Weekend Reading #303
This is the three-hundredth-and-first weekly edition of our newsletter, Weekend Reading, sent out on Saturday 22nd February 2025
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What we're thinking.
Alibaba headlined the week as its definitive leadership of this China bull market continued. The price action is unlike anything we’ve seen in China since Jack Ma was disembowelled by Xi all those years ago. It’s fitting then that what went viral this week was Xi’s “bro handshake” with Ma. In China symbolism is everything and this was choreographed to the last detail. We would do well to heed the message. We wrote a couple of blogposts last year on China and there were a couple of false dawns but as we have said many times and again now is that when the state machinery tells you what it wants, we market participants do well to listen. This is a real bull market.
Elsewhere the gamma boys were back in action this week in many retail favourites. The flavour du jour was Super Micro Computer, a company no stranger to corporate governance (to put it mildly) concern across many cycles and iterations of its own business model. This time, facing a delisting from the Nasdaq next week for failing to file its required annual report, the company announced very bullish revenue guidance for 2026! The retail boys went nuts, crescendoing into zero dated call options like they were running of supply. The ensuing gamma driven rally has fuelled monumental short covering driving the stock up over 100% in just over a week. There are a number of examples of this behaviour around. As much fun as it all is, this type of stuff doesn’t happen at bottoms.
What we're reading.
In this binary era of black or white, love or hate, cancel or don’t, it was very refreshing to read this piece from Douglas Murray in the New York Post of all places which states categorically what President Trump’s approach to a Russia/Ukraine peace may risk getting wrong. It is the second piece this week from someone highly respectable in my own view that pushes back on the White House’s preferred narrative. Niall Ferguson had been lambasted by Vice-president JD Vance for his comments earlier this week and responded with a well thought out and clear piece. What I like about all this is that neither of these pieces is black or white. They both push back hard on the parts they disagree with and respectfully acknowledge the parts they do agree with. Holding multiple conflicting thoughts at the same time? I thought that was from an age long past.
While scrolling through Ferguson’s X feed, I came across this article by Noah Smith, which if you go by what he thinks, should give one a chill up one’s spine (not a good one). He says that the behaviour of the new Trump/Elon administration is essentially an early surrender in cold war 2.0. This is well worth a read regardless of one’s conclusion. It actually made me stop and say “holy sh*t”. Much of it focuses on the concept of manufacturing power, something which is touched on in the Palmer Luckey chat linked above. Luckey has said that if America and China had to have conflict over Taiwan, America’s missile inventory would be used up in just 8 days and be impossible to replenish in time. The Chinese know this and would just wait it out. This is just an example. The point is that China has hundreds of the times America’s manufacturing capacity as America has outsourced its own to the rest of the world incl China over decades in the interest of increased profitability. Smith’s one view is that possibly America’s new leaders have worked this out. That they know they can’t win a war against China and that an early concession has been made in which the world is divided into 3 spheres of influence each for the US, China and Russia to wield influence. Something different to the regular programming for sure but it does make sense given recent behaviour. DC
What we're watching.
Palmer Luckey is quite possibly the brightest and most ambitious American mind since Elon Musk first sprang into the scene. The difference is that he is only 32. His business, Anduril, just hit a 28 billion Dollar valuation in its latest private round. He thinks it’s the most important company in America and if you watch this 4 hour marathon conversation on the Shawn Ryan show, you’ll understand why and a whole lot more. There is everything in here. Everything. China, exoskeletons and the story on his dismissal from his own company, Oculus, for his political views. But the most important piece once again - China and its risks. This is absolutely compulsory listening.
I don’t really write much about football but every now and then something just has to be said. This clip of the Real Madrid and Barcelona youth teams (I don’t know what ages) is just superb. It’s probably quite old as I think I recognise a few of the players (I think Gavi is in there but maybe not). If you think your kid is good enough to be a pro footballer, this is a great reality check! DC
What we're listening to.
This podcast with Satya Nadella, the CEO of Microsoft, is probably mandatory listening for anyone trying to work out where we stand in the AI cycle – which is probably everyone around. Aside from them launching a quantum computing chip, called Majorana zero, a potentially game-changing development in terms of an inflection in the speed and accuracy of quantum computing (and computing in general), he also discusses where he sees the path going ahead from here in the AI world. At risk of oversimplifying, he firmly believes that AI will not be winner-takes-all especially in enterprise, and cautions against hiding in an echo chamber of supply-side thinking of “if we build it, they will come” when it comes to capacity. For him, hyperscalers like Azure and AWS will likely be the means by which AI compute becomes cheaper and more capable on a per token basis and suggests that over the next few years, by 2027-28, it’d be much more viable to lease capacity than build. Topped off with a philosophical discussion about the technological, economic and social hurdles that stand in the way of the utopian AI-revolution (specifically, “you can’t just have a return on capital and no return on labour.”), it’s an extremely thoughtful conversation that is a must-listen. EL