This week’s reading list is about labels that have quietly stopped describing the thing they name. American companies posted 57 per cent aggregate earnings growth last quarter, which sounds splendid until you notice that more than half of them reported earnings going backwards, and Damodaran does the unglamorous work of separating the accounting from the cash. America did not lose its rare earth industry, as the usual telling has it; it sold the thing, one individually sensible transaction at a time, until the equipment from the last magnet plant was on a boat. A million AI agents turn out to buy speed rather than intelligence, with the gains flattening somewhere around eight. A 60/40 portfolio left alone since 2020 is now a 77/23 portfolio, whatever the statement still calls it. Deloitte is alleged to have signed accounts as true and fair while sometimes relying on documents it had helped produce. A Japanese residence category meaning “nationality not confirmed” leaves its holders stateless, which is not a nationality but is printed where one ought to be. And the most pristine coral reefs in the Pacific turn out to run largely on bird droppings. The useful lesson for investors is that labels tend to be maintained by whoever benefits from them. The best investors are not taking the description on trust. They are checking what is actually in the box.
📚 Stock Prices, Earnings and Cashflows: The AI Effect plays through! Markets added US$2.5 trillion of capitalisation in September, almost US$1.5 trillion of it technology, while the ten year Treasury rose 54 basis points, a move in the top decile since 1962. Aggregate second quarter net income rose 57 per cent, though more than half of companies reported net income falling, and capex was up US$133 billion year on year. His implied equity risk premium has dropped below 4 per cent for the first time this year. (Musings on Markets)
📚 America Didn’t Lose Its Rare Earth Industry. It Sold It. Kirsten Asdal, Tom Koch and Tao Tan on how a market worth under US$10 billion came to control an enormous amount of downstream value. China refines more than 90 per cent of the world’s rare earths and close to 99 per cent of the heavy ones, having bought General Motors’ magnet unit in 1995 and watched the last US plant close by 2006. Each sale was rational on its own terms, which is rather the point. (Lawfare)
📚 Can a Million AI Agents Create Superintelligence? Ramez Naam, guest posting, tests Dario Amodei’s “country of geniuses in a datacenter” against the measurements. Going from ten agents to a hundred added about 27 points on a formal maths test; the next tenfold step added two. On one security benchmark, one agent scored 71.2, four scored 74.3 and sixteen scored 76.4, and a separate study found gains flatten after about eight. (Noahpinion)
📚 Is It Time to Rebalance Your Portfolio? Ben Carlson on the allocation you have rather than the one you chose: a 60/40 portfolio untouched since the start of the decade has drifted to roughly 77/23. High quality bonds now yield above 5 per cent for the first time in almost twenty years, so a balanced portfolio no longer needs heroic equity returns to hit a 7 per cent target. He concedes rebalancing is psychologically hardest precisely when it matters most. (A Wealth of Common Sense)
📚 How Deloitte allegedly helped Abramovich hide $10bn: Simon Lock on claims that Deloitte Cyprus and a spin-off falsified at least 1,000 corporate records across more than 100 companies, backdated by up to five years between 1999 and 2013. The firm is alleged to have acted as nominee director, shareholder, administrator, accountant, tax adviser and independent auditor simultaneously. Deloitte Cyprus says it acts in compliance with applicable laws; Abramovich’s lawyers deny any knowledge of unlawful backdating or concealment. (The Bureau of Investigative Journalism)
📚 Don’t Trust People Who Talk Like This: Ted Gioia watches David Ellison, fresh from a US$111 billion Warner Bros deal underwritten by US$40 billion of his father’s personal guarantees, explain that he is “positioned to win in every single vertical” with “marquee intellectual properties”. Gioia’s subtitle is the test: the beginning of wisdom is calling things by their right names. A portable instrument for reading company announcements. (The Honest Broker)
📚 The Tao of Tao: Terence Tao on where AI actually changes his working method and where it does not. He now runs what he calls clinical trials of mathematical methods across datasets of more than 10,000 problems, previously impractical, under a three year US$5 million DARPA grant. His image for unverified AI output is a firehose of undrinkable water, with formal verification as the filter, and he notes the machine “is not grounded in any actual understanding”. (UCLA Magazine)
📚 Why I Remain Stateless: A Short History of Chōsen-seki: Taejun Shin is 45, runs a financial group across seven countries, has entered about twenty countries for work, and holds no passport because he holds no nationality. His Japanese residence card records a 1947 designation meaning only that his nationality has not been confirmed, a category that has fallen from roughly 600,000 holders to about 22,000. He could have opted out decades ago and describes why he has not. (Taejun’s Substack)
📚 Some of the most pristine coral reefs have a secret weapon: birds: Lauren Sommer from Palmyra Atoll, where seabirds across almost 200 atolls were estimated to deliver more than 100,000 pounds of nitrogen, a nutrient trail running from forest to reef and showing up in plankton, fish and manta rays. Rats arrived in the Second World War and peaked at perhaps 30,000; since 2019 more than a million coconut palms have been removed. Researchers first noticed the connection because manta rays were clustering near bird colonies. (NPR)
📚 The Many Failures of Larry David: Blake Harris on a man who sold irregular bras on Broadway, drove a limo, and would walk offstage mid set if he felt disrespected. He demanded his name be taken off his first sitcom script, and the Seinfeld pilot tested so badly it was renewed for four episodes, possibly the shortest order on record. Shooting at Yankee Stadium years later, the one fan yelling that he sucked stuck with him more than the fifty thousand cheering. (Colossus)
