Weekend Reading #129 — Three Body Capital

This is the hundred-and-twenty-ninth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 31st July 2021.

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What we're doing.

We have finally signed a lease on new offices in London and as of 2 August we will move in. We absolutely cannot wait to have a place to all be together again. While remote working had its pros, being able to feed off each other on a day-to-day basis is simply critical. So, from next week we move into our new, trendy spot, on Theobalds Road down the road from the British Musuem. We firmly believe that life has chapters and we are now entering our third as a business. First, we had a wonderful beginning in Camden, then we figured it out all at home and now we move to a new area and look forward to discovering all the things that this part of London has to offer. DC

... and one of the things we're most looking forward to when we're back in the groove of office life is getting to know the local eateries in this part of London. For too long, lunches have been, at best, a homemade sandwich or eggs on toast, or somesuch and, at worst, not very much at all. One of the joys of being back in an office and working as a team will be to eat together at lunchtime. In Camden, our daily excursions to one of the many local restaurants (be it kebabs, sushi, burgers, fish and chips, laksa, falafel etc) was the place not just for physical nourishment but also the forum where we got to talking about the weird and wonderful ideas that have gone on to shape the business as you see it today. It is these conversations in relaxed environments, a million miles away from a Zoom login and a webcam, that I most look forward to enjoying once again. So, bring on 'Midtown', as I've seen it painfully called, and all of its many potential lunchtime hotspots. If you have any recommendations, please hit us up or, better still, meet us there! EJP

Schools out, however that does not mean that our kids will switch off and hunker down in their bedrooms playing Xbox or PlayStation for hours on end. We are firm believers in our house, that whilst the sun shines, the boys need to be out and about or exercising... this week we’ve been on family walks, biking and running down the towpaths of Surrey and SUP’ing on the river Thames. Those who know me will know that fitness is a key ingredient in life. Physically fit usually means one is mentally and emotionally fit too, which I think is extra important in this environment / pandemic! Looking forward to a weekend of cricket and footy competitions as the school season comes to a close. DK

What we're thinking.

Despite the blanket coverage of China’s so called “tech” clampdown (and our own views we wrote about) this week once again saw sheer panic as investors smashed stocks yet again. There has been a bounce off the lows, but as we have said many times before, in our view the structural story is over. Dead cats can bounce a lot though and for now we observe with interest what happens next. Elsewhere it was big cap tech earnings week with modest selloffs after good earnings across the board. Pretty much what one would expect given the monster rally we have seen there.

A statistic we read this week came from Scott Rubner at Goldman where he wrote “In the USA, passive fund assets ($4.441 Trillion) now exceed active fund assets ($4.204 Trillion) for the first time on record. USA Passive Assets represent 52% of fund US assets, while Active funds represent 48% of fund assets.”

The passive dynamic is something we are acutely aware of and have written about before but the above stat is just staggering in terms of its implications.

Speaking of which, is the crypto bear market over? This week’s sharp rally in Bitcoin specifically is fascinating given the sheer amount of negativity pervading its news cycle. The kitchen sink has been thrown at Bitcoin - US tax talks, Binance under attack from regulators, proof of work’s energy intensive nature and of course don’t forget the Chinese authorities who started with crypto before moving onto the tech champions. And after all of this Bitcoin is still $40,000 or so. We don’t know exactly where it goes next, but 7 months into 2021, $40,000 is respectable indeed. DC

What we're reading.

I recently subscribed to a newsletter called Neckar’s Notes which I have really enjoyed. Frederik (the writer) writes about the rise and of businesses and (usually) famous investors. He writes with a softness that one wouldn’t expect from a business letter as well as a deep vulnerability as he regularly shares his personal stories with readers to help build a connection. He succeeds on all levels! This week’s piece is about the Rise of Johan Elkann, who heads up Exor, the public holding company of the Agnelli family (Fiat). It covers the story of a young heir and investor who is maturing rapidly. DC

Late this week Fortune released its latest issue which is all about crypto. There are loads of excellent articles but the feature for me was this incredible cover designed by a digital artist who goes by the name of pplpleasr1. She rose to fame last year as she designed some animations for the leading DeFi protocols but this is just brilliant. The cover shows all the pseudonymous twitter handle images that anyone on crypto twitter will be familiar with. It's just awesome. DC

What we're watching.

BBC dramas are often much of a muchness offering up the same tired-ish tropes with some grisly violence tossed in when the drama falls a little flat. But every now and then there is a series that the BBC produces that seems to be a little smarter, a little sharper than the rest. MotherFatherSon is one of those. Released in 2019, it tells the story of an uber-successful father called Max Finch, played by Richard Gere, who is the owner of a media empire that dominates British politics and power. His dysfunctional family comes together when his son, Caden, played by the excellent Billy Howle, suffers a breakdown. The reason this drama feels different is because it is written and created by the hugely talented Tom Rob Smith, author and screenwriter whose most famous creation is the book and film, Child 44. This is smart television, beautifully made and produced, with great writing and ideas. It's seems to stand apart from the rest and it's 8 episodes (6 of which me and my wife got through this week when we should have been sleeping) are well worth watching. EJP

The Olympic Games in Tokyo – what's not to love (other than the lack of support). It will always be an utterly amazing spectacle to watch the world's best athletes in many disciplines, slog it out for the top prize... “BEST IN THE WORLD.” It honestly does have it all... especially the comeback stories. Everyone loves reading about previous failures and they survived those experiences to rewrite their own personal new chapters in their lives. With our attention turning to the track and field now, after usual early tournament swimming events, who could deny watching other events like, Beach volleyball, Skateboarding, BMX racing, Surfing, Cycling and MTB to name a few... Fascinating to watch! DK

The British & Irish Lions tour continues today with a cliff-hanger of a match... “part 2”. As a neutral, one would love to see the Springboks win tomorrow which would set up a truly mouth-watering encounter next week. Me personally, last week was a tough pill to swallow losing the way “we” did however I have every faith in a positive reaction from the Bokke and two wins on the bounce DK

This week Netflix unveiled a new hit movie, Chernobyl 1986. This Russian thriller is the first Russian feature film to talk about the nuclear disaster since it happened and is a clever comeback to HBO’s series. Despite watching in a language I understood none of, it was highly enjoyable. The film follows the story of Alexey Karpushin, a retiring firefighter who is drawn back into the action just as he waves goodbye to his team. With his newfound family nearby, he does whatever it takes to save Europe from the fallout of further reactor damage. HS

It's funny, and perhaps a quirk of human nature (although it might just be personal to me), but the busier and more stressful the day and the greater the need for a good night's sleep, the longer I stay up at night. There's a magical something about the wee small hours that act as a decompression session after a long day when, in fact, the much better course of action is always to get an early night. But one late night this week I stumbled on The Bourne Ultimatum, a film I hadn't watched in a couple of years and got to be reminded what a top-rate thriller it is. I now know why it's one of my all-time favourites and it was a joy to be quoting Jason Bourne and Pam Landy in real-time once again, on my sofa in the dark as the clock ticked past midnight. If you find yourself wired after a stressful day, I highly recommend reminding yourself how good the Bourne series is and especially the third instalment. EJP

What we're listening to.

I listened to the latest Invest Like the Best featuring Carl Kawaja, a long-time portfolio manager at Capital Group. Anyone in markets will know Capital well as being the biggest and most patient investor. I’ve had the pleasure of dealing with many of the team over the years when looking at emerging markets and the ability and style of holding for the long term is something that really stands out. In this chat, a number of things resonate, in particular the opening segment in which Kawaja talks about two long term holdings, both of which we know well – Vale and Taiwan Semiconductor. He speaks about how different the businesses are optically yet in many ways they are the same. Both have provided almost identical returns to him since investment many, many years ago and it is refreshing to hear somebody speak this way about a mining business which is supposed to be cyclical. There are many other nuggets to take away and it's well worth a listen. DC