On Tuesday night, I attended the Magellan Investor Gala Dinner at the MCEC. Magellan CEO/CIO, Hamish Douglass, held the 2000-strong audience’s attention for a solid two hours, discussing the big issues on his mind for both the short-term and the long-term. The talk was wide-ranging, but the main focuses of the night were:

  • How technology is changing the world, and faster than we think. (Long-term)
  • Donald Trump – It’s probably not as bad as we think. (Nearer-term)

In addition to my highlights below, we hear from Roger Montgomery and two prominent senior financial advisers about their highlights from the evening.

Google is watching… and listening

There were audible gasps from the audience as Hamish demonstrated Google’s impressive capabilities at understanding and translating speech.

As Douglass demonstrated on stage, computers can already hear and see. He believes we may be near a tipping point, and in less than 10-years, they may be able to understand natural language. Even as a close follower of technology, I was surprised at Google’s ability to translate a complex spoken word sentence quickly and accurately. It took only a couple of seconds to translate this sentence from English to Italian:

“The McKinsey Global Institute says artificial intelligence is happening ten times faster and at around 300 times the scale or roughly 3000 times the impact of the industrial revolution.”

The largest productivity gain in a hundred years

Douglass believes we could see one of the most significant productivity gains in history as households could save up to $20k per annum as cars become autonomous and electric. Cars are the 2nd largest CapEx item for households, with large amounts also spent on fuel and parking. He says that volume of cars on the road could drop by 85% with the introduction of autonomous cars.

Just walk out

Though it currently doesn’t appear in the Global Fund portfolio, Amazon has clearly impressed with its technology. He sees Amazon’s Just Walk Out technology from their Amazon Go stores as a solution to the issue of theft for retailers. He believes shoplifting could “go to zero”, which is great for retailers, but “probably not a good thing if you’re into shoplifting.”

Matthew Scholten, Practice Principal at Scholten Collins McKissock, had this to say about the discussion:

The most fascinating thing for me was hearing about where technology is heading, and what that means in the longer term; not just for investment, but also for society. Will technology lead to a totally different society? Will it lead to us living lives that are totally different and foreign to how we live now? And what does that mean for investment? I think it’s a great unknown.

What really interests me is what society will look like. 55% of Americans could find themselves without jobs as a result of some of the technological advancements. What happens if people do start living significantly longer lives? People are talking about 150 being achievable, what does that mean financially for someone who wants to retire at 60 and has another 90 years to live?

If you want to measure that exponential growth that Hamish discussed, just look at what’s happened in the last 20 years with how we use technology. If we’re going to grow at a faster rate over the next 20 years, I don’t think anyone can fathom what technology will be able to do and what society will look like. I think that creates an intriguing investment environment and a really challenging one as well.”

If you'd like to hear more of Hamish Douglass' views on technology, he penned a detailed letter on the subject last year, which can be accessed here.

Four issues for the near-term

With so much noise around geopolitics and economics at the moment, he says they’re focussing on just four major issues:

  • Monetary policy
  • China
  • Trumpism
  • European risks

As he’s previously covered monetary policy, China, and Europe extensively, the focus of the night was on Trump, and what his presidency means for investors.

“The first thing I do when I think about Trump is put the ear plugs in.” - Hamish Douglass

After the event, I spoke with Nick Gunner, Senior Partner at McQueen Wealth Management, who had this to say on the subject:

“The most important thing that I took on board was his analysis of the political noise we’ve been experiencing recently. Not many people are talking about the fundamentals, and they’re not giving much analysis on what the political noise actually means. So, to get someone to put aside the emotive side of it and say ‘ticks on a few areas’ – some of the things that should go well, and which are a positive for investment. That’s really useful to see because nobody in the press is really focussing on that, it’s all very subjective at the moment.”

The areas of Trump’s policies to receive a tick from Hamish were:

  • Higher US corporate profit
  • More positive business environment
  • Rising US rates
  • Strong US dollar

And the crosses:

  • US social instability
  • Trade wars
  • Relationship with China

How Magellan are positioned (for both Trump and Tech)

  • 70% of the portfolio is domiciled in the US.
  • Underlying earnings are 55% US-based.
  • 5% exposure to China earnings. “If a mistake is made, China could turn very anti-American.”
  • 5% exposure to US interest rates.
  • 42% in technology – but well diversified… Consumer platforms, payments, enterprise software, semiconductors, eCommerce.

Douglas admitted to missing the trade on rising US interest rates, but feels that there’s “no use jumping on the bandwagon.”

The $90,000 raised from the night will be donated to the Victor Chang Cardiac Research Institute, The Reach Foundation, and The Lighthouse Foundation.

Roger Montgomery, Chief Investment Officer at Montgomery Investment Management, was also in attendance. I spoke to him after the event to hear his thoughts on the top takeaways from the night. You can read the transcript here or listen to the short interview here.

Graeme Holbeach

Definitely interesting, though I find it difficult to understand how degradation of the environment does not make the 'Trump crosses' list.

Jordan Eliseo

Great note Patrick - one of the obvious questions that springs to mind in light of the potential with driverless cars is the merit of huge infrastructure spending plans (particularly for roads)! Big question on whether we really need to spend money in that area given the potential productivity/efficiency dividend this technology will bring!

Patrick Poke

Great point Jordan, a question that isn't being asked enough (if at all).