Weekend Reading #266

This is the two-hundred-and-sixty-sixth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 4th May 2024

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What we're thinking.

After yet another exasperating fundraising call, we are wondering whether we are wasting our time with institutional allocators. We deliver results, consistently since inception of our fund 4 years ago, but traditional allocators are keen to either put us in a box or not bother at all. We don’t fit in a box. That’s the entire point of what we do. We designed it that way. We don’t want to make money some of the time when the market comes around to our “style”.  We want to be adaptable and make money in any market which is why we have many styles, each appropriate for a different market.  

This week we were told that it would be easier to raise capital if we were like those funds that have larger drawdowns and a traditional process of “conviction” and “buying the dips” so that investors can buy in at lower “valuations”, knowing that we would be buying dips. This would apparently be preferred to a fund which doesn’t have a major drawdown in the first place. Absolutely bizarre. And clearly no one considered that the dip that can keep on dipping - the stock market is full of examples of perma-dips for those who care to look. Put differently, it seems like allocators treat fund allocations like a stock position that they can trade on a mean reversion basis, which to us is completely at odds with the idea of “management”. We don’t want to have large dips in performance, and apparently that makes the strategy difficult to sell. This led us to realise that maybe we are looking in the wrong place. So if you are interested in an investment product that delivers results, please do get in touch! 

In markets, Chinese stocks finally had a major break out after threatening since the start of the year. As we have written about, positioning is low, sceptics abound and that creates conditions for a big move which we have seen now. Nothing convinces people quite like a move in price! A big correction in commodity stocks and a continued correction in crypto had led us into Wednesday’s Fed meeting where Jay Powell seemed to suggest he does not want to raise and he wants to cut as soon as he can. Friday’s payroll numbers certainly got market participants hoping the Fed would notice its first weakness in some time. Did the anticipated May selloff happen in April? Crypto for sure, looks like it has had all the leverage cleaned out, the speculative froth is gone and could be poised for a nice pump. And Nvidia has rollicked straight back up again. Queue renewed chatter about AI (our view being price leads narrative). Could Nvidia still yet become the most valuable company on earth before this run is over? 

What we're doing.

I’m back in Indonesia this week, on the 4th anniversary of our Fund (27th April 2020 was when we started), with a fully packed schedule which - safe to say now with hindsight - was magically efficient. Probably a mix of being sufficiently familiar with Jakarta’s traffic patterns and having the sense to book no more than 3-4 meetings a day, allowing things to overrun into the evening. Spacing out meetings also gave room to join in the local sports scene - including a spontaneously organised “NoBar“ watching the U23 football against Uzbekistan. The term is portmanteau of nonton (to watch) and bareng (together), and it was fascinating to see such a huge gathering to watch football.  

With less than 100 days to go to the Olympics, a fact I only know because I was able to attend a small event hosted at the Institut Français d’Indonesie marking the 100 day countdown, it’s evident that sports makes for a great unifying force. Yet not all sports are made equal - and while I have little interest in football (and still don’t), I’m definitely interested in the interest in football, in the apparent hypnotism that watching 22 players chase after a ball causes and the way the sport unites (and divides) people like no other sport, not even other team sports. It’s a topic touched on by WaitButWhy in that epic saga of “The Story of Us”, but as to why football is so special amongst sports - and how it can be replicated - I’d say it’s a worthy topic for an appendix to that blog post saga. EL

What we're watching.

My wife got me into this show on BBC called Race Across the World, which is superb! I’ve tried a few of these type of travel-race shows before but they tend to be more kitsch reality and more about the contestants than the countries they travel through but this one is proper. This is the 4th series apparently and so far the teams have crossed from Japan into South Korea and next up is Vietnam. This is well put together and I already know a bit more about Japan and South Korea than I did before. DC 

What we're reading.

One of the most incredible aspects of the upcoming U.S. election is how most of the mainstream media still pretends Donald Trump doesn’t exist. Minimal coverage all round. So when a monster interview appeared this week in Time Magazine of all places, it was well worth a read. The journalist clearly isn’t a fan so take it with a pinch of salt. Trump’s comments merely just remind us that he is what he is. Unapologetically and entirely. If he wins, he will be emboldened and driven to achieve his objectives and is not too worried about who or what gets in his way. It will be chaos for the U.S. as division, which is already erupting, surely will get worse.  

It's impossible not to comment on the farce which has unfolded at many of the universities in the US in recent weeks. This Free Press article by Abigail Shrier, couldn’t put it better when it comes to discussing the double standards and hypocracy involved in these protests. The problem is that whatever the truth is, numbers matter. And in this age of social media, truth is lost in the sea of mass conditioning. When watching the videos of many of these students, despite the clear seriousness of their antics and the issue which they proclaim to care about, one cannot help but feel sympathy for these kids. They are so lost. So easily influenced by the vegetative gaze of what they have scrolled through for years, that one wonders whether there is any hope for them (or the rest of us) in the years to come.

As regular readers will know, for us Indonesia is the country that has done a perfect job of balancing its respective relationships with the West and China.  This article showing BYD is building a facility in the country emphasizes that while Europeans are scrambling to work out the size of the tariffs against Chinese vehicles, Indonesia is embracing them. DC 

What we're listening to.

U.K. “centrist” politician, Rory Stewart, has a podcast and this week he and his co-host, Alastair Campbell, chatted to former Israeli Prime Minister, Ehud Olmert. Olmert is famous as the man who offered The Palestinians and Mahmoud Abbas the deal they couldn’t refuse. Until they did. Both sides have their views as to what went wrong but from there everything went south.  Olmert also was found guilty of corruption, something he naturally minimises while blaming current PM, Netanyahu, his political nemesis, for this many years ago. Needless to say, he doesn’t like Bibi much. This conversation is excellent. As a leader he was a true centrist and genuinely believes in peace. Sadly he does not see any possible personality today who is capable to making the difficult decisions necessary to bring hope. But that doesn’t mean he isn’t hopeful. Well worth a listen all round. DC