Weekend Reading #362

This is the three-hundredth-and-sixty-second weekly edition of our newsletter, Weekend Reading, sent out on Saturday 2nd May 2026.

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What we're thinking.

After a few weeks of everything going up, we are starting to see divergences in line with what is unfolding globally. US markets continue to go up led by anything to do with AI, whereas many markets struck by the ongoing energy crisis have halted. Europe is struggling, the South African Rand is weakening and there are many other similar moves. As we wrote about last week, we really do like a good bubble and sometimes we see one even if it isn't there. But in our esteemed view, never has there even been a set of ingredients for a bubble as the conditions we see now in AI. One important development has arrived in recent weeks. For months, leading up to the Iran War, there has been lots of hesitation and angst when it came to buying the hyperscalers, the megacap names who are spending sensational amounts of capital in rolling out the infrastructure needed to support their plans. And with good reason. We have never seen such big amounts of capital supposedly lit on fire as we have been told. The thing is that no one really knows and that creates our favourite market word - UNCERTAINTY. And when future returns are uncertain, particularly after a massive growth period, stocks DERATE. But over the past few weeks we have noticed that when using our shiny new AI tools, we are now being capped in terms of how much compute we can use. Tasks that a month ago we were doing for free, we are now being asked to pay extra for. And guess what, we are paying. So, there is a possibility we now have line of sight for future returns on the capital. We are not saying it is clear. It isn't! But it is clearer than it was last month and in markets nothing matters more than RATE OF CHANGE. Throw that together with an environment where many parts of the markets globally are not looking great given changing global conditions (oil, logistics etc) and the recipe for capital to cluster into a bubble is there. Retail has led the fun since the lows, and we are now rapidly getting all aboard. The next few months could be historic. The last phase of a market move is usually the most aggressive. But the seeds for the bear market thereafter are being sown at the same time. So by all means join the party, but always bear in mind that after the frenzy comes the lesson. It is important to keep both ideas in mind at the same time.

What we're doing.
We spent the last week or so in Japan – it was my first time here, mainly in Tokyo and Kyoto, which for many is hard to believe given how popular Japan has become in recent years as a tourist destination, thanks in part to the steadily weakening Yen. And I can safely say that the legends about the Japanese are true: for a country with declining demographics and an economy that has literally gone sideways for more than 30 years, Japan has done an amazing job of keeping things running impeccably.
 
Sure, it has its share of corporate scandals and social peculiarities, and it’s far from perfect. But the mentality of the Japanese people, that unspoken pride in everything that they do, no matter how small, shows in everything about the country: from the clean, orderly streets, to the décor in restaurants regardless of size, to how hotels somehow think about every little detail in advance (even those you never even thought to think about – such as free rental pyjamas), to how nothing is too small for innovation and quality, from the famous Japanese toilets to the Shinkansen to wet paper serviettes in restaurants that are stronger than cloth despite being one-use. The British may have used to be known to have a stiff upper lip – no longer. It is probably the Japanese who deserve that honour now.
 
That said, the demographic challenges that face the country are real, and we’re constantly reminded that outside of the major metropolitan areas, rural Japan is depopulating fast. Population shrinkage at -0.5% a year annually since 2011 is further exacerbated by an economy that’s structured around a depreciating Yen. Japan’s conglomerates are considered blue-chip around the world, from the automakers to the banks to high-tech semiconductors and machinery, and of course, they have Softbank which one often forgets is also a local telco. But their success is almost dependent on the decades-long Yen carry trade, the net effect of which is sustained financial repression of the domestic economy. The average Japanese income is around $30k USD a year, but considering about half goes to housing and a quarter to tax, that’s not much left to go around. Couple that with Japan’s trademark stoicism and it’s no surprise that the Japanese have terms for “death from overwork” (過労死) and “suicide due to overwork” (過労自殺) – the meanings obvious in themselves for those who can read chinese. Some say that Japan is a preview of what is coming for the declining West – if Japan’s a preview, that’s good news given the way things are going!
 
For Japan though, it seems something’s changing, at least on the margin. The current Japanese PM Sanae Takaichi, Japan’s first female PM, has been vocally nationalistic and hawkish, at least more so than her LDP predecessors. I’m a complete ignoramus when it comes to the complex world of Japanese politics but as with the point above about Japanese pride in what they do, it is refreshing to see a people be proud of their history and heritage rather than try and water it down to blend into the ambiguity of a “global citizenry”. We come to Japan to experience a Japanese way of life, business, food and culture – not to see what we’re familiar with, just in a different location on the planet. They should be proud of being Japanese in its entirety, and most certainly shouldn’t be shamed into giving any bit of it up.
 
On a side note, I don’t know if this is the same tissue we came across but I was told about this patent filed in 2019 by a Japanese paper company that made tissue paper with wet tensile strength (i.e. how much can you stretch it without breaking) equivalent to fibreglass filament tape or conductive metal tape (e.g. Hi-bond). Who in the world invents soft yet industrial strength one-use tissue paper as a serviette for use before/after a meal and patents it? The Japanese. EL

What we're listening to.
Paul Tudor Jones appeared on Invest Like the Best this week (though it was recorded in Feb) and it was one to remember, albeit for different reasons to what I had hoped. Being a trading mercenary, I was looking for as much alpha and secret tips as possible. But to my disappointment it was more philosophical than lowly trading talk. Lots about how to live a good life and all that stuff. A tip on how important (proper) journalists are and some advice on playing bridge. I guess that's what happens with great wealth and of course as one gets older and for what it was, this was a gem of a conversation. An opening sortie into how paying forward from a single act of kindness set the tone. Either way, its worth listening (or watching). DC
 
What we're reading.
I am so excited for what AI will bring to film and TV. The main reason is that current film and most TV is completely devoid of new ideas. Risk taking has disappeared and large players gatekeep pretty much everything especially access. AI is already changing this. This article in Piratewire is brilliant. It tells of a chap named Charles Curran. He is a movie nut. Obsessed with film-making. And he has gone viral recently using AI tools to create short films. He believes we are on the verge of a new golden age of cinema for many of the reasons I highlighted above and more. Of course there will be AI slop, but there will also be an entire generation of storytellers from all over the world able to get their stories across. The barriers to entry for film-making have collapsed. I for one can't wait.
 
In an age of screens, I have learned to discern between good screen time and bad. We knew already that some kinds of videogames are actually really good for the brain but this post was a timely reminder! It shows once again that games that require fast thinking or even intuitive thinking train brain-response time and that strategic games teach our brains to think harder and smarter. It makes complete sense. As opposed to TV screens or social media, where we simply ingest rather than interact, games are interactive! Really cool. DC