Weekend Reading #202

Photo by Gabriel Sollmann from Unsplash

This is the two-hundred-and-second weekly edition of our newsletter, Weekend Reading, sent out on Saturday 28th January 2023.

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What we’re thinking

We are once again thinking about the pain trade which remains up. There are very few bulls around (who are not always bulls) that we talk to or see in the media (yes even on CNBC). Yet each day the market is getting stronger, with breadth improving and in particular commodities, China and legacy emerging markets leading the race.  

Chinese stocks have surged anew this week in the US, while the local markets are closed for Chinese New Year. It seems the covid-reopening playbook is being applied as Chinese consumers, who for a long time have been stuck away at home, unleash their substantial savings into spend mode.  

Commodities have gone along with copper reaching new post-selloff highs and oil marching back up again. Even crypto has joined the party, but with one notable characteristic in our view. Bitcoin is leading the rally, having outperformed Eth. Possibly Bitcoin is showing signs of behaving like a commodity in an environment where the Fed, despite aggressive rate hikes, may not be able to control inflation. If that canary is in the coalmine, then hold onto your horses because this real-asset show is just getting started. 

Even Europe, not somewhere we trade too actively, is having a ball as evidenced by this chart on German equity participation, which just reached a new record. 

Source: @schuldensuehner twitter feed.  

Finally, a footnote on the topic of dispersion: there's "dispersion" where the good go up and the bad go down, and then there's "dispersion" where the reverse happens - but we don't make the rules (h/t Matt Fleury at Goldman Sachs):

What we are reading.

Since beginning to contribute to this newsletter from the early days of Three Body Capital, keen readers may have noticed that it’s often a rare sight to have seen a contribution from me when it comes to the ‘what we’re reading’ section of our weekly blog. In being completely honest, I typically am not a big reader. Perhaps this is a function of the generation I belong to or even just a lack of inspiration when it comes to my choice of novels. In most circumstances, I would much prefer to watch a gripping series on TV or otherwise watch a film. That being said, I've tried to get into a few books but haven’t been so successful beyond sitting on a beach where I lack 4G or WiFi. I also tried to get into a few non-fiction books although they were even drier and had me putting them down within no-time. However, when going for a walk this week, I found myself in a local bookstore where the sudden urge to grab a book (also to stop looking at my phone before bed) kicked in. Following the recommendation of the staff in the store, I decided to purchase ‘I am Pilgrim’, a crime thriller written by Terry Hayes, in which a retired intelligence worker comes back to resolve several seemingly unrelated crimes that have taken place amidst a terrorist plot. Whilst it sounds rather cliché, it’s actually really quite good so far and having been written by the author who wrote the screenplay for the Mad Max series of films, it’s quite an easy transition into reading fiction once again. HS 

This extraordinary piece goes deep into the identity of Turkey as a nation as we approach the 100th anniversary of the Republic this year. I’ve read Kaya Genc’s book, The Lion and the Nightingale, before and in this article entitled “The Long Shadow of the Last Ottoman Sultan”. he brings to life the split personality of Turkey as a country even today, a century after the fall of the Ottoman empire and its ruling family. President Erdogan has done his utmost to renew the longing for the Ottoman period in casting himself as the hero in his own journey. If you want to understand one of the main undercurrents of Turkish society, this is a must read. As election in May approach and as we have written before, we are in the final stages of Erdogan’s rule in its current form. On the other side of May, whatever may unfold will be very different. Enormous hope and opportunity beckon but a smooth ride it will almost certainly not be.  

The Vikings have always fascinated me and thanks to a lot of historical fiction (courtesy of Giles Kristian) and streaming shows on TV, I have a pretty good feel for most of the Viking history but one of my new finds, The Cultural Tutor on Twitter provided this great thread giving a whistlestop summary of Viking history which is a great taste for anyone who is interested in more.  

And finally, another cool substack find – this amazing post about why the main Indonesian island of Java has such a large population. You have to read the post (or the thread summary) to find out! I sent this to a few Indonesian friends who were also quite amazed even though one had learnt about it at school (a long time ago!). DC 

What we’re listening to

Many years ago, I read a fascinating book called The Chimp Paradox by Professor Steve Peters. It was a fresh way of illustrating the internal struggle we always have between our “human” and “animal” brains. Prof Peters became famous for helping sports men and women achieve success through focusing on their mental side. He was involved with Team GB for the 2010 Olympics, Liverpool Football Club and snooker’s mercurial talent, Ronnie O’Sullivan amongst many others. He makes a rare appearance on a podcast this week with Steven Bartlett in a fantastic conversation about how to tame your inner chimp. High quality stuff in here.  

Desert Island Discs is a legendary show in which guests are asked to choose 8 pieces of music and talk through their lives and stories along the way before being casted off to an imaginary desert island with only a few items to choose from to take with. In recent months the show hasn’t had any guests I would consider eye-catching and I haven’t listened for some time but when Steven Spielberg popped up, I had to have a listen. It is one of the best ones I’ve heard as he goes into the stories around his upbringing, his start in the industry and much, much more. For example, he encountered Bill Gates and Paul McCartney along the way for reasons I’ll leave you to listen for. Truth is stranger than fiction in some of these stories. Wonderful listen this one. DC 

 What we’re watching.

As previously planned, we went to the BFI IMAX at Waterloo to catch Avatar 2 in its full IMAX 3D glory. For anyone that’s considering going to catch it but haven’t yet, be sure to give lots of time on the schedule, because Avatar 2 is 3 hours long, pushing the 2h40 mins run time of the original Avatar. Did we like it? As far as 3D films go, Avatar 2 is probably the best candidate for a 3D IMAX screening – the rendering of the environment, particularly the interplay between what is CGI vs actual human actors and props, is immaculate. Avatar was good, Avatar 2 is even better, especially when this isn’t simply an exercise in CGI inserting a car or a tank, but actually something starkly different (aliens) from the physical props that can be used. Storyline wise – it's not bad, but at the end of the day, who goes to watch Avatar for anything other than the visuals? The amount of care and prowess that has gone into making Avatar 2 cannot be understated, and it’s certainly a singular experience that is very well-suited for a 3D IMAX viewing. In light of all the advances in CGI rendering, the shock effect of the quality of the rendering is much diminished compared to what it was when the first Avatar came out. But as with all things, advancing towards perfection is asymptotic, and parabolically difficult. No spoilers here, but there was an obvious gap left at the end for a sequel, which after some quick Googling, is apparently due to be out in 2024, with Avatar 4 due in 2026 and Avatar 5 in 2028.  

Those GPUs must be working properly hard. EL