Our team this week
Before talking markets this week I’m really pleased to share the endeavours of Mihir Choughule one of our youngest chartered advisers and some of our clients.
Mihir this week recorded two podcast episodes with Martin Lewis and the BBC for a new series of podcasts Martin is doing where he will stray into financial advice, and of course he isn’t a financial adviser! The BBC selected Tideway’s Mihir for the job along with Charlotte Jackson from the Department of Work and Pensions sponsored MaPS – Money and Pensions Services.
Let’s hope Martin has Mihir back, they look like a great team! We think the episodes, focused on pensions, will be out in the next few weeks and we will share links as soon as they are public.
We are also proud to support long standing client Sir Nicholas Mostyn (centre) whose podcast with Helena Kennedy and Lord Charlie Faulkner ‘Law & Disorder’ we are sponsoring for the next 6 episodes.
Sir Nicholas, a retired (although he is still bursting with energy!) famous divorce barrister and Judge is looked after at Tideway by senior wealth manager Ben Klein.
He has recently been podcasting with Jeremy Paxman and fellow Parkinson sufferers in the aptly named ‘Movers and Shakers’. Both podcasts are entertaining and highly informative. ‘Law & Disorder’ will re- examine the case of Derek Bentley one of the last executions in the UK in one of these upcoming episodes.
Finally, congratulations to our clients Helen Bunten and Paul Matthews looked after by Will Bale at Tideway for producing their first play ‘A Word For Mother’ now on until May 24th at Upstairs at the Gatehouse in Highgate.
Our marketing manager Edna Oliveros has set up a new page on our website to showcase such endeavours, so if you have anything you would like us to consider promoting please do share with us.
Equities
It was a long time coming but finally the FTSE 100 index has gone through 8,000 and looks like staying there for at least two weeks!
Is this a sign the UK economy is doing better? We don’t think so. According to financial data supplier LSEG, in March this year, 80% of the revenues of FTSE 100 companies now comes from outside the UK. What it does mean is that broader market and sectors like financials, energy, and insurance, which make up most of the FTSE 100, are catching up a bit on big tech. Something we expected to happen.
Likely to go out of the FTSE 100 in the next few weeks will be St James’s Place, now worth just £2.5bn. Shame!
Earnings in the last few days have highlighted some of the issues for the biggest companies in the world with expectations running high and fuelled by the clamour for all that is AI. Volatility in the share prices of these companies is high as investors speculate what the future might bring.
Meta fell 12% or $190bn in value after its earnings revealed projected spending of $35bn -$40bn on AI in 2024, a staggering amount of money and a signal that efforts to generate income from their virtual reality investments may be proving harder than thought.
Tesla, whose value has fallen by more than half and around $600bn since its peak value at the end of 2021, went up around 17% after its earnings this week. Not because of good results, they missed targets on all key metrics and now have declining revenues and profits. Rather because Elon Musk refuted a rumour they had pulled away from lower cost vehicles and because his hands-free driving software looks like being legalised in China. Roughly 10%, or more than half of that gain has already reversed.
A closer look at both businesses throws some light on what’s going on.
Meta’s spend on AI is staggering and shows the ability of these firms to invest huge capital sums based on the founder’s view. Mark Zuckerberg, Meta’s founder, looks like he is going for the scorched earth approach on AI to catch up on Microsoft and Open AI’s Chat GPT. Meta is throwing money at it and making his AI software ‘open architecture’ for all to use – reminiscent of Google Android versus Apple iPhone. Meta will likely add AI capabilities to their existing social businesses, Facebook and Instagram, to corner search market share from Google and monetise it through advertising.
Elon is also in full Founder mode, firing 14% of the workforce last week and whole teams this week, including the entire team pushing the car charger network in the US. This network was going to be utilised by other EV manufacturers, leaving these manufacturers somewhat confused. Elon’s challenges are huge, but if we are to believe him and his fans, he has not one but four game plans to further enrich Tesla. In short; driverless taxis, robotics, energy storage and, of course, electric vehicles. It is possible to do ‘back of the fag packet’ calculations on the value of all these markets to support sky rocket valuations for Tesla. The question is how long, if ever, will these markets take to develop and will one company be dominant in any of them. As the late Charlie Munger of Berkshire Hathaway said about Tesla, he wouldn’t want to own it, but nor would he bet against it.
Fortunately, at Tideway, the Founder has to get through both Neil and Ursula, who present a formidable barrier to the bank accounts in order to spend any money or plough into flights of fancy!
One last comment on AI, I saw a statistic this week that caught my eye. Those who read regularly will remember my update on Nvidia’s H100 GPUs, used by AI developers and powering its profits. According to website Electronic Specifier, which I’m sure you all read avidly, each GPU, when being used for 61% of the time, uses 3,740 kilowatt hours of electricity annually. To put that into context the average household in the UK uses 2,700 KwHs per year and Nvidia have sold around half a million of these and similar GPUs already. Zuck’s budget suggest Meta will be buying a few more. According to Stocklytics.com, these power-hungry processors are projected to consume a staggering 13,797 GWh in 2024, exceeding the annual energy consumption of nations like Georgia and Costa Rica.
I hope it’s worth it!
Fixed Income
In fixed income markets it’s all been about higher for longer, with base rate cuts always a few months away, but never arriving.
Longer dated gilt yields have almost fully reversed their declines at the end of 2023 and from the chart below you would have to say are still in an upward trend.
Whilst we thought about it last year, we resisted adding meaningfully to the longer term bonds in our fixed income investments and that has been a great decision for 2024. Our fixed income investments are up around 3% so far this year , whereas gilts and longer dated corporate bonds are both down in total return terms, the UK gilt index by around 3%. We continue to monitor this closely.
- The content of this document is for information purposes only and should not be construed as financial advice.
- Please be aware that the value of investments, and the income you may receive from them, cannot be guaranteed and may fall as well as rise.
- We always recommend that you seek professional regulated financial advice before investing.
