Weekend Reading #116
This is the hundred-and-sixteenth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 1st May 2021.
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What we're doing.
We celebrated a major milestone this week with the one-year anniversary of our Three Body Fund’s launch. This time last year at the depth of global covid despair, we were faced with a huge decision. Do we go ahead and launch our fund with a tiny amount of capital after losing (essentially) all our committed AUM pre-launch?
A wonderful quote introduced to us by our friend, Jawad Mian, is from Rumi, the great 13th century, Persian poet and Sufi mystic. It best describes our decision and what came after.
“As you start on the way, the way appears.”
We decided YOLO (you only live once) and we launched with in all likelihood the smallest fund size in the history of Goldman Sachs Prime Broking. A year later we have delivered what we said on the tin to our investors and are immensely grateful to those who backed us from the start as well as those who have joined along the way. With a “last 12 months” column now on our factsheet we are as excited as ever to continue our money management journey. It has been a wild time in markets and in the world and if we can continue the way we have started we will be delighted.
Another highlight earlier this week was a presentation that David and Eugene gave to a group of nearly 300 Indonesian investors about the opportunity in crypto and the potential implications of the technological revolution it brings. We fielded an hour of excellent questions and really enjoyed interacting with so many smart people. We have deeply missed travelling to Jakarta and although nowhere near the same as sitting down face-to-face, the session was highly rewarding. With deep gratitude to our partners and friends at Verdhana (and Nomura), we look forward to the next one! If you are interested in listening to a recording of the presentation, you can access the audio recording here and drop us an email if you want a copy of the slides (compliance).
What we're thinking.
This week saw copper trade near its ALL TIME high. Of course, copper going up usually coincides with a global economic upswing (hence “doctor copper”) as well as a weaker dollar, but to us in conjunction with all the other signals we are seeing, it means perceived higher future inflation. The scramble for real assets has begun and if our suspicions are correct, hard assets are about to have their time in the sun. Agricultural commodities after years in the doldrums are also having a surge. Corn, Wheat, Soybeans and all their friends are breaking out anew this month as they join the global commodity party. And yet again this week, Fed chairman, Jay Powell spoke of “transient” inflation. While inflation is generally good for stocks it is not good for all stocks and as a long/short manager we are licking our lips at the potential dispersion that threatens to unfold. DC
One of the big questions that has come up in our discussions about the future of crypto relates to the impact of the adoption of an adjustment to Ethereum’s core code called EIP-1559. At risk of oversimplification, these changes have the potential to turn issuance of Ethereum’s native token Ether into a deflationary asset, rather than its current inflationary state. This podcast with Bankless HQ is critical listening (and probably belongs in the “What we’re listening to” section below) but the reason it is here is because it raises a bigger set of questions that we have to think about: given the entire world of the decentralised web is built directly or indirectly on Ethereum, what does a deflationary supply of “fuel” for this computing system mean for yields, returns and the economics of the decentralised world? From staking platforms like AAVE to “layer 2” solutions and competing chains like Polkadot and Binance Smart Chain, steadily deflating Ether has profound implications.
Of course, because of the ability to Ether’s price to be expressed in up to 18 decimal places (1018 wei = 1 eth), there really isn’t a hurdle to “usability” in “dollar terms”. More fantastic is how a trope that started as a throwaway phrase by Ethereum founder Vitalik Buterin that Ether could be “Supersonic money” has gradually evolved into a meme about Ether being “Ultrasound money” and subsequently the reality of it being (arguably) “ultra sound money”, with a space - a jab at Bitcoiners' long-time claim about Bitcoin's soundness (not untrue either, just less sound).
Memes turning into reality: best appreciated accompanied by pictures. EL
What we're playing.
Having purchased the latest Call of Duty instalment just last week (not particularly new but new for me), we have been giving it a go and rather enjoying it. Over the past couple of years, we have skipped out on buying CoD as it seemed as though it had lost touch with players, instead opting to play other FPS and try out a few other different genres. However, the maps and gameplay on Cold War are now back to how they should be, making for a very nostalgic experience; at last the days of overly jumpy exo-skeletons and futuristic weapons are over. Whilst on this trip down memory lane, we also decided to boot up Black Ops 3 who’s Chronicles DLC allows you to play many of the old maps ever featured in Zombies mode throughout the years. That means classics like Kino Der Token, Ascension and Shangri-la! HS
What we're reading.
This fascinating photo essay in the New York Times provides a behind the scenes look at how Pfizer makes it’s COVID-19 vaccine. It all begins inside a facility in Chesterfield, Missouri, where trillions of bacteria are producing tiny loops of DNA containing coronavirus genes which acts as the raw material for the Pfizer-BioNTech vaccine. This is the start of a complex manufacturing and testing process that takes 60 days and involves facilities in three states throughout the US. The result will be millions of doses of the vaccine, frozen and ready to ship. This is the miracle of science in action and it’s amazing to read and see. EJP
The world is filled with people doing incredible things, but James Lawrence surely takes the cake. Also known as the Iron Cowboy, the multiple time Guinness world record holder decided to take on the challenge of completing 50 iron man triathlons in 50 days through 50 US states. Once he was done with that naturally he thought well why not try do 100. So he is now in the process of completing his biggest challenge to date – Conquer 100. 100 triathlons in 100 days from 1 March 2021 to 8 June 2021. You can keep up to date with his progress at www.ironcowboy.com. DC
Regular readers will know we are fans of Epsilon Theory and this latest piece from Ben Hunt perfectly captures why Wall street is becoming so enamoured with Bitcoin. At the end of the day the narrative of inflation hedge is something that banks can sell and productise. They don’t mind whether it goes up or down, they just want throughput. Once Bitcoin has been “captured by Wall Street” it goes into the wheelhouse of tradeable assets and that where the real money is made. Ben says it a lot better than me so have a read and open your minds to it. DC
Still on the subject of Bitcoin, this Twitter thread from Travis Kling of Ikigai Asset Management is excellent at articulating the “bubble of everything”. In the thread he dissects the performance of well pretty much everything in a time of financial inflation and asks the question if everything else is inflated in value, why on earth shouldn’t Bitcoin be, especially given its inherent characteristics as a supply constrained digital store of value. DC
Users of the decentralised web will doubtless be familiar with Metamask, the software wallet plug-in with a cute fox icon (which always stares at the mouse cursor) that plugs into Google Chrome. And what does the fox say? Metamask just announced that there are now over 5m monthly active users, up from 1m only 6 months ago. Yet these are not just “punters” and “traders” as the cynics would want us to believe - crypto is getting more and more real by the day, for more and more people.
From their press release:
More and more people living in the Global South are using crypto, and many see MetaMask as a safe and trustworthy option. For example, India and Indonesia are both in the top 5 countries in terms of MetaMask mobile adoption, while Vietnam and Nigeria are in the top 10.
Increasingly, these people use MetaMask to earn a supplemental income or to make long-term investments. Many are unable to access their local banking system and thus need alternative technology to act as a savings account. For example, the average percentage of people who don’t have access to a bank account in South America by country is 54%.
While many are not able to get bank accounts, even the ones that do might have more trust in using MetaMask than banks. Many people in these countries do not trust their governments, and thus eagerly look towards alternatives. We will discuss this trend in an upcoming webinar on May 5th with Emerging Impact.
The decentralised web beckons. Ignoring it doesn’t make it go away. DC
What we're watching.
We stumbled across this very cool clip on YouTube (likely via Twitter) of Paul Simon explaining to TV host Dick Cavett what led him to write one of the greatest tracks of the 20th Century, Bridge Over Troubled Water. It's remarkable footage, with Simon taking his guitar and showing how he pieced the track together for the first time. As Cavett explains, like everything original, there was a moment in time when Bridge Over Troubled Water didn't exist. And then, all of a sudden, a moment when it did. So how do original thinkers and creative geniuses like Simon unlock the magic behind those moments? Simon is candid in his response, showing how his music isn't actually original, but merely a conflation of other ideas and excerpts that had gone before and that he admired. By piecing together/ripping off a piece of choral music by Bach, some gospel from a group called The Swan Silvertones, a lyric from a scat singer... he gave birth to one of the most enduring and beautiful pop hits of our time. Genius isn't necessarily original. Nor is creativity. Both merely rely on identifying existing pieces of a new puzzle that fit beautifully together... And, having enjoyed this clip immensely, I stumbled via the YouTube algorithm onto another classic version of this iconic track as the great Elvis Presley takes it for a spin accompanied by the Royal Philharmonic Orchestra. How magnificent! EJP
Andre Agassi was one of my sporting heroes growing up and the clashes with Boris Becker were epic. In this clip, Agassi reveals that like a poker player, he figured out that Becker had a tell. Each time he would line up his booming serve, he would give away where he was going to aim it. Best of all is how Agassi says he had to use every ounce of willpower not to overcapitalise on his secret knowledge and give away to Becker that he could pick his serve. And even better was Becker’s reaction many years after retirement when Agassi told him about it! Thank you to Kieran O’Dea on the Stray Reflections Slack forum for the link. DC
Magnus Carlsen is a name many will know well from the world of chess. This clip of him identifying chess positions from chess games taking place before he was even born is just mind boggling. It gives some insight into the mind of someone at the absolute top of his profession. Its like a supercomputer and just blew me away. His tongue in cheek reference to the interview also brought a smile to my lips. DC
What we're listening to.
Having returned to the English countryside for the first time in almost a year, it was fascinating to randomly land on a page on the BBC Radio 3 website in the days preceding my trip that offered a beginner’s guide to identifying birdsong. This is something I knew next to nothing about and, quite frankly, had very little interest in learning much about. But it’s amazing how in even the shortest space of time you can teach yourself something new. In this case, having read this article, listened to some of the listed sounds and dug a little deeper on the internet, it was incredible that, within a matter of hours, I could sit in the garden of my rural Airbnb and recognise some bird sounds. If the last year of lockdown has taught us anything it’s that pleasure can and should be derived from simple things that are close to home and may have been previously overlooked. Until reading this article, birdsong seemed random to me, just background noise. But I now have a new appreciation for it and that feels rather good. EJP
The Touré-Raichel Collective is a group led by Malian singer and guitarist Vieux Farka Touré and Israeli singer and pianist Idan Raichel. Vieux Farka Touré is the son of the great Ali Farka Touré, who we've written about on the blog before and whose album with Ry Cooder, Talking Timbuktu, is our most played album of the year so far. This week we've been greatly enjoying the album that Vieux Farka and Raichel made together, The Tel Aviv Session, and their eclectic sound that mixes the Middle East with Africa. The group's origins go back to 2008 and a chance meeting in a Berlin airport terminal between Touré and Raichel. They forged a friendship and decided that they would, at some point in the future, make some music together. Bringing their different backgrounds, histories and musical sounds together, they eventually got together a couple of years later to put down an album. The resulting output is a beautiful mix of spontaneous musical freedom. The Tel Aviv Sessions is a live, unplanned improvised album recorded in 2010 with Touré and Raichel in session in a Tel Aviv music studio. It is awesome, magical and hugely uplifting. EJP
The DSCH Shostakovich Ensemble’s recording of Shostakovich’s complete chamber works for piano and strings is a revelation. This is extraordinary music played with a fresh look and real mastery. Adrian Brendel’s account of the Sonata for Cello and Piano, Op 40, especially the long line at the beginning of the Largo is mesmerising. LM