Weekend Reading #305
This is the three-hundredth-and-fifth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 8th March 2025
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What we're thinking.
Another week on the markets of the rotation game except this iteration of it is not going very well for US equities. By focusing on yesterday’s story of US Tech et al, one misses the big opportunity which year-to-date has been China, small parts of EM and in particular European equities, which are all benefiting from the flow out of US megacap tech towards these markets. Many investors attribute their own genius to actually just being part of a secular move in their favour. What matters most in markets is capturing inflection points relatively early. It seems as though the Trump administration’s approach has catalysed a possible inflection point. It is still early (only the first months of the year) but our case is that this is an inflection point of some kind. We shall call it THE GREAT ROTATION.
It is also hard for us to resist commenting on global events over the past week as once again President Trump was the driver of an outpouring of righteous indignation from commentators far and wide. We find this rather curious. We would like to think that we analyse things fairly objectively as that is the job of a trader. We are not here to work out who is right and wrong when it comes to global events but rather to profit from them. And our view of Trump is that one really needs to stop focusing on his behaviour and the emotion he whips up (in this case as purveyors of Euro-centric commentary have been) and simply listen to what he says and observe what he is doing. In our view he is putting his election promises to work sequentially and in good order. Eyes on the prize! He has been clear in his assessment of America’s interests and he is going about a realignment of the global order to reflect that. Whether one agrees or not is irrelevant.
It's actually becoming an interesting case in observation. For example, over the past many years, the waffle of US politicians has meant it’s quite difficult to work out what they want regarding markets. This contrasts with the Chinese, who consistently and clearly tell you exactly what they want to do. And then they do it. With the Trump administration, they have so far told us what they want to do and they are doing it. Shock of shocks! Earlier today (Friday) I watched Treasury secretary, Scott Bessent on CNBC and he told everyone who cared to listen that they want US equities to go down. Taking a page out of the Chinese investors’ book, listen, observe and adhere accordingly.
What we're reading.
Continuing from the What We Are Thinking Segment above, a Trump interview in The Spectator conducted by a guy named Ben Domenech, who has apparently interviewed every American President since Bill Clinton (except Joe Biden). This interview is pure gold. As we said above, one simply has to remove bias and outrage and listen to what Trump says. He is crystal clear. This interview is also a great example of one of things that Trump’s base loves about him – his comedic timing. He had this guy eating out of the palm of his hand. This is a must read (or watch).
I recently came across a Moroccan geopolitical commentator named Zineb Riboua, whose writing I have really enjoyed. There are two pieces recently in particular that were very good. The first is an opinion piece about a Russian “philosopher” named Alexander Dugin, in which she writes about how he is actually far more influential outside Russia than inside. In the West she believes he appeals to the “dispossessed of globalisation”. I follow him on Twitter and I agree with this assessment. The second is a piece in which she writes about “Dostoevsky as Russia’s Future” in which she illustrates how Russia has historically resisted external influence and models of development one way or the other but without actually generating one of its own. This tug of war has left it in limbo. Both excellent and valuable reads. DC
While people go on about how a silicon will never be as good as a human brain at being a computer, or about how much electricity GPUs and data centres in general consume, one would typically not imagine this as a proposed solution: a commercial biological computer. In short, an Australian startup called Cortical Labs announced technology that combines “lab-cultivated neurons from human stem cells” with silicon, with the neurons growing across the silicon chip, which sends and receives electrical impulses into the neural structure. The neurons are described as “self-programming, infinitely flexible and the result of four billion years of evolution” and can be kept alive for up to 6 months. The price tag? $35,000 apiece and consumes 850-1000W of energy. As a plus, it’s animal testing free, though the question is whose stem cells they get the neurons from. Certainly gets the imagination going to see developments like this, and it definitely warranted a quick check to make sure it wasn’t yet April for something like this to be announced. EL
What we're listening to.
Regular readers of this newsletter will be used to me citing and linking to a VC investor named Josh Wolfe of Lux Capital. This week I listened to a podcast appearance of his on Shane Parrish’s The Knowledge Podcast and my goodness it was excellent. The nature of the conversation was different, in particular one segment in which he was asked on how he is preparing his kids for what an AI-dominated future may look like. I suggest listening to this in great detail as he goes into how doubling down on human relationships as well as exposing kids to these AI tools early, will compound over time. DC
LLMs have so far taken over basic reasoning jobs that require memory recall and digging through tedious amounts of info. And sure, with some guidance it can make up some nice pictures that look increasingly realistic, and even videos. But surely it can’t make something creative and abstract like music. Or can it? Turns out music is at its very base mathematics, and the math of what sounds good lends itself to regressions and extrapolations – like all other math. This LLM model called Notagen, trained on classical music orchestral scores, put together this piece which – while not a Rachmaninoff or Beethoven masterpiece by any measure – would probably earn a decently good grade as an early classical composer’s first jab at an orchestral piece. Most importantly, now in music too, LLMs have gone from “cannot” to “can” – what happens after is just fine tuning. EL
What we're watching.
Thanks to Josh Wolfe’s mention in the abovementioned podcast, I went down a serious rabbit hole into a guy named Kirby Ferguson, who has created these short videos on Youtube called “Everything is a Remix.” The concept is that every act of creativity has a first step which is copying. And by iterating what we’ve seen we get to something new. His contention is that very few creations are 100% original. And he spends 4 videos magnificently illustrating how. It is FASCINATING stuff. The first starts with music, where he shows how “sampling” (to me a euphemism of outright copying) has created the industry as we know it. Then he moves on to memes and how they have infiltrated popular culture, before illustrating films, ideas, products, the list is endless. And finally, a segment on AI. Some quotes which stuck out:
“Copying is the wellspring of all creativity”
“First we copy and then we create”
Anyone who has followed the development of Chinese industry will agree. The days of the Chinese only being able to copy are over. Now they create better products in phones, cars and even now AI! And there is no industry where this applies more than investing. My own process is a combination of many influences which first were copied and then iterated countless times to arrive at the end result (which is still iterating). This is the best thing I’ve seen for a long time. DC