Weekend Reading #280
This is the two-hundred-and-eigthyth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 24th August 2024
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What we're thinking.
While all the attention has been on the US markets and the political theatre going on across the ocean, the real action has been in emerging markets. Through a combination of better domestic conditions and the absolute trashing of the dollar, they are flying. South African markets reached all-time highs. So did Brazil and Indonesia and India (India technically was last week but you get the point). Poland is strong and even the Philippines has seen a rally. Turkey continued its contrarian relationship with pretty much everything and sold off. Ironically if you had to look at the MSCI emerging markets index you’d be forgiven for wondering what's going on as it has been a terrible performer. But how is that possible given all the “emerging markets” are going up? One word – China. China, despite mounting a mini rally this week, remains a major laggard. It still dominates the index for some reason even though it’s more a Superpower than an EM. Another vote for politics and a nail in the coffin for this ridiculous anachronism as a measure of EM performance.
And as for Nvidia and the so-called collapse of AI, whisper it but Nvidia after its gargantuan rally off the lows of earlier this month is just around 8% off Apple’s benchmark as the most valuable company in the world and ahead of Microsoft as we type.
What we're reading.
I hadn’t read anything from Matthew Ball for quite a while but found his newest essay really excellent. It's all about Roblox and is entitled “Roblox Is Already The Biggest Game In The World. Why Can’t It Make A Profit (And How Can It)?”. It's better than any sell-side report one can ever read. It goes really deep into this very valid question. In terms of daily active users and monthly active users Roblox is flying. 80 million people log on every day and 380 million every month!
Revenues are strong but the problem is that costs are explosive. A big part of the problem is platform fees (app store fees) but also payments to developers. The former not much can be done about though over time it likely comes down. The latter is catch 22. If they chop their payments to developers, growth slows. But the real cost is R&D, which is 44% of revenues. The good news is other major tech platforms stabilize R&D eventually at 6-12% of revenues. The bad news is that even if R&D dropped to 10%, Roblox would still be unprofitable. If you have further interest have a read but it's no real wonder why Roblox’s stock price hasn’t gone anywhere for years after its initial Metaverse bubble-infused rise after IPO. If a path to profitability appears, this stock will go insane. So far anyway, the path is not yet clear. Keep an eye.
As many readers may know, I’ve been down a lot of rabbit holes when it comes to trying to understand consciousness and where it comes from, what it means etc. As odd as it may sound to many left-brained readers, a natural extension of this to me is the research into UAV’s (or UFO’s for the old schoolers). If consciousness is not an internal phenomenon stuck in our brains, then we need to search for explanations all over the place. Lue Elizondo is someone I’ve been following for a few years. He was the head of the US Department of Defense’s Advanced Aerospace Threat Identification Program (AATIP) until he resigned in 2017 effectively to pursue more transparency with respect to (in more blunt terms) non-human activity on planet earth. His book, “Imminent”, was released this week and I devoured it in a day. Let me tell you, this was just WILD. The stories, the things he claims, are straight out of a sci-fi book. And not all of it is good. In fact, not much of it is good. I didn’t sleep to well for a few nights after. He will be all over the press in coming weeks so I’m sure everyone will get a good dose of what he says. I could write for a long time on this but just check out the reviews of the book on Goodreads and you get it all if you don’t mind spoilers. But the question I ask is, why is he being allowed to disclose all these things now? As much as he claims to be a whistleblower (and I think he genuinely is), the content is disturbing. I had always imagined a headline on TV or in the paper saying it rather than having to piece it together from congress wording. Believe it or don’t but the message is clear. They are telling us we are not alone and now for some reason after so many decades, they have decided we should know.
Finally, Niall Ferguson wrote an absolutely brilliant piece this week for The Free Press entitled “The Barbenheimer Election”. Last year, when two movies, Barbie and Oppenheimer were released simultaneously this amalgamation of a word was created. Barbie – ditzy, shallow, surface level etc and Oppenheimer – meticulous, cerebral, deep etc were such contrasts in their core material and creation that one became either a Barbie or an Oppenheimer fan but surely not both. And so Ferguson writes about the US election. It’s an excellent analogy and this essay really made me think. DC
What we're watching.
On a purely coincidental note, even though I didn’t watch the original “Alien” movies, I went this week to see Ridley Scott’s “Alien: Romulus” release. I have one word which summarizes it. Relentless. The pace was frantic from the start until the end. I was exhausted afterwards. Good fun and full value entertainment. DC
What we're listening to.
Peter Thiel’s conversation with Joe Rogan is a long one but it goes a lot deeper than his other recent interviews. The problem is that after three and a half hours of chat, I wasn’t all that much wiser as to what his thoughts and opinions are. I’m intensely curious as to what Peter Thiel’s views are on so many things given his influence on everything from tech to modern politics and I hunger for real answers but after every interview I am always left unsated and disappointed. He seems to be a master of saying a lot but revealing nothing. It’s worth listening to this for this reason alone. The real question I have is why suddenly after so many years of carefully and obviously avoiding the media and podcast circuit, is Peter Thiel everywhere? Give me the answer to that and I suspect it will answer many questions in the public realm.
I’ve followed an account on Twitter called Marcellus Investment Managers for some time and when its founder and CIO, Saurabh Mukerjea, appeared on the Making Markets podcast, it piqued my interest. In it he covers the recent history of India’s financial markets and the explosion in retail interest in the market. He naturally has a bullish outlook, which structurally it's hard to disagree with. For me the reason India is interesting as a market is that there is a definite domestic stock market culture, similar to the US. Everybody is involved in stocks one way or the other. And with different demographics entering the workforce, there are tailwinds to last for many years ahead. India’s recent stock market boom has been due to domestic flows almost exclusively. Foreign interest is of course there but is dwarfed by the size of domestic flows. This is a recipe for great success for a market. A really enjoyable listen. DC