Weekend Reading #365

This is the three-hundredth-and-sixty-fifth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 23rd May 2026.

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What we're thinking.

A bit more volatility again this week as the market starts to trade less homogenously once gain. The theme of the week was not Cerebras’ enormous IPO, nor Spacex’s filing of theirs. The theme of the week was GOVERNMENT DEBT as bond yields across the world spiked. Japan, US, UK, France, Germany etc; very few were spared. Is it the possible inflation everyone is afraid is going to be embedded? Is it solvency concerns? Our thoughts are the latter. The war in Iran, although seemingly paused has consequences for supply chain for key materials as we know. But more importantly, it has drawn attention to the plight of most developed countries’ long term solvency situations once again. Remember Liz Truss? She presided over a brief but rather terrifying (if you are in the UK) episode of GILT volatility. And yields continue to rise. The war could just be the straw that broke the camel’s back. Another country where yields are spiking once again is Turkey. They are blowing their proverbial ammo on defending the currency, but it cannot last without structural change. Again, the war may be the final straw. All these nations are on the edge of the abyss. If this so-called peace deal doesn’t happen soon, there is going to be trouble. Not that the world of AI cares much. After a sharp correction earlier in the week and late last week, AI related names surged anew. And why not.
 
Yet away from all of this, the most important outcome of the week may have been in China. President Trump’s visit, despite predictably being mocked by the mainstream media as one would expect, was absolutely fascinating to us! The symbolism, as noted by Pippa Malmgren in her newsletter this week, was not so subtle if one was observing properly. President Xi took Trump along to The Temple of Heaven as the place where their compact was sealed. Having been there myself with my family late last year I can tell you once again it is a rather remarkable spot and its importance to the people of China cannot be overstated. It was the single most important experience we had when we were there because I observed how people came from quite literally all over the country to offer a prayer and see the famed temple. I would go so far as saying that they came to make pilgrimage. And by Xi bringing Trump there, a strong message was sent to all Chinese people and to the world if they were watching closely. The message is that this is the real deal. Our base view has been for some time that contrary to what one may read, Trump’s objective is to extricate the US from policing the world. To do this however the US needs to gain control first and wind down any existing conflicts (militarily or other). Iran ironically is an attempt to do this. But the big ones are China and Russia. Get China onboard and likely the Iranians and indeed the Russians will follow. We think we are closer than many realise to this. China and America need each other, and Russia needs them both. As George Friedman opined recently, the odd one out here is Europe. Once China, the US and Russia are aligned, the Europeans will have no choice but to cooperate one way or the other. The risk to this is the midterms. If the wars do not get ended with enough time, then Trump and his crew could lose, which would jeopardise the entire plan. It’s a fine line! But we would hope that everyone can agree that world peace would be quite pleasant even if it was achieved by Trump. DC

 
What we're reading.

In an interesting development contrary to the common belief that AI is about to wipe out all coding jobs, we saw Microsoft over the past week or so start to cancel Claude Code licenses. To some extent, this is to be expected, with Microsoft pushing engineers to shift to GitHub Copilot – why use another company’s AI solution when you have your own? Of course, for various reasons, Copilot has quite some way to go, and being pre-installed on every Office installation doesn’t seem to really help adoption. Even Microsoft’s devs seem to prefer Claude Code. Aside from product preference, it seems like reality is biting in terms of unit economics, with the token-based billing model reportedly consuming its Experiences & Devices division’s full year budget in less than half a year.
 
One can’t help but wonder if this is reminiscent of the first wave of the .com boom – remember when everyone first discovered websites, FTP, email, dial-up internet, search engines, messengers, chat, bulletin boards… those were the days when the fundamentals of the internet were newly put in place, but when the tech stack simply was insufficient to support what eventually became the internet we know today. Would it have made sense to try and launch something like the cloud-based storage and always-on internet we have today, back in the early 2000s? Probably not, not least because storage was expensive, and clogging up a phone line for the entire day when every home had one only land line was impossible. The unit economics didn’t work out (yet), and the demand that was expected didn’t come till way later. Net result: 2000 and 2001.
 
Many of the investments that were made outlasted their investors, but they also set the stage for outsized returns for the later entrants, and for all of us. Perhaps this move from Microsoft, itself a hyperscaler, in response to AI token price subsidies wearing off, is a sign that the economics for widespread AI adoption don’t quite work out yet. It’s not to say that they won’t, but considering unlimited 100mps fibre internet now costs less than 56k dial-up internet back in the 2000s, maybe the industry is once again getting way ahead of itself. Guess that’s what bubbles do!
 
Speaking of bubbles, isn’t it time this one burst? It doesn’t seem to want to, though. For some reason, the long-awaited popping of the bubble, presumably by the realisation that inflation is out of control, driven by trade disruptions, creeping into all aspects of life and triggering shortages that collapse the euphoria in the market just hasn’t happened, to the chagrin of anyone trying to short this market in anticipation of the bubble popping. The straw that was supposed to break the camel’s back was oil, but the weight of $150+ crude oil doesn’t seem to have materialised – maybe “not yet”. This note posits a theory about how the oil price has miraculously not broken out to $150-200/bbl. It’s worth a read but the short answer is market structure. Through a keen and intimate understanding of the market structure of oil (futures vs physical, what drives the price on the screen vs delivered realised prices), it is possible that sovereigns’ strategic oil reserves can last way longer than expected, and by controlling prices at the margin, they successfully keep the headline price of oil down. Of course, every hack has its cost – in this case, we’re probably saying goodbye to $50/bbl oil prices for a long time to come. As always, the strategy is mortgaging lower oil prices in the future to subsidise the present. As long as the hope remains for peace “in the next few months”, this continues to work. EL

What we're listening to.

Gavin Baker appeared once again on the Invest Like the Best pod this week and the focus was on AI once again and the various pieces of the puzzle form chips to compute, from power to space. The guy is an absolute mine of information on these topics. I have no idea how well his fund has done (I can’t find any public data) but it is rather large now and apart from being a highly respected fund manager, he is probably the most influential public influencer if you like on these topics. DC

What we're watching.

Wildcard of the week for the brave. I wrote about Luis Elizondo’s book years ago where he set the scene for the forthcoming disclosure on what is now called UAPs. Now I warn you this interview is WILD. Every conspiracy theory you heard about aliens is in here and what is petrifying is how these topics are being discussed in Congress. Alien/human hybrids, time travel, abductions, you name it it’s in here. Allow yourself an open mind. I am so deep in the weeds on this stuff that the sci fi I read isn’t even sci fi anymore but my goodness this is fun (as long as it’s not real). DC