5 Idea Friday: Sugar High; SaaS and News; Retail Rules Options; 'Jobless Productivity Boom'; Sustainability Lost
A feast for thought, heading into the weekend
Sugar and other stuff from the ground
SaaS-Attacked, looking back, looking forwards
Retail rules options
‘Jobless Productivity Boom’ reprised
Sustainability Lost
👉👉👉Reminder to sign up for the Weekly Recap only, if daily emails is too much. Find me on twitter, for more fun. 👋👋👋Random Walk has been piloting some other initiatives and now would like to hear from broader universe of you:
(1) 🛎️ Schedule a time to chat with me. I want to know what would be valuable to you.
(2) 💡 Find out more about Random Walk Idea Dinners. High-Signal Serendipity.5 Idea Friday
Five quick hitters on this and that for the weekend.
1. Sugar high
I found this both surprising and amusing.
As a world, we apparently harvest more sugar than wheat and rice combined:
Almost 2B metric tons of sugar cane produced in 2024.
And that doesn’t even include the 300M metric tons of sugar beet!
It’s an observation as old as human history, but still probably underweight for our current day and age: when given the option to choose, we don’t always make the best choices, especially when the alternative is quite tasty (in the short-term, at least).
Speaking of things we get from the ground, this was also pretty striking, albeit a sequitur):
The price of commodities have risen dramatically—silver even needs its own axis.
So, there’s a premium on the stuff used for building stuff. Part of that is probably speculation driven, but a lot of it has to be the electrification of everything, too. For now, electricity costs haven’t increased that much, so that’s good, but we shall see.
2. SaaS-Attack is about later, not now
The SaaS-Attack hasn’t really stopped, but it has started to make a bit more sense.
Companies that have performed well, or are perceived to have more durable advantages, have differentiated somewhat from the pack. So, “platform” businesses, or highly specialized “vertical” software, e.g. NOW 0.00%↑, TYL 0.00%↑, DDOG 0.00%↑ or PCOR 0.00%↑, have stopped their bleeding a little.
And if you’re Figma, the Adobe design challenger, you can wipe out monthly losses almost entirely when you pull off one of these:
Figma’s net dollar retention increased to 136% (and shares gained ~18%, but are still down for the year).
If existing customers are spending ~36% more, then it’s hard to argue that vibe-coding is eating your lunch. Good for Figma.
Elsewhere, if you want to bearish about SaaS, there’s some data that suggests retention is getting worse:
Ramp’s enterprise spending data shows weakening retention across all software categories (except for GenAI).
Ramp’s data is pretty skewed to startup land, so take that for what you will, but if the companies of the future are dialing back their incumbent software spend, well maybe that’s where the future is going. Idk. My guess is that it’s sample bias, but again, take that for what you will.
Anyways, it remains the case that overall, tech has become quite cheap, relatively:
Earnings multiples for software relative to the broader index are nearing post-GFC troughs.
The sell-off persists, even though performance has stayed pretty strong:
Forward earnings for the IGV continue up and to the right, even as prices plunge.
Whatever the vibes shift might say about techcos, the performance says otherwise. At least for now.
But, of course, present prices are really about expectations for future results. The market isn’t spooked (entirely) by what SaaS is doing right now. They’re spooked about what might happen in the future.
To wit, the sister chart to the one above is the one below:
Newspaper stock prices began their decent about 5 years before Newspaper earnings collapsed.
So, you see, sometimes the price is right before the fundamentals rear their ugly heads.
That’s true so far as it goes, but the actual interesting thing about that chart is that newspapers didn’t collapse until the GFC . . . and then just never recovered. It says something about the destructive power of recessions. Presumably part of the story is that the businesses that used to advertise in newspapers evaporated. And once that firm knowledge and relationship capital was lost, it was gone forever.
ICYMI
3. Retail Rules, and other tales (good and bad) from ‘democratizing’ capital markets
Technology has made investing far more accessible to retail investors.
ETFs have a far lower fee-load than mutual funds (let alone active management). Snappy UIs like Robinhood (but other ebrokers too) have made the whole investing game a lot more fun, as well.
In all events, there’s no doubt that retail is playing a much larger role in moving public markets, for better and/or for worse.
That’s especially true with respect to some pretty risky stuff, like option trading:
Retail daily notional cash option trading is nearly 2x the 5-year average, 3x what it was in 2020, and ~60% higher than last year.
These are unprecedented volumes of retail participation:
Retail cash participation in the option market hit all-time-highs in the early part of the year.
Wall St. + Tech has made option-trading easier for retail, and retail is all-in.
Retail tends to be pretty bullish, has been buying up downtrodden software companies, and hopefully isn’t losing their collective shirt. It’s almost certainly the case, however, that retail is making Ken Griffin a lot richer (and the possibility that retail is beating some of the smartest people in the world at a game of derivatives is basically 0).
Elsewhere, though, tech-in-markets is doing some good.
Remember how lower trading costs have made illiquid bonds liquid? Well, here’s some more evidence of that:
More than $61 billion of US corporate bonds traded per day on average in January . . . That’s 11% hotter than at the same point in 2025 . . .
Quantitative traders are growing increasingly active in corporate bonds, boosting liquidity in many of the securities. And geopolitical tensions around Greenland and Venezuela have given investors more reason to cut exposure to some companies and boost holdings in others.
The volume is hard to keep up with, some market participants say.
“It’s been relentless,” said Tony Trzcinka, senior portfolio manager at Impax Asset Management, who has managed investment-grade portfolios for over two decades. “We are going home later than usual and getting in earlier.”
More liquidity in credit is good. Can’t wait for retail to get involved.
4. The Jobless ‘Productivity Boom’ (reprise)
Just to briefly revisit this topic, from earlier in the week.
GDP numbers have already been revised downwards, and yes, the story is still AI Capex + Healthcare:
Tech hardware and healthcare service spending are both at all-time-highs, as a share of overall GDP.
The former is hopefully sound investment in future productivity growth. The latter is mostly not, but I suppose knee replacements are a good thing.
As for an actual ‘boom’ in productivity, it seems way too early to tell, but maybe there’s some smoke there.
If workers are more productive, then they’d work fewer hours, right? Maybe Keynes was right all along:
Workers appear to be working ~2 fewer hours per week than they were before the pandemic!
Less work, more output . . . it’s a productivity revolution. 15 hour work week, here we come. Keynes has 4 more years to be right, after all!
Lol, no. It’s not productivity. It’s part-time work:
The share of employees that are part-time (i.e. work fewer than 35 hours/week) is ~45%.
The part-time share is slightly lower than last year, but much higher than before the pandemic. My guess? It’s the rise of dashers and uber-drivers, which can be a bit of a blessing and a curse.
Over a longer-time horizon, and using BLS data, working hours do appear to be increasing:
Labor utilization for non-manager works is trending up, recently.
Doing more with less, maybe?
The good news is that Random Walk’s early prognostications about the direction of labor demand appear to be mostly correct (for now):
The premium to job-changers is high in ‘building stuff’ (i.e. data centers), and white collar stuff, too.
Job-changers to healthcare are also getting a wage incentive, contrary to what the BLS data was suggesting, so that’s not great (even if that’s the not-great thing Random Walk has been worried about for a while). But, the premium for white collar suggests at least some broadening of the overall good-news picture.
Job postings too, tell a similar story:
It’s an improving look for architects, hr, manufacturing and . . . software developers!
See that? AI is a job-maker, not a job-taker.
And “AI Engineers” skew to the younger (and male) side:
AI Engineers are weighted more heavily (~50%) to 2010-2019 grads than the rest of the workforce.
AI Engineers are also very manly, outnumbering women 3:1 (amongst known genders). Good news for young men, I suppose.
Obviously, it’s all way too early to really tell what’s going on. But, my suspicion is that following some seasonal layoffs, we’ll see some moderate positive momentum in ‘26.
Just one coda on the subject of manufacturing jobs that I found a little amusing:
Iowa has the third largest in-state share of manufacturing employment, and it’s growing.
Iowa is already where the young people are and maybe it’s where the manufacturing will be too.
5. ‘Sustainable’ Investment, we hardly knew ‘ye
It feels like forever ago, but ‘sustainable’ investment strategies were a very hot thing in ‘21-’22.
Money was cheap, and the subsidies were flowing, and well it’s ‘enlightened governance’ when one team does it, but ‘third-worldist arm-twisting’ when the bad guys are in charge.
Anyways, once the subsidies ran out, it was predictable that the strategy would too. And so it has:
“Sustainable” funds in the US are in die-out mode, with fund closures outnumbering fund launches by ~35.
A good chunk of ‘sustainable’ projects are not, in fact, sustainable, which is why they required so many subsidies to make them happen. Whether those subsidies are good or bad depends on your priors, but I find the word games irritating.
This too was a fun little factoid:
“Climate change” was all the TED-talk rage for about 3 years, and now it’s not quite so compelling anymore.
Truthfully, I don’t know anyone who’s listened to a TED talk in over a decade, but it certainly tells you something about where the consultant class sees the money. And like fund managers, they apparently see less money in Climate Change (and rightfully so).
Anyways, in the big scheme of things, Coal is still king:
Global coal consumption hit an all time high.
The good news is that the growth of coal consumption does appear to be slowing down (especially in China, the biggest offender). The bad news is that progress in the US appears to have stalled out a bit.
Previously, on Random Walk
Private Credit and Insurance, two peas in a pod (reprise), and a chart dump on default rates
five charts on the rise of private credit in life insurance
Energy in 1776
It’s July 4th, so Happy Birthday America, and we’re going to keep it light and only semi-topical.
Random Walk is an idea company dedicated to the discovery of idea alpha. Find differentiated data, perspectives and people, and keep your information mix lively. A foolish consistency is the hobgoblin of small minds. Fight the Great Idea Stagnation. Join Random Walk. Follow me on twitter. Follow me on substack:
Ofc the bear case for software is 2y+, even maybe 5y+ down the line not next quarter. We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten.
But if all those Saas shitco have ZERO path to profitability until 5y+ out do they deserve to be valued at anything like current metrics? The answer is no.
They're still very expensive and until they start being profitable they will become even more so as AI progress faster than they can reach profitability. Don't get me started on the Stock Based Compensation trick.. it should of course be included when evaluating if those business are profitable.