Weekly Reading Round-up: 26/06/22
Interesting Things I Read This Week
Overnight Alpha - interesting paper on price moves when the market is closed, doing the rounds. Elm was founded by ex-LTCM Partner, Victor Haghani; their views and writings are generally worthwhile
“A striking feature of the stocks that tended to perform best at night was their popularity with retail investors, in that they were well-known brand names, frequently mentioned in the news (as quantified by Google Trends data), heavily traded in the options markets, and/or had high recent returns”
Tiger Global takedown - New York Magazine anatomy of a screw-up at global hedge fund Tiger Global (down 52% YTD…. yikes). Fun and informative!
“The hedge-fund portion of the strategy came into play as these unicorns went public: Before the IPOs, Tiger Global’s hedge fund would also invest in the same unicorns as were backed by its VC funds. In a buoyant market, the stocks typically took off, as fellow Tiger cubs as well as other hedge funds bought into what became a growth-stock bubble. That way, a big winner in the venture-capital portfolio could become a big winner in the hedge-fund portfolio. “Everybody used to copy them,” says the fund manager with ties to the Tigers. “That’s why everybody’s in the trades with them. That’s why everyone started doing dumb shit, like buying stocks at 30 times sales.””
Losses on Private Equity deal debt - ding ding ding, another ring of the bell for danger in the under-capitalised and over-levered private markets….
“Investment bankers in the US and Europe are bracing for potentially billions of dollars in total losses on big-ticket leveraged buyouts as they struggle to offload risky corporate debt that’s plunging in value amid a sweeping market selloff”
Podcast Interview with Marc Andreeson - Andreeson as in Andreeson Horowitz, one of the most successful and powerful VCs in Silicon Valley. Interview with polymath Tyler Cowen, recommend pretty much everything he does, including Conversations With Tyler. Lots of interesting points, but the below hitting on something I’ve been thinking about for a few years now, especially in light of crazy high house prices
“Second is this whole idea of the nuclear family being detached from the extended family, again, because of the need for young people to move for economic opportunity. Should the home really be two parents and a couple of kids? Or should the home really be, again, a back to the future thing? Should it be three or four generations of people and a lot of cousins and aunts and uncles, and then a lot of kids running around?”
Using Data for Diversity - Fortune article by Harvard professor Roland Fryer, arguing for a more evidence-based approach to corporate initiatives to reduce gender and race based inequality
“This is the key step that is missing in every DEI initiative I have seen in the past 25 years: a rigorous, data-driven assessment of root causes that drives the search for effective solutions. In other aspects of life, we would not fathom prescribing a treatment without knowing the underlying cause. Hiding information on resumes when information bias is present is as effective as using alcohol baths to treat fever”
The Fringe Benefits of Failure, and The Importance of Imagination - Harvard commencement speech by J.K. Rowling from 2008. Worthwhile, written or just listening to the speech
“rock bottom became the solid foundation on which I rebuilt my life”
Podcast interview with Jim Weber - Jim is the longtime CEO of Brooks Running, a Berkshire Hathaway-owned manufacturer of specialist running shoes. He’s an all-round awesome guy, it’s a great story and a hugely entertaining listen. In my 5k route, there is a beast of a hill that I hate going up. I was listening to this interview when running this week, and was so engrossed that I didn’t even notice the hill. That good. Recommended
“In our sport, unlike basketball, everybody knows - all the kids especially know - what Steph Curry plays in. Most people don't remember who won the Olympic Marathon and moreover what shoe they were wearing…One person breaks the tape. Forty thousand people run the New York Marathon. We'll take the 39,999 that want to have their best day”
Panmure House - New memo from Howard Marks, a transcript of a converation he had at Edinburgh University’s Panmure House. Interesting throughout
“Most people think being a skeptic consists of dealing with excessive optimism by saying “that’s too good to be true”. But when it’s pessimism that’s excessive, being a skeptic means saying, “That’s too bad to be true””
Lindy - do you know the Lindy principle? Find out…
Even experts can’t see Gorillas - recreating the classic basketball-bounce-count experiment in medicine. The results are, ahem, not good
“We asked 24 radiologists to perform a familiar lung nodule detection task. A gorilla, 48 times larger than the average nodule, was inserted in the last case. 83% of radiologists did not see the gorilla. Eye-tracking revealed that the majority of the those who missed the gorilla looked directly at the location of the gorilla. Even expert searchers, operating in their domain of expertise, are vulnerable to inattentional blindness”
Wall St. Math Hustle - refreshing (if a little old) Institutional Investor article on the (mis)use of maths by investment managers trying to do what they do best: raise money into average funds
“By definition, a portfolio that has components that diversify each other will have a portfolio variance below the weighted average of the individual stocks within it. But hang on a minute: To the extent that this difference is large, an investor has put together securities that are intrinsically different from each other — but it doesn’t necessarily mean it’s more diversified than the market-cap-weighted portfolio. Betting on both red and black at the same time in roulette delivers a mammoth diversification ratio. It’s also stupid”
Coal from South Africa - Europe replacing Russian coal with South African supply; expect energy prices to keep. going. up.
“Between January and May of this year, roughly 40% more tons of coal have been exported to Europe from South Africa’s Richards Bay Coal Terminal (RBCT) than were exported in all of 2021”