Bill Gurley’s September 2023 talk “2,851 Miles.” is a very interesting read on this very important topic in economics and investing.
As a rule, regulation is acquired by the industry and is designed and operated primarily for its benefit.” I like to say, “Regulation is the friend of the incumbent.”
As markets look to peak policy rates and beyond, this newsletter has been a really useful one-stop shop to get a detailed overview of central bank action and markets.
For example the declining Clevland Fed nowcast of inflation (source).
The latest 2023 report is worth a flick (all 160 slides).
This graph, for example, shows the largest Nvidia H100 chip clusters – interesting to see TSLA there, who also run the 4th largest A100 cluster in the world.
Or see Slide 76 which suggests that Nvidia’s advantage (the use of its chips in academic papers) continues to increase.
Investment managers that carry large short positions in equity securities will be required, within two weeks after each month, to report those positions and related short sale activity to the Commission. The threshold for reporting will be met when an investment manager’s short position in a particular equity security of a reporting issuer is at least $10 million or the equivalent of 2.5 percent or more of the total shares outstanding on average during a month.
Based upon the filings to the Commission, the Commission will make public, within four weeks after the end of each month, aggregated, anonymized data about the gross, end-of-month large short positions. The Commission also will publish the net aggregated daily activity data for each settlement day.
The UK (and EU) have good disclosures on shorts >0.5% of shares outstanding.
Borrowing by private equity firms at the fund level.
Ted Seides argues it is an end-of-cycle phenomenon.
“NAV loans strike me as a canary in the coal mine signaling the end of the private equity boom. According to Preqin, 645 firms have not raised a new vehicle since 2015. With interest rates higher and the fundraising environment tighter, credit is scarce. NAV loans feel like the “extend and pretend” activity we saw after the GFC. For every Vista NAV loan, there are probably ten used to cure the woes of a GP.”
Interview between Goldman Chair/CEO David Solomon and former CEO/Chair of Google on the future of Generative AI is worth a read.
“In general, the disruption occurs first in the industries that have the most amount of money and the least amount of regulation.”
Pairs nicely with this analysis of the latest batch of Y-combinator companies that are using AI/ML startups (139 in total!) and what areas they are working on.
“For the first time, China has overtaken the United States as the number one ranked country or territory for contributions to research articles published in the Nature Index group of high-quality natural-science journals.”
Interview with the military and grand strategy author – Edward Luttwak – thought-provoking throughout.
America’s power abroad, especially in Asia but increasingly with a resurgent Nato, is strong due to its alliances.
But this power is useless unless you have cohesion at home. There America is experiencing a cultural war.
Parallels with the Roman Empire are clear – “I think we could last another couple hundred years, but not much longer. For Rome, they had barbarian migrations and, of course, an ideological break that was fatal. Rome’s institutions were remarkable, and their concept of citizenship was something deep and profound, but the Romans were overwhelmed demographically.”
“The chart below shows the substantial amount of debt to roll over in the next 2 years with $127bn, or circa 12% of the market’s outstanding debt, being due for US HY companies. In Europe, maturity walls are even steeper, with €97bn of debt (23% of the index) maturing in 2024/2025. Add in 2026 maturities, and the refinancing wall shoots up to just to under 50% of the market. Historically speaking, this is likely to become the largest refinancing effort for HY issuers since the GFC (2008), and while some companies have already begun doing their homework, we expect it to become a key theme in 2024, particularly if base rates and borrowing costs remain elevated.”
Unlike GFC, as M&G points out, the situation is better – (1) new issuance is open (2) rates are lower despite the spike (3) quality is better.
