A Few Things: China vs US, FED Trading Scandal, The Energy Crisis, Bruce Lee's Wisdom and What Are Family Offices Thinking
October 3, 2021
“The most important decision you make is to be in a good mood.”
“We have a terrible fear that if we stop for a moment we will miss something. The exact opposite is true.”
- English journalist Simon Barnes
“A man should never be ashamed to own that he has been in the wrong, which is but saying, in other words, that he is wiser today than he was yesterday.”
- John Maynard Keynes
“People demand freedom of speech to make up for the freedom of thought which they avoid.”
- Søren Kierkegaard
A. A Few Things Worth Checking Out
1. Fascinating All-In podcast with Chamath, Jason Calacanis, David Sacks and David Friedberg with Balaji Srinivasan discussing the role of de-centralization and China/US breakdown. The really interesting stuff starts 16mins in: comparing and contrasting the US and China's future outlook.
The most fascinating thing about listening to this is seeing the Silicon Valley narrative around China changing quickly. It comes with a lot of self flagellation about every one missing the rise of China and what China could do to us. These guys sound defeated.
2. Have you been watching the FED insider trading scandal, leading to the resignation of Richard Clarida and Robert Kaplan?
This article argues that Jerome Powell is finished.
The insider trading scandal at the Fed is going to trigger a bank run on Powell’s political prospects. Already, the prediction markets are starting to sniff this out. The chart below from PredictIt shows the betting odds that Powell gets another term. We don’t give investment advice here at Doomberg, nor are we experts in technical analysis, but that chart sure doesn’t look healthy to us. And for good reason.
3. China Orders Top Energy Firms to Secure Supplies at All Costs. We could have a tough winter ahead. Will inflation be transitory or permanent?
China’s central government officials ordered the country’s top state-owned energy companies -- from coal to electricity and oil -- to secure supplies for this winter at all costs, according to people familiar with the matter.
The order came directly from Vice Premier Han Zheng, who supervises the nation’s energy sector and industrial production, and was delivered during an emergency meeting earlier this week with officials from Beijing’s state-owned assets regulator and economic planning agency, the people said, asking not to be named discussing a private matter. Blackouts won’t be tolerated, the people said.
4. This NYT article discusses a new FED paper on how little we actually know about how the economy works.
All of this makes it a challenging time for central bankers and other shapers of policy. “If you’re a policymaker and you don’t have robust confidence in the parameters of the game you are managing, it makes your job a whole lot more difficult,” Mr. McCulley said.
But if you are in charge of making economic policy that affects the lives of millions, you can’t simply shrug your shoulders and say, “We don’t know how the world works, so what are we supposed to do?” You look at the evidence available, and make the best judgment you can.
And then, if you think it turns out you were wrong about something, publish a sassy paper to try to get it right.
5. Matt Ridley on the Roots of The Energy Crisis: “This current crisis is a mere harbinger of the candle-lit future that awaits us if we do not change course”.
6. Prof. Galloway had a thoughtful article on the emerging crises among young men in America.
While men enjoy numerous inherent and societal advantages — from deeper voices to private clubs — there are actually significant obstacles facing boys. It starts early, with small differences. For example, 80% of kindergartener parents expect their girls to attend college, while 77% of parents expect their boys to. But such small differences expand over time. The disparity in parental expectations grows by 10 percentage points by fifth grade. Boys act out more than girls and face harsher discipline, especially in single-parent homes, where boys are 13 percentage points more likely than girls to have been spanked in the past week. Overall, 1 in 4 boys experience at least one school suspension in the eighth grade, compared to 1 in 10 girls. School suspension is predictive of college attendance and college completion, and boys, normalized for behavior, are twice as likely to be suspended. (Black students are also more likely to be disciplined, and black boys face even greater disparities.) Finally, in the nation with the world’s highest incarceration rate, men are imprisoned at 14 times the rate of women. And 70% of prisoners didn’t complete high school.
7. Thinking better: The Art of the Shortcut by Prof. Marcus du Sautoy.
Finished reading this great little book last week. It’s filled with different tricks, shortcuts, heuristics that mathematics can teach us. It’s a history, creativity and maths lesson rolled into one.
It’s a hard one to summarise, so check out this 19 min video of Prof. du Sautoy discussing Shortcuts.
8. The SALT conference was in NY, in early October, they had panels on everything from Longevity, The world in 2050, Crypto and Sustainable Infrastructure Investing.
B. What Are Family Offices Thinking About
We organised a round table with a few Family Office CIOs last week to discuss what was top of mind and what they were doing about it.
We had CIOs joining from Dallas to Munich.
Here are the 3 big takeaways:
1. Inflation is a concern - what if it's not transitory? How do you position a multi-asset portfolio for a world of rising inflation and interest rates. It's definitely not a traditional 60/40 portfolio.
A number of CIOs looking for "Alt alts" - strategies that can provide uncorrelated returns in the portfolio.
2. Do Commodities belong in the portfolio - whether due to inflation or just years of underinvestment, we could see rising commodity prices across the complex. How does one take advantage of that and what are the right commodities to be long? Crypto currencies, Gold, Oil Futures and Commodity Indices are all part of this conversation.
3. What are expected returns across asset markets going forward. This is a perennial issue. Multiples continue to go higher and rates are anchored lower. What returns should one expect in the decade ahead across asset markets? Are double digit returns even possible in a multi-asset portfolio. Most are anchoring to 6-8% real returns across their portfolios.
What do you expect from markets in the next decade and what are you doing about inflation?
C. Bruce Lee’s Wisdom for Daily Living
Bruce Lee is a fascinating person and he had a big impact on my child hood.
A friend had recommended his book: Striking Thoughts, which is a collection of 825 aphorisms.
Here are some that spoke to me:
If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them.
Emptiness the starting point. — In order to taste my cup of water you must first empty your cup. My friend, drop all your preconceived and fixed ideas and be neutral. Do you know why this cup is useful? Because it is empty.
Because one does not want to be disturbed, to be made uncertain, he establishes a pattern of conduct, of thought, a pattern of relationship to man etc. Then he becomes a slave to the patter and takes the pattern to be the real thing.
Organised institutes produce prisoners of concepts. I no longer am interested in systems or organisations. Organised institutes tend to produce patternised prisoners of a systematised concept, and the instructors are often fixed in a routine. Of course what is worse is that by imposing the members to fit a lifeless preformation, their natural growth is blocked.
A choice method imprisons the mind. A choice method, however exacting, fixes the mind in a pattern. A choice method is the cultivation of resistance, and where there is resistance there is no understanding. A well-disciplined mind is not a free mind. Any technique, however worthy and desirable, becomes a disease when the mind is obsessed with it.
The need to progress - Do not hold on to what you have. It is like a ferry boat for people who want to get across waters. Once you have got across, never bear it on your back. You should head forward.
D. The Tech and Crypto Section:
1. This could go down as the seminal piece on Bitcoin and DeFi. “Only The Strong Survive: A Philosophical, Technical, and Economic Critique of Prospects in “Crypto” Beyond Bitcoin”
Written by a PM at Ballie Gifford and a US HF, they discuss the core properties that make Bitcoin work, and that these properties are lacking in alternative “crypto assets”. They discuss their concerns that “crypto” has not shown a path to establishing a basis for justifiable real-world value.
In the end, they conclude that Bitcoin is the only real asset given Proof-of-Work (PoW) and that a Bitcoin “Stack” is coming.
This video mentioned in the document is worth a watch on what the future of development looks like on Bitcoin.
2. Meltem is one of my favourite Crypto people and she was on Twitch TV discussing the Good, Bad and Ugly of Crypto (video starts at 4:15).
3. Kyle Samani of Multi-Coin Capital was on Business Breakdowns discussing Solana.
4. Rodney Brooks, the creator of the Roomba, throws cold water on the idea that AI will surpass human intelligence in the near future.
“The choice you can make is to stop believing you’ll ever solve the challenge of busyness by cramming more in, because that just makes matters worse. And once you stop investing in the idea that you might one day achieve peace of mind that way, it becomes easier to find peace of mind in the present, in the midst of overwhelming demands, because you’re no longer making your peace of mind dependent on dealing with all the demands. Once you stop believing that it might somehow be possible to avoid hard choices about time, it gets easier to make better ones. You begin to grasp that when there’s too much to do, and there always will be, the only route to psychological freedom is to let go of the limit-denying fantasy of getting it all done and instead to focus on doing a few things that count.”
- Oliver Burkeman (“Four Thousand Weeks”)
“As I’ve gotten older...I could not help but notice the effect on people of the stories they told about themselves. If you listen to people—if you just sit and listen—you’ll find that there are patterns in the way they talk about themselves.
There’s the kind of person who’s always the victim in any story that they tell—always on the receiving end of some injustice. There’s the person who’s always kind of the hero in every story they tell. The smart person—they deliver the clever put down. There are lots of versions of this. And you gotta be very careful about how you tell these stories because it starts to become you.
You are, in the way you craft your narrative, kind of crafting your character. And so, I did at some point decide: I am going to adopt self-consciously as my narrative that I’m the happiest person anybody knows. And it is amazing how happy-inducing it is.”
- Michael Lewis
Have a great week.