Weekend Reading #176
Photo by Hatice Yardım via Unsplash
This is the hundred-and-seventy-sixth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 9th July 2022.
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What we're doing.
This week saw our COO, David Kemp or Kempo, celebrate his 40th birthday. To the man with the broadest shoulders on earth (literally and otherwise) we wish him much NACHAS from here on.
This week for the first time quite literally since my days at a larger hedge fund (around 4 years back) I attended an investor dinner here in London hosted by my friend, Jawad, from Stray Reflections. The dinner is called The Most Interesting Dinner In The World and for very good reason! A round table of 10 or so investors from different disciplines all talking markets and musing about the world. Each invitee must bring one chart to contribute to the discussion which is the format the evening took. It was a wonderful event, and my takeaways were as follows. For every bull there was a bear. For every short there was a long. A reminder than even the smartest minds in the business are split as to where we are headed. The level of debate was mind blowingly high and the nature of engagement of those who sometimes vehemently disagreed with one another was respectful and kind – something we rarely see these days. This is down to the tone of the host who creates an enabling environment of love amongst strangers. A memorable event for all the right reasons and plenty of food for thought. DC
What we're thinking.
Yes, Minister and its subsequent series Yes, Prime Minister are probably one of the greatest evergreen pieces of political comedy to be produced by the BBC. Coincidentally, the happenings in the UK this week can only leave us wondering what was truly happening behind closed doors, although the hope remains that the institutions in this country, supported by the strength of a civil service built across multiple generations, will persist beyond the term of whatever government occupies Whitehall and Downing Street at any given time.
An old favourite quip is Sir Humphrey’s dictionary-like definition of the prefix “meta”, as “with or after, or sometimes beyond.” (“It from the Greek, of course”, he goes on to explain). While often used in the context of the gaming metaverse these days, “meta” feels rather applicable to the narrative changes in the market. It’s like multi-dimensional chess – a game within a game, multiple layers of narratives within narratives. Just as in well-designed games, there is the game you play and there’s the metagame – the true strategy underlying the superficial layer. Likewise, there’s a metagame in play in markets, only that it’s way more complicated than the average computer game.
Recession or no recession, honestly its hurts our brain to even think about it. A recession is a technical term for two consecutive quarters of negative GDP growth and if you ask us, we will tell you honestly, we have NO idea. But it seems lots of people do and that has caused havoc over the past week or two as the recession narrative has come into the public consciousness and seesawed depending on which expert one speaks to. Lots of smart people we know are on different sides of this particular fence. The “recession” playbook was out in full force last week or so with cyclicals getting whacked and then the Friday payrolls number got the other camp excited again. All a bit crazy if you ask us. We try to be sensible in that obviously after record stimulus, substantial inflation and interest rate hikes alongside liquidity withdrawal, the rate of change of growth will be down. Stemming from that, just do don’t do anything stupid as an investor. One has to take what the markets have to give. When the markets are not offering anything, one can’t force it. As we’ve said for a while now, keep risk low and be patient. Hard as that may be.
That’s the real metagame.
What we're listening to.
Demis Hassabis is the founder of Deepmind and probably one of the smartest people on earth. Deepmind has been behind a number of AI breakthroughs in recent years from Alphago to Alphafold and there is just so much coming down the line that an opportunity to listen to him talking to Lex Fridman for over 2 hours is pure gold. They talk philosophy, AI, aliens, consciousness and of course breakthrough technology. His views are not conventional and neither are his habits and routines but then again the greatest minds never are. Sit in the sun and have a listen.
Binance is the largest crypto exchange around and while Coinbase seems to lurch from one mini crisis to another, Binance continues to develop into a behemoth of an entity and dominate crypto in most countries other than the US (which is now being dominated by FTX). We’ve been following Binance for many years and have watched the business evolve into a multidimensional entity at record pace. The token price of BNB, despite falling a lot from the highs of last year is still up 20x from even just a few years back (refer our blogpost this week). As crypto grew over the past couple of years, Binance has inevitably faced regulatory scrutiny and the challenge for the next phase of business is to mainstream itself into the “real world” so that its total addressable market can grow and it can begin to challenge traditional financial services businesses. This interview with founder, Changpeng Zhao (CZ), is really revealing in that he spells out his vision for the business going forward and it may be surprising to some. Our view is that this is still a very young organisation, there will continue to be regulatory challenges but they are being dealt with head on and have to be in order to grow. Ultimately this could become one of the biggest businesses in the world and CZ seems to know exactly where he is headed. DC
Another Bankless podcast that dropped recently was a follow-up podcast with historian turned investor Josh Rosenthal. For those who don’t remember, a refresher of some of the ideas he put out went into our piece about everything being a meme. Particularly, from a historical context, he posited that crypto – as a new form of self-sovereignty and absolute ownership at least of digital assets enabled by technology – constituted the starting point of a new renaissance, comparing it to the dawn of double-entry bookkeeping and the printing press. So, in this continuation of his discussions on Bankless, Josh extends this logic to contend that just as the American Revolution was the logical consequence of the renaissance, spawning experiments (many of which failed initially!) with decentralised governance in a new world built around ideas of freedom and individual liberties, so too crypto is moving towards taking the concepts of a renaissance and becoming tangible in its effects, potentially building out a new “new world”. It’s another fascinating listen, and importantly makes the case for what we’ve seen in crypto being the end of the beginning, rather than the end. EL
What we're reading.
There's been a lot of fuss in recent times about rare earth minerals. Geopolitically, China has the largest reserves and has also been vacuuming up control reserves in other places so this announcement by Turkey (announced by the government so needs a pinch of salt) is quite big in the scheme of things. They have announced the discovery of 694 million megatons (a megaton is 1 million tons) of rare earth minerals. Apparently they’ve been digging since 2011 and plan to build extraction and processing facilities this year. Turkey has always been important geopolitically and if this is to be believed, it just got even more so. DC
I managed to find some time for a bit of reading and started Get Rich or Get Lucky by Max Nowaz, a gripping fantasy thriller that follows Adam who finds himself in control of a magic he never knew existed. After a string of disappointments with his literary career, Adam decides to embark on a get-rich-quick scheme by renovating run-down houses. By chance he discovers a book of magic in the basement of a derelict property and he can’t believe his luck. Excited by his find, he invites his friends Dick and Charlie, to tell them about it. The story unfolds from there and I really enjoyed it. DK
What we’re watching.
With Marvel’s latest instalment, Thor: Love and Thunder, Thor's retirement is interrupted by a galactic killer known as Gorr the God Butcher, who seeks the extinction of the gods. To combat the threat, Thor enlists the help of King Valkyrie, Korg and ex-girlfriend Jane Foster, who - to Thor's surprise - inexplicably wields his magical hammer, Mjolnir, as the Mighty Thor. Together, they embark upon a harrowing cosmic adventure to uncover the mystery of the God Butcher's vengeance and stop him before it's too late.
What a weekend ahead. Sport on display till your hearts content. You’ve got Rugby (North vs Southern Hemisphere), Wimbledon finals, Tour De France, Austrian Grand Prix and more!!!! Combine that with the glorious weather and you have more reason to get the BBQ’s/Braai’s out and enjoy some SPORT!!! DK