Weekend Reading #153

Photo by Ali Shah Lakhani on Unsplash

This is the hundred-and-fiftieth-third weekly edition of our newsletter, Weekend Reading, sent out on Saturday 29th January 2022.

To receive a copy each week directly into your inbox, sign up here.

*****

What we're thinking.

We are thinking only about the markets this week. We were once pure growth investors and back then growth didn’t mean what it has come to mean today. Growth then was growth in revenue, margins and hence PROFITS. As time went by, the “growth in revenue” crowd arrived on the scene and everything became a bit blurred. It seems as though the tide may be turning once again. Which narrative will drive markets going forward? Only time will tell though we have a bit of an inkling that a valuation premium is about to be placed on near term cash and certainty of future cash flows. And given the way that the hot ball of money rotates in these markets, we wouldn’t bet against a new type of bubble forming. As we like to say, “There’s always a bull market somewhere”. Good luck to everyone out there. 

At the other end of the market, in crypto land, a little storm seems to be brewing. Multiple explanations exist for why this may be happening, but the short, succinct version is that an algorithmic stablecoin is threatening to break its peg as we speak. MIM, also known as “Magic Internet Money” - probably named as a tongue-in-cheek jibe at its critics – had previously enjoyed great success as a cross-chain algorithmic stablecoin, spanning multiple chains and allowing users to post collateral, leverage up and transfer that levered value across chains.  

It turns out that making snarky jokes runs the risk of the jokes coming back to bite. 

The problem, as many algorithmic stablecoins have discovered before, is that while the self-correcting mechanism on which these tokens rely to maintain their $1 value is able to manage and correct for small shocks, they don’t fare so well when a big shock hits the system. As it stands, liquidations and market weakness aside, some revelations about the less-than-illustrious pedigree of one of the co-founders of Abracadabra Money, the protocol behind MIM, led to a wave of worried redemptions and selling of the underlying SPELL token, which has now significantly weakened the collateralisation behind MIM, leaving it open to attempts to break the peg. 

Why? Because that’s what crypto traders do. 

The extension of this is that the largest pool of collateral behind MIM is actually UST, comprising about 36% of total collateral behind MIM. UST itself is an algorithmic stablecoin, backed by the Luna token, which has understandably been under pressure as a result.  

Moral of the story: everything is linked. And as episodes like these become more common, severe dislocations start to provide interesting opportunities that would otherwise not have existed in a more irrationally exuberant market. 

What we're doing. 

Some of us spent last week in Athens, Greece where we finally sat down with our development team to plan out the next stages of Nachas Networks, our mobile trading software business. Since launching our trading solution we’ve been adding on brokers to our network and improving our capabilities and last week was time to think about the next group of features and functionality with some Ouzo and superb Greek food and company. HS

What we're reading. 

The Lost Pianos of Siberia by Sophy Roberts is a wonderful book in both terms of entertainment but also, more so, enlightening and educating you about a world, Siberia, that so many of us know so little about. The little I knew about Siberia before reading this book was that it was massive and very cold. Turns out, both things are true, but there is also so much more to this vast expanse of nothingness. Most intriguingly, hidden in the cold and barren landscape, there is another tale to be told, and that is the incredible fact that dotted throughout this remote and beautiful landscape are pianos created during the boom years of the 19th Century. Their existence tells the story of how, ever since entering Russian culture under the influence of Catherine the Great, piano music has been at the heart of Russian culture. How these pianos made the journey into this snow-bound wilderness in the first place is remarkable. That they might be capable of still making music today, so many years later, in such a hostile landscape feels like a miracle. Reading this book transports you away to the magical world of Siberia and music, revealing a story of epic musical legacy, but also immense human bravery and fortitude. EJP

As the inflation word pops up everywhere we look, one story that captured the moment for us was this one on how the price of Umaibo is rising 20% due to higher costs. Umaibo corn puffs are Japan’s favourite snack and the price had never been increased since the product first went on sale in 1979! Japan is famous in the economic world for its deflation which has lasted for decades. This just another anecdotal (but significant) data point that the world is not quite what it used to be. A great article also putting the cultural importance of Umaibo into perspective too! 

Something I’ve been thinking about for a while is how a decentralised structure may impact the sciences and in particular biotech. In theory, it should expedite sharing of ideas and resources and debottleneck what is an extremely siloed and slow process. I have no idea how it unfolds (and obviously there are very good reasons for the multi-stage approvals regulations there are) but some fascinating developments are happening in what is now being called DeSci (as opposed to DeFi!). This blog post covers the emergence of biotech DAOs. The first is one which I’ve read about before called VitaDAO and focusses on longevity research. The next one being prepared by this platform called Molecule (who wrote the blog) is focused on psychedelic drugs. Even by crypto standards its early for these but in principle it seems really promising that there could be an improvement in some way of what already exists today. Long way to go but well worth a read. DC 

What we're watching.

With Omicron cases rapidly in decline, travel restrictions have began to ease, meanwhile airlines are still offering some incredible deals on international flights. That meant that when the chance to go see the Brooklyn Nets came up last week, I took up the chance right away. The Nets were playing the Denver Nuggets and without team MVP James Harden narrowly lost at 124-118. It was a great little trip and exciting to see how the city has changed since my last visit more than 5 years ago. HS

If you liked Downton Abbey, then do I have a show for you. DA creator, Julian Fellowes, has written a new show that’s just gone live on HBO, The Gilded Age, in which he transports us across the Atlantic and uses his storytelling skills to focus on the Gilded Age of American society and commerce at the end of the 19th Century. This is a period of history – the age of Rockerfeller, Carnegie, Vanderbilt and Morgan – that fascinates me shaped the world as we know it. It should be of interest to anyone who wants to learn how the world came to be the way it is today. Fellowes’ funny, acerbic and highly stylised look at New York in the 1880s, whilst a work, much like Downton Abbey, of often-times ridiculous fiction, is an amazing lens through which to view this period of immense boom and growth. The show begins in in 1882 with Marian Brook moving from rural Pennsylvania to New York City after the death of her father to live with her thoroughly old-money aunts, Agnes van Rhijn and Ada Brook. Marian soon becomes part of a social battle between one of her aunts, a scion of the old-money set, and her stupendously rich neighbours, a ruthless railroad tycoon and his ambitious wife, George and Bertha Russell. This is old money versus new and, in classic Fellowes style, a look at what class and money can do to people and relationships. I found the show educational and highly entertaining, bringing to life a period of history that I have read much about on the page, giving my imagination a frame and colour to understand a little better what was an extraordinary time in world history. EJP 
 

What we're listening to.

After making us wait 9 years since his Racine Carrée album took the world by storm, Stromae has finally got a new album coming out. Multitude is due to be released in March. He went onto The Jimmy Fallon Show recently and performed his new single, Santé, an ode to those who work while others party. Here is the music video - cheeky and edgy and full of fun as always. His next single released a few weeks back is called L’enfer and speaks to his mental troubles. It's pretty dark to be honest but I just love the music - the tempo and the mixture of different music styles together is just fantastic. March 4 can’t come soon enough. DC