August 31, 2024 Weekly Recap & Good Reads

Last week in Random Walk+Good Reads, all in one email

Feeling pugnacious today.

👉👉👉Reminder to sign up for the Weekly Recap only, if daily emails is too much. Find me on twitter, for more fun. 

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Last week in Random Walk . . .

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👇Here’s what Random Walk published last week 👇

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Analysis & Ideas

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Macro & Markets

Disparate outcomes of bank v. non-bank lending. NY Fed research on whether it matters where credit originates from: banks or non-banks.

Financial system is changing. Lots of slides on the growing prominence of “non-traditional” investment strategies, which includes both non-traditional lending institutions, non-traditional asset-managers, and non-traditional investments.

Why China is starting a new trade war. We subsidize consumption (which indirectly subsidizing production). They subsidize production (which indirectly subsidizes consumption).

PE/VC

Continuation funds losing their allure? Some scuttlebutt that the favored liquidity source for private markets, i.e. GP-led secondaries of their own funds to a new set of LPs, may be running out of steam.

Family Offices are losing interest in Private Credit. Some scuttlebutt (and data) that the favorite allocation in private markets is losing some favor.

Infrastructure funds want to know if they will be subsidized or not. With a new administration possibly on the way, some candid admissions that ‘reindustrialization’ is unsustainable without Uncle Sam’s largesse (which is, of course, unsustainable). Food for thought.

This too shall pass, private market slog. Bain, the consultant to the private equity industry, says nothing to worry about. Public market yields are slowing, so investors will inevitably chase private market yields soon enough.

$1B Amazon aggregator goes to auction. Interesting as an example of a private credit deal gone badly. Victory Park was just acquired too.

Tech

Uber partners with GM’s self-driving Cruise cars. Very cool. Self-driving may be the “post-hype sleeper” of tech promise. Waymo is already fully operational in SF. More please.

Ex-googlers discover that startups are hard. My pet-theory of AI-safetyism was that it was basically a wounded status play by brilliant researchers who found themselves on the outside looking in when OpenAI became a business. They’d never cop to it, of course, and it’s almost an impossible thing to prove, but when the research became a business, they became less relevant to the org, and they knew it. Kicking and screaming about AI safety—especially safety as a priority—is a pretty good way to make them relevant again. “It’s not that I can’t build a business—it’s that the research is more important!!!”

Energy

Exxon says global oil use is robust, and warns of supply shock. And around and around we go. Are we at peak consumption or is a shortage on the way? If AI really gets ripping, seems hard to believe that we’re at peak oil.

AI

“Selling models is going to be a zero-margin business.” I personally find Stebbings very difficult to listen to, but the interview with Cohere’s CEO is interesting. This point especially around the [margin] race to the bottom is something worth considering. As we know, however, that very low margin commodity businesses, like definitely not price-gouging retailers, can still be very big businesses.

Labor markets

Canada tightens immigration rules to staunch rising unemployment. Oh.

Real Estate & Migration

Life insurer exposure to CRE/CMBS. Chicago fed analysis on how and whether life insurers are exposed to commercial real estate. It’s not terrible, tbh.

Mobility v. Density. Good points by Tyler Cowen that density should be much less of a focus than mobility. Density has some obvious drawbacks, as revealed preferences make clear. Or, as Random Walk likes to say, density is neither good nor bad.

Thread on the “corporate landlord boogeyman” theory. The always excellent Jay Parsons with some data on the dismisinformation conspiracy theory divisive hate speech that “Wall St. is eating all the homes.”

What drives home values (it’s not supply). It’s incomes. And demand.

Consumer

Starbucks cards go negative. I failed to appreciate how central the starbucks card is to the success of the company’s topline. Well, card spending has finally gone into negative growth territory.

Customer LTV for good delivery cos. Lots of data on LTVs for the various delivery companies. Doordash has something figured that the rest don’t.

New age of sports betting. Collection of Bloomberg longform on the brave new world of widespread legal sports betting. I suspect legal gambling and legal weed are probably two of the more understudied shifts. I’m a minimalist when it comes to telling people what to do (even if it’s good for them), so I’m generally supportive of legalization, but that doesn’t mean these things weren’t haram for a reason.

TopGolf hit by double downgrade. High(er) end discretionary is not on the menu.

Regulators

FTC’s efforts to expand its monopoly to grocery go to court. See also DOJ seeks to throttle competition in real estate. Both of these cases are preposterous for different reasons, but the thing that keeps getting lost is that the only real monopolist here—the one that creates actual and impenetrable barriers to entry—is the US government. It’s the one exerting horizontal and vertical control over the entirety of commerce. No one can opt-out of the FTC’s grasp. No one can opt-out of the rules, requirements and tortured fixes that these petty tyrants impose on an entire industry. Did you hear the one about the evil monopolist that exploits consumers by charging exactly $0 for its search engine? Hilarious.

People & Culture

Pricing in the fertility decline needs urgency. Another mini-essay on the steep decline in babymaking, and the general lack of urgency relative to the consequences. “Childless cat ladies” do have misaligned incentives. Sorry, not sorry. Our culture has no problem with name-calling when it wants to lower something in status or make a symbolic point, and pretending otherwise is so obviously hypocritical (or my-side bias) there’s little reason to take the objection seriously.

See also Having Children Didn’t Make Sense to Me, a roundtable of Jews who are child-free by choice. I mean, sure, no doubt people have good reasons for it, and no doubt, people have made them feel badly for their choices—must be a coincidence how Jews are actually pretty good at babymaking. And imagine the horror of being surrounded by certain expectations for a life well lead (and again, while I find the notion “respect my life choices” to be appealing, it’s just not a very pervasive ethos, and in this case, it’s at least somewhat inconsistent with the far more important prerogative to create positive cultural expectations around parenthood. A few hurt feelings seems like a small cost to pay. Sorry, not sorry.

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