The Best Media Content I Consumed This Month (June 2023 Edition)
Here's a glimpse into the best podcasts, videos, articles, and books I consumed in June 2023.
Podcasts
1) Chris Joye - Cash is King (Inside the Rope)
This was the best podcast I’ve listened to so far in 2023 breaking down the current macroeconomic landscape. Chris Joye (CEO / CIO of Coolabah Capital) is one of the most articulate macro thinkers out there - we’re lucky he’s Aussie so most of his research is directed towards the AUS market! Some of my key takeaways from this interview:
Pauses during rate hiking cycles in AUS (like we saw recently when the RBA kept rates flat for a few months) are surprisingly common throughout history.
20% of household income during the COVID period was saved by AUS households (i.e., because they had nowhere to spend the money), which has been a big driver of demand for goods/services remaining high, despite the recent rate hikes.
He thinks inflation will remain elevated around the 3-5% range due to these above demand pressures (particularly for services).
His base case is that central banks will need to tip economies into a recession to get inflation under control (i.e., a hard landing).
He thinks both the stock market and residential/commercial property markets are “delusional” right now. It makes no sense to purchase a residential/commercial property that yields 3-4% right now when investors can easily achieve 4-5% yields in risk-free term deposits or high-quality corporate bonds.
Corporate defaults and insolvencies are still low in absolute terms but are the highest they have been since the GFC period (2009-2010).
Mortgage defaults for non-bank lenders have risen substantially over the past few months from 2% to 4% (non-bank lenders tend to offer the riskiest home loans to the riskiest borrowers and see distress before the bank lenders). Chris thinks this is a potential sign of pain to come in the traditional bank lenders.
He still expects a 15-25% drop in national house prices from the peak in 2022, primarily driven by a reduction in household borrowing capacity.
He believes commercial real estate (e.g., office buildings in the CBD) is a massive disaster right now and is on the verge of a major default cycle.
So, given the above, how does Chris think investors should position themselves?
Hold cash (provides optionality + downside protection).
Hold high-quality corporate bonds with low default risk (e.g., CBA senior bonds have a 6-6.5% yield right now).
Hold some fixed-rate government bonds as protection against a possible scenario where the economy falls into a recession and central banks cut rates, forcing interest rates to drop.
2) Matt Barrie - Why house prices are the cause of today’s cost of living crisis (Equity Mates)
On a similar note, Matt Barrie (CEO of Freelancer.com) had a fantastic episode on Equity Mates which delved into his bearish thesis for the AUS property market (music to my ears!). Some learnings:
The median house price to income ratio in AUS is 13x (anything above 3x is technically considered “unaffordable” by most socioeconomic measures).
Using this median house price to income ratio, Sydney has the 2nd most expensive housing market in the world (behind Hong Kong). Even ahead of LA, New York, London, Paris, etc.
Sydney house prices are up a whopping 86x over the past 61 years (seems absurd but only works out to a 7.6% CAGR in the end).
There are 3 main theories for why house prices continue to rise: (1) lack of housing supply, (2) net immigration increasing demand, and (3) favourable tax/policy incentives for home ownership (e.g., negative gearing, first home buyer grants, etc).
Of these 3 potential causes, Matt thinks net immigration is BY FAR the largest contributor to unsustainably high house prices (interestingly on gut feel, I would’ve put this factor last).
He quoted a statistic that the average household in Sydney would need to devote 62% of their income to service the average mortgage cost. This seems ridiculously high so would be great to verify? If so, that’s bonkers.
He believes property prices CANNOT feasibly continue to grow at the same rate as they have historically because mortgage payments as a % of income will simply become unsustainable to service for the vast majority of people (i.e., not enough people will earn enough to service the average mortgage).
3) Chris Sacca - Hustling to Save the Planet at Lowercarbon (Capital Allocators)
Chris Sacca is one of the all-time great VC investors and his 2010 seed fund at Lowercase Capital is regarded as one of the best performing VC funds ever (invested in Twitter, Stripe, Uber, Twilio, Instagram, etc). This was a fascinating interview delving into his childhood, how he lost $4m trading stocks with leverage during his postgraduate law degree, traits of founders of “unicorn” companies, how he generates unique deal flow, and his rationale for setting up a new climate-focused VC fund (Lowercarbon) at the height of his career.
YouTube
1) Druckenmiller on How AI is Dominating His Long Portfolio (Bloomberg Conference)
Another solid interview with the macro GOAT (Stan Druckenmiller). There wasn’t a ton of new information in this interview compared to his previous interviews, but I’ve summarised my main learnings anyway:
There is a massive fiscal gap between the amount of revenue the US government generates from taxes each year vs. the amount of entitlement benefits (e.g., pensions, medicare, etc) it has promised to US seniors in the future.
To meet all future promised entitlement benefits, the US government would need to either: (1) raise all taxes 40% in perpetuity or (2) cut all fiscal spending 36% in perpetuity.
He thinks the US government will almost certainly need to cut entitlement spending at some stage in the future (better to do it sooner than later).
US interest expenses on the national debt and entitlement expenses are expected to exceed all government revenue from taxes by 2040 based on public estimates (how is that sustainable!?).
His central case is still a hard landing for the US in late-2023.
He admitted that this is the most complicated macro situation he has seen in his whole career.
He expects to see lots of fat pitches (i.e., no-brainer investments) in the next 24 months, so recommends investors stay patient and hold some cash on the sidelines.
He is becoming more bullish on the Japanese market due to: (1) breaking the deflation cycle, (2) a greater focus on maximising shareholder value amongst companies and the government, and (3) a looser central bank relative to other developed economies.
2) Blackstone President Jon Gray’s 2023 Commencement Address
A super inspiring (but also surprisingly very humorous) commencement speech from Jon Gray, President of Blackstone Group.
My main takeaways were: (1) remain eternally curious, (2) appreciate the present moment, and (3) never take yourself too seriously.
3) Succession Intro But It’s Formula 1
A classic for those dual Succession + F1 fans out there (surely almost everyone by now!?).
BOOKS
1) So Good They Can’t Ignore You: Why Skills Trump Passion in the Quest for Work You Love
This is one of my all-time favourite books and one that had an immense impact on me when I read it for the first time at 18 (back in 2016). I would HIGHLY recommend it for all people wanting to become more purposeful about their career development. Some of the core messages of the book:
The “passion hypothesis” argues that the key to work happiness is to match one’s job to a pre-existing passion. However: (1) most of our “passions” are difficult to monetise (e.g., skiing, sports, movies, etc) and (2) most successful people with interesting careers often have complex origins that did not involve following their pre-determined passions.
Research has shown that many of the factors that predict job satisfaction are unrelated to our pre-existing passion for the job, but rather: (1) our level of autonomy, (2) our perceived competence (comes with experience), and (3) our sense of relatedness to colleagues.
Blindly following our passion into a job can lead to chronic job switching in pursuit of the “perfect job”.
We should focus more on what we bring to a job, rather than what a job does for us.
Most entry-level positions, by definition, involve boring and unfulfilling work, so we should not expect to love them. BUT, they provide a route to more interesting work down the line.
One must have rare and valuable skills (i.e., “career capital)” before they can expect a rare and valuable job that pays well. The world does not owe us a great job.
We should ideally venture out on our own (e.g., become our own boss or start a business) once we have acquired enough career capital to immediately thrive in that situation. Ideally, this new venture is in an industry where you have gained substantial skills and connections through previous work.
Control is an important element of a satisfying job, but we need to earn control through having marketable skills and building trust with bosses / customers.
We often need to master a field / profession before we can find our lifelong mission because: (1) it will be hard to know what our true mission is unless we have tried several different things, and (2) we only learn what the “adjacent possible” breakthrough is in a field once we have mastered all existing knowledge in that field.
Articles
1) Can you Scale a Venture Capital Fund?
An interesting article from Abhishek Maran (Investment Associate at Rampersand) about the unintended consequences of firms raising mega-funds for early-stage investments. What happened to the classic milestone-based VC funding model of the 2010s!?
1) Chris Joye’s Process for Writing AFR Columns
This was a fascinating post from Chris Joye on his process for writing an AFR column each week. His schedule sounds unbelievably hectic and unpredictable, and it’s mind-boggling to me that he can produce such high-quality content in such a short space of time. I guess that’s what happens when you’ve got decades of experience in a field and think about it 24/7!