Weekend Reading #111
This is the hundred-and-eleventh weekly edition of our newsletter, Weekend Reading, sent out on Saturday 27th March 2021.
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What we're doing.
Investors in our fund will have read at length about why we chose originally to set our period end in the middle of each month. Being a young and forward-thinking group, we do things differently across our entire business. But we always listen to our community. Following feedback all round, we have decided to move our fund’s period end to the more conventional month end. Our original decision was largely based on not wanting to be involved in the month end shenanigans that occur each time as funds jockey for positioning to improve period-end optics. It turns out though that most investors just want to be able to compare our returns properly with our peers. So, the period to end March 2021 will be a 6-week period for us as we fall back in line with industry convention and report calendar monthly going forward. DC
Now for the slightly less formal update on the week just gone: As most of you may be aware, the past year at TBC has been eventful any many wonderful ways. Aside from our working lives, you will know that our respective families are “growing” too, just like our business. One of my favourite quotes is “change is the only constant” - Heraclitus. That saying could not be any truer for us at Three Body. Change is the norm for us! Almost a year ago (in the throes of lockdown), my family welcomed into the world three gorgeous girls (Identical triplets). They have flourished and chipped away at all the milestones that one tracks with new-borns for which we are very blessed. In addition, we have been fortunate to be able to share our journey with the nation live on the Lorraine Kelly show ITV (Lorraine - Triplets born in lockdown 1 year on). If your families want a little insight to our “crazy” lives, look us up on Instagram. We are loving the challenge in both our personal and professional lives! DK
This week I attended a unique conference (albeit virtually) which is brings together all the Hedge Funds top Operations professionals from around the world to discuss the ever-changing environment we find ourselves in. It is a showcase conference held annually in Paris. (hopefully to be held in PARIS next year when the pandemic is over). The conference hosts extremely talented individuals and highlights the more challenging topics that we face in everyday life. One of the best segments of the three days for me, had to be a truly inspirational talk form Mick Ebeling, Founder of Not Impossible Labs, a company committed to creating technology for the sake of humanity. Just puts life into perspective and makes you think. The phrase he asked “us all” to take away, was “Who is your Daniel?” Do yourself a favour and go watch the Daniel Project (REALLY MOVING!) DK
What we're thinking.
Last week we wrote about the distinction between “proper” and speculative tech stocks where some companies have profit or a visible path to profitability and others.. Well... they don’t. The past week saw a substantial difference in how the market is viewing these names. After a speculative frenzy for the past year or so we are seeing major markdowns in names with no sniff of a path to profitability. We don’t like to name stocks we are negative on (in public anyway) but suffice to say a number of them have fallen hard. DC
We have also been thinking this week about the European Union. Remember the crisis? Greece? Italy? The EU is going to fall apart? Well, it didn’t. We have long thought that the key reason the EU didn’t disintegrate during its crisis was due to sheer political will. It didn’t suit any of these countries to go it alone. One of the main reasons (if not the main reason) for the decades of peace enjoyed by its citizens was the political union. However the way we see it there is a new threat and the threat is one of significant proportion. While the UK and the US, as large and wealthy countries, have been quick to vaccinate their populations, the EU has been an abject failure. This is nothing short of a disaster. From a humanitarian perspective with an old population and from a political perspective. There is absolutely no excuse for the rollout failure. The EU is wealthy and had easy access to vaccines. Bureaucracy as well as the farce relating to the AstraZeneca vaccine being put on hold, has now resulted in a sizeable 3rd wave across the continent, led by France and Germany. We have no crystal ball and are by no means experts on European politics, but we suspect that down the line the political implications of this will be severe. DC
This podcast from last year with Jeff Snider of Alhambra Partners (whose work on fixed income and liquidity effects on markets first drew our attention) explores in quite a balanced manner some of the explanations given for socialism/communism’s failure (at least as implemented) in the past and why some argue things may now be different. It is a tempting notion to entertain – hence the title of the podcast, “The Mass Opiate of our time”. Context is always important, and for us, we continue to believe that notwithstanding the lapses in governance and equality in the world as we see it, it is much more worthwhile working to improve the system as we know it rather than subscribing to the ideal of tearing it all down and having (another) go at a communist utopia. EL
What we're playing.
Having finally collected a PC from the office heralds the return of PC games, which have been on hold since using a Mac over the past few months. As such, whilst still in lockdown, this weekend we can enjoy looking through the Steam store for what’s good. One game coming later this year that I’ve been eager to try is Dying Light 2, having enjoyed the first game in 2015. It is an open-world game with a rich story in which you are part of the last human settlement within an infected apocalyptic world. You come face to face with the challenges you would expect in such an environment, but the storytelling and side quests are fascinating. Whilst we await the sequel, revisiting the first game will be a necessity in the coming weeks. HS
What we're reading.
This blogpost from Aswath Damodaran encapsulated the essence of what higher interest rates actually means for stocks. It captures the difference in outcomes across a number of metrics when rates rise from an improving economic environment (higher real growth) versus when driven by higher inflation. Our base case (for the moment) is the latter. DC
Like everyone, we watched and greatly enjoyed the Netflix series, The Last Dance, which charted the exorbitant success of Michael Jordan and his Chicago Bulls during the 1990s. It was a fascinating watch, even for those of us who aren’t huge basketball fans. We also found that many of the learnings from the show – about leadership, teamwork, innovation etc – could be applied to areas of our lives well beyond sport. In a similar vein, this week I finished reading The Last Season, by Phil Jackson, coach of the LA Lakers throughout the 2000s, winner of a record total of 11 NBA titles as a coach. The book details a season-long journey from training camp through the end of the 2004 NBA Finals told from the perspective of Coach Jackson as he tries to build a winning team whilst handling the larger-than-life egos of the likes of Gary Payton, Shaquille O’Neill and a young Kobe Bryant. It is a great read where Jackson details both his basketball analysis of the season, which is, admittedly, a little dry, alongside the psychological and spiritual challenges he faced throughout, which are fascinating and contain many lessons applicable to life and business. EJP
I enjoyed this very funny article in the New Yorker titled: Things Fully Vaccinated People Are Still Not Allowed to Do. Here in the UK, as friends, parents and grandparents get their second dose of the much-vaunted shot, it’s reassuring to see a list of things that these freshly ordained super-humans cannot do, despite being in possession of the superpower of a COVID forcefield. They include:
Stay Unmuted During Group Zooms
Eat Hot Dogs Horizontally, As if They’re Corn on the Cob
Use Both Armrests on a Plane or a Train
Suddenly Stop Walking Up a Flight of Stairs to Look at Your Phone
Thanks to the New Yorker for this reassurance.
I’ll be sure to inform my freshly-vaccinated mother that these rules still apply.EJP
When readying epic fantasy I'm always looking for something more spectacular than before. The Rage of Dragons by Evan Winter is mind blowing. The author was born to South African parents and spent much of his youth on the continent, and it shows. This book (the first in the series) is African at its core in combination of all the best fantasy writing. It tells the story of Tau, a lower caste boy, who grows up seeking vengeance. What follows is epic fantasy writing of the highest order. It is definitely not for the faint hearted and its very gory! I’ve ordered book two and can’t wait. DC
What we're watching.
The Spy, starring Sacha Baron Cohen is an absolute much watch on Netflix and a show I’m sure we must have recommended before. It chronicles the real-life story of Eli Cohen, an Israeli Mossad spy who navigates his way to the top of 1960’s Syrian society in the years leading up to the Six-Days War to extract critical info and turn the tide in favour of protecting Israel. Cohen is an excellent fit for the role, and it makes a real change to see him in a more serious role like this. However, he still manages to sport his now iconic Borat Sagdiyev moustache which seems somehow fitting with the times. The writer, Gideon Raff, is well known for his work in creating the Israeli hit-series, ‘Prisoners of War’ which went onto inspire the critically acclaimed show, ‘Homeland’. HS
The conflict in Syria has been the subject of many documentary filmmakers over the last decade. One such documentary I watched this week had a real point of difference in that it was delivered from a female perspective, telling the story of Waad al-Kataeb, a young video journalist, as she films what it's like to live in the heart of the conflict in war-torn Aleppo. Over a period of six years, she lives first as a student and then as a young mother and her story is one of everyday existence by someone living in one of the most inhospitable places on earth whilst trying to raise a young family. For Sama went on to become the most-nominated documentary in BAFTA history, and Al-Kateab's video diary is a powerful, remarkable watch, especially if you're a parent. We've all struggled in the last 12 months, but some of our struggles pale into insignificance when compared to what many in Syria have lived through over the last 10 years. Not easy, but a salutary, vital watch. EJP
What we're listening to.
This recent episode of Sam Harris' Waking Up podcast is well worth a listen. It's Sam in conversation with Nobel Prize-winning physicist and Macarthur fellow, Frank Wilczek, about the fundamental nature of reality. In a wide-ranging and mind-blowing chat, Sam and Frank discuss the difference between science and non-science, the nature of time, the prospect that possibility is an illusion, the current limits of quantum mechanics, the possibility that we might be living in a simulation, the fundamental building blocks of matter, the structure of atoms, the implications of infinite space-time, dark energy and dark matter, and other topics besides! Educational, mind-bending, perception-challenging, thoroughly disturbing... this is everything a good podcast should be, if you’re into that type of thing! EJP
There are few things more enjoyable than reading a great sci-fi detective mystery, but one possible candidate is listening to a great detective mystery on a podcast. That’s exactly what the BBC has delivered in The Cipher, which follows the story of 16 year old Sabrina who cracks a cryptic online puzzle called the Parallax, and subsequently get recruited to track down a serial killer that (at this point) seems to not be of this realm. The astute listener would recognise a familiar voice, too – Sabrina is voiced by Anya Chalotra, who played Yennefer of Vengeberg in the Witcher series on Netflix. EL