Weekend Reading #200 — Three Body Capital

This is the two-hundredth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 14th January 2023.

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What we’re thinking

After a frenzied end to 2022, we were relieved to have a few weeks of relative quiet. We closed our year with both our stock and crypto vehicles nicely in the green for the calendar year but as ever one year ends and a new one begins and we are straight back on the hamster wheel. And wow have we had to move our legs fast to keep up already as the year got off to a rollicking start.

Away from the macro some specifics have caught out attention. First in Turkish stocks, we have been cautious for the past few weeks as December’s crescendo set off alarm bells all over for us. After being the best market in the world last year (In dollars!) it has fallen over in the first couple of weeks this year. Every warning sign is there in terms of massive speculation, retail involvement, margin trading etc. We have now seen the Index fall 10% alone with many stocks getting reacquainted with the limit down mark. We are cautious against buying this dip but as ever will wait for the price action to give us a few more clues.

And after feeling a bit left out all of 2022, crypto has made a rampaging start to the year. While the velocity of the move in Bitcoin and Ether has not quite matched up to prior rallies (yet), some coins have led the rally. Of particular interest to us has been the move in Optimism, the layer 2, scaling solution on Ethereum, which just surpassed its competitor, Arbitrum in terms of transaction activity. Even more relevant is that combined transactions on both Optimism and Arbitrum are quickly closing in on the transaction volumes on Ethereum L1. Who said that fundamentals don’t count? Real progress on a critical barometer of progress in crypto – scaling Ethereum.

And after being lambasted and ridiculed for months and months all over the mass media, Coinbase stock is up around 35% YTD (as of Thursday’s close). Obviously, it's just the first few weeks of the year but this was not on the bingo card for January 2023 for most.

Meanwhile, looking back at 2022, statistics compiled by the FT are pointing to new records being made on the corporate communications front:

What we’re doing.

Last week I took the week off to go skiing as I do most Januarys, although this year’s trip made for a very different kind of ski holiday...there simply wasn’t enough snow. Having travelled to Les Deux Alpes, a resort renowned for being the largest glacier in France and second oldest ski resort in France behind Chamonix, I was quite disappointed to find that my ski-in/ski-out accommodation that I’d specifically chosen was no longer skiable. That meant that when I did want to ski, I had to head all the way up to at least 2500m above sea level in order to start to get the real snow, although given that just 25% of the runs were open, the choice was uninsured off-piste skiing or packed runs. Nevertheless, I made the most of the trip, and decided to take things at a much more relaxed pace. It was no longer me taking the first and last lift up the mountains in the morning and evenings, but instead enjoying the apres-ski experience, eating good hearty mountain food and soaking up the sun before checking out the nightlife of the town come evening. On one day, I even decided to go alpine hiking, trekking almost 20km up close to the peak of Mont-de-Lans. This unexpectedly warm weather meant I could make the most of both the summer and winter offerings of the alps, so it was actually a really good time, although hopefully next year there’ll be some much better ski conditions. HS

What we are reading.

My project for the festive season was to finish reading a book I’d been drifting in and out of pretty much all year. Genghis Khan and the Making of the Modern World by Jack Weatherford is packed with detail about the life of Genghis Khan and his offspring. It also features a decent portion of the book on Kublai Khan, his grandson. There are so many delightful bits in the book I can’t even begin to detail them here but the main premise is that Genghis gets a tough rep in western history books as a barbaric warrior who plundered at will, without any care for the welfare of women and children etc. Weatherford gets access to the actual Mongol archive as documented by the Mongols, themselves, The Secret History of the Mongols, which was only unsealed after the fall of the Soviet Union. He uses this and other non-Western sources to paint a rather different picture of Genghis. There is zero doubt that he was a ruthless conqueror, but less well known are his many other innovations, on and off the military field. His advancement of a meritocracy was unheard of at the time. His creation of written records and a proper administration is also less well known as well as his great tolerance for other religions and cultures. In fact, at times, you are left wondering whether he was the savage as widely depicted or if he was actually the civilised one. Having read historical fiction on the Mongols before in the form of the Conn Iggulden epic series, this was a perfect next step. I don’t find non-fiction books as easy to read as I used to but this was well worth the perseverance.

Back on the fiction front, I also made a valiant attempt at Gardens of the Moon, the first book in the Malazan Book of the Fallen series by Steven Erikson. This is billed as a hardcore epic fantasy series for real die-hard fantasy fans. It is incredibly detailed and has an enormous cast of characters. I must admit that I didn’t quite succeed in getting in to it as I had hoped. Maybe the prospect of 9 more volumes was a bit intimidating in a world of scarce attention resource but I actually gave up halfway in, realising there was little point unless I was going to go all the way. I mention this book because if you are a real fan of fantasy there is much to dig into here, perhaps for someone with more patience than me.

In terms of market related reading and things relating to our field, I’ve read a lot as always but to be honest I’ve been struck by the true lack of original thinking and ideas around. Sometimes this is a function of the market environment (most likely explanation) but it also may be a function of how we have all been conditioned to expect continuous content and how the providers’ thereof provide content for content’s sake rather than anything else. Food for thought and also for our own reflection. DC

What we’re listening to.

The short break we managed to have at the end of the year turned out to be a great opportunity to pull out the vinyl records for some analogue enjoyment, including recordings of Daniel Barenboim and Jacqueline Du Pré performing Cello sonatas by Chopin and Franck. When it comes to capturing the spirit of a specific point in time, recorded onto a physical medium and replayed with full fidelity, there is probably nothing like a vinyl LP. Sadly, even the highest quality streams on Spotify don’t cut it. But it’s more than just the physical medium that matters: it’s the recording equipment used. For all the advancement in digital recording technology that’s been made, it simply doesn’t sound the same as a high-fidelity analogue recording aka the same as having a live performance at home. Analogue is just built different. So while it’s with great interest that we pick up on news stories like these saying that Vinyl is outselling CDs in the UK (h/t Hakan), the sad truth is that a digital recording pressed on vinyl is going to sound... digital. Full marks for marketing though – nothing like selling a £50 vinyl record that sounds the same as the Spotify stream. EL

What we’re watching.

In preparation for IMAX 3D tickets bought for Avatar 2 (for a show that’s 2 weeks away, no less – the hype is real), a re-watch of the original Avatar on Disney Plus was warranted. And if there was any doubt about how revolutionary Avatar was on its release in terms of the quality of the animation – particularly the interplay between the animated and real world – a rewatch quickly dispels any contention. What it does do is set Avatar 2 up with a pretty high bar to jump in terms of animation quality. Initial reports from others who have seen the new release are so far mixed, although the positive feedback seems to be skewed towards being from those who watched in 3D. Harry’s going to watch it over the weekend – we can compare notes after the 26th.

On that note, what is probably NOT a good idea is watching Avatar 2 on a tiny laptop screen on Disney Plus, so despite the temptation to do so, alternatives need to be found.

Those alternatives are found in another section of the Disney Plus archives – particularly in a basement office occupied by David Duchovny and Gillian Anderson. The entire ten-season run of the X-files, as well as the two movies, are available on Disney Plus and they probably deserve to be immortalised as a classic, not only because of that haunting opening theme which, back in the day, marked the beginning of night time TV and usually signalled bedtime. Having had the benefit of the passage of time, one can conclude that the X-files were actually top quality creative writing in action. While alien abductions, the occult or the supernatural might no longer be the topic of choice for conspiracy theorists, some of the other hypotheses put forth about differing degrees of government coverups continue to remain food for thought. Who really knows? As always, the truth is out there. EL

One show I’ve been trying to watch for quite some time, although wanted to wait until I had an open period to watch it all has been Lupin. Perhaps one that we have mentioned a couple of times now since its initial premier now more than 2 years ago, however, for those that haven’t seen it, it is well worth a watch. Inspired by the character Arsene Lupin from French novelist, Maurice Leblanc, the series tells the tale of a Senegalese migrant in Paris who fights against the injustice done against his late father. Many have compared the character whom which inspires the protagonist Assane as the French counterpart to the UK’s Sherlock Holmes. All in all, it’s one of the great shows of Netflix and thankfully it has been renewed for a third season coming later this year. HS