Weekend Reading #210

Photo by Patrick Tomasso on Unsplash

This is the two-hundred-and-tenth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 25th March 2023.

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What we’re thinking

As usual we are thinking about markets. And as usual we have hundreds of things going on in our heads when we try to make decisions. But in the end the key driver is price. We can make many articulate bull and bear cases all round but price movement answers it all. In this case and for now anyway, the market is dismissing all fears and pushing higher, especially the Nasdaq. It’s a mini throwback to the time of FANG as Netflix and Meta lead the way alongside the company with the worst fundamentals according to all of Fintwit. We remind everyone that fundamentals are just another story and, in this case, the narrative around AI and the prospects for Nvidia are capturing the imagination. As we wrote in our recent investor monthly newsletter, Nvidia is not a fundamental play at the moment it is a momentum play as the stories and blue sky around AI-centred opportunities takes centre stage. Will it last forever? Absolutely not, but while it runs best not to get in the way.

Meanwhile, the gears of the machinery continue to turn, presumably in the name of financial stability.

We came across this chart on twitter (h/t @etiennedemarsac) putting into context the amount of liquidity that has been provided into the financial system in the past couple of weeks:

The debate as to whether this is a repeat of QE seems to have been largely settled – this isn’t QE, but what it actually is and what the impact to system liquidity is remains a topic of ongoing consideration. A few things seem clear, though: the Fed DEFINITELY thought this was a big enough problem to act, and they acted fast. Sure, it wasn’t as big a spike as in Covid, but this wasn’t Covid either. Was it half as bad as Covid? Not so clear.

Additionally, we’re often skeptical in the sense of thinking that something which doesn’t need to be said doesn’t get said unless it wants to eventually be said, with the aim of making the “unsayable” a bit more “sayable”. In this case, this article that appeared in the New York Times broaches the subject of moving the Fed’s 2% inflation target up, and lays out a case that effectively says that the 2% target was rather arbitrary anyway, so why can’t it be higher?

The pen can indeed be mightier than the sword, and one can’t help but wonder if these words are the warm-up for something coming round the corner.

What we’re doing

Last night, I attended a live music event at the Crate Brewery, a converted former factory with its own micro-brewery and pizzeria, situated right in the heart of Hackney. There were DJ sets and even live performers making for a great evening, and I look forward to visiting this rather unique venue again soon. HS

This week, my good friend and celebrity local solicitor invited me along with him to the Gillian Lynne Theatre to see The Lehman Trilogy, a show I had heard much about in recent years and which finally I got the chance to see. It was just brilliant. The whole show is just 3 actors, each playing one of the brothers from the Lehman family that landed in America in search of the American dream in the mid 1800s. The story is of course one of the bank that they founded after a number of what would today be called “pivots” in strategy. But it is far more about history, family and togetherness. It is about the challenges that every immigrant family faces. The actors, Hadley Fraser, Nigel Lindsay and Michael Balogun were fantastic and at times hilarious. The whole play is over 3 hours long and it goes through the various generations of the family and the story of the bank in some detail. I did find it a bit odd how at the end the events of 2009 were rushed through, particularly as so much time and focus in the play was on the period around The Great Depression and the analogies are clear. But I really enjoyed it, especially given some of the things we are seeing the US financial system as we speak. DC

What we’re reading

Continuing my quest to dig deeper into the world of AI, I read another great newsletter from Dominic Cummings’ Substack, focused on a number of things of which AI was one. There are some great links to resources for learning more (for that you have to pay for it) but the one I will share today is this one to another Substack from Scott Alexander, a US doctor who writes about all sorts of weird and wonderful stuff. This post, entitled “Perhaps It Is A Bad Thing That The World's Leading AI Companies Cannot Control Their AIs” is further food for thought. He is not sure AI is being controlled very well by its creators and goes into a bit of detail around how OpenAI has tried to censor ChatGPT. The examples given are for controlling violent commentary or racism, but one can imagine if this is extended to overall safety. If the organisations are struggling to solve such basic control issues it doesn’t bode well for more serious potential ones down the line. DC

While we contemplate how we’re all going to lose our jobs to AI, the people at a16z are revisiting an old obsession: Space. This market map of companies involved in space-related businesses which they published lays out a good collection of them, including the big ones like SpaceX, Blue Origin, Virgin and Starlink, but also a much more populous small/medium sized segment of the market which we’ve probably not heard much about yet. The exploration of space, including the moon landing, was undertaken at a time that coincided with a cold war and an ideological faceoff, leading to the relentless pursuit of what had previously seemed impossible. That desire cooled for some time, but perhaps like every other bubble in history, there was the initial excitement (the Apollo programme etc), the lull and then the REAL ramp up.

Who can tell if we’re in a similar geopolitical set-up as things were when the Apollo programme took flight, but who can mention the pursuits of space travel without revisiting President JFK’s “We choose to go to the moon” speech 61 years ago? As it happens, listening to that speech again, there is no doubt that there remain lessons to be learnt from those words.

What we’re listening to

Every now and then I like to listen to Simon Sinek’s podcast – A Bit of Optimism. The topics have nothing to do with markets or anything like that and that’s why I like it. This week’s guest was a fellow by the name of Mike Reiss. Turns out Reiss has been a comedy writer on The Simpson for 35 years. He has done some other stuff too but that is his main claim to fame. But the reason he was invited was to talk about his travels. He has been to 124 countries including some of the wildest spots on earth – North Korea, Easter Island, The North Pole and even in a submarine to see the Titanic. This is a fun episode that got my Wanderlust going for sure. DC