As we reach the end of an eventful year, and we near the best meal of the year (Boxing Day cold meats with bubble and squeak) I wanted to touch base with you lovely people one last time.
Historically, the end of year newsletter is used for predictions about what will happen in the markets next year. We’re not going to do that. Firstly, there are enough other people making predictions. Secondly, most of them will be wrong. Thirdly, and most importantly, our job is not to predict the future but to understand the present, and look for anomalies. What is happening that shouldn’t be, and what is not happening that should be?
So, let’s instead talk about Christmas songs, which are impossible to avoid this time of year. My daughter used to start playing Christmas music in the house in September, but after the threat of legal proceedings she now doesn’t break out the Bublé until December.
Everyone has their favourite song. Mine is ‘Driving home for Christmas’, but actually there is another song which caught my ear recently.
‘Santa Baby’ has been covered by many artists including Taylor Swift, Kylie Minogue, Ariana Grande, Gwen Stefani, even Miss Piggy! The Madonna version is particularly horrifying. So lets stick to the 1953 original by Eartha Kitt. I can’t believe there would be anyone reading this who has not heard this song, but just in case, the song is a list of nice gifts she wants Santa to hurry down the chimney to bring her, as she has been an “angel all year”.
In a cost of living crisis some of these requests look a little extravagant to say the least. So, this year perhaps we could use our portfolio management skills to help Santa create a basket of investments to match the gift requests, and track how those invests performed over 2023.
Firstly, she wants Santa to “slip a Sable under the tree”. I have been reliably informed (by Google) that a sable is a small weasel-like animal, that mostly lives in Russia. Ms Kitt is not requesting a pet. She wants a coat made from the animals fur. Russia? Killing animals? This has escalated quickly! Let us instead buy the shares of a few high end fashion companies that sell ‘fur’ coats. Over the last few years Burberry, Prada and Canada Goose have all have publicly committed to stop using animal fur in their products, and Santa prefers to invest sustainably. Despite the backlash against ESG investing in certain parts of the political sphere the trend for companies doing the right thing continues to move in the right direction, which is good to see.
Next up on the list is a “’54 convertible too, light blue”. One of the most popular convertible cars of this era was a Chevy Bel Air. Chevrolet are owned by General Motors so we can add their shares to the portfolio. We don’t invest in classic cars, but as a proxy of second hand car demand we can also buy the shares of Autotrader Group.
Wanting “a yacht” which is “not a lot” is the next item on the list. Some of the prices for even fairly modest yachts are eye watering, so not sure about ‘not a lot’, but a small investment in shares of a handful of yacht builders is well within Santa’s means. Additionally, sticking with the shipping theme, we could invest in an Exchange Traded Fund (ETF) which tracks a global shipping Index. This was a great investment during the pandemic as the knock-on effect of supply chain bottle necks pushed up the costs of shipping goods around the world.
The next gift request is the “deed to a platinum mine”. A key investment tenet is to diversify your holdings to reduce risk, so it would be better to buy a fund which invests in global mining companies rather than a single mine. Also, we can buy fund which tracks the platinum price so will give us a purer exposure to the precious metal.
She also wants Santa to fill her “stocking with a duplex, and cheques”. A Manhattan duplex is an apartment that spans two floors in a building, but getting exposure to residential property through investment funds is difficult. Instead we can easily buy a fund investing in US listed real estate companies and Real Estate Investment Trusts (REITS). ‘Cheques’ is a nice and simple one, and who doesn’t love cash as a present, we can just add short term US Treasury bills to the portfolio. For anyone under 25 reading this- a ‘cheque’ is a paper version of an electronic bank transfer.
With requests of “some decorations bought at Tiffany’s” and “a ring” we can use the same investment. I love it when a plan comes together. Tiffany and Co was acquired by the French conglomerate LVMH in 2021 for a cool US$15.8bn. LVMH is the world’s biggest luxury brands business and has a vast stable of brands across fashion, jewellery, perfumes, wines and spirits. In fact, it would very difficult for Santa to fulfil any present list without using one of their products.
So here it is…. the Santa Baby index.
A portfolio of investments weighted equally by the gifts that were requested would have produced just shy of 3% this year to date. Eartha Kitt would have made more money putting it into short term money markets! Oh well, at least we got an article out of it.
Also, if someone from Blackrock, Fidelity, Amundi etc. tries to steal this idea and build a product using this index, then we will be seeking royalties. In cheques!
Merry Christmas to you all.
