Weekend Reading #159

Photo by Franz Schekolin on Unsplash

This is the hundred-and-fiftieth-ninth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 12th March 2022.

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

*****

What we're thinking.

Amidst all the action in the commodity markets this week, one particular episode caught our attention: on Tuesday, the price of nickel spiked briefly in LME trading to USD 100k. At those prices, the range of estimated losses by one counterparty which was short Nickel went all the way up to USD 12bn. As far as free markets go, that’s a fantastic trade: all’s fair in love, war and markets. Unfortunately, that was not to be the case: the LME instead suspended trading in Nickel, rolling back and cancelling some of the trades that pushed through the spike.  

The big loser caught on the wrong side of this trade was the Chinese nickel giant Tsingshan Holding Group. 

That move led to many investors, no doubt especially the winning side of the trade, to cry foul. As it stands, the reported loss from that position was USD 8bn pending settlement, so it does look like the loss was reduced by the rolled-back trades by about 1/3. Either way, we’re not involved directly in commodities trading, but we do look upon these happenings in awe and wonder how truly free our free markets – even in the UK – are.  

For further context, this tweet thread by one of our favourite accounts @BaldingsWorld might be helpful, shedding light on the oft-forgotten fact that the LME is now owned by the Hong Kong Exchange Group, challenging the assumption that the exchange is an objective, unbiased central counterparty to trades. For its part, the LME asserts that it did what it did because it had to maintain an orderly market. It seems like order, too, is becoming a rather subjective thing. 

Its latest press release on the matter (link here), the LME justifies its actions on the following basis: 

During the early hours of trading on the morning of Tuesday 8 March, Nickel prices moved up significantly in a short period of time. It became clear that pricing in the early hours trading did not reflect the underlying physical market and that the Nickel market had become disorderly. 

Would the NYSE therefore be justified in rolling back and cancelling trades in equities because they don’t reflect the underlying fundamentals of a stock? Furthermore, with the LME being (hitherto) “The World Centre for Industrial Metals Pricing” (as per their website), isn’t it also true that the LME price IS the definitive price from which the underlying physical market takes its reference? 

Free markets, indeed. 

In other news, the Bored Ape Yacht Club, known for its price chart-topping collection of NFT apes, seems to have made a bit of a faux pas, leaving many of its NFT owners incensed when a new link pinned on its twitter page pointed users to a site called somethingisbrewing.xyz. The fact that something is brewing isn’t the problem. Rather, it’s the fact that a decentralised crypto project like BAYC is starting to require KYC to be done in exchange for the right to participate in whatever is brewing that has infuriated much of the community. 

Just as we are putting this newsletter together, news just hit the wires that Yuga Labs (the team behind BAYC) has acquired the IP behind two of the other iconic NFT projects: Cryptopunks and Meebits, from Larva Labs.  

Seems like something was indeed brewing. The Bored Apes are going to have a bit of a rowdy time coming up. 

What we're reading. 

Death is not a jolly subject, and a book focused upon it might not be your idea of a relaxing read, especially given the terrible daily news that is hitting our phones and televisions from around the world. However, I cannot recommend highly enough Philip Gould’s short memoir, When I Die, an account of his battle with throat cancer which, sadly, ends in defeat. Gould worked alongside Alastair Campbell in putting Tony Blair and New Labour into power in the late 90s, working as strategy and polling adviser to the Labour Party in countless general elections, but regardless of your politics, Gould is a fine writer and communicator. The book – with the log line “lessons from the Death Zone” – was written during the last few months of Gould’s life and describes the journey he took with his illness, leaving to the reader some of the lessons he learned whilst in, what he calls, the death zone. It is an amazing read. Courageous, moving and strangely inspiring. This is also a great accompanying video from Gould, too, filmed during the last 2 weeks of his life. Whilst it might not sound like an uplifting read, especially given what’s going on in the rest of the world, I would recommend Gould’s memoir as an offbeat and awesome piece of escapism. EJP

What we're watching.

The Ipcress File on ITV is a very enjoyable bit of stylish escapist TV... that is if you don't consider a Cold War spy thriller about espionage and the threat of nuclear war is too close to the bone in these troubled global times. The story kicks off as the Cold War rages and ex-smuggler turned reluctant spy Harry Palmer finds himself at the centre of a dangerous undercover mission, on which he must use his links throughout Europe, both on this side and that of the Iron Curtain, to find a missing British nuclear scientist. Tom Hollander steals every scene as Palmer's handler, Major Dalby, and every single shot has been put together in a beautiful, stylised way that makes you think, for a passing moment, what a fascinating and entertaining job being a spy in the 1960s might have been! The danger and threat to your life during every waking moment, aside, of course. EJP

Having caught Covid late last week, I’d subjected myself to self-isolation and as such, found myself with much more time in the evenings to catch-up on some Netflix where I would otherwise be out and about. One film I watched was “Something's Gotta Give”, a 2003 comedy starring Jack Nicholson, a playboy bachelor in his 60s and the unlikely relationship that forms with his girlfriend at the times’ mother. Rom-coms are by no means the sort of film I normally enjoy watching but it’s a pretty awesome watch with good humour throughout and all-star cast.  

The first teaser trailer for the new Disney+ Obi-Wan Kenobi Star Wars spin-off series has dropped this week and has taken the internet by storm. So far, the Star Wars series we’ve seen like the Mandalorian and more recently, The Book of Boba Fett, have been excellent and so we’re on the edge of our seats eagerly awaiting what this somewhat darker series has to show. The announced release date is set to be 25th May! HS

What we're listening to.

In line with our blogpost this week, I had a listen to Patrick O’Shaughnessy chat with Eric Mandelblatt, founder and CIO of Soroban Capital. The conversation was about commodities and what struck me most apart from the content (which I am well aware feeds our confirmation bias) was the tone of the interview. As ever, O’Shaughnessy was excellent as host, only intervening when necessary and asking razor relevant questions. But what fascinated me was how little he seemed to know about commodities. It could be he was just asking basic questions he knew that the audience would want to hear about. But it could also be that the last decade of software, ecommerce and internet has created an era of investors who have to learn from scratch how to invest in what we think is possibly a new investment regime - commodities and those countries (mainly in the old emerging world) that will benefit from it. A great conversation if you want to freak out as someone living in this world and if you want to learn about what some of the opportunities out there are in this space from an investment perspective.  

I also listened to a podcast called We Study Billionaires which this week caught my eye featuring Tony Robbins. I’ve never really understood the life coach thing but this one was about his new book called Life Force. Long story short, Robbins got injured and refused to accept the prognosis he was given by the doctors, so he made it his mission to research and find out about the newest, most cutting-edge treatment options available. His story involved stem cells and his own recovery was remarkable, but he then went down a rabbit hole and produced the book which I haven't read but he says features the results of all his research with the world’s foremost medical technology practitioners. From the sounds of this podcast, most of us just have no idea how many radically better options there are out there – for a price of course at this stage. Worth a listen from an investment angle but also if you are suffering from any of the things he touches on, there may be a way out. DC

The Sunday Times released a list the top 21 songs of the last 21 years. Needless to say, and not that I’m the world’s biggest music fan, especially popular music i.e. the sort that will always make up a list comprised by music journalists like this, but even I was drawn into the debate around what songs were and were not on the list. Check out the playlist of the 21 songs on Spotify, The Best Songs of 21st Century, enjoy a dose of nostalgia while you listen, and have a think about what’s missing. What do I think they’ve overlooked? Easy. Starts with Bruce and ends in Springsteen. EJP