Weekend Reading #186
This is the hundred-and-eighty-sixth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 17th September 2022.
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What we're thinking.
Tuesday’s inflation data gave a pretty convincing answer to the bull or bear debate as markets resumed the cascade downwards. Options expiry on Friday provided some hope for a bounce but so far as we type this it hasn’t worked out that way. So many times, we’ve written about the roller coaster of emotions in managing a fund and most importantly oneself but honestly the past week has been one of the most volatile weeks of our careers so we will definitely be putting our feet up this weekend and taking a break. Monday has been declared a bank holiday in light of the Queen’s funeral when the country will come to a (further) standstill. Unfortunately, it's not a bank holiday for markets (other than the UK which we barely trade).
Notwithstanding the rollercoaster ride in markets, something interesting is starting to emerge: for once in a very long time, we are starting to see persistent dispersion not just on a thematic basis (we’ve seen that in sectors like energy vs the rest all year), but also within thematic groups. Recent downdrafts in the market have seen the selling of macro hedges (mainly ETFs) in order to maintain long positions in specific stocks which investors like, leading to individual stocks starting to outperform not just the overall index but also their peers. Are we moving back to an environment where stockpicking is a source of alpha? Perhaps. If so, that would be a very welcome change from the high correlation world we’ve had these recent years.
What we're doing.
For those eagerly eyed readers who notice the tags of who does what, you may notice that on several occasions I’ve written about my rock climbing experiences. Whilst I am fortunate enough to go to a very nice gym which has some great climbing facilities, it’s always fun to try other walls and different aspects of the sport. Typically, I do regular climbing with a harness and use an auto-belay system to come down which makes for a fast, efficient and most importantly fun climbing experience. However, this week I headed out to CanaryWall, just a short walk away from our office, to try out their bouldering wall. For those that don’t know the difference, bouldering is typically done on much lower climbing walls meaning you don’t need to clip in and harness, although don’t be fooled, it can be extremely tricky as it requires incredible dexterity and grip/forearm strength in order to navigate the often-narrow holds. HS
What we're reading.
I had absolutely no idea who Kevin Cooper was until I stumbled on this article. It turns out he was a prodigiously gifted kid who made an incredible impact both on his family and his community before he tragically drowned recently at age 14. This superb article in a publication I’d never heard of gives a full overview of his story. And wow what a story it was. I actually don’t want to give it away at all other than to say that this is just heart-breaking. This was a remarkable kid and not only because he was talented. Pour yourself a beverage and sit down for a nice long read. The publication the article appears in is called Deseret News and according to its website it was founded in 1850 and is the state’s longest continuously running business. DC
This week also saw the release of a new raft of clinical data from Intellia Therapeutics, demonstrating positive interim data for its second systematically delivered CRISPR candidate, NTLA-2002, which is a treatment targeted at correcting a hereditary disease called Hereditary Angioedema (HAE). NTLA-2002 follows NTLA-2001 (which targets ATTR amyloidosis) as Intellia’s second application of CRISPR editing, in this case knocking out a specific gene in liver cells, thereby reducing the production of the kallikrein protein which leads to the recurring, debilitating and potentially fatal swelling attacks that occur in people with HAE. Most impressive is the efficacy, with a reduction in HAE attacks by 91% even in the lower dosed cohort, with two of three patients remaining attack free since treatment, suggesting this is potentially a permanent cure rather than just offering temporary relief.
What is becoming clear here is that Intellia is building a platform which can be expanded to multiple applications, and its early investigations are meant not as treatments in themselves, but a proof of concept that their technology works. Hereon, it is a case of loading the CRISPR protein with different configurations to target different parts of the genome to cure disease. The potential for these platform technologies, Beam therapeutics being the other name we’re watching, to scale and deliver permanent cures is revolutionary. But more profoundly, their ability to scale an underlying technological solution to cure all sorts of diseases over time represents a transformative opportunity. EL
What we're listening to.
Gabriel Leydon has been on invest like the best before and I shared his chat back then. Since then and more recently he has announced the launch of his new business, Limitbreak, a web3 gaming company. Leydon is famous before as the co-founder and CEO of Machine Zone, one of the pioneers of free to play mobile gaming. His new venture starts with $200 million in funding from the start, a massive number. His philosophy is what he called free-to-own, his view of the next iteration of blockchain games - where one can mint the NFTs for free. His first foray into this is called Digidaigaku, a series of 2020 Japanese anime character NFTS, the lowest values of which is now selling for $7,500 a pop. The principle is that these “genesis” NFTs are able to breed others, all of which will have some use in the gaming ecosystem being built by Limitbreak. This second chat, a year after the first, with Patrick O’ Shaughnessy is compulsory listening to understand one possible future of blockchain gaming.
I also listened to a great interview with Kyle Bass on the Meb Faber Show. Bass, famous for his financial crisis bets and then for his very outspoken views on China, covers a bit of financial markets and he talks a lot about his new pet project called Conservation Equity Management, which aims to profit from restoring wetlands in a really unique way.
One of the others I listened to is this one in which Demetri Kofinas chats to Nick Timiraos, the chief economics correspondent for the Wall Street Journal. Timiraos has shot to fame more recently as the Fed “mouthpiece”, frequently leaking information that the Fed wants the market to see before an event to shape perception. Turns out he is a lot more than just that as this one goes deep into Fed policy and also the personalities of the Fed officials and indeed the mechanics of how decisions get made. DC
What we're watching.
The Capture is a fantastic U.K. spy thriller about the implications of deep fake video technology and what happens when the deep state has a new tool in its quest to cast reality. I watched season one a while back, but the series really explodes into action in season 2. The pace of this show is just relentless. It’s only 6 episodes and it’s probably the most enjoyable show in this genre I’ve seen in years. Brilliant
I’ve written many times that for me Stan Druckenmiller is the investor who for me is the best. This chat with Palantir CEO, Alex Karp, it’s just pure gold. It’s from just a few days ago and it’s worth watching every second. Karp himself is a brilliant character. It turns out Druckenmiller invested in Palantir 14 years ago already and the two have a great chat about the state of the world both geopolitically and from a markets standpoint. Also, Karp goes into some detail about the business which is one of the unique businesses around today. If people understood it better it would probably be worth a lot more. It’s commercial business has recently started to accelerate, and it seems to me that it could well be perfectly placed for the difficult world that sadly we seem to be going into. DC