Weekend Reading #294
This is the two-hundred-and-ninety-fourth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 30th November 2024
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What we're thinking.
Some signs of rotation appeared this week as large cap tech went a bit off the boil and various other pieces of the markets moved a bit. Nvidia in particular has slowed (but not collapsed at all) and small caps in the US have a had a nice run. Crypto paused somewhat with a pullback but seems poised for some potentially explosive moves ahead. I have lost count of the number of people I haven’t heard from for a while who have called to ask if its too late to buy crypto. While this is actually the right question to ask given the secular opportunity as part of an asset allocation framework, the attraction is no doubt due to the recent moves in prices. This tends to herald some kind of top in the near future but once again, another month or two of this and things can get really hectic on the pricing front and as this may be a secular cycle, so I’m not quite sure that prior analogies are completely comparable.
Microstrategy did indeed pull back hard this week. Time will tell whether its peaked or not but either way it has brought attention to crypto in pretty sensational fashion. The real action may be in Coinbase. Given the repression of anything crypto by the Biden administration, the complete 180 to date by the Trump administration could lead to a major secular boom. Price action is suggestive of a new regime, but it hasn’t quite erupted just yet. We are watching closely.
What we're listening to.
Two pods with similar content but both very high quality. First up was Marc Andreesen on Joe Rogan for 3 hours talking about all things politics. This is a very insightful conversation in which he goes into detail on many topics including operation chokepoint 2.0 which shut down pretty much every crypto business in the US (and some beyond) through the use of multiple agencies to clamp down on any perceived threats to the Biden administration’s status quo. There is a lot more in here and again like the Peter Thiel pod, I recommend listening in full.
The other one was Dominic Cummings chatting on politics and most pertinently on AI and what we can expect from it. This was incredibly revealing in terms of trying to map out what a future world with AI may look like and what it means for government. Again, if you care about the future and want to imagine what it may look like, good or bad, listen up.
Funnily enough both pods above featured a quote from Cicero
“Our leading men think they have transcended the summit of human ambition, if the bearded mullet in their fishponds feed out of their hands and let all else go hang. Don’t you think I do service enough if I succeed in removing the desire to do harm from those who have the power?… The others you know. They are fools enough to expect to keep their fish ponds after losing their constitutional freedom”
American Silicon valley elite worrying about their “fishponds” instead of the state of the country. Go figure. DC
What we're reading.
Alongside all of the action in crypto land, it looks like a new candidate for a potential crypto haven has appeared. That new candidate is none other than Russia, with a new law being signed in by President Putin exempting crypto from VAT, clarifying it as income in kind. Not many other places in the world charge VAT on crypto, and my guess is it’s a Russia-specific thing to clear the way for crypto to enjoy the standard income tax rate. Unlike most other tax systems, Russian income tax looks tantalisingly low: 13% income tax up to 2.4m roubles (US$22k), and 15% thereafter, with corporation tax at 25%. I have no idea how simple or complicated the entirety of the Russian tax code is, but at first glance that seems like a tax system that most definitely disincentivises creating complex structures to “optimise” for tax (corporate > individual income) – perhaps some lessons for tax starved governments, and a reminder of the old Laffer Curve from basic economics. EL
What we're watching.
As far as fictional universes are concerned, the most famous of the lot is arguably the MCU, followed by the likes of DC’s Justice League and other franchises like Fast and Furious etc. I wouldn’t tag them up as being particularly sophisticated in plot lines, beyond the complexity endowed upon them in the prior decades, but they’re generally good for low brain power consumption: the good guys always win, and if they don’t, there’s “part 2” and then the good guys win. On a recent flight, I decided to click on a film called Tiger 3 – turn out it’s a Hindi action film, but even more interesting was that it was the third in a series of films featuring a fictional Indian agent, Tiger, and Tiger exists in a fictional action universe called the YRF Spy Universe: 5 films so far with 4 more planned. Given the last Hindi film I decided to click on (also on a flight, many years ago, can’t remember the title sadly!) involved some pretty impossible action scenes, I’d say this is a big step up on the realism scale. And very much like the MCU, it’s a gratifying, easy watch – and of course, the good guys win in the end. EL