Each Sunday I compose a list containing the most thought-provoking and interesting content I’ve consumed during the past week. Primarily as a way to keep inventory of material that influenced me and my way of thinking.
Papers/Notes
First Quarter 2022 Investor Letter by Third Point.
”Even after dramatic declines, it is difficult to call a bottom in the high-growth, high-valuation end of the tech sector, especially given that many of these companies relied on stock-based compensation and controversial accounting and reporting techniques. It appears that many of the companies Page 3 which used this type of compensation to attract employees may have retention difficulties, leading to increased dilution for future stock grants or increased cash wages, which could weigh on margins for analysts who rely on adjusted measures rather than old-fashioned GAAP. We fear Soros’s theory of reflexivity will come into play should such a spiral ensue.”
This line of thinking as it relates to GAAP vs non-GAAP is second by Fred Hickey in this week’s episode of Superinvestors and the Art of Worldly Wisdom.
Writings/Essays
The Modern World Can’t Exist Without These Four Ingredients. They All Require Fossil Fuels by Vaclav Smil.
”Four materials rank highest on the scale of necessity, forming what I have called the four pillars of modern civilization: cement, steel, plastics, and ammonia are needed in larger quantities than are other essential inputs. The world now produces annually about 4.5 billion tons of cement, 1.8 billion tons of steel, nearly 400 million tons of plastics, and 180 million tons of ammonia. But it is ammonia that deserves the top position as our most important material: its synthesis is the basis of all nitrogen fertilizers, and without their applications it would be impossible to feed, at current levels, nearly half of today’s nearly 8 billion people.”
What If? by Alfonso Peccatiello.
”Policymakers’ reaction function to higher or lower inflation expectations tends to be mostly linear, but it could quickly becomes convex once you approach certain ‘unacceptable’ thresholds: the bond and the inflation swap markets are pricing a low probability of such non-linear reaction functions at this stage, but the ‘what if’ question remains an important one to monitor.”
Fun trade with an asymmetric payoff in the event inflation expectations become unanchored and Fed Funds rates continuous to get upwardly adjusted. Jim Leitner expressed a similar idea during this week’s Market Huddle. A couple of week’s ago Mike Green took the other side of this bet and expressed a trade idea which would payoff handsomely in the event of lower Fed Funds rates at year-end than is currently priced.
The Gamma of Levered ETFs by Kris Abdelmessih.
‘An Outstanding Film Director and a Good European’: An Interview with Max Ophüls by Francis Koval.
Podcasts/Conversations
The Dark Side of Renewable Energy with Adam Rozencwajg, Top Traders Unplugged.
Jim Downey, Fly on the Wall with Dana Carvey and David Spade.
Judea Pearl on Cause and Effect, Sean Carroll’s Mindscape.
Long vol, short prediction models 