Weekend Reading #349

This is the three-hundredth-and-forty-ninth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 31st January 2026.

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What we're thinking.

After a rollicking start to the year, metals are finally having their reset as we speak with gold and silver both falling today. All the way back down to where they were.... earlier this week. Is it the end of the metals bull market? Who knows but the good news is that everything else is also selling off. Tech stocks, financials, everything. Unless you are in Turkish stocks that is. The low foreign involvement seems to insulate this market from broader influence these days and its performance this year has been strong. Everything else appears to be part of a global beta trade at present. The only other piece of the market that doesn't appear to be correlated is crypto. It just goes down whatever the mood. And so it should. Bitcoin has once again proven that it doesn't really do anything. The sweet spot for Bitcoin in our view was when the hope existed that it would be a new type of haven asset. It was hoped first to be a hedge against inflation, then a hedge against fiat debasement and then a hedge against money printing. It then was a proxy for risk on sentiment by way of Nasdaq correlation. None of these amounted to much and in the end in the year when Gold went nuts, Bitcoin was down. So what is the point of it then? Now Bitcoin will imminently it seems have a new problem to contend with. Michael Saylor of "Strategy" now is edging closer to his average buy price of around $76k (less that 10% at time of writing). His Bitcoin "yield" is disappearing rapidly and he owns over 3% of Bitcoin's supply. He has promised he will never sell. Right? Right? His apprentice in chief, Tom "never bearish" Lee, is coming under scrutiny for his unashamed promotion of his own crypto treasury company, Bitmine Immersion, in which he has obliterated many billions of dollars of retail money in his quest for 6 digit Ethereum. Surely some regulatory agency has to look at these guys. Is it stealing if you ask someone for their money?
 
Back to metals and markets and the obvious question is whether this is a pullback or the end. The shift from a megacap US tech-led market to an EM and metals led-market seems to us to have reached an inflection point late last year. We expect this to continue as our base case going forward and use this shakeup to continue to position appropriately. But as ever this is the stock market and who knows?! If we are wrong, we will simply exit rapidly and start again like we do every time we are wrong (which is relatively frequently). DC

What we're listening to.

Marc Faber is heading towards his 80th birthday next month yet is still as full of fun as ever. For the uninitiated he is known for his Gloom, Doom and Boom reports and is usually bearish markets and bullish precious metals for as long as I can remember. Yet in the context of today's market I really enjoyed listening to him chat to Meb Faber (no relation apparently) and talk about his concerns. Similar to guys like Russell Napier, there is a time for them and it may well be now. Even Peter Schiff is having his time in the sun. We would do well to pay attention to what he is saying and plan for the what if.
 
And now for something completely different. C Thi Nguyen appeared on Jackson Dal's excellent Dialectic podcast to talk about his pet topic - measurement and meaning. He argues that our obsession with keeping score and quantifying every aspect of our existence leads to a crisis of meaning. And in my esteemed view he is absolutely right. Nowhere in my mind is it more evident than in education. The obsession with testing and quantifying ability of young kids is compressing a 360 degree way of dealing and encountering the world into the left side. All round this is excellent! DC

What we're reading.
 
In another classic case of FAFO, the Indonesian market found out the hard way this week that trying to be too clever at gaming index rebalancing formulae to engineer forced buying by passive and benchmark hugging capital is a really bad idea, as early Wednesday morning (4.24am Indonesia time) saw MSCI put out this announcement. It doesn’t get more grim than the way it actually looks, other than what it actually said, pointing out “fundamental investability issues persist due to ongoing opacity in shareholding structures and concerns about possible coordinated trading behaviour that undermines proper price formation.” In case you missed it, Indonesian small/midcap stocks have printed charts over the past year that look more like crypto tokens than stocks. The catalyst for these moves was local conglos deploying capital to the (illiquid) traded shares of their subsidiaries to attain ostensible conformance with index requirements, triggering weighting increases and compelling benchmarked funds to match those reweights – leading to inflows on an illiquid base first from retail money anticipating the reweighting, and subsequently some institutional money, at least where they manage to. The result: capital flows out of actually liquid megacaps like BCA out into a smaller pool of small/midcaps in an attempt to chase these indexed moves. Obviously, because the underlying liquidity wasn’t present, the index reflected less and less of reality. So, after almost a year (or even more) of shenanigans, MSCI has stepped in with a stern warning, and an even more lethal threat: downgrading to Frontier market status, a scenario which if materialised would lead to an outflow of whatever little emerging market allocations were left.
 
IDX (the index) and OJK (the regulator) have since promptly stepped in and promised addressing these issues by March (ahead of MSCI’s May deadline) – it’d be interesting to see what comes of their promised disclosures, and potentially that rectification would make for quite a good trade. It’s worth noting too that amidst the chaos and bloodshed even in megacaps, one group stood out as remarkably stable for now: miners. A feather in the hats of fundamentals in this case, but more importantly hopefully a lesson learnt and a step towards maturity in the market.
 
On a different note, this essay by physicist Florian Newkart at Leiden University on the nature of Time should make for great food for thought. The argument he makes is contextualised by the struggle the world of physics has had in trying to create a theory of everything, wrapping in theories of relativity and quantum mechanics and everything else in between. The main problem seems to be that Time, this thing that we all experience and benchmark our existence against, is a variable that somehow gets cancelled out once a combination of theories is attempted. The alternative theory is that Time is emergent – in that it is experienced as a result of interactions between fundamental factors, but is not a fundamental characteristic in and of itself. For example, temperature is something we experience, but at the molecular level for example, “warmth” doesn’t exist. He further theorises therefore that Time is experienced as a function of information – the interactions all of us (alive/animate or otherwise) have with everything else. Put differently, time is the result of all our experiences, whether as a human or as a molecule. It doesn’t mean that the future is set in stone, but perhaps we all know deep down that the past is a major determinant of what the future brings. EL