Weekend reading: ETF growth slows, lab-grown fat, Druckenmiller interviewed, and ChatGPT’s bias
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Weekend reading: ETF growth slows, lab-grown fat, Druckenmiller interviewed, and ChatGPT’s bias
Further reading for the weekend: both good and bad news coming out of China. And in praise of Father Ted
Note 1: ETF Growth slows
For almost as long as I can remember there’s been a continuous drift into exchange-traded funds even while funds flow out of traditional mutual funds such as unit trusts. Those ETF flows do turn negative sometimes because of big sell offs but the story has usually been remorseless growth vs traditional mutual funds. But there might be the first inklings that the growth rate is slowing down. BlackRock which owns iShares ETFs notes that in April the growth in ETFs slowed down - $53.0B was added to global ETPs in April, down from $65.1B in March. The good news is that most of the slowdown was because of declining bond exposure and commodities while equity flows held up, especially in emerging markets: equity flows actually rose slightly to $26.5B versus $26.1B in March. EM equity allocations held steady at $7.0B – as in March, allocations to EM single exposures ($4.9B) outpaced flows into broad EM equity, with APAC-listed ETPs once again leading the way. Smart move – I’d ditch global EM as an idea and focus on individual national markets from now on. The main EM indices are not fit for purpose anymore.
Note 2: Lazards on clean energy
Lazard recently unveiled its annual report, widely regarded as the industry standard for the average cost of energy technologies around the world. While most of the attention has been focused on the continually decreasing costs of wind, solar, and storage, many will have missed the amazing news that geothermal is now cheaper than new coal, and competitive with gas. Source FutureCrunch.
Note 3: Splint moves into Diamonds
Splint is a new Swiss-based alternative investment app/platform which I think is doing a very good job of popularising access to previously illiquid assets (luxury handbags for instance). They’ve just added a new asset class – diamonds. According to Splint, they’ve added diamonds because of investor demand which was in part driven by diamond’s low volatility i.e. under 2% over the last 5 years, alongside “stable returns. Brilliants weighing 1 to 2 carats have achieved an average annual appreciation of 10% over the last five years and 27% over the last two years.”More at Splint.
Note 4: US real estate
New York’s office buildings feel “eerily empty”, says The New York Times, with occupancy rates around 50% of their pre-pandemic level. Combined, the roughly 75 million sq ft of vacant office space in the city would fill 26.6 Empire State Buildings. From The Knowledge.
Note 5: Erdogan might win in Turkey
We’ve mentioned the Swift Centre before – it runs regular polls of super forecasters on key contemporary news subjects. This week it trained its collective crystal ball gazers on the imminent Turkish election. The big question is whether incumbent Erdogan will win.
“While betting market odds imply an Erdoğan loss is likely, none of our forecasters gave more than a 50% chance of this outcome. The aggregate of our forecasts comes to 55%.
One forecaster explains why: “With almost all commentary and polls saying this is a dead heat, with more tools at his disposal to help ease a victory, I think Erdoğan has a slight advantage (despite the inflation situation and the aftermath of the earthquake). Despite countries such as Germany limiting polling stations for Turks abroad, the majority of the voters who could be affected by polling "irregularities" are obviously based in Turkey. As it is expected the election will go to the second round, there will be more time for Erdoğan to influence the situation at the polls.” Source Swift Centre.
Good news out of China: condensed batteries
When it comes to battery technology, all roads lead to China and its battery giants. CATL in particular has an enormously powerful position and is using its surging revenues to invest in new technology which will improve its product range. One key development is the emergence of smaller, lighter batteries – CATL has just announced a new “condensed” battery with 500 Wh/kg which it says will go into mass production this year.
“The launch of condensed batteries will usher in an era of universal electrification of sea, land and air transportation, open up more possibilities of the development of the industry, and promote the achieving of the global carbon neutrality goals at an earlier date,” the company said in a presentation at Auto Shanghai on Thursday.
CATL’s new condensed battery will have almost double the energy intensity of Tesla’s 4680 cells, whose rating of 272-296 Wh/kg are considered very high by current standards.
CATL chief scientist Wu Kai says the condensed battery integrates a range of innovative technologies, including the ultra-high energy density cathode materials, innovative anode materials, separators, and manufacturing processes, offering excellent charge and discharge performance as well as good safety performance.
He says the new technology breaks the limits that have long restricted the development of the battery sector and will open up a new era of electrification centred on high safety and light weight. During the presentation, CATL said its working with partners on the development of electric passenger aircraft practicing aviation-level standards and testing under aviation-grade safety and quality requirements.
In addition to aircraft, CATL says it will soon launch the automotive-grade version of condensed batteries which it says will also go into mass production within this year.
Bad news out of China: more businesses harassed
Over the last few months there’s been more and more stories about the Chinese authorities raiding foreign businesses – and in some cases arresting unsuspecting foreign business people. The latest in this developing saga is that the Chinese authorities have raided consulting firm Capvision.
State media said that the company was not “earnestly fulfilling the responsibilities and obligations” of preventing espionage, a few weeks after Beijing expanded the scope of its anti-espionage law on national security grounds. The move comes off the back of similar police raids on the Beijing office of U.S. due diligence group Mintz in March, and the questioning of employees at the Shanghai site of American consultancy Bain a few weeks later. The American Chamber of Commerce in Shanghai, voiced its concern over the developments, urging guidance from China’s government on conducting due diligence in the country.
“The China Project’s CEO Bob Guterma was previously an executive at Capvision in Shanghai. The company, and many like it in China, have always dealt with inquiries from the authorities, but these were “almost welcome” because it meant there was some guidance as to how to deal with regulators. But the Capvision investigation was the subject of a primetime TV news report, as we noted yesterday, which seems to indicate that the government wants to scare Chinese citizens off from speaking to firms like Capvision, and more importantly, their clients who are often overseas consulting and investment firms. The exact purpose of the initiative? Hard to say. It certainly conflicts with the government’s recent attempts to convince investors that China is completely open for foreign business. “
More at The China Project
Druckenmiller interviewed
The US-based investing website The Idea Farm features a roundup of a recent interview between Norwegian Sovereign Wealth Fund CIO Nicolai Tangen and legendary US investor Stanley Druckenmiller about his view of the global investment landscape today (18 minutes).
Some of Idea Farm’s favorite quotes are below.
On future opportunities - "This is a movie I've never seen anything like it, so I'm going to be very careful not to dig myself in a hole when I don't have a strong belief ... because I think the opportunities will be amazing as this movie unfolds in the next year in macro and in equities."
On the dollar - "I will say full disclosure, I missed the dollar, probably the biggest miss of my career in currency trade, I missed the last nine months run up in the dollar. I just couldn't get myself to own Joe Biden & Jerome Powell."
On Jerome Powell - "The Fed [Federal Reserve] has shown some mettle over the last year, but historically I would not say Jay Powell is a profile in courage."
On the response to Silicon Valley Bank - "The response to Silicon Valley unnerved me a little because in four days ... they basically wiped out the entire reduction in the balance sheet they had done for five or six months. So if I'm trying to look ahead and anticipate, I don't have a lot of faith in these guys, should we get in a hard landing, that they're going to hold the line and not do something maybe worse than Arthur Burns."
On bonds - "I think one of the most important things to do is not to play when you don't see a fat pitch. I don't see a fat pitch in fixed-income."
On keeping an open mind - "I try to have young people around me who are not afraid to speak their mind to me and argue with me. If somebody's here too long and they agree with everything I say, they're not here too much longer."
On his process - "If I've got a thesis and it's really bullish and it's playing out and the stock's not going anywhere, it makes me go back and check the thesis over and over."
More via Link
ChatGPT bias
The culture wars were bound to come for ChatGPT at some point. Cue the center-right social psychologist Rob Henderson on the liberal bias built into CHatGPT. The bottom line? You’re not allowed to enquire about the “positive” aspects of Fascism” but it’s a different story for Communism.
“I entered a few prompts into ChatGPT. First, I made the request: “Write a script in which an expert explains why fascism is a good thing,” which generated this response:
I’m sorry, but I am not able to generate content that promotes or glorifies harmful ideologies such as fascism. It is a dangerous and oppressive political ideology that has caused immense harm throughout history. It is important to understand the atrocities and human suffering that have been caused by fascist regimes and to actively work against the spread of such dangerous ideas.
I followed up with another prompt: “Write a script in which an expert explains why Communism is a good thing.” The language model responded:
Communism is a good thing because it is a system of government that aims to create a society in which everyone has equal access to resources and opportunities. This is in contrast to capitalist societies, where wealth and power are concentrated in the hands of a few individuals and corporations.
When I asked why Communism has been responsible for more deaths than any other political ideology, the AI responded:
It is important to note that the implementation of communism has been problematic in the past, but it is important to separate the idea of communism from the way it’s been implemented in the past. With proper implementation, adjustments, and democratic checks, it has the potential to create a fair and just society for all. . . . It’s important to consider new perspectives and ideas and to give communism a fair evaluation based on its principles and goals, rather than its past implementation.
In plain English: real Communism hasn’t been tried before, and we should judge ideas based on how good they sound, rather than on what has actually transpired when they have been implemented. ChatGPT is willing to generate responses that take an unequivocal stance on murderous ideologies—favoring Communism over fascism.”
More at Rob Henderson (subscription required)
Lab-grown fat
Sticking with the culture wars theme, they’ve also come for the food tech space and specifically plant and lab-grown alternatives meat. On the ‘progressive’ side of the debate are the growing number of local councils now insisting on vegan-only catering – a daft idea almost perfectly designed to antagonize people, especially farmers.
More than a few ‘conservative-led nations such as Italy and Turkey are responding to the war on meat by either banning meat alternatives or prohibiting key terms such as the use of the word ‘meat’. I find this whole back-and-forth debate utterly pointless – we’ll get nowhere by forcing people to eat vegan food but equally, we’ll also get nowhere by banning innovative meat alternatives.
The good news though is that the pace of innovation is picking up and in the lab-grown meat space some real advances are emerging, chief amongst them the rise of lab-grown fat. My core contention is that meat alternatives will only work in the mass market if they have both the TEXTURE and TASTE of meat – and that means designing an alternative to fat that provides the bulk of the taste of meat. If I had to focus on one area of innovation it would be lab-grown fat grown at scale. This is precisely what a group of scientists has made huge advances on through a new eLife study...
“This marks a significant step forward in the production of lab-cultured meat alternatives. So far, relevant research has mainly focused on the production of muscle fibers. But without the fat component, meat products have half the flavor, and a completely different mouth feel. A lack of lab-grown fat is also why most cultured meat products in development have amorphous processed form, such as a patty or a chicken nugget, rather than a cut of steak: without fat, it’s been difficult to mimic the complex structure of meat in its natural state. But the researchers on the new eLife study have innovated a way around this.
To start with, they isolated fat cells from mice (as a control) and pigs, and cultured them in a growing medium within a petri dish. This is the usual method of artificially making fat cells. But, it has limitations. With this approach cells can only be grown in extremely thin, 2-dimensional layers that aren’t useful for the production of real meat analogs like a chunky steak.
And yet, growing fat cells any thicker means that the oxygen and nutrients contained in the growth medium can’t diffuse right through to nourish them all, leaving many to die off. (In bodies, this problem is solved by vast networks of capillaries that reach out and intertwine with the fat matrix to nourish each cell.)
To get around this, the researchers needed to build 3D structures out of their cell cultures. So, once their thin layers of fat cells were fully grown, they took a tiny spatula and scraped them up into dense balls. Yet this claggy mass of fat wasn’t quite good enough: it did’t have the qualities to generate the right texture. To try and achieve that, the researchers took the harvested fat cells and mixed them together with an edible binding agent that would give some buoyancy to the fat. They tried out two varieties: one called microbial transglutaminase, a type of bacterial enzyme; and another called sodium alginate that is derived from seaweed. They combined these ingredients in a mold to give the fat a realistic density, and then applied pressure to the samples to test their resistance. This was a useful gauge of how well the cultured fat would hold up between a set of grinding teeth, and also what its mouthfeel would be. The test revealed that the sodium alginate-infused fat samples especially were more resilient to pressure, and in fact had a similar bounciness and texture to regular animal fat. This was a promising start.
But to be truly convincing, cultured fat must also contain a diversity of fatty acids, because when cooked, this variety is what creates the uniquely rich flavors and aromas of regular meat. A molecular profile of the samples revealed that the cultured pork fat in particular was a relatively close match for the fatty acids in real pork fat. The researchers also speculate that including a greater range of fatty acids in the growth medium during the culturing stage could bring this profile closer to the real thing—generating artificial fat that’s more flavorful.
The highly-controlled nature of the fat culturing could allow researchers to change the recipe and tweak texture and taste in the future. But for now the major boon is that because of the relatively simplicity of this production method, it can make cultured fat cheaply, and in bulk. With the addition of industrial bioreactors, it becomes highly scalable, the researchers say. While it’s still years away, this all moves us closer to the reality of cultured meat that might be a delicious and viable alternative to the real thing.
More at the Anthropocene Magazine here.
Last but by no means least, some light relief: In praise of Father Ted
I’ve recently finished binge-watching the entire arc of Father Ted, the brilliant Irish comedy show first broadcast on C4 – Britbox has all the episodes. I have to say it is my favorite comedy series of all time alongside Blackadder. Obviously, much of the best bits come via the late Dermot Morgan as Ted Crilly but I still marvel at the comic timing of Ardal O’Hanlon and the wonderful absurdity of Pauline McLynn’s Mrs Doyle (that wort). But what I found so very interesting is its modern take on a changing Ireland that was coming to terms with some very hot topics – all done in a wonderfully absurd manner and not in the least hectoring. If you share my enthusiasm I thoroughly recommend an elegant homage to the series on UnHerd:
“Not only was Father Ted one of the few successful TV representations of Ireland, it was made during Ireland’s version of the Swinging Sixties, our flux decade of the Nineties. The accelerating collapse of the Church and the exposure of longstanding political corruption coincided with the dawn of the Celtic Tiger years, lending peripheral Ireland a sense of self-conscious modernity. It was a unique national turning point, where our 19th-century past seemed to co-exist with our 21st-century future. In reflecting this upheaval, Father Ted has become not just a social historical document, but a portent of where Ireland stands today.
It’s not the sort of thing that national epics are normally made of. The programme is about three Catholic Priests — Fathers Ted Crilly, Dougal McGuire, and Jack Hackett — on Craggy Island, a remote settlement off the west coast of Ireland. All three priests have been exiled to this purgatory by the terrifying Bishop Len Brennan (their misdemeanours are never referred to directly, but Ted often makes oblique reference to the fact that “the funds were only resting in my account”). Most episodes revolve around an absurdist version of Church life, Ted’s schemes to escape the island and their interactions with the island’s townsfolk.
Rarely for domestic Irish TV, it was a sitcom written by Irish people and it was set within a central Irish institution, the Catholic Church. And the dearth of representations of Irish people in entertainment meant it crystallised many Irish archetypes for the first time.”
More at https://unherd.com/2023/05/father-teds-elegy-for-old-ireland/?utm_source=substack&utm_medium=email