Weekend Reading #233

This is the two-hundred-and-thirty-third weekly edition of our newsletter, Weekend Reading, sent out on Saturday 2nd September 2023.

To receive a copy each week directly into your inbox, sign up here.

*****

What we’re thinking

A nice rebound in markets this week albeit with some unusual dispersion. Large cap tech in particular saw a big rally off the recent lows. The AI trade has seen some dispersion as mega cap Nvidia continued its grind up post results in line with its index-leading peers, but the smaller AI companies fared poorer with the likes of Super Micro Computer (for some reason deemed AI) and Palantir eking out a tepid bounce from the lows. Our thinking recently has been that dispersion is set to become more prominent and this past few weeks’ price action seems to support this for the moment.

Meanwhile the other notable move in recent weeks is in oil. Despite the Chinese economy’s weakness, oil prices are moving higher. As has been evident for some time, the structural backdrop is positive with supply constraints and now there is now momentum behind the price. Could we be entering a sweet spot for oil and related stocks?

The dominant macro hotspot has been US 10-year yields, which after the “de-dollarisation” narrative caught wind for a while have retrenched somewhat. This has caused relief all round. We’ve been thinking as follows: Given the worry about yields breaking out and surging in recent months, if yields fall a little as they have, it causes relief, even a goldilocks-type narrative may be allowed to form. However, if yields keep falling then suddenly everyone begins to worry about recession. If yields spike up again then all hell can break loose. Markets will ebb and flow accordingly. As we’ve written recently, we are cautious with making high conviction bets at this stage as there are simply too many variables, but the above is important to watch as an overall indicator. As ever, price action rules.

What we’re doing.

Last weekend I ventured out to Orford, a coastal village in rural East-Sussex for a quick getaway with some friends. Surprisingly, there was absolutely no mobile signal in this village so the entire weekend (aside from the 10 mins or so at the bakery with its free Wi-Fi) was spent disconnected. It was incredibly relaxing although it’s very easy to notice the dependency we have on technology. We went sailing but having not been in some time, it would have been handy to quickly look up a few things but alas it was not possible, and it didn’t matter (as through our determination we somewhat figured out the right approach). The weather was fantastic, and I could argue that I got more of a tan (although definitely not much of one) in this one weekend in Sussex than I did in the entirety of my stint in Asia and brief time in Australia earlier this year. Perhaps a highlight of the trip was the visit to the local pub on our way back from the boat club, where I absolutely devoured the beer battered fish and chips, followed by an evening of pints, gin and tonics, along with some simple card games like Uno and Président. It’s important to disconnect from technology; and whilst running a tech company may prove that to be a difficult endeavour, it’s certainly something I’m going to try to do from time to time. HS

Last weekend we took the chance to do a long hike (c. 23km) from Glynde to Seaford, which was a route we last hiked a couple of years ago, but which continues to live up to its reputation as the best route in the TimeOut guide (at least according to the Saturday Walker’s Club website). The route is well-walked and cuts through fields and a long climb to the midpoint of the village of Alfriston, where an old inn from the 1300s (The George Inn) was our lunch stop. Unfortunately, the dish that could have been the raison d’etre for the entire hike, a king prawn, sundried tomato and chorizo linguine, was no longer on the menu. Annoyingly, the menu had been reorganised into categories of “meat”, “seafood” and “plant”, and presumably the combination of chorizo and king prawn made it impossible to classify and the rather senseless decision was made to just take it off. Thankfully the rest of the route leading down to the Cuckmere Meanders and Cuckmere Haven beach lived up to our memories, taking us to the chalk cliffs of England’s south coast before one final ascent and descent into Seaford. To be sure, this has nothing on the scenery one gets in the Dolomites or around Mont Blanc, but there’s a hill, there’s blanc (cliffs) and getting to it doesn’t involve a gamble on the reliability of the UK’s air traffic controllers (which appeared in short supply last weekend). EL

What we’re reading

The Free Press held their inaugural high school essay contest recently and they have released the two runners up and winner’s essay. These are all worth reading because they are written by youngsters. The two runners up wrote essays entitled “Why I Traded My Smartphone for an Ax” and “I Had a Helicopter Mom. I Found Pornhub Anyway”. The winner wrote an essay called “A Constitution for Teenage Happiness”. These are all excellent and highly recommended reading. DC

What we’re watching

The Lincoln Lawyer was a 2005 novel written by Michael Connelly, a popular crime fiction author. The book chronicles the ongoings of defence attorney Michael ‘Micky’ Haller as he rides around Los Angeles, California operating his legal practice from the back of his Lincoln Town Car between each of his cases. Since then, there have been two adaptations of this popular book; a movie released in 2011 starring Matthew McConaughey as well as an entirely separate series produced by Netflix in 2019. If you have a Netflix subscription, it’s highly likely that you’ll have seen the promotions for this recently as season 2 was released over the summer. Interestingly when it came to the second season, Netflix wasn’t forced to come up with its own ideas as Connelly thankfully had several related books which Netflix could lean into for storyline. I’m only reaching the start of season 2 now, but I’ve thoroughly enjoyed the first season and resultantly I would be keen to watch the 2011 McConaughey film to see how it compares or even pick up one of the novels. In fact, Connelly has written as many as 38 novels within this fictional storyline. I’m yet to watch the film, but it’ll likely be something I’ll give a watch when I get some time in the coming weeks so watch out for my thoughts on it in future updates. HS

Saint X on Disney Plus is a less glamorous version of The White Lotus. The White Lotus was great, until every American began travelling to Sicily thereafter for some reason. This series takes place in the Carribean and follows the lives of those involved in the tragic death of a 19 year old girl. Despite its lack of polish, I thought it was a good effort. Better than The White Lotus? No. But still decent entertainment. DC

This week saw probably the largest collection of the world’s greatest runners descend on Chamonix for the Ultra TMB races. As I write, the race has only just begun for the actual UTMB event: 170km along the Tour du Mont Blanc, 10km+ of elevation gain, through the night and into tomorrow morning (and probably the rest of the day). The men’s record for the entire trail is 19h49m, and the women’s record is 22h30m, but for normal people, the hike around the TMB is an 8-10 day exercise. The live stream of the race is here and it’s very much a sight to behold: both the scenery and the pure display of human prowess with these runners. EL

What we’re listening to

I’ve struggled for a while when it comes to reading most non-fiction books. When they are written in a factual way, I find it almost impossible to read for long periods of time. The thing is that I really want the knowledge in the books. So, after suffering for over a year, on and off, while trying to get through Walter Isaacson’s biography on Leonardo Da Vinci, I had an idea. I’ll download audible and listen to it narrated to me while I’m running. So, over the course of 2 runs this week, I listened to as many chapters as I’d read in the past year. While I may not remember the dates and names so readily when listening, I definitely get the story and the key parts that are important to me. This is a revelation for me and may well be my new approach to dry non-fiction!

A new season of Empire began this time focused on Russia and including some epic-looking episodes. Empire is hosted by William Dalrymple and Anita Anand. Its first two seasons covered the British in India and then the Ottoman Empire. The first episode is one featuring Simon Sebag Montefiore and covering the reign of Ivan the Terrible. As always, it’s full of great titbits from Sebag (as he prefers to be known) and great historical context for what we are seeing unfold at the moment. I once read a great historical novel called Last Crusaders: Ivan the Terrible by William Napier and it certainly seems that most of it was not fiction at all. Ivan was indeed terrible by all accounts. The next episodes cover Peter the Great and Catherine the Great, both of which should also make for good listening. DC

This podcast featuring historian Neil Howe in which he speaks about his new book The Fourth Turning Is Here is a fascinating listen. For those who haven’t heard of this theory, the idea is that history moves in generational cycles, with each cycle comprising four segments – four “turnings” - each lasting around 20 years. The last time the cycle “reset” was after the Great Depression and WW2, and we’ve once again reached a Fourth Turning: an era of tension and conflict as the dividends from the previous 3 turnings – the establishment of order and the strength bestowed upon institutions gradually eroding into individualism and culminating in conflict and disorder, ultimately leading to a populist demand for order to be re-established. Unfortunately, this all looks uncannily accurate; fortunately, there is still the possibility of an outcome that doesn’t involve a full-blown conflict – but the volatility and uncertainty will likely become a common feature of the years to come.  EL