Weekend Reading #286

This is the two-hundred-and-eigthy-sixth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 5th October 2024

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What we're thinking.

What a week. Take it for what it is. 181 BALLISTIC missiles were fired at a sovereign nation with the entire population forced to shelter in underground bunkers. Commentators are talking about us being on the precipice of war in the Middle East. Well then what exactly is this if not war already? From a markets risk standpoint, the previous attack in April was quickly brushed off. This time, we think we are in a more serious position. It’s not often at all that geopolitics genuinely influence markets, but this may well be one of those times. Be careful. Who isn’t worried about the geopolitics? Chinese stocks. A rampaging week on the back of all of last week’s action and it shows little sign of letting up. We did emphasize that last week’s policy action was unprecedented. And we have seen an (almost) unprecedented reaction so far. One other spot we are keeping an eye on is AI. Nvidia is trading unsettlingly well and threatening to break out once again (not quite yet but close). Everyone (including us!) assumed the move so far was the bubble. What if it wasn’t. Yet. Elsewhere crypto continues to be the most disappointing asset class as it gives back most if not all of its gains since the Fed’s rate cut. Shana Tova and Happy New Year to all our readers wherever you come from and whatever you may believe. May it be a sweet new year of peace. At this rate we all better pray really hard for one. DC 
 

What we're reading.
 

Ben Hunt has put together a frightening essay entitled “Generative AI is a Resurrection Machine” in which he proceeds to scare the living daylights out of any reader who thinks Gen AI is a passing fad or something to be used to make nice images and videos. He goes deep and explains why it is a consciousness extension tool and it is only now that we are at the tip of the iceberg, and everything is going to change. And it likely won’t be for the better. A sobering and important read this weekend. I’m not sure if this is available to the public but send me an email if the link doesn’t work and you want a pdf (members have permission to forward to a few people). DC

I came across this interesting article about coal and wood, a fascinating history of how the arrival of cheap coal to England coinciding with ironworking (wood for fuel), wars (need for wood for timber), fires (again, timber for construction), technological change (glass production with coal rather than wood) and social evolution (agriculture and the rise of cash crops like corn) caused a significant shift of fuel mix in favour of coal from wood, which coincided with significant deforestation across the country as the needs of industry in terms of both energy and material evolved over the centuries. It’s a long read, and I certainly wouldn’t have thought that an essay on coal and wood would be this interesting. EL

What we're watching.

We started watching the latest season of Rings of Power on Amazon, and it’s always interesting to watch prequels and how they’re made – obviously we all know where the story ends, and having read through (or rather listened to Andy Serkis narrate) the Silmarillion, the starting point of the lore of the LOTR saga is also well-known. Obviously by construction there can’t be any spoilers – but so far, beyond a few splashes of diversity here and there (chinese elves and baby orcs, anyone?), the filling in of the unwritten details in the timeline has been pretty respectable. Not sure what the Tolkien hardcore fans would say but as far as we’re concerned, it’s an enjoyable watch. And no, we’re not about to fact-check every single rendition on screen against the books – unfortunately we did that with Dune, and it brought nothing but disappointment. Won’t be repeating that mistake this time! EL 

What we're listening to.

Meb Faber’s podcast this week featured Brad Gerstner who had a lot to say about AI and lots more. His view is AI and search can be compared. In the early days of search, everybody knew it would be big, but nobody knew who would win from any number of Yahoo, Ask Jeeves, Google, Alta Vista etc. If you had been patient and invested in Google’s IPO, you captured 90% of all the gains to be made from search. This as opposed to rushing to invest in one possible winner earlier on and getting zeroed. Today with AI it’s the same story. Nobody knows which consumer business will be the big winner. Only time will tell. But there is one obvious winner already using a picks and shovels approach and Gerstner believes that computation will take a larger share of the stack for AI versus the internet too. That is obviously Nvidia. Nvidia today trades on a similar multiple to two years ago before the AI boom. All its growth has been earnings. Bubble? Not so clear is it. Gerstner’s other major project is an initiative to get every child in America a stock account from birth which can’t be touched until the child hits 20 years old. Apart from the obvious financial benefit the point he made was that it gets everyone on the same team and will do wonders for financial literacy. Getting government to fund it will be tough, but he is making progress. There is much more to this but what a great idea! I love it. Roughly 3.7 million children born in America each year an account starting with $1000? Less than $4 billion cost to implement each year. DC