Weekend Reading #139
Photo by Clem Onojeghuo on Unsplash
This is the hundred-and-thirty-ninth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 9th October 2021.
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What we're thinking.
Amidst all of the notably violent flip-flopping in markets this week, one thing is emergent – the direction of travel for interest rates, whether the Fed says it or not, seems to be up, at least for now. As US 10 year treasury yields pushed hard to the upside this week, sitting at just below 1.6% as of the time of writing, these were levels that only earlier this year the market would’ve deemed “catastrophic” for markets.
Whether rates continue on this trajectory, only time can tell. But at the back of our minds lies the possibility that there is a regime shift happening right before our eyes. Liquidity is on the move (probably out, unless the Fed U-turns, in which case – central bank credibility??), and we all need to think hard about what this means for risk allocations across the various themes in the market: growth, Internet (profitable vs unprofitable), commodities (especially with the backdrop of China’s ongoing resolution of past credit and capital allocation issues), and even crypto to name a few.
In the background too is the inexorable rumbling of the passive allocation machinery (which we wrote about last week), seemingly ceaselessly directing new capital passively into US index funds. The movements now seem to be even more macro in nature, no longer “value vs growth” or “megacap vs midcap”, but “bonds and money markets vs equities”. If we think about rising tides and boats, then the theoretical scenario is what happens when the dam gets opened once more than a decade of fixed-income buying reverses into outflows in a still-low interest rate world.
As always, things probably become clearer in the coming weeks and months but while we can spend all the time in the world thinking about what may happen, what has served us well in the past is having a plan for whichever outcome materialises.
On the other side of the “real” world, we’ve been taking some time to think about the developments in the metaverse and the world of NFTs. Aside from the thoughts we’ve penned on how “non-fungible” is something we’re actually already familiar with in “real life”, a concept that deserves deeper exploration is the intersection of NFTs and DeFi. If that sounds like jargon, fret not – think about re-mortgaging (finance) a house (non-fungible) and that should resolve any confusion.
Another big story this week was the announcement that the Saudis have bought Newcastle football club. Now you may be thinking why you should care as it’s a half-baked club from up north (no offence to Newcastle fans who are awesome) and you don’t like football. But that’s where you would be wrong! Think about it. The premier league is a melting pot of ideology. Look at the club owners: the English and American owners (think Liverpool, Manchester United and arguably Spurs and Arsenal) run the clubs for profit as they worship at the capitalism citadel. It informs all the decision making. Compare that to the other clubs which are owned by Russians (Chelsea), Chinese (Aston Villa and Wolverhampton Wanderers) and Emirates (Manchester City). Add to the last batch now the Saudis with Newcastle. This last batch seeks relevance and influence at the epicentre of U.K. culture (not to mention business and politics) - football. One can be sure the Saudis will turn Newcastle into a contender given the resources they can deploy (even with the financial fair play rules), and their fans will be no doubt delighted just like the Manchester City story. But as purveyors of western ways of thinking, surely the powers that be can see what is going on here. Then again maybe that’s what makes the U.K. work (and yes it still works very well) – it’s openness.
What we're reading.
I read this really nice piece in Project Syndicate (a publication whose opinions I don’t always agree with) about Indonesian president, Joko Widodo, or Jokowi as he is called. I remember back in 2014 the cautious optimism felt by many Indonesians that someone from outside the traditional establishment was democratically elected as president. There were many promises as there always are in elections, but Jokowi has overcome the odds to actually deliver over the years he has been in charge. It’s a pity that COVID engulfed the country like many others as one can't help but feel Indonesia would be reaping the rewards from a job well done by now. This article gives a glowing review of his achievements. My own hope for what it’s worth is that as he nears the final part of his second term is that someone who thinks and behaves similarly continues in the same vein so that Indonesia can consolidate on what he has built in a world with so few stories like this. DC
Through the years, I've read a fair few books about the late, great Muhammad Ali. I'm not quite sure why he holds such a fascination for me, as I'm not a huge fan of boxing, but his life and achievements chart such an extraordinary period of American and world history that, as we all know, he is a man who became far than just a sportsman and his story is about way more than what he accomplished inside of the ring. Jonathan Eig's biography from 2017, Ali: A Life, was an excellent, detailed read about the man himself and the sport that he came to dominate. This week I read David Remnick's, King of the World: Muhammad Ali and the Rise of an American Hero. It is a fantastic book that goes way beyond the world of sports, plotting the incredible rise to power of Ali, telling in almost mythical terms of battles fought both inside the ring and out. This is a story of a transcendent athlete and entertainer who, most fascinatingly, was a mirror of his era, a dynamic figure in the racial and cultural clashes of his time who grew to be, in Remnick’s words, the King of the World, the most recognised and celebrated person on the planet. Not only is Ali's a great story but New Yorker editor, Remnick's, telling of it is great too. Remnick is one of the great modern writers, and his long form archive in the New Yorker is well worth digging back into. A true historian of modern American history, there are few people better suited to telling Ali's story. Hence, why this book is so special. EJP
What we're watching.
Having recently finished Gotham and in search of a new series to watch, I scrolled through Netflix feeling as though nothing would jump out at me. I finally decided to take a chance on ‘White Gold’ having seen it advertised on the ‘shows to watch within a weekend’ section. The BBC Original starring 2 of the original Inbetweeners cast play part of a team of wideboy-esque Essex double glazing salesmen. Set between 1983-1985, the show has plenty of historic call backs, is pretty funny and as Netflix warned, is extremely easy to binge within a very short amount of time. Whilst it took me somewhat longer than the single weekend Netflix claimed, it was only about a week for me to get through the two seasons in their entirety. HS
What we're listening to.
I listened to a nice episode of The Knowledge Project this week where host, Shane Parrish, chatted to the great writer, Walter Isaacson, about his life and work. I haven't read too much by Isaacson (though DC has), although I listened the audiobook of his biography of Leonardo da Vinci and thought it was absolutely fantastic. His skill in distilling a life of such magnitude, such as da Vinci's, down to something that is digestible for a simple-minded reader/listener like me felt like a work of genius and I have been intending to pick up some more of his work ever since. In this podcast, Parrish and Isaacson go in search of answers to the question of what do Steve Jobs, Leonardo da Vinci, Benjamin Franklin and Jennifer Doudna all have in common? Isaacson's life work and writing has been about explaining how curiosity has always fuelled creativity among history’s greatest innovators, and how each of those individuals shaped the world around them. Issacson talks in this episode about the curious obsessions of Jobs, da Vinci’s ability to develop a brilliant mind, Ada Lovelace and how she developed the algorithm, and how Doudna’s work with gene editing could shape the future to come. An enlightening and inspiring listen. EJP
NFT art has been a revolution already but the poster child for me of this new era is a gentleman by the name of Tyler Hobbs. Hobbs is the artist behind a series of generative artworks called Fidenzas. The series has shot to the top of the sales charts quite rapidly as it was one of the first to be featured on what is fast becoming the go-to platform for generative NFT art, Art Blocks. This podcast is an interview with Hobbs in which he talks about his upbringing, his interest in both art and software and some of the delicious details around how he goes about his work. What I find so fascinating about his story is that he had a fairly unremarkable story. No famous art school. No famous gallery owner plucked him from obscurity. That’s what the world of crypto and NFTS brings. Distribution! If you’re interested in learning more its worth looking at his website where he features a history of all his old work. Really fascinating to read his commentary and see the changes over time. DC
A very enjoyable moment of musical serendipity occurred this week when the Spotify algorithm sent a dose of Brian Wilson (he of Beach Boys fame) into my ears with his reworking of his own track, God Only Knows. This version is taken from a forthcoming solo piano album of stripped-back classics from Wilson's catalog that's coming out in November. The album will include Wilson's new interpretations of classics, such as Wouldn’t It Be Nice, Surf’s Up, Good Vibrations, and more, along with God Only Knows. The album is Wilson, who has taught himself piano throughout his life with no formal training, on piano and not a lot else and it's absolutely wonderful, incredibly uplifting. The full Beach Boys band sound is magic but stripping it back, simplifying it, removing the harmonies and symphonic background, in many ways, makes their California-inspired tunes even more poignant and nostalgic. EJP