Weekend Reading #334

This is the three-hundredth-and-thirty-fourth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 27th September 2025.

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What we're thinking.

Markets showed a few cracks this week as we had a bit of a selloff from the highs. Nothing major but September isn't over yet and seasonals may just get their time in the sun. One potential indictor of a turn in sentiment is crypto, which after threatening to roar ahead has fallen anew. This begs the question of whether this is an early warning sign for markets at large. The dollar has failed to collapse further and had a small rally. Copper stocks went mad as Freeport declared a force majeure (obviously Freeport didn't go mad, it fell a lot) which was interesting as we are long 3 copper stocks but not Freeport. If you ask us why those and not Freeport, we will tell you that Freeport's price action was poor relative to the others, so we didn't buy it. It turns out there was a very good reason! The market always knows, and the price action always gives clues. Over the past few weeks, we have been pre-empting a bit of a selloff but had some sharp rallies along the way. Our book has held up more than well because we what we do is manage risk for a living. Both upside and downside risk. If you are following each weekly comment from us as gospel, please don't. Rather invest in our fund and you can get the returns without guessing what we are going to do next!
 
Back to crypto for a moment and this week saw an SEC announcement about front running for a crypto treasury company. In our esteemed view this is only beginning. These vehicles are disgraceful. A transparent attempt to dump retail. While not illegal (retail has been dumped on in many formats since markets began) it is rather disappointing. The latest example of grift in crypto. And believe us when we say it will end badly. We cannot wait to get our teeth sunk into these things when they collapse.

What we're doing.

When researching the trip to Cappadocia, there were a few words that continuously came up on the internet. Magical. Fairytale. Spectacular. etc. Cappadocia is all of these things. The rock formations and geology are spectacular. The sight of the hot air balloons filling the sunrise-draped landscape each morning is like a scene from a fairytale. And the feeling of floating upwards amidst all of this is actually rather magical. But one word that was left out was BUSINESS. Above all else, Cappadocia is a place of commerce. People come not only from all over Turkey but from all over the region to eke out their trade and survive. There are only two places in Turkey to be a tour guide year-round and earn enough of a living to survive. One is Istanbul and the other is Cappadocia. In Istanbul a tour guide needs to be more than a purveyor of historical information, facts and great stories. A guide there needs to be resourceful, aggressive and as I was told, a traffic expert. And for those who don't want that, Cappadocia is quieter and simpler. But let’s be clear. It is obnoxiously expensive. There are almost zero local tourists. This is a place which has a tourism industry of only around 30-40 years old. The original genius was that of some local official back then who thought of a hot air balloon as a way to optimally view the landscape. Couple that with the virality of social media to spread the images of the balloons for tourist's bucket lists and you have a massive commercial opportunity.
 
But my goodness was it worth it. We stayed in one of the many cave hotels (literally a hotel built into the rocky hills). Each of these has a terrace which is a viewing spot to wake at 5am and witness the majesty of the balloons. On day one we awoke at the crack of dawn, marshalled the kids up to the terrace and stood waiting to catch our first glimpse. 30 minutes later we couldn't understand why there were no balloons! It turns out the weather was a bit windy and for the 4th day running there were no balloon flights. An Aussie couple we chatted to had spent 4 days on a once in a lifetime trip and didn't see or go on any balloons despite waking at 5am each morning and paying for it (they were refunded don't worry). The system for the balloons is a racket. You pay based on demand and supply. So, let's say we book in advance. If the balloons don't fly, we'd get a refund and have to rebook for the next day. But by the next day, as there were no flights the day before, the demand has pretty much doubled (and so almost has the price). And so now we'd need to pay the new price. Now imagine what happens when no balloons fly for 4 days!
 
So, day one we got a guide and went to check out all the sights. We stayed in a town called Goreme (the main town) and first up was a spot called Goreme Panorama, from where one can view the entirety of the landscape with all its rock formations and “fairy chimneys” as they are called. They form over millions of years as continuous volcano eruptions resulted in different rock layers. The softer "newer" top rock erodes, and the harder rock remains underneath (although it also erodes but slower) giving the triangular pointed look over time. It’s pretty cool I must say. Next up was Parabagli, an area which was once inhabited by monks and with Churches built into caves. We climbed up and the kids had a ball. This was real rock climbing. Next, we went to an area called Imagination Valley, created purely for tourists to be told that a certain rock looks like a camel, another like a woman, a turtle, a snake etc etc. This was quite comical. Next up was Kaymakli, an underground city. This was also super cool. 8 levels of tunnels used by locals to hide from invaders. In non war times they were used for wine making (given the constant cool temperatures) and grain storage etc. Not for those with claustrophobia (surprisingly many).

We were pleased to get the cultural stuff done in a day so we could get on with the fun stuff. Next day after rising early once again and this time seeing the splendour of the early morning balloons from the terrace, we went to a local Turkish Hammam and had a family bubble massage which literally involves having foam dumped on top of you and then a short massage. The kids loved it! In the evening, we went for a sunset horse ride through the valley which was really glorious. On the human side, the harsh-looking boys working there all came from Syria a decade ago and it was good for the kids to understand what this meant and see it with their own eyes. It was good for me too. Life is tough in many places. But these kids were full of smiles and energy. The ranch owner said they work hard, and they have a future in Turkey, courtesy of Erdogan’s policy of providing benefits to Syrians. Official numbers say 2 million of them arrived but according to the local tourism guides it could be as much as 10 million!

Day three was the culmination of our Cappadocia trip as we finally got to go up in one of the much-venerated balloons. Despite the immense build up, the hundreds of buses approaching the launching area simultaneously and of course the obscene pricing, it was absolutely a once in a lifetime experience. It was just beautiful to be in the sky amongst all the balloons looking down at the most phenomenal kaleidoscope of colours painting the landscape. The colour of the sunrise on the rocks, the colour of the different balloons, the wonder on the faces of all the people lucky enough to be up there. But what I loved the most was something unexpected. The silence. It was beautiful. Over a kilometre up in the sky and there is no sound. No engines, no propellers, nothing. It was pure, unexpected bliss.
 
After the balloon ride we found a beautiful old hotel up in the hills of Uchisar with a huge pool overlooking the landscape. We planted ourselves there. The best part was we were the only ones using it all day enjoying the shady pines, the birdsong and the views. Uchisar is a bit further away (not much) from the action and prices were much cheaper. We had a world class buffet lunch all of us for the price of one of us a couple of kilometres down the road. We left happy. Next up is Singapore. DC

What we're reading.
 
I have always wondered about the topic of this week's Tom Pueyo piece - "Why are warm countries poorer?". I, like many, had assumed that it was because warm weather makes people lazy. And to a degree this is true. But Pueyo has come up with an entirely new theory. Heat plays its part as the main protagonist but there is one even more crucial factor - mountains. He says logically the higher one is the cooler it is. He also concludes a big percentage of the equatorial population are mountain dwellers. If you are in the mountains, it’s harder to get around, it’s harder to trade and populations interact less with surrounding populations. It's a brilliant piece. DC
 
As if correlations in stocks weren’t already a huge problem for risk management, this snippet about how retail investors are increasingly using ChatGPT (and probably other LLMs) to pick stocks delivers a high octane boost to that correlation number. Of course, increasing the ease of access to information isn’t a bad thing – there’s nothing more satisfying than dumping multiple 10-K and 10-Q PDFs into an LLM and asking it to process, but the driver of worry is in the prompt that graces the title of the article: “ChatGPT, what stocks should I buy?”. The view from here has been consistent – LLMs aren’t “intelligence”, they’re just a very, very intuitive search system that aggregates information and pushes it out in a format that best corresponds in a natural language context to the prompt given. A sloppy prompt gives a sloppy answer, regardless of LLM. Even our favourite, Perplexity, faced with a prompt like this, simply aggregates the most recent articles (link to my query here) on Yahoo Finance, Forbes, Investopedia and… a random blog arguing the case for owning Indian renewable stocks (which for any non-Indian investor first involves an impressive list of forms to fill to get an account set up). Thus, the problem comes when everyone starts believing that LLMs are intelligent rather than just highly efficient at data collection and collation.
 
In other news, just as the west increasingly goes into protectionist mode (or as I was told earlier today, “anti-aspirational” in nature), Indonesia joins the ranks of countries working to make itself more attractive to foreign investment, with its version of a Golden Visa scheme drawing in IDR 48tn (around US$2.8bn) in investments from 1,012 golden visas issued in September itself. Interestingly, despite the benefits being largely administrative (express airport lanes, legal certainty on investments, property ownership rights etc) and with little by way of tax incentives or discounts, the uptake has been impressive, mainly from foreign companies establishing branches or subsidiaries in Indonesia. Put differently, it would seem at first glance that a structured system of access to the 4th largest population in the world and the 7th/8th largest economy globally adjusted for PPP (16th otherwise in absolute terms) is more than attractive enough once the bureaucracy is put aside. Indeed, as some doors close, others open. EL