A Few Things: The Retail Rally, The Other Bull Market, The Gender Divide, 49 Changes For Healthier Happier Life, Rory Sutherland, Quantum Computing, News & Charts You Might Have Missed....
January 26 2024
I am sharing this weekly email with you because I count you in the group of people I learn from and enjoy being around.
Here is last week’s discussion: Live Longer Feel Better, Tail End, Hedonic Escalator, Living Fuller Lives, Yuval Hariri on the Future, Ghattas On the Middle East, AI Industry Structure, War On The West, Entertainment….
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Quotes I Am Thinking About:
"The way I see it, if you want the rainbow, you gotta put up with the rain.”
- Dolly Parton
“The question isn’t who’s going to let me, it’s who’s going to stop me.”
- Ayn Rand
“Information generally follows the well-known 80/20 rule: the first 80 percent of the available information is gathered in the first 20 percent of the time spent. The value of in-depth fundamental analysis is subject to diminishing marginal returns. Most investors strive fruitlessly for certainty and precision, avoiding situations in which information is difficult to obtain. Yet high uncertainty is frequently accompanied by low prices. By the time the uncertainty is resolved, prices are likely to have risen.”
- Seth Klarman
A. A Few Things Worth Checking Out:
1. Two interesting pieces by Gavekal this week, worth highlighting.
First one titled - Retail Rally
Two key points:
Retail investors now hold a larger share of the US stock market (41% of market capitalization) than in recent decades, due to easier access to information and trading platforms as well as extra savings from COVID stimulus checks. This has implications for market performance.
Retail investors tend to be concentrated in familiar mega-cap names rather than broadly diversified. This helps explain the outperformance of mega-cap stocks and the cap-weighted S&P 500 index over the equally-weighted index.
Final paragraph:
Second one titled - The Other Bull Market:
Japan's stock market rally looks more broad-based and sustainable than the US rally. While the MSCI US index is up 21.1% over the past year, the median US stock is only up 8%. In contrast, the MSCI Japan index is up 16.7% but the median Japanese stock is up 35%.
Inflation has returned to Japan after many years of deflation. This is helping restore pricing power and profit margins for Japanese corporations. Corporate governance reforms are starting to positively impact Japanese companies, with more focus on shareholder returns through buybacks and dividends.
A new class of domestic buyers (Japanese households) is expected to invest over $180 billion into equities over the next 5 years. This should offset any potential outflows of foreign capital.
2. If you’d like to double click on Japan (amongst other things), Steve Clapham spoke to the always interesting Grant Williams in an episode titled: The Japanophile.
Grant made the following points:
Japanese institutions may start repatriating funds back to Japan if interest rates go up there, making the yen more attractive. This could lead to the yen strengthening significantly from current levels against the US dollar.
Corporate Japan has gone through a quiet revolution, improving balance sheets, dividends, buybacks etc. This makes Japanese equities more attractive for investors.
Sentiment and positioning around the yen is very negative and presents an asymmetric opportunity if the Bank of Japan moves towards normalizing interest rates. Even small positive interest rates would send a powerful signal.
The Bank of Japan tapering its bond purchases could also lead to a reversal in capital flows back to Japan. This could help alleviate concerns around their large debt holdings.Increased inflation gives the Bank of Japan room to normalize rates. This would benefit Japanese financials significantly.
Demographic headwinds are offset by very low investor expectations and high pessimism around Japan currently. This sets up opportunities in Japanese equities.
3. The FT had an interesting piece titled: A new global gender divide is emerging.
It argues that a growing ideological and political divide is emerging between young men and women globally. In countries across continents, young women are becoming more progressive and liberal, while young men are shifting conservative.
This gap first opened up with the #MeToo movement, which empowered young women to speak out against gender inequalities. But it has now extended to broader political issues like immigration and racial justice.
The divide is starkest in South Korea, where there is a yawning chasm between young women backing liberal parties and young men swinging to the hard right. This correlates with plummeting marriage and birth rates.
The attitudes gap is self-perpetuating and growing over time across issues. Young women continue shifting left, while men stand still or actively move right.
Smartphones and social media exacerbate this by allowing young men and women to inhabit separate online spaces and cultures. This matters because young people's formative political experiences shape their lifelong ideologies. The divide could therefore impact societies for generations through changing values, priorities, and voting patterns.
4. The Sunday Times had a useful article: 49 small changes for a healthier and happier life.
Some of the ones I hadn’t heard before:
Focus on five food categories to get the nutrients you need. These are spices (turmeric, ginger, garlic and cinnamon are my top picks); brassica vegetables (such as broccoli); greens; root vegetables; and plenty of herbs (such as parsley, coriander, basil, oregano, sage and rosemary). These foods are chock full of a combination of antioxidants and inflammation-reducing compounds, and provide fibre to feed your gut microbiome.
Eat 2-5 portions of fermented foods every day for better gut health. If I had to suggest just one thing, it would be to increase your intake of fermented foods. This includes products like kefir, kombucha, kimchi, natural yoghurt and sauerkraut. Evidence is mounting that eating more fermented foods is linked to a healthy gut microbiome, which is associated with good overall health. So eating 2–5 portions every day is good.
Know how to check your skin for signs of skin cancer. The British Association of Dermatologists (bad.org.uk) has useful resources for how to do a full skin check on yourself. Anything asymmetrical, anything with irregular pigmentation or darkening, anything growing fast or changing should be checked out.
Do planks 3-4 times a week for healthier joints. Making planks a regular part of your routine is hugely beneficial for improving healthy joints. Do a variety of planks —basic and rotation, or with arm and leg raises — 3-4 times a week for stronger joints throughout the body.
Move around every 20 minutes to protect your back. Holding any position for more than about 20 minutes is bad news for your back. Movement not only helps to avoid excessive loading on any specific structures, but also helps to prevent the core muscle and connective tissues from becoming either elongated or shortened.
5. Chris Williamson at Modern Wisdom spoke with the always entertaining Rory Sutherland about the Hidden Psychology of the World’s Best Advertising.
Two Key Insights from Rory to give you a flavour for the conversation:
Online dating sites and graduate recruitment often use proxies like photos, grades etc. to make decisions, but these are imperfect measures of who would make a good long-term partner or employee. People tend to choose houses and partners very differently in the internet age compared to the past. The regimented decision making process online is less efficient at matching people than the "messier" offline methods.
Comedians like Andrew Schulz seem skilled at addressing sensitive topics like race by acknowledging differences and making light of them. This may be an effective way to defuse tensions. Taking an extremist stance to win arguments can be counterproductive for solving actual problems. A more open-minded, non-dogmatic approach is better suited to complex challenges.
B. The Science and Technology Section
1. Mark Zuckerberg says Meta wants to build AGI (artificial general intelligence) and open source it, brings Meta's AI group FAIR (Fundamental AI Research) closer to generative AI team to advance AI toward more human-like intelligence.
Future plans for AI will also require it to build a "massive compute infrastructure.”
Highlighting Meta's investments in AI, he said that the company expects to end this year with 350k Nvidia H100 GPUs. These graphics cards used for AI training and inference reportedly cost around $30k apiece, amounting to billions of dollars. Including other non-Nvidia GPUs, Meta's compute infrastructure will reach ~600k GPUs.
2. Everyone is talking about AI, but maybe something else will be bigger - Quantum.
Good short (13mins) introduction from the show 60 Minutes:
C. News and Charts You Might Have Missed
1. A survey found that 41% of Americans reported that they’ve become “more spiritual” over the course of their lives, vs 13% who said they have become less spiritual in general.
That’s a different thing than being religious, in fact; only 24% of respondents claim they have become more religious over the course of their lives, while 33% said they’d become less religious.
2. Oppenheimer saw the most Oscar nominations, with 13, including Best Picture, Best Director, Best Actor (Cillian Murphy), Best Supporting Actress (Emily Blunt), and Best Supporting Actor (Robert Downey, Jr.).
Poor Things took the 2nd most nominations with 11, while Killers of the Flower Moon received 10, and Barbie received 8.
Jimmy Kimmel will host this year's show on March 10. Netflix led with 18 nominations, the most of any major film studio. The streamer's biographical drama "Maestro" received 7 nominations, including Best Picture. Apple scored 13 nods this year, for the films "Killers of the Flower Moon" and "Napoleon."
3. This surprised me about Chinese Equities.
Believe it or not, that “♡ Like” button is a big deal – it serves as a proxy to new visitors of this publication’s value. If you got value out of reading, please let others know!
Re-watched this last weekend, had forgotten how great it is:
Great insights on a variety of subjects. I always find myself heading down a few rabbit holes after reading this !!