To Our Investors and Friends,
The S&P 500 Index increased 2.3% in July, driven by mega cap growth stocks that were bought by a market unnerved by the Delta variant. Oil increased 0.7% to under $74 as OPEC indicated their intention to return to normal production over the coming months. The 10-year Treasury bond declined 21 basis points to 1.24%, as did the spread between the 2- and 10-year, ending the month at 105 basis points, a 15-basis point contraction. The Bloomberg 1000 Growth Index expanded 3.1% for the month, driven by growth in the largest tech companies, which were bought at the expense of most of the rest of the market. The Bloomberg 1000 Value Index expanded a modest 0.5%. The small cap indexes were sold off: both the Bloomberg 2000 Value and the Bloomberg 2000 Growth fell approximately 3.3%.
Occasionally, we are introduced to an insightful book that helps us see the world in a new light. Last month, Gillian Tett’s Anthro Vision introduced us to the concept of the other AI….Anthropology Intelligence. In her book, the author applies an anthropological lens to both the finance industry and many leading corporations. An anthropological lens, described by Tett as a lateral lens or “worm’s eye view of the world,” helps provide greater perspective to such notable events as Wall Street’s failure to anticipate the 2008 financial crisis and the unexpectedly deep relationship between consumers and the internet technology they engage with.
Most interesting to us is understanding the social connections that tie people to the world around them. As applied to the internet, Tett reveals that data finds its roots in the plural of the Latin word datum – to give. Data is a gift. The author further explains that gift giving “is endemic to societies” because it creates social contracts that are “trailing debts that bind people together.” The receiver becomes indebted to the giver to reciprocate at some point in the future.
According to the other AI, individuals become bound to social platforms because they obligate receivers to reciprocate in the sharing of information and life events to their social network. The other AI notes that the relationship between individuals and these technology providers was initially ignored by Wall Street because free is a negative in a world obsessed with money. Anthropologists, in contrast, actively listen to social silence and recognize the value that such an incidental information exchange creates.
In combination, we think the two AIs can be very powerful. Artificial intelligence can provide insight into what is happening, while anthropology intelligence helps explain why it is happening. We believe that this type of two-pronged analysis can help determine how successful new technologies may ultimately become. For example, Shopify’s (SHOP) intuitive and comprehensive ecommerce technology set the stage for an emerging software leader from a strictly quantitative analysis viewpoint. Add to this the anthropologic view that entrepreneurship is growing post the financial crisis and young consumers prefer to buy from businesses they identify with, and the makings of a new blue-chip powerhouse become more evident.
At Kingsland Growth Advisors, we have always sought out the why, which helps us frame the size of any new opportunity. We believe that by focusing on both the what and the why, we create the potential to turn short-term fluctuations in the market into even better long-term returns in the next generation blue chips stocks that we seek.
All the best to you,
Arthur K. Weise, CFA