Weekend Reading #370
This is the three-hundredth-and-seventieth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 27th June 2026.
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What we're thinking.
This week's main event in the markets was MICRON. After suffering some major volatility this week, they reported earnings and absolutely blew away expectations both in terms of earnings and in terms of forward guidance. But the most interesting thing of all was the announcement of long term take or pay agreements with major customers for around 40% of revenue which effectively reduce their earnings cyclicality. One of the key reasons to own Micron is the fact that it is in an historically cyclical industry with the potential due to AI demand for it to become more structural. The market has been reluctant to price it accordingly and up until now almost all the growth in the name has come from its sensational growth in earnings. It is possible that with this announcement that changes. As the downside part of the cycle is removed and earnings now appear to be smoother, so exists the possibility of a major rerating in multiple. This debate between cyclical and structural is reminiscent to us of the commodity discussion back in the mid to late 00's. As China’s demand for commodities appeared insatiable during its infrastructure build phase, the commodity cycle extended way beyond historical norm. This was termed a commodity super cycle. Could we be in the early to middle part of a memory supercycle? Time will tell! Elsewhere markets were quite weak especially in tech and in anything that is priced against the US Dollar, which has surged ahead. According to everyone, the negotiated "deal" to end the war was meant to be the end of Pax Americana right? Right? What might be the end of Pax Americana could come from inside rather than out as socialist/left/whatever you wish to call them candidates continue dominating local election outcomes in New York and surrounds. So far Zohran Mamdani's reign hasn't shown much in terms of improvements for residents, but he talks a very good game and the young are heavily disillusioned so unfortunately there is no reason why this trend should not continue.
What we're reading.
We spend a lot of our time flippantly tossing around the world bubble when it comes to AI and in some areas, this is quite possibly the case. But what if despite all the frenzy and furore, we are actually still underestimating what the impact of this revolution (yes, it is one) can be on companies and their forward returns to shareholders. This blogpost written by a guy named Kerman Kohli takes that view and lays out a bull case for investing in the AI infrastructure supply chain with a focus on hardware even now. I don't know who he is, but this makes for interesting reading. If he is right, it is still early.
An alternative view of the deal to end the war in Iran is proposed here by Victor Hanson. It sounds a bit more sensible and is good counterbalance to the prevailing view of US capitulation. Worth a read. DC
With the heatwave in Europe and the UK running at full steam, it appears that air conditioning (or rather the right to install air conditioning and not die in extreme heat) is now the hot topic du jour. Yet anecdotally, stories like this one on reddit of a user who had been served with a notice to REMOVE air conditioning already installed truly leave me wondering how things got here. It turns out that there is a “cooling hierarchy” policy in place, leading to residents having to prove that they’ve tried everything before installing air conditioning as a last resort. This other account on GBNews should be read without comment. All of this is in the service of a “net zero” narrative, except a quick search proves that isn’t even true – 50% of UK electricity is from renewables, about 2/3 from “low carbon” (renewable + nuclear), and the UK accounts for 1-1.5% of global CO2 emissions so whether that number goes up or down barely moves the needle. Similar stories are coming out of France where hospitals wards are overheating, and a bus driver in a non-air-conditioned bus (thankfully with no passengers) actually fainted due to heatstroke and crashed the bus. Health and safety don’t seem to be taken that seriously now for some reason. Hopefully the heat wave passes soon, and the consequences of these policies get pushed out for yet another year.
In other news, read this how you wish but it looks like the jaws are closing on the PE party. On one hand, the FT dropped a report this week about how PE executive are increasingly borrowing against carried interest from their PE funds which they forecast to receive based on the fund’s valuation – including on unrealised holdings. One would almost imagine that they’re in a rush to get the cash out before those forecasts don’t hold up. Just a day after that, the SEC reportedly started to ramp up scrutiny of continuation funds – funds that are set up to buy out older PE funds after their fixed closed-end term ends, creating liquidity for older funds by letting investors cash out while bringing in new capital. The question here is whether the valuations paid for by these continuation vehicles are fair, especially amid a marked increase in these continuation fund transactions. Feels pretty much like kicking cans down the road but coupled with borrowing against carried interest and project profits, this starts to smell suspicious.
On a lighter note, this is a masterclass in either how to or how not to make presentation slides (can’t decide yet) – behold Masayoshi Son’s latest presentation deck to Softbank’s Shareholder AGM. The short story is that Son-san has now decided that he doesn’t want to retire and instead wants to continue growing Softbank given the coming AI age. He goes on to argue that he and Softbank as an organisation are the secret sauce in creating shareholder value, and that investors overlook the value of the organisation. This all makes perfect sense, but his choice of imagery was that of the Golden Goose, arguing that the Goose (Softbank) has not been valued, because “eggs do not lay eggs”. That line has obviously now turned into meme material. I suppose since the slide deck got that message across so clearly without many words, it should be a “how to” masterclass instead of a “how not to”! EL
What we're listening to.
For the second time in a week, a rather curious guest on Stephen Bartlett's Diary of a CEO podcast. The flip side of the above argument about underestimating AI is 87-year-old market veteran, Jeremy Grantham. How he got to be on this particular pod is an oddity once again for me. And for this reason, I was curious. Now Grantham has called markets overvalued and due for a crash for some time and I guess eventually he will be right. He isn't just calling for a crash in markets by the way. He is calling for a complete economic and societal collapse in most parts of the world, but in particular in the USA. He draws attention to the lost decades for Japan after its collapse and the lost decade in the US after the dot.com boom and warns of 20 years of drought in the US. Now with these types of fellows, it pays to take with more than a pinch of salt, but it also reminds us that these things can happen, and we must be open to it, especially when we are getting carried away with all the positive momentum we see in the AI mania (not bubble). DC
What we're watching.
The World Cup has already been a feast of fantastic football, and it's barely got started as we head towards the expanded knockout stage. The star of the show once again has been Lionel Messi. At the ripe old age of 39, he is the top scorer and continues to make magic every match. While most of the focus is on his individual genius as it probably should be, one of the things I've noticed is how the entire team has been built around him in order to maximise his skills relative to his advancing age. He would simply not be able to do what he is doing if he didn't have complementary players buzzing around him doing all the grunt work. And he knows it. One can see the genuine appreciation on his face for his teammates and of course their awestruck faces for his genius when he does something special. A worthy reminder of that old idiom that it takes a village. Wonderful to watch all round. DC