September 28 2024 Weekly Recap & Good Reads
September 28 2024 Weekly Recap & Good Reads
Last week in Random Walk+Good Reads, all in one email
Favorite tweet of the week.
👉👉👉Reminder to sign up for the Weekly Recap only, if daily emails is too much. Find me on twitter, for more fun. Last week in Random Walk . . .
👇Here’s what Random Walk published last week 👇
Analysis & Ideas
Macro & Markets
Lessons from a bailout. Marc Rubenstein makes the argument that moving quickly and with overwhelming force is the key to a successful bailout. But does it increase the likelihood of needing another one?
Has liquidity in Treasury markets improved? NY Fed deep dive on liquidity in the Treasury markets. It seems like it should be an easier thing to ascertain, but maybe not.
When a crystal ball isn’t enough. Fun paper around a game that lets you see the headline and trade the index (S&P and 10 year) accordingly. Most people did poorly, especially around sizing. The game is fun (and I doubled my money), but directionally, it’s hard to know what’s already been priced in, so seeing the headlines isn’t really “knowing the future.”
PE/VC
PE firms seek new terms to increase upside in deals. As PE goes overweight lending, inevitably yields compress, which in turn means PE needs more upside for its (increasingly equity-like) risk.
Private Credit Premiums Shrink as Investors Warn of Defaults. More of the same. Some of this is the competition talking, but competition will squeeze yield, no doubt.
Thoma Bravo partner makes the case for bigger PE is better PE. ‘We’ve got size and we’ve got skillz.’ Context here is that it’s tough(er) sledding for GPs raising money, and the argument has come down to “bigger is better” v. “smaller managers get better returns.” Basically, established mega-GPs and smaller/emerging ones are fighting for a scarcer pool of LP money, and while the mega-GPs are definitely winning for now, the debate rages on.
UVA’s endowment misses benchmark by over 50%. You know the story. All that allocation to private capital, and no liquidity to speak of.
Real Estate & Migration
Sales of second-homes picking up? JBREC makes the argument that “second-home” markets are picking up steam. I wonder if that’s because there’s pressure on the supply side, rather than the demand side.
AOC wants $30B to become a landlord. This seems to be the end game of “fair weather YIMBYs” (and why it’s correct to view them with skepticism). There’s nothing “free market” about it. It’s simply a means of transferring permissioning authority from decentralized groups that are less reliably politically aligned to centralized ones that are. The goal is to build housing for progressive constituents, and get credit for it (and all the better, t develop ‘deep blue’ strongholds in places that are not ‘deep blue.’) That’s a perfectly valid goal for someone like AOC to have, but any stated commitment to YIMBYism is a trojan horse, plain and simple. They have no qualms with zoning, they just don’t like zoning that (a) isn’t theirs to make; and (b) interferes with their political goals. See also Zoning’s Hidden Power.
Tech
Cynic’s guide to fintech. From 2015, and most of it holds up. The biggest miss is on fintech’s advantages for acquiring a new generation of customers, with different expectations for interacting with product. TradFi’s “connectivity” got somewhat outdated (but they do know how to catch up quickly). But when it comes to disintermediation or risk selection or being “nicer,” that was always nonsense. Otherwise, startups were better and leaner at building backend product or fintech infrastructure.
Incubating mobile apps. Just some street level observations from a VC working on mobile (which touch on current state of venture, but also the build v. check-writing divide).
Reddit aims for profitability. Ad revenue and (training) data licensing growing quickly. Someone should tell Reddit that Google is a monopoly and they might as well quit while they’re ahead.
Plaid’s former billionaire CEO has a bold plan to revive its growth. Unusually strong article for Forbes on Plaid, an amazing company that probably should have cashed out sooner (and tried to, but regulators said SMASH), but is trying to earn its valuation with the double headwind of slower growth and tighter cap markets.
Energy
Nuclear in Idaho. Momentum around nuclear seems to be growing pretty quickly. See also Three Mile Island reopening.
AI
Whatsapp dominates AI use. Relates back to somewhat Random Walk wrote about last quarter—MetaAI’s powerusers are coming from whatsapp (and likely coming from India). The users are less valuable from an ad targeting standpoint, but lots of secular tailwinds.
AI’s impact on Call Centers and the Philippines. I’m somewhat skeptical that hard working people with excellent English will have a hard time finding gainful employment, but if there is a shock, it can take some time to reconstitute those supply chains.
When did China block which AI sites? Some data and commentary around which apps get blocked when by China. Not sure what to make of it.
The intelligence age. If you haven’t already seen it, Altman’s paean to compute+data. Continued exodus from OpenAI reinforces whatever priors you have about OpenAI. For me personally, it’s that the genius researchers are weaker on the business side (and therefore felt their status slipping), but I know that to be true with basically zero confidence. Maybe there’s a massive fraud. Who knows. Maybe it’s nothing.
Consumer
Data on fast food and QSR customers. Who shops where (and where else)? Starbucks customers are somewhat affluent. Subway’s customers are rural. Dunkin’s customers are likely older. Fun stuff.
Why Amazon is helping merchants sell on rival sites. One way of thinking about it is that distribution and marketplaces have become more fungible, but complex logistics (and the scale and margins to make it work) have not. Better to keep customers hooked on the logistics, then worry too much about keeping them loyal to the platform. Idk.
Art market is tanking. “Tanking” is a bit of an exaggeration, but “art as the new alt” and the asset that always goes up was always nonsense. The worst thesis is “democratizing” art investing, as though scarcity/exclusivity wasn’t the exact thing that made it valuable. It’s like someone saying “I’ve got 10 perfect replicas of the Mona Lisa, which I can safely value at 10x the Mona Lisa.”
Regulators
DOJ ramps up its attacks on consumers, businesses, and shareholders, now targeting Visa for a shakedown. Yet another attack on all things good and decent. These thugs are clearly emboldened by the lack of pushback. Their lust for power is boundless.
See also Inside the Biden Admin’s Plot to Destroy Silverbank and debank Crypto for good. You can absolutely hate crypto and still see why this is pretty wrong or, at the very least, un-American.
People & Culture
Jawad Mian’s interview with Steve Cohen. Lots of good stuff. “I don't look at my winners, I look at my losers . . . If I'm making money on something, I'm good. I'm focused on why something's not working. And try to figure out why. It may be that it's just -- could be part of some sort of factor move or sector move that I actually think is wrong, and I'm willing to hold on to it. But I'm focused on my losers. Am I missing something? Is there something changed? That's where I focus on.” Cohen sounds like a peach to work for, lol. “You always hear people say, Oh, well, the market . . . What the hell does that -- I don't even know what that means. As opposed to -- what did you do? The world is going to exist whether you like it or not. Like I always say, I gotta live in this world, I don't create it. The world is happening. Okay, what are you going to do about it? And it's amazing how people attribute outside forces to what's happening to them, as opposed to being accountable and dealing with it.” Another crowdpleaser. The interview is actually quite good, and Steve Cohen seems like a pretty fascinating guy. One of eight kids, too.
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