Weekend Reading #269

This is the two-hundred-and-sixty-nineth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 25th May 2024

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What we're thinking.

Despite many public prognostications to the contrary, Nvidia did it again and this meme, which seems to do the rounds each results season since the AI uplift began, was never more apt than Thursday when it was quite clearly Nvidia vs the world.

Nvidia now lurks just beneath Microsoft in the battle for the title of the largest company in the world by market capitalisation (a 25% relative rally away). Commodities are having their selloff too and China has gone off the boil since Alibaba and JD have announced large convertibles and of course the Chinese have surrounded Taiwan. We have always thought China prefers to take Taiwan politically but the new Taiwanese president’s bellicosity has not helped any potential political solution. The Chinese have acted accordingly. As it stands the military drills send a very strong message. Ironically the new president’s actions may accelerate a political solution. Then again what if it’s not an exercise this time while the world quietly looks on.
 
Ethereum’s ETF approval (well the steps to approval have been completed now making it inevitable) caught crypto participants off guard. It seemed that the SEC would reject the ETF until a stunning about turn, seemingly driven by a Democratic Party 180. Realizing that Trump was about to get the crypto vote, they completely changed course, not only with the ETF being approved but also and more importantly with the passing of pro-crypto regulation that seemed until only a few days ago likely to be rejected. This is the most bullish thing we have seen quite possibly since the beginning as the US is finally set to embrace crypto. This roadblock has been a massive block on innovation and we can be hopeful now that this technology can actually move from having speculation as its primary use case to be actually being technologically useful. Finally, some good news.

What we're reading.

Living in London and coming from Cape Town, I often dream of being by the water so when I came across this study, shared by Adam Grant on Twitter, I naturally felt vindicated! According to the study, being on the water results in a lower heart rate and blood pressure! Find me somewhere coastal to go which ticks all the boxes and I’m there.
 
Elsewhere, a Chinese research team revived a human brain which was frozen for 18 months. Cryonics is something straight from science fiction and which in real life seemingly existed only for hopeful billionaires with too much money. The problem is that other than the Global Times, a Chinese newspaper, I can’t find the story anywhere else. Is it true?
 
After many years of teetering on the edge of researching the history of Saudi Arabia in more depth, eventually my curiosity tipped me over the edge. I often find it works like this. I can’t force myself to read something I don’t intrinsically want to. So when my inner self was finally ready I and began The Caravan Goes On by Frank Jungers (thank you to Jawad Mian for the recommendation), I was ready to dig in! Jungers was the American CEO of Saudi Aramco and wrote this autobiographical account of the company and its inseparable relationship with the Kingdom’s history and indeed America’s. I’ve flown through it and already learned a lot about halfway in. Jungers passed away last year at the ripe old age of 97. DC

The experiment in economic orthodoxy (aka common sense) in Argentina seems to be yielding some amazing results – amazing simply because contrary to the increasing layers of political intervention in markets in the developed world, Argentina is de-regulating, and it’s paying off. This article entitled Argentina Offers a Textbook Study in why Rent Controls are a bad idea is a must-read for anyone who believes that the solution to higher prices of anything is price controls – especially rentals. Introduced in 2020, rent controls made to “protect” tenants imposed a minimum length of 3 years on all rentals and rent increases were capped at a weighted average of inflation and wage growth. Deposits were capped, rents had to be paid in pesos (solves the FX problem right?) and while rents could be adjusted between contracts, ending tenancies before their term was basically impossible. Tenants were meant to enjoy more economic “security” against their rapacious landlords.
 
The result: it became such a pain to be a landlord that many decided that it was better for them to just put the apartments up for sale. Fewer apartments were on the market, those that were had asking rents that priced in future expected depreciation AND inflation (i.e. expensive) or moved to short term AirBnB rentals (probably including the one we took in Palermo) which could be paid for in USD, and the apartments that came for sale were obviously still at a price that none of the prospective tenants could afford.
 
It stands to reason that President Milei’s dismantling of rent control policies reverses these effects and achieves the outcomes that were REALLY in demand: +50% rise in notices offering traditional rentals and rental prices falling by 20-30% so far.
 
If these policies keep rolling in, Argentina’s really starting to look promising.
 
In other news, the dog that spawned a joke that turned into a US$23bn memecoin, more if you consider its cousins Shiba-Inu and Floki (that’s an additional US$14bn + $2.5bn), has passed away. Kabosu, the dog whose image is (digitally) imprinted on Dogecoin, passed away today at over 17 years old. A memorial party is being held for Kabosu on Sunday – details on her owner’s blog (in Japanese) if anyone intends to attend, would be interesting to see what the turnout is!  EL