Weekend Reading #112
Photo by Foad Roshan on Unsplash
This is the hundred-and-twelth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 3rd April 2021.
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What we're doing.
From all of us here at Three Body Capital, we'd like to wish all of our readers a Happy Easter and a Happy Passover!
And lo, it came to pass, that following months and months of (mostly) only hanging out with our closest family at home, the UK lifted lockdown a touch this week and we were allowed to venture out into the big wide world to meet with family and friends. Yes, the Rule of 6 still applies, and overnight stays and foreign travel remain a long way off, but the fact it was, at last, legal to meet a mate in a garden for a barbecue or another family for a picnic in the park felt incredibly good. Never before has a singed steak or paper plate of Midget Gems been so bountifully received! The gods also clearly took pity on us Brits too, as this week’s weather cranked up to an almighty 24 degrees. So, when away from the immense busy-ness of building our business, we’ve had a terrific week in the sunshine, pretending and hoping that the world was more normal once again. UK lockdown rules will be gently eased further in the coming weeks and that can mean only one thing... TBC Spring Braai. Watch this space for a match report on the shenanigans that will inevitably occur when we can get the team back together. All of us are yearning for a get together and some more consistent face-to-face interaction and, as the spring sun begins to shine and the COVID rates continue (fingers crossed) to decline, we can’t wait for some fun over the coming weeks. At the end of a long, hard and extraordinary eventful 12 months, it feels like we all deserve it. EJP
Now that we’ve passed the “one year in lockdown” milestone, it's become the new norm to keep ourselves active, physically fit, and mentally fit for that matter. Mental wellness is key in this current environment. With no access to the gyms for the better part of a year, I stumbled across Ronan Oliveira. Those who know me, will know that I’m passionate about exercise so I’ve found it tough and challenging to get the right balance of cardio vs weight training. The Secrets of At-Home Strength Training | Just for the health of it | Ronan Oliveira is the perfect way to get that extra strength training that the body craves until we can head down to the gym again. Enjoy! Also, time to touch on Wim Hof breathing tutorial again (we’ve referenced it in the past): Wim Hof breathing tutorial by Wim Hof. I have found this to be extremely beneficial especially in the most recent lockdown during the winter months. Your body and mind will be revitalised! DK
What we're thinking.
This week, a divergence opened up in the world of tech stocks as what we call “proper” companies’ stock prices outperformed those that have been lifted by the prior rising tide. It leads to the possibility that for the first time in a long time, some dispersion appears to be happening within the tech space. We are still waiting to see how all this price action unfolds before committing large capital back into the market. The inflation theme is not going away, but even with it front of mind, businesses that have pricing power should continue to see their stock prices recover best. The large cap tech NASDAQ components which barely fell and had underperformed the hotter stuff since the 3rd quarter of last year, also have rallied nicely, suggesting that the passive inflows are not being as heavily offset by active selling as they may have been before. We would not be surprised at all to see the NASDAQ back at all-time highs before long. As ever we wait for the markets to show us where it they want to go. DC
While listening once again to the superb Balaji Srinivasan, this time being interviewed by Tim Ferris, we learnt from him about the story of the NSFAUP – the National Science Foundation’s Acceptable Use Policy. This policy prevented commercial use of the internet in its early days due to the fear the internet would be plagued by spam, porn and malware. It was only repealed in 1989 and in 1991 the first ISP was allowed access. Before the internet was opened up, it was used primarily for academic purposes. One needed a .edu or .mail domain in order to be part of it. Our takeaway from this relates to the world of cryptocurrencies. While early on it was indeed used for smuggling, tax evasion and all sorts of negative use cases, it is rapidly becoming clear that the positive use cases of blockchain technology will dwarf these concerns over time in the same way that once commercial use was permitted, the innovation around the internet has dwarfed the porn, spam and malware which is still around, bigger than ever before. It goes to the argument of the greater good, and the way we see it, the good of blockchain and cryptocurrencies is only beginning. DC
What we're playing.
Having been inspired by hearing of DC and his wife’s love of board games, this week, once our daughter was soundly asleep, me and my wife turned off the TV and got out the backgammon board. We were lucky enough to be gifted a very fine set for our wedding (a good wedding present if you never need inspiration when buying) and we thoroughly enjoyed a night of hard-fought gaming action. Having dusted off the rules and some strategies that we developed a few years ago when we first started playing, it wasn’t long before we were into our third, fourth and fifth games, each one closer and more keenly fought than the last. With neither of us having played any competitive sport in a long time, it felt as if we’d found an outlet for some competitive energies that had been building up for the last year or more! You’ll be pleased to hear that I won our marathon series, just, which was great, but the one downside was that the shouting when things got really close towards the end of the deciding, razor-tight game and a double 6 got rolled woke up my daughter. Oh well. A small price to pay for a hugely enjoyable evening. EJP
What we're reading.
With “real life” coming back into play as COVID comes under control, at least in the US and the UK, one can’t help but wonder if the fantasy-world market conditions of the past 12 months are coming to an end. This snippet flagged up by Nomura showing US Total Call Option Volumes, the poster child of the YOLO mentality in markets over the past year, falling vertically may just be the first sign that for most people, “real life” beckons and all that spare cash saved up over the year is better spent on drinks with friends, shopping and maybe a nice holiday.
By any measure, those deliver a much better return than short-dated call option punt trades.
Another interesting chart from The Lykeion that got us thinking was this chart showing market-priced inflation expectations over the next 10 years:
A simple explanation: prior to Jan 21, inflation expectations over the next 10 years was that the first 5 years would be less inflationary than the next 5 years (grey line > yellow line). Since Jan this year, things flipped: the market is expecting inflation to be front-loaded (5 yr inflation > 5y5y forward inflation). This isn’t just a “base effect” story of “transitory” inflation – the market is taking this pretty seriously. Structurally, too, these inflationary effects aren’t going away and as we’ve flagged up before, for the first time in many decades the water is which we swim is changing from deflation/disinflation to inflation/stagflation. EL
This chart captured my attention and really made me take a moment to think. It shows the time Americans spend with the various people they interact with. There are two obvious conclusions. First, as I hit 40, the time I get with my kids is about to plummet as they get bigger and bigger. While obvious, this is still a little sad and reminds me to enjoy each day as it comes. Secondly as we get older, the time we spend with our spouses rises materially. So best we all make sure we invest heavily in our relationships with our significant other! The rest is obvious too and one also best make sure one enjoys one’s own company as that line above goes into the biggest bull market of all. DC
What we're watching.
If you haven’t seen Wandavision on Disney Plus yet, this is the strongest recommendation we can make for a TV series. Suffice to say, it is impeccably and brilliantly made. The first few episodes might leave you scratching your heads wondering “what on earth is actually going on??” but as the episodes go by, things start to fall into place. The consensus “threshold” beyond which things make sense is episode 4, and by the time you get to the final episode, one cannot help but conclude that the genius of team Disney combined with the prolific imagination of the late Stan Lee’s Marvel Universe is the best combination for content creation of all time.
One other tip with Wandavision: there are lots of easter eggs hidden in each episode, and also across episodes. Youtube is teeming with review videos but our advice is to finish all the episodes (savour them in their brilliance), and THEN go back to the in-depth analysis done by the youtubers and marvel at how intricately Marvel/Disney have strung everything together into one seamless masterpiece. The benefit of only starting when all of the episodes are released is that you no longer need to endure the agony of waiting to find out what happens next.
Then again, in true Marvel style, Wandavision ends on – you guessed it – another post-credits cliffhanger. EL
The Flight Attendant on Now TV is a show based on a pretty grim premise – a murder – but is also a bit of a laugh. In fact, given the stressful times we’re living through it is a show that we’ve greatly enjoyed because it’s managed to achieve the often impossible by making you enjoy the show and keeping you hooked whilst not stressing too much about what the finale will be. Too often I find that TV and films nowadays are almost unbearable to watch, due to the high-octane, high-drama stakes that producers, directors and writers think that all viewers want/need to endure. For me, too much tension is a turn off. Yes, sometimes great drama hangs on suspense, the idea that you need to watch until the very last second in order find out whodunnit or who got away with it. But not always – sometimes drama can just be good fun. The Flight Attendant is a little more whimsical, fast-paced, good looking and actually not as stressful to watch as many other drama/thrillers. It also travels to some nice-looking parts of the world, which is always fun in times like these when we’re becoming increasingly bored of staring at the 4 walls of our living room. Watch it. Enjoy it. And relax a little. EJP
Just a week after the third season on Netflix’s Formula 1 epic, Drive to Survive debuted here in the UK, we were quick to finish it in almost one sitting. The show explores the various driver’s stories over the past 12 months as Covid-19 disrupted the truly international sport; it talks about the challenges each of the teams have faced and the competition for seats from drivers. It is a fantastic insight into the lives of the drivers, and really goes beyond what you’d see from a regular race weekend. HS
The weekend just passed also marked the start of the 2021 F1 season which we were keen to watch. Having performed fantastically in Saturday’s qualifiers, we were hoping that Red Bull’s Max Verstappen could knock Lewis Hamilton down a peg and we were in for a treat when it came to race day. Despite not getting the result we were hoping for, the race was an exciting spectacle and it was so close to happening. Having followed Aston Martin’s transformation as a company over the last year, we were also excited to see Aston Martin’s F1 debut with seasoned veteran Sebastien Vettel behind the wheel of one of their cars. He did not perform as well as expected despite his upgrade from last year’s Ferrari, but luckily Lance Stroll was able to pick up a few points for the team. HS
We fell into a Netflix rabbit hole of two series based on comic dramas by the American author Charles Forsman, The End of the F***ing World and I Am Not Okay with This. Both of them are coming of age stories with a twist or two but really enjoyable, even if one feels like that it would have been a good deal to swap series 2 of The End of the F***ing world for the second series of I’m not ok with this which Netflix cancelled. LM
Away from dark Netflix series, there are two opera productions worth watching. One is Dmitri Tcherniakov’s masterful production of Tchaikovsky's Eugene Onegin, a production originally staged at and toured by the Bolshoi Theater, but in this case performed in Vienna in October last year conducted by Tomáš Hanus with Nicole Car as an amazing Tatiana. The other is a milestone in opera history, as the Staatsoper in Munich replaced its legendary, near 50 year old production of Richard Strauss’ Rosenkavalier, which had been premiered by the legendary Carlos Kleiber in 1972. The extraordinary Barry Kosky directs and the amazing new music director of the Staatsoper Vladimir Jurowski conducts. LM
What we're listening to.
I listened to a new podcast episode from The Genetics Podcast where host Dr Patrick Short interviews the Dr Kaja Wasik, co-founder and CSO of one of my favourite private companies called Variant Bio. This company blew my mind when I first came across it as one of Lux Capital’s portfolio of companies. Variant is bringing the X-Men to life! The company searches for communities all over the world which have had a unique evolution and partners with them to use their genetic data in drug development. The approach to partnering with and rewarding the communities they work with is really collaborative and very much not the norm one would expect from a pharma company. In this interview Dr Wasik talks about the company and some of the mind-boggling things they are doing. DC