11 February 2021
Watch Freddy Lim, StashAway Co-founder and Chief Investment Officer, and Philipp Muedder, Head of Financial Planning, discuss the latest global events and their impact on the markets.
In this episode,
00:01 | Philipp
Hello and welcome, everyone, to another weekly market commentary from StashAway. With us of course, Freddy Lim, our Chief Investment Officer. Freddy, how are you?
00:11 | Freddy
Hey, Philipp. Another week has passed, time's so quick now.
00:16 | Philipp
Still going quick. Still no travel, though, but we're getting there. So we do have a few updates; I think, you know Freddy, one of the things I wanted to get into is the recent crypto rise in a second. But obviously, one of the big topics of the week as well is the Senate has started the impeachment process of Donald Trump, right? I think, you know, we're recording this on a Wednesday. So today actually, the Senate confirmed there will be a process with 6 of the Republican senators siding with the Democrats to go forward with the process. How do you see this impacting the market at all? Or is it just a political game that we shouldn't pay too much attention to? Is it a side note?
01:04 | Freddy
I'll be brief on this one, and for an outgoing president, I think the impact on policies and markets is no longer relevant, it's probably more impactful for Donald Trump himself in terms of civil liabilities or more.
01:22 | Philipp
Yes, I think, just to mention, it's been in the news, so for people to understand how much of an impact it could have for them. The other big one is, of course, it feels a little bit like 2017/2018, when it comes to people looking for, or searching for - talking to me at least - I don't know how it's been for you Freddy so far, but obviously the whole crypto space is getting mentioned a lot more again, right? This has something to do with the price obviously increasing again, right? People blaming the Federal Reserve for printing the money, of course. But also there are other things like Tesla this week, Elon Musk putting 8% of the cash reserves and buying Bitcoin for this, right? So people are saying, oh this is now accepted, right? They might even accept it as payment, which they're not doing yet, but that's what they're thinking of doing. This would be the first big payment you can make on a transaction basis. What are your thoughts on all of this?
02:25 | Freddy
Maybe not my thoughts, but more like an unbiased opinion from what I read and from different angles, from the corporate governance angle, and from the SEC angle, I think Tesla's move will invite attention, may even invite props, because it's very unusual for a corporate company to allocate cash reserves into something that's volatile and something that is not officially recognised by the accounting bodies as cash or cash equivalents. So I believe that there will be some regulatory props that will be upcoming. And also, personal thoughts would be from a corporate governance angle, I think this might not be the best idea for any company to go ahead, but of course, the market is just now presuming that more and more companies would do the same because Tesla did it. But don't forget that Tesla is a more innovative or progressive company. Other companies may or may not be. So buyer beware, check in your FOMO.
03:38 | Philipp
And I think this is something we talked about obviously in 2018 a lot. So, do you see this already overheating or any opinion on that?
03:48 | Freddy
Who knows? I think we did this before and we mentioned that, you know, if you actually do the math in terms of the number of coins left to be mined, the network effect, eventually, where is it going to grow? You make some assumptions. Some people have Bitcoins, fair value at $100,000 a coin. Some people had it more. But even then, when you are paying $46,000 now, a coin going for $100,000 in 120 years - because that's the amount of time where all the coins will be mathematically mined - it's a non-linear time frame. It's actually not a great return over the very long-term basis. You're better off with rubber glove companies doing well in 2020 or you're better off elsewhere. I mean, there are people that beat Bitcoin, right? Do you call it Doge-coin or Dodge-coin? What was that coin that went up more than 1000%?
04:42 | Philipp
04:42 | Freddy
And a lot more than Bitcoin and it's also inviting eyebrows within the cryptocurrency community in a sense that it was designed as a joke, as a prank. And it's actually taking money away from the serious guys who're actually innovating. And Elon himself has tweeted a number of times referring to Dogecoin, referring to it. And, you know, I personally felt that was a little less than responsible.
05:14 | Philipp
No, good points there Freddy. We do have a question from one of our listeners from last week's video. So for everyone else, if you're new here, please feel free to put any questions in the comments section so Freddy and myself will be able to pick that up. Or if you listen to it as a podcast, send us an email to firstname.lastname@example.org and we'll pick that up from there. But David Fletcher had a question for you Freddy, and he asked, "Are there any changes on the view in the high allocation that you currently have to GLD or the Gold ETF we use, going into 2021?".
05:50 | Freddy
Well, thank you David for the question. It's always a very critical one and it wouldn't be my view - I'm more like a translator of the signals that we see and what ERAA®, our investment framework, sees today. It’s that we are in an unprecedented situation where an unprecedented amount of money has been printed. I mean, this topic is also a reason often cited by the Bitcoin or cryptocurrency community as to reasons why people are trying to diversify a little just to see how it goes. Gold is one option that has a long track record of proving itself in terms of being a hedge against the dilution of paper money. And central banks systematically hold gold reserves to diversify their trade balances and surplus reserve holdings. So it has a special place. The reason why allocations are high for some portfolios at StashAway is because of the huge amount of monetary stimulus that's going on. In fact, if I have to be more useful than this, I would mention specific numbers in the sense that, during Covid-19, peak-to-bottom when the market crashed, our Singapore users gained 7.5 percentage points in returns to offset asset losses to keep things under risk controls. And that's thanks to allocations such as Gold that the huge amount of Gold actually works out well. And also, 8.9% for our Malaysian users. So, its function is to also absorb the impact of the depreciation in US Dollars, for example. So those things have really worked out well. And at some point it will change to the other way. We would just have to monitor incoming data, leading indices and let the data speak for itself. It's not a view-based approach, it's a data-driven approach.
07:50 | Philipp
Yeah, the data will tell the tale. And when it does, we will let everyone of course know and you'll see that also in your portfolio changing at that time.Thank you, Freddy. We do have a few webinars coming up, as always, in the new year. We have in Singapore our Investing Basics webinar, which is on Thursday, the 18th of February from 7pm onwards. The links are in the show notes below. In the MENA region, we have a - Freddy's actually doing a webinar called A Deep Dive into StashAway’s Advance Investment Framework. So if you're interested in learning more about what Freddy just mentioned, for example, Gold and changes to the portfolios, feel free to join the MENA region seminar. It's on Thursday, the 18th of February as well. And the links are in the show notes. And last but not least, for our Malaysian customers and listeners, we have An Inside Look into StashAway. So, if you want to learn more about StashAway, if you have questions that you've always wanted to ask, feel free to join us next Wednesday, 17th February, 6pm. Again, links are in the show notes below. And we're looking forward to having you attend those sessions. They're super helpful, super educational and also interactive. So please join us if you want to learn more. Otherwise, Freddy and myself, we'll surely be back next week and you'll hear from us then. Have a good rest of your week. Thank you.