Weekend Reading #378

This is the three-hundredth-and-seventy-eighth weekly edition of our newsletter, Weekend Reading, sent out on Saturday 22nd August 2026.

To receive a copy each week directly into your inbox, sign up here.

*****

What we're thinking.

For once, this week wasn't really about AI, or maybe it was but we will get there. US Treasury Secretary Scott Bessent's announcement that he would double buybacks of long dated US Treasuries set fire to the dollar this week and much, much more. Since we have been in markets for nearly 20 years the biggest theme of all has consistently been the US deficit and the inevitable moment when it all blows up resulting in a cascade of weakness to the US Dollar. Is this the moment the pundits have been waiting for all this time (and probably since even before we arrived on the scene)? Our regular readers will not be surprised to hear that we don't know! But there sure are a lot of reasons to think we are at some kind of moment for now anyway at least. Last week (or the week before but that’s semantics) we had Bessent buying Yen allegedly so that the Japanese didn't sell US Treasuries. 4 years ago, we had the US seize Russia's Treasuries. In between, we have seen relentless sovereign selling and buying of Gold as a replacement. Panoptica's narrative tracking software says that since Liberation Day (tariffs) last year, USTs are no longer the go-to for where to park capital in a risk off environment. All of this has built a strong narrative. And when price follows, the boat can start filling really fast. Are we seeing that this week? Well, Gold has ripped, the Dollar has tanked and most importantly in our view, crypto has issued the god candle everyone dreams of, but which only happens very infrequently. Bitcoin is going up in a straight line. Some of that is positioning - of all asset classes it is the least owned and most hated. But remember the reason why Bitcoin exists. In our view there is only one. Not to hedge inflation. Not as a payment instrument. But in our view, purely as a hedge against FIAT debasement. And that is exactly what this week's events are suggesting. That we may be in a time where rightly or wrongly (we don't know yet) the market is placing this bet. Next week is Jackson hole and new Fed chair, Kevin Warsh, will have to put on a good performance to help his old pal Bessent get this genie back in the bottle.
 
Back to AI. This may all be about AI in the end because the scale of the borrowing ramped up by the hyperscalers has reached such high levels that there is an argument that it is crowding out US treasuries. The yield spikes we have seen may be due to AI spending in the end. Or not, who knows. But the argument is there. And ironically the high AI capex may be threatening the very names which should benefit. With higher funding rates it jeopardizes the scale of the spend which puts doubt on all the glorious outlooks from all the spend beneficiaries issued (checks notes) as long ago as last week. Are we having fun?
 
One more thing to remind our readers periodically. We speculate every week about possible future outcomes. We love it. It's fun and it is intellectually stimulating. Yet we are wrong a LOT. We don't care. Our job isn't to correctly predict the future, it is to make money. Things change so often and that's why we love it. Neural plasticity is a feature of what we do. In our fund, we have been right on average about 40% of the time but have made about 3x as much when we were right than when we were wrong. That’s the investment case!
 
Good luck out there.

What we're listening to.

Geroge Friedman this week spoke in detail this week on the new apparent Sunni alliance between Turkey, Saudi and Pakistan. Turkey has the military, Pakistan the nukes and Saudi the cash. It’s a great deal for them all. The only loser here is Iran. The Americans benefit as they can withdraw focus and resources sooner. The Israelis benefit as Iran is contained, even though they may worry about having Turkey a little close for comfort as this week’s strikes in Syria showed. But as Friedman points out, Turkey and Israel have never fought a war. A fantastic listen! DC

What we're reading.

With the tools available now for learning via AI and the broader internet and with the problems AI gives in terms of kids using it for homework, why not INVERT the classroom and the homework. It is a genius idea! Kids get given resources to watch, read, listen to etc at home from Youtube, Khan academy and AI tools to use and then the following day they do all the exercises and project work at school with the teacher's help. It utilizes the full infrastructure of the school but completely flips the emphasis, allowing kids to benefit from world class tools and also get in person help in areas where needed.
 
And my favourite topic (ask my children) is learning how to do hard things. Because the more you learn to do hard things and believe you can do them, the more likely you are to try do more hard things and succeed. This excellent essay highlights doing things versus the theory of doing things. Thinking uses energy. It is hard and it takes effort. But that's what counts! DC

What we're watching.

This is a video of a cell. Incredible. And as Tim Urban of waitbutwhy points out if this was how biology looked at school rather than drab diagrams it would be a different experience and far more likely to generate the curiosity of kids. DC

This video of Blackrock’s Larry Fink trying to stave off legendary activist investor Carl Icahn calling Blackrock “dangerous” is an entertaining but nonetheless solemn watch, because for all of the fancy financial engineering Blackrock has done to create liquidity in the market, one can’t help but wonder if Icahn’s right – that when the time comes for there to be liquidity, no one shows up because everyone’s invested and also needs to sell, invested because things looked a lot more liquid than they should’ve been. ETFs have been a wonderful invention, but when oversimplified into the realm of “explain like I’m 5” and subsequently dished out generously to retail, we already see how the combination of retail options and ETFs leads to sector and country ETFs trading with correlations and volatility more like single stocks of years past than top level indices. Everything’s a stock now, it seems. Doesn’t make the risk of an “owl market” disappear though.  EL