Month: October 2020

ESPORTS For Me Sport

Image from Sydney Esports Open – dailyesports. The Melbourne Esports Open is now postponed to 21-22 AUGUST 2021

A month ago, if you asked Slack Investor what these people are doing, I would have scratched my head. However, in the spirit of trying to know a little bit about a few things, I have been researching the Esport phenomena. I would have guessed that Esport has something to do with multiplayer video gaming … but I have found that Esports are much much more than this – a jumble of entertainment, video gaming, sports, and media. For a brief insight into this strange world of competitive gaming, check out even a few seconds of this Youtube video of an Esports gathering in Paris.

Esports have evolved from the recreational to the competitive and, putting aside arguments of what constitutes a sport, in the world where Chess is considered an Olympic Sport, Esport is the world’s fastest-growing “sport”. There are now more than 2.7 billion active gamers worldwide. Incredibly, the video game business is now larger than both the movie and music industries combined. The top Esports tournaments are transmitted live and are where fans meet and socialise with friends. They draw crowds rivaling the World Cup football and the Olympic Games.

From Newzoo – 2020 Global Esports Market Report

Once you drill down to the specifics of Fortnite or League of Legends, I am lost – but when it comes to growth prospects, Slack Investor pays attention. China is the largest market by revenues, followed by North America. It is not just PC-based games, Esports on smartphones are showing strong growth in Southeast Asia, India, and Brazil.

Although the big stadium Esports events are suffering due to COVID-19 separation rules

The upward trajectory for gaming brought on by the pandemic has accelerated what was already a growth industry, with Australian estimates suggesting demand for esports has at least tripled since the coronavirus outbreak. 

From The Guardian

How to invest in Esports

Slack Investor has been generally ignorant on the details of this new phenomena, but I can recognize growth. In October 2018, the fund manager and ETF provider VanEck started an Esports ETF in the US (also called) ESPO . They aimed to replicate the Global Video Gaming and Esports Index by investing in the whole industry. I have watched this ETF from afar and, after a shaky start, the chart below shows that they have been doing OK.

Performance of the VanEck Vectors Video Gaming and eSports ETF (ESPO) against the eSport index (MVESPOTR) since ESPO inception in October 2018.

In September 2020, VanEck have introduced an Australian-listed Video Gaming and ESports ETF (ASX:ESPO) offering exposure to the larger global Esports connected companies. The fund’s top holdings include Nintendo, AMD, Tencent and Nvidia. The management expense ratio is higher than I would like (MER 0.55%), but it is a convenient way to get involved.

Usually Slack investor makes his decisions on weekly or monthly charts. The ESPO ETF was listed on the ASX less than a month ago (at an initial price around $10) and there is not enough information on the larger time scales. The Daily chart is presented below.

The Daily chart (Click to get a higher resolution) of the newly established Australian listed ESPO ETF established by Van Eck – From incrediblecharts.com

This is not advice, but Slack Investor bought in at $10.39 and set a stop loss at $9.85 at a previous minimum point (“Higher low“). I try to keep initial stop losses at less than 10% of purchase price at a point on the chart that “makes sense” to me. I will check this stock on a weekly basis … and, if ESPO is below the stop loss at close of business on Friday, I will try to sell it on the next Monday – unless it is rebounding strongly!

In many ways, Slack investor has an “actions per minute” at the opposite end to Esports gamers … but, when it comes to smelling growth, Game On!

Tales from the Bizarrro World and September 2020 – End of Month Update

Bizarro World

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From Amazon.com

Back in the last century when I was a big fan of Superman, DC Comics released a specialty series called “Tales from the Bizarro World”. Bizarro World was a square planet inhabited by imperfect copies of earth dwellers and they do the opposite of all earthly things. Little did I know that I would be living in Bizarro World in 2020.

As of last month, every advanced economy and all emerging economies are in a recession. Unemployment rates have increased rapidly and, due to COVID-19, over a third of the world has been in lockdown. Yet, in the worlds largest economy, on the day the US fell into recession in February, the S&P 500 overcame the COVID crash and rose above where it began the year!

Some governments are going through heroic efforts to inject cash into these flailing economies with some unforeseen results.

In this Bizarro Universe, with empty CBD’s and flourishing suburban strips, Australian retailer Harvey Norman reports its sales for July to September were up 30.6% on the previous year.

“People can’t spend their money on other things anymore, so they are spending time upgrading their home,” he said. “And that’s happening right across the world.”

“There’s also been so much money thrown into these economies, and because they can’t spend it [elsewhere], we’re getting the advantage of that. We’re in a very fortunate position.”

Gerry Harvey, founder of Harvey Norman – from the Sydney Morning Herald

It is not only furniture, but food expenditure has also increased in the 12 months to June 2020. Naturally, there has been reduced spending in lockdown crushed areas like health, transport, restaurants and accommodation.

Quarterly changes in Household Spending for the 12 months to June 2020 – From Auscap Asset Management – Click to Enlarge

It is probably due to fear about the future, but these troubled times have also modified the savings behaviour of Australians. In June 2020, credit card debt has been reduced by 20% (still $22.4bn though!). Savings as a percentage of income have increased from the paltry long term average of 5% to 20%.

Australian quarterly savings have rocketed up From Auscap Asset Management – Click to Enlarge

But there is also evidence of increased spending. Australians were recently given the chance to access up to $20000 of their retirement savings. In an illion survey of 10000 people, almost two-thirds (64%) of this additional spending was on discretionary items such as clothing, furniture, restaurants and alcohol.

In July 2020, the 2nd tranche of government stimulus and early access super caused big changes in household weekly expenditure. Although the actual dollar amounts were not reported, looking at bank data from 250 000 Australian consumers, the biggest spending changes were found in the allocation to Online Gambling (+95%) and Food Delivery (+342%)!

“Financial comfort levels are up for now, but many households
are on the cliff’s edge. They’ve lost income, their jobs and entire
livelihoods, … and government support is the main action stopping them from falling over.”

ME Bank Household financial comfort report 2020

Slack Investor feels that things are precarious in Bizarro World – government spending is just holding things together. As of July 2020, according to the AFR, the Australian government has spent 10.6% of GDP on COVID-19 stimulus (+1.6% Loans). In the UK it is 3.1% (+15.7% Loans) and the US 6.9% (+4.2% Loans). This spending will not go on for ever and the Bizarro World party may end badly for households that, through the lottery of occupation, are stressed.

September 2020 – End of Month Update

Slack Investor remains IN for Australian index shares, the US Index S&P 500 and the FTSE 100. All Slack Investor followed overseas markets this month slumped (ASX 200 -4.0%; FTSE 100 -1.6%; S&P 500 -3.9%).

I am very nervous about the US market with its high valuations, forthcoming election and, what pushed me over the edge, was the beautifully described “S*%tshow” of a debate. Slack Investor has had to act and adjust his Stop loss for the S&P 500.

When pushing up stop loss levels, it is always about finding a sensible place to leave the level at a “higher low”. I couldn’t really find one on the monthly or weekly chart. The Daily chart below revealed a higher low of 3200 in July 2020 that wasn’t breached in late September. So this is my new stop loss.

Daily chart for the S&P 500 – From Incrediblecharts.com

In the real world, the US economy entered a recession in February 2020 and Slack Investor has his stop losses live for all Index funds.

All Index pages and charts  have been updated to reflect the monthly changes – (ASX Index, UK Index, US Index). The quarterly updates to the Slack Portfolio have also been attended to.