Kings Portfolio Newsletter Q3 2020 – No room for pessimists

Economy & Capital Markets

US equity markets moved to new all-time highs and the fastest ever recovery from a bear market as, Central Bank liquidity moved to assets whilst avoiding the huge economic capacity. In a well flagged move the US Federal Reserve Bank now target (excess) average inflation as a policy goal, that had led to sharp declines in the US dollar. In the previous ten years the Reserve Bank already failed the lower bar of MEETING its annual inflation target.

Politicians continue to target headline GDP that increase their power, a different policy goal than increasing their citizens income (or GDP/head and its statistical distribution). Further newborn US citizens are now responsible for $90,000 in government debt as the Treasury borrows from their future.

Productivity of the digital economy is being realised. In service sectors the acceptance of work from home allows, reduced property costs for employers and reduced travel fees and times for employees. For consumption sectors purchasing on-line boost distribution players and robots reduce the need for humans in production process’. However most human animals require social contact and experience that is not acceptable digitally even in the best virtual environments, this will maintain a proportion of the pre-pandemic order.

Performance

In the first three quarters of the year the Kings portfolio returned 6.04% (sharp 1.29) whist the S&P 500 returned 4.09% (0.33) and the ACWI 1.69% (0.21). Winning positions for the third quarter were longs: Freshpet (US fresh dog food) gaining 36%, Sunrise Communications (Swiss telecom subject to takeover) 32%, Penn National Gaming (US casinos) 30%, Avon Rubber (UK personal protection products) 28% and JD.com (Chinese online retail) 26%; and shorts: Husky Energy (Canadian oil and gas) falling 33%.

Development

Artificial Intelligent Deep Learning utilising hardware purchased two years ago is progressing ahead of schedule and providing very promising results.

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