Weekend Reading #255

This is the two-hundred-and-fifty-fifth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 17th February 2024

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What we are thinking 

How much more can these stocks go up in a straight line? No idea. But its quite fun while it lasts. 0DTE options now make up more than 50% of the total options market (as of yesterday’s trade) so its all a bit of a punt now. The move on Friday in SMCI illustrated that well. Away from AI and some parts of tech, markets remain pretty grounded. Chinese equities are showing some promising price action this week in Hong Kong and the US but local mainland markets only reopen next week after Chinese New Year and then we will see what the real price action brings. Meanwhile crypto continues to surge. Everyone is getting rich. Right? Right? 

What we are reading 

This week heralded a big moment in financial markets history. Passive investments overtook active funds as a percentage of ETFs, clocking in at over 50%. We haven’t written about this for some time given that to us is so obviously now the key driver of market flow along with the gargantuan derivatives market. This thread from Jim Bianco shows it all. 

As readers will know by now, I’ve spent a lot of time on the topic of smartphones, social media and teenagers. You would know that I’ve referenced the research of Jonathan Haidt many times and that the evidence is very compelling. So compelling that last week Mark Zuckerberg had to apologise in front of congress to parents of children who had suffered directly from their access to his social media sites. But this research piece (you need to click on the link in this piece), shared by Ben Hunt of Epsilon Theory took the cake. It is written by a group called 13D Research and Strategy, which is headed up by Kirill Sokoloff. It shows some of the recent neuroscientific research done into this and its conclusions, are even more shocking. The actual brains of our teens are being shaped and reshaped by this stuff. If you are a parent and have given your pre-teen/teen a smartphone I’d strongly suggest reading this. What a mess. I'm convinced more than ever that historians will write of this era we are living through as the creation of generation SAD (stupid and depressed). We are allowing this to happen through sheer apathy. If ever there was a case for regulation its here and its urgent. 

South Africa continues its march towards the autocracies of the world with this appearance at a Moscow forum. What a joke. Funnily enough the president of country which is currently chairman  

of the Social Forum of the United Nations Human Rights Council, yep you guessed it, Iran, is coming to South Africa on a visit soon. Simon Sebag Montefiore summed it up well. I’m sure he will receive a hero’s welcome. 

After dismissing JK Rowling’s detective series for so long given the natural hype, I was recommended it by a friend so I kicked off the first one, The Cuckoo’s Calling. I was quickly engrossed and found it unputdownable. The main character is a private detective named Cormoran Strike, who has a peg leg and a seriously good story. It’s cool it takes place in London and it's so damn well plotted that for the first time in decades with a detective book I could not figure out whodunnit until pretty close to the end. It was so good I’m not even waiting till I read the next one. Its jumped straight to the front of the (very long) queue.  

I also finished reading George Gilders' book, Life After Capitalism, which I mentioned in this newsletter a few weeks ago. Its short and sweet. There is quite a lot of economic jargon in there which is usually enough to put me to sleep but I got through that and to the juicy bits. He basically says innovation is everything and the world after capitalism will be about whoever innovates best. Innovation is measured by time, the ultimate currency. There is a lot on currencies and central banks and the usual but bottom line in almost every place where capitalism has been present, the learning curve has reduced the cost of things as measured in terms of hours worked consistently over time. He is annoyed that we are shooting ourselves in the foot in the West by introducing what he calls “emergency socialism”. The climate is dying (which he finds evidence not to be true) let's dish out trillions for that. There is a pandemic, let's dish out trillions for that. All in the name of the current emergency. He knows it's going to end badly but whatever comes from the ashes he is certain will be a digital information age and yes bitcoin and crypto have their parts to play too. He is a very good writer and a great thinker. DC 

What we are watching

When Tucker Carlson interviewed Putin last week, everyone (including me) had an opinion. The amazing thing that I find in today's world is that everything seems to need be binary. Either you love Putin or hate Putin. Either you think Carlson is a moron or a bastion of free thinking. The reality so often lost today is that one could and should be capable or realising everything has levels and nuances. One can think Carlson is a joke AND think that his access to Putin is a major coup. One can think that Putin is a polymath but also a despot. This week Carlson went off to the Moscow Metro and figured out what anyone who knows anything about Russia knows already. The Metro is beautiful and its clean. He also went to the supermarket and learned you can get fresh food and good prices. Incredible stuff. So yes its possible Russia is run by a polymath autocrat but the Metro is meticulously maintained (it was built by Stalin for goodness' sake) and the supermarkets in Moscow are nice. Moscow is a wealthy city (GDP per capita of around $30,000) so of course this would be the case. But sadly, reality bit on Friday morning when news broke that incarcerated opposition leader, Alexei Navalny, “fell during a walk around his prison area” and died. You can have nice supermarkets, the loveliest Metros, the most storied history and culture (so does China), but as this indicates, you are only as free as your overlords allow you to be. Navalny paid the ultimate price. He knew when he returned after his failed poisoning this was how it would likely end, and he returned anyway. May his memory be a blessing. DC  

What we are doing

On our way back to Buenos Aires from Antarctica, we stopped by the Falkland Islands for a day. It was an interesting experience since after weeks of essentially "South American" style views, with everything on shore being in Spanish in Argentina and Uruguay, as we got off the boat at Port Stanley, we very quickly found ourselves in what could easily be a village along England's southern coast, but for a pair of sea lions sunbathing on the jetty pier as we arrived. From the architecture of the houses to the red phone booths, things looked familiarly English, including the equally familiar scenes of tourists taking photos with the Police "Bobbies" with their characteristic uniforms and hats. Things were priced in pounds, with the Falkland Islands Pound valued at 1:1 vs the GBP.  

The Falkland Islands as a UK overseas territory is perhaps the UK's equivalent of Hawaii, or France's equivalent of Tahiti. The islands are wind swept, with no trees on the island beyond around the harbourfront at Port Stanley planted for decorative purposes. Total population is around 3,000 people, and for anyone taking a Malthusian economic view of life, it's the epitome of the beauty of a small population. While officially a "devolved parliamentary dependency" of the UK, the Falkland Islands is self sufficient, taking little to no financial support from the UK mainland, although a UK military garrison is stationed there especially after it was invaded by Argentina in 1982, and retaken by the UK after 74 days. Many of the locals were either born there and of British descent, or moved there from the UK - and when we asked why, the said it was safe, healthcare services were free like the NHS but at zero risk of overcrowding (not with 3,000 people), education was likewise free and adequately provisioned for and jobs were abundant, with many of them having multiple jobs and the only reason people have for not holding a job being that they don't want to. Fishing, agriculture and tourism are their key industries. 

It's not only the people who come here for fish: colonies of penguins, dolphins, whales, sea lions and other marine life frequent the Islands' (it's an archipelago, rather than a specific single island) waters, bordered by fine sandy beaches. Unfortunately, unless you are one of the above animals, visiting the Falklands' for a "working holiday" is going to be a challenge. Because where even the most remote of villages in the English countryside has OpenReach delivering high speed connectivity at very reasonable prices, OpenReach didn't make it here. Free WiFi doesn't exist: certain cafes and hotels have hotspots, but you'll need to pick up a scratch card with data credit to wire into that hotspot. The price: £6 for 100mb, £10 for 200mb and £15 for 400mb. Of course, there's only one network operator on the islands (called "Sure"), and whether it's for lack of scale, demand or need, competitive speeds and pricing of connectivity definitely isn't a thing. One bar I tried to get WiFi at said that the allowance they have is enough for their card machines to accept payments, that's all. Can't share, there's not enough capacity to go around, sorry. 

The Falklands, or Islas Malvinas as the Argentinians call it, carry their share of controversy, a remnant of the UK's former global empire. But it's a fascinating place, undeniably beautiful - not sure if we'd ever come again given how far away it is from London, but for the people (and animals) that call it home, it's probably precisely because it isn't teeming with people that they make their homes there. EL 

What we are listening to

I’m not generally a big podcast guy, I very occasionally switch one on whilst working or doing sport but earlier this week I was at the gym and for whatever reason I decided that after my usual workout, I’d do some cardio. Whilst torturing myself on the Stairmaster, I found myself listening to ‘Political Currency’, a relatively new podcast hosted by George Osborne and Ed Balls. Both coming from opposing sides of the political spectrum, they discuss the current political climate in the UK as well as some of the policies they worked on during their tenure and the rationale behind them. Something to which they previously weren’t able to discuss so openly when under the spotlight. Aside from more the political themes, there is also an element of light-heartedness with questions from their listeners leading them on to discuss things like meetings with celebrities or their own personal lives. If you follow UK politics, I’d certainly give it a quick listen; it felt just about the right length with episodes roughly 30-50 mins long. HS