exploded on the All Else Equal podcast (apple)

Thought for the week - Who spends the most time eating and drinking (LI post)?