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Any good ETFs to invest Roth into?
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In Europe, perhaps. People are underestimating what a battle that will be in the US, and emerging APAC. The ESG theme is really just a proxy for momentum investing in many ways. Let’s say the White House changes hands in 2024, CliFi / ESG is, at the earliest, a story that takes off domestically in 2030.
My thesis is broad and high level, but big tech will continue to get bigger. Not necessarily on a flight to safety, but I’d say that’s an accelerant. In a higher for longer rate scenario, I don’t think we’ll see the S&P outperform RoW like is effectively has for two-ish decades. Investors will have to find new pockets of high octane growers. India will be a tremendous growth story on development alone. Asia demographics need a course correction before growth reaccelerates. If a recession comes on hard, EM will get smoked for awhile on stronger USD. Big question marks are going to be cyclical junk rally, peace in the gulf, China / Taiwan, Russia and how they envision their global footprint, energy transition, another global pandemic…these are some major geopolitical headwinds that could throw a wrench in anyones thesis, and rather quickly (in my view). Happy to chat offline further too
Very gd pt, alas, on the White House changing hands in ‘24. It will likely delay the clifi/ESG takeoff.
It’s something I’ve thought about as well.
Agree on India.
And agreed that there are a lot of factors that could throw a total curveball in anyone’s thesis (Covid 2.0 anyone?)
valuation for ESG/climate investment is super expensive (overvalued imo) at the moment, so unless it all goes to plan then the bubble will probs pop at some point. On the other side, if you look at the more "anti esg" type of investment, like O&G, tobacco, commodities (you need commodities for net zero transition as well) etc, valuation is super cheap, extremely profitable, strong cash flow (just go check out the fcf yield of these companies), a lot of them you can recoup your investment just by dividends in 4/5 years (some got 20%+ dividend yield)
Sustainability investing, tech, blockchain
What kind of tech though?
Yes in blockchain 👍
AI
Not sure how granular you want to be in your thesis, but it’s a real strong bull case for security companies, particularly network and infrastructure. Access management as well. Okta and CHKP are doing some fascinating work in this space. Back in my corporate banking days, the wire room would have to do a call back to the client for certain $ amounts and above, now imagine a deep fake voice system being able to verify and facilitate the transfer of enormous sums of money
Going with ESG. I think the democratization of the workplace via Covid and American political discourse are the biggest indicators of its ability to be the next wave. Both have resulted in the conscious worker as well as the conscious consumer. Businesses that pivot and adapt aspects of ESG will fare well. Those that don’t will exist but similar to print media. Currently republicans are having their way in state legislatures. They have risked blowing up their whole party
By that I mean, you have tons of staunch republicans who are now on the fence. If they actually vote Democrat, progressive agendas are going to take places in places where we never thought they would take place. Corporate governance is going to get strong, regulations will become more powerful and therefore I think investments will become more and more conscious. The consumer is already there and ready.
Industry will always change, don’t put all your eggs in one basket and be open to change.
Industry pitch progression past 50 years
-Stock picking
-Asset allocation
-ETF
-Planning
-ESG
Now: Alternatives
EM - the end of reserve status of USD is closer today than ever. I would expect EM to rally.
Metals and oil
Alpha is expensive, rather Im sticking with index funds for the next 1-2 years until inflation returns to normal levels
On the volatility point, volatility is just your distribution of log returns over some time series. Distribution includes downward movements, but it also includes upward movements. So algebraically, my beta in the CAPM formula captures the up movements too and people forget that. In other words investors see risk and they think downside, but upside risk has been the dominant narrative since the GFC. Apply that to CAPM and all of a sudden my expected returns don’t jive with the fees that you pay for passive management on an etf. And I think that will be the dominant narrative for the time being. And that narrative is flipped on its head when rates are zero because bps changes in rates can mean multiple % points on my returns. So back to the example and we have $1-2tln in Chinese savings since C-19, which puts a wrench in the consensus view that S&P falls on rising rates. The China reopening story has lagged the developed world by a year. Which is just goes to show us that when travel returns to normal levels, inflation will hold up on China spending while the geographies they’re spending on continue to have restrictive monetary policy. Call it crazy, but it requires a 2nd derivative view in a world that hasn’t seen anything like that for the last decades because of rate movement. That’s why I’m an active investor. Every bps of rate rises are an opportunity to have an active nuanced view of the markets. And, in my view, to follow the winds of the market right now is just being lazy. for folks that have a 50 year investment horizon lazy is awesome. I just don’t