July 2021
Insights

“Walking in Memphis - But do I really feel the way I feel?”

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Walking in Memphis
But do I really feel the way I feel?

 

There are three possible dimensions of the world in which we live; what is, what be and what it could be. We often get confused when investing by what we believe should happen and the more realistic view of what we believe will occur.

A great macro investor once told me, the art of investing is differentiating between what one believes should happen and what is likely to take place. The probability of “could” and “would” is usually greater than that of “should”.

The world should be a fairer place, income inequality should be lower, everyone should care about their social responsibility and the environment should be apriority.

Countries like Australia should not have 3.3 million people living below the poverty line(2020) of which 1.1 million are young people. That’s 13.6% of the population. The US is similar with 13.4% below the poverty line and, as of 2020, 23% of Britons lived in poverty including 4 million children.

Globally, COVID has driven an additional 100 million people into poverty according to the World Bank and that’s based on the international poverty line definition of earning less than $1.90 per day .

 

Should? Could? Would?

Investing success comes when what should happen, matches what could and does occur.

How many good ideas should have worked but didn’t?

The environment is clearly a place where what should and could happen will coincide, but the path to that end is never a straight line.

How will people feel when the monetary and fiscal stimulus of the last two years is withdrawn? We are past peak stimulus already as evidenced by the rise in global bond yields. Fiscal spending is not yet contractionary although it might well be by the end of 2022 (notably in the US post the midterm elections), but the increases in spending are less.  

Much of the correction in pandemic related gainers has already taken place; Docusign, Zoom and Peloton equity prices are down 60, 70 and 80% respectively, from their all-time highs. Bitcoin is 40% off its recent all-time high.

The mega cap tech stocks have not corrected. Microsoft and Google are eating Zoom’s lunch, but who wins? Apple CEO Tim Cook’s latest remuneration was set at a booming 1447 times the average wage of an Apple employee. Inflation-adjusted CEO pay at the largest 350 public companies in the United States grew by 1,322 percent between 1978 and 2020. In stark contrast, real wages of production/nonsupervisory workers grew by just 18 percent during the same timespan.

“Yeah, I got a first class ticket
But I'm as blue as a boy can be”

Should. Could. Would.

The world should change, the world could change, but will it?

Change is driven by the collective but can be driven by the minority. Studies show  it takes around 3.5% of the population actively participating in the protests to ensure serious political change. (Erica Chenoweth, Harvard University)

We must speak up to enact the change needed, we have to change the way we think about the world and the way we invest. Governments have not been the solution and their firepower will be restricted by the debt increase from the pandemic. Change needs to come from the local. Enhancing local capability by advising and investing in SMEs and NFPs is how Beckon believe we will make a difference.

Put on my blue suede shoes
And I boarded the plane
Touched down in the land of the Delta Blues
In the middle of the pouring rain

Walking in Memphis by Marc Cohn is about his journey to Memphis to unlock his writer’s block.

https://www.youtube.com/watch?v=PgRafRp-P-o

 

(*I have never been to Memphis, but travel restrictions make we want to travel to places I have never been. I should and will be able to travel freely soon enough, we all need to unblock our lives.)

David 'Bushy' Nolan

Strategic Engagement

+61 (0) 409 881 910

david.nolan@beckon.capital

beckon.capital

This communication was prepared by Beckon Capital Pty Limited (ABN 49 628 013 678), authorised representative No. 001280538 of Fundhost Limited (ABN 69 092 517 087, AFSL No. 233045) and is issued by Fundhost Limited.
This newsletter is only for general information and opinion on matters that may be of interest and is provided “as is”. The information should not be relied upon for any decision making or for any other reason by a person or entity. This information should not be used as a substitute for consultation with your professional advisors. Any use of this information is at the user’s own risk.
Beckon makes no representations or warranties, express, implied, statutory or otherwise with respect to this information or its content. Beckon expressly disclaims any contractual or other duty, responsibility or liability to any person or entity in relation to the content.
This newsletter was written by David Nolan, an employee of Beckon, but does not necessarily represent the views of Beckon. Nothing in this newsletter is an offer to buy or sell a security; Beckon is not responsible for any investment decisions, damages or losses resulting from, or related to, the the opinions or information included or their use.

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