Former hedge fund manager; writes top 10 finance Substack netinterest.co/ and contributor to Bloomberg @opinion.
London, England
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"Panics do not destroy capital; they merely reveal the extent to which it has been previously destroyed by its betrayal into hopelessly unproductive works." John Mills, 1867
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I've removed the paywall on this one netinterest.co/p/the-demise-…
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CEO of Apollo, Marc Rowan, is one of the shrewdest investors out there. In Sept/Oct, his firm was on the other side of 1/3 of the liquidity supply that stemmed from LDI-related forced selling.
Here's what he had to say on his firm's earnings call today 👇
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Affirm $AFRM is simply an API between Peloton and Cross River Bank.
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Stripe processed more payments last year than the entire e-commerce industry did when the company was founded in 2010.
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Bank analysts should really take a look at Maker DAO if they get a chance. It's a new, decentralised bank which already has $4.5bn assets on its balance sheet and makes >$100m a year.
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After 15 years as a public company, Sculptor Capital Mgmt (formerly Och-Ziff)—one of the only listed hedge funds—finally called time. The experiment failed. The stock came to the market at $320 and goes out at $11. Along the way, employees took out $4.3bn of comp.
netinterest.co/p/the-end-of-…
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Completely missed this but Sberbank announced its earnings yesterday for 4Q21. They beat consensus by 6%.
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"Investors have now discovered that everything is correlated to the Fed. And they are also discovering that most, if not all, of last decade's investment acumen was really nothing other than market beta and in some cases, nothing other than levered market beta."
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In 1969, Warren Buffett was top of the world. He’d grown a fund from $105k to $105m over 12 years, returning 31.6% pa without a single down year.
And then he wound it all up.
“The only way to slow down is to stop,” he explained. But he didn’t stop. So what happened? 👇
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“When you’re not working, what do you do to de-stress?” Morgan Stanley analyst to $SIVB CEO on TUESDAY.
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Ken Griffin has an unusual take on LTCM:
“They had the most thoughtful structure to how they financed their business...to literally be down 90% and still be in control... And so when Long Term Capital failed, I actually interviewed a number of the senior people…to understand how they pulled off that miracle, that ability to survive. They were in control until almost the bitter end.”
goldmansachs.com/intelligenc…
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Afterpay and Square are both unusual for having avoided venture capital to fund their growth.
Square $SQ has created 98% of its value in public and Afterpay $APT has created 99.5% of its value in public.
More here netinterest.co/p/after-after…
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The Power Law reveals some eye-popping data on Sequoia's VC performance:
• 155 US investments across 3 funds (2003/07/10)
• Half lost money
• 20 did over 10x and earned $100m+
• Overall return of 11.5x net of fees (2000-14)
• Net return of 6.1x exc top 3 inv'ts
Anyone interested in VC needs to read The Power Law by @scmallaby. From the early days of Arthur Rock to the impact of Tiger Global, it's a definitive account of the history, the people and the lessons that underpin venture capital. My review 👇 netinterest.co/p/the-power-l…
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The FDIC estimates its loss on First Republic will be
$13bn. That takes total losses to $35.5bn – a quarter of the Deposit Insurance Fund. It leaves the insurance fund at 0.92% of insured deposits (vs stat min of 1.35%). Big levy on the big banks to build that back up.
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This is the best Visa breakdown I’ve ever come across (and I bought stock in the IPO).
Great work, @patrick_oshag and @arampell
joincolossus.com/episodes/46…
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Warren Buffett in his May 1969 partnership letter: One observer commenting on security analysts over forty stated: “They know too many things that are no longer true.”
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Once one of the largest conglomerates in the world, Brookfield $BAM has spent the last 20 yrs transitioning into an investment management firm. Next week, the metamorphosis will be complete when it spins off its asset management business. The full story👇 netinterest.co/p/the-new-con…
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In this week’s Net Interest, I discuss the economics of starting a hedge fund. netinterest.co/p/so-you-want…
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To many players of fantasy football #FPL it feels like the game is getting harder. They’re right. It’s due to the *paradox of skill* as explored by @mjmauboussin. Over the past 10yrs the number of players in the game is up from 1.95m to 5.91m. 1/8
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GLG, the world's largest expert network, filed for IPO yesterday.
It has 1 million experts on its books and facilitates calls between them and its 2,700 clients.
Its S-1 highlights the power of aggregation. 👇👇
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A Substack milestone: 20,000 subscribers, which is very exciting!
If you're interested, here's how I did it 👇👇👇
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"This market is actually showing FAs and is showing clients that the 60-40 portfolio is not relevant anymore. I expect and our team expects that 50% of a high net worth individual's portfolio over the next 5 to 10 years will be alternative [to publicly traded stocks and bonds]."
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"…We've now seen it in LDI. And we will continue to see that because…our system is designed today such that things are only liquid on the way up there, not liquid on the way down."
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JPMorgan making the point that they have sufficient capital today to absorb all US bank loan losses during the global financial crisis.
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"When a Leica camera sells for USD 15m in June (one went for USD 2.5m in 2018), a bottle of Japanese whisky -Yamazaki- for USD 500k and a VHS cassette of Jaws for USD 33k, it’s hard to say we’ve hit the bottom."
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"Uncertainty is not a time not to invest. Uncertainty is a time to make sure you are getting paid and going in with your eyes wide open as to a range of outcomes."
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TPG is IPOing next week.
In its 30 year history, the firm has bought 640 companies. A better analyst than me could look at all 640 to get a handle on their investment process.
I take a look at five. netinterest.co/p/tpg-a-tale-…
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Anyone interested in VC needs to read The Power Law by @scmallaby. From the early days of Arthur Rock to the impact of Tiger Global, it's a definitive account of the history, the people and the lessons that underpin venture capital. My review 👇 netinterest.co/p/the-power-l…
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"Securitization is now how America banks. We estimate that less than 20% of debt capital to US businesses and consumers is provided directly by the banking system. The vast majority of capital is provided by all of you through intermediaries like us and our peers."
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Fifty four years later, the combination of insurance + investment management + permanent capital is catching on.
Much more here netinterest.co/p/other-peopl…
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Softbank's fintech portfolio looks a bit…soft
ALT https://tearsheet.co/member-exclusive/a-closer-look-at-softbank-vision-funds-fintech-portfolio/
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A reminder of what a financial system looks like. Three layers: an asset layer, a funding layer and a collateral layer.
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Excellent talk by @rorysutherland the other evening about his new book. I wrote up some notes here.
(cc/ @david_perell @mikedariano @farnamstreet)
degreesofcertainty.blog/2019…
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I wrote a substack about equity research.
It’s amazing that research analysts spend their days valuing businesses, yet struggle to value their own. They give their product away for free!
Highlights in thread 👇
netinterest.substack.com/p/t…
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1/ In 1907, to staunch panic, banks took out a series of ads in newspapers.
Some argued for calm:
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"We've lived in 10 years of benign environment with increasing liquidity and low rates. And this mismatch of daily liquid products with non-daily liquid assets is across our financial system. We saw it in March of 2020...where it happened in open-ended mutual funds and ETFs…"
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Digital bank accounts have 2x the churn and 15% of the balance of traditional bank accounts. Profitable?
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If you’d bought Sberbank stock the day before the Ukraine invasion, you’d now be in the money (even if it is in a side pocket). US & European banks, not so much. Investing is hard!
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Robinhood filed its year end balance sheet.
5x increase in margin loans, to $3.3bn (from $639m).
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End of December $SIVB had 37,466 deposit accounts with balances of over $250k. Average balance $4.2m. 🐥
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Jamie Dimon on why are bank stocks sell so cheaply:
"The banking system as a size relative to the global economy is getting smaller and smaller and smaller… So you've had 80% of mortgage go outside of banking; tremendous amount of private credit is going outside of banking…"
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Looking for a primer on Wise (formerly Transferwise) ahead of their direct listing in London?
You're in luck.
Read how they threw out the Uber playbook and brought in the Amazon playbook and the questions it raises👇netinterest.co/p/money-witho…
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Trafigura is the biggest company you know least about. $230bn in revenues, yet no stock price or credit rating.
Now it’s in the market for capital.
If you want to learn more about Trafigura, @MarcRuby must read substack detailed what the firm is about.
netinterest.co/p/commodities…
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My former colleague Pete Davies is one of the best investors in the UK.
I learned a lot from him over the years, but he doesn't normally share his wisdom widely. This week he made an exception as a guest on the Money Maze podcast @podcast_maze.
Here are some of the takeaways 👇
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"People who are hanging around, trying to buy great companies cheaply never get anything done. They spend a lot of time congratulating themselves about their wisdom but they don't actually get anything done."
Morgan Stanley CEO taking a swipe at value investors on his call y'day
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Banks have created more value outside their perimeter than within it. Bloomberg, ICE, Visa and many more - all seeded by banks.
If Barclays had kept its 20% stake in BlackRock (which it got as part-payment for its sale of Barclays Global Investors in 2009) then that stake would alone be worth almost as much as all of Barclays is today.
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Starting a newsletter on financial sector themes. You can subscribe here. netinterest.substack.com/p/i…
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Maker is years away from mainstream adoption, but that gives bank investors plenty of time to get up to speed! More here: netinterest.co/p/reinventing…
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"I think it is precisely because I understand banks that I never invest in their shares." Terry Smith ft.com/content/831cee08-7250…
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This is what decentralization looks like.
0.0068% of employees working in head office.
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They banned payment for order flow in Europe this week.
So that's Europe, UK and Canada where it's banned, leaving US increasingly isolated. More on what it all means in this week's Net Interest 👇netinterest.co/p/free-trades…
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Banks are getting increasingly worried about the threat from Big Tech on an uneven playing field. This from chair of Santander in today’s @FT
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Well, Vision Fund has bounced back despite "many regrets".
Listed companies now make up 43% of the fund, and are valued at 3.85x cost, including Coupang (10.3x) and Doordash (11.9x).
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Marqeta:
73% of net revenue from Square
94% of TPV settled through Sutton Bank
Affirm $AFRM is simply an API between Peloton and Cross River Bank.
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Congratulations @HaydenCapital who spotted Afterpay early and publicly shared his detailed work. haydencapital.com/wp-content…
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Hedge funds not having an easy time, according to GS. "The most popular hedge fund long positions have suffered their worst 12-month return relative to the S&P 500 on record"
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Reading through all the $SCHW comments, the securities book is a fright BUT the funding is in better shape. Only $68.9bn uninsured deposits (19%) and the bank has $68.6bn of capacity at the FHLB.
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“The biggest losers were men with considerable wealth, plenty of free time, and a convenient nearby stock exchange, who were very active traders during the mania.”
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Had fun writing this one.
Read how I was scammed out of some Bitcoin and went on to establish my own decentralised bank!
netinterest.co/p/my-adventur…
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A few years ago Stephen Schwarzman, founder of Blackstone $BX, complained about his firm's valuation.
He complained that Waddell & Reed's multiple was 80% higher than his.
Last year, Waddell & Reed was acquired at a multiple of 7.5x. Blackstone now trades at 23x.
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Credit Suisse risk culture is like Trigger's Broom. You can change the head, you can change the staff, but it stays the same broom.
This week's Net Interest ... netinterest.co/p/what-sort-o…
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Citadel, Millennium, Marshall Wace – 25+ years old, $60bn+ assets, multi-strategy, leverage technology
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Latest Net Interest is on the rise of pods.
If you enjoyed @patrick_oshag interview with Will England on @InvestLikeBest, @FundamentEdge post on "how to beat the pods" and @RobinWigg articles in @FTAlphaville, then this one's for you... netinterest.co/p/peak-pod
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The number of analyst shouts of "Great Quarter!" dipped on earnings calls in 2018/19 but it's back up again. Read more on this sorry phenomenon in this week's Net Interest! netinterest.co/p/great-quart…
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As we approach the 10th anniversary of Fannie and Freddie being put into conservatorship, I remain baffled – as a European – how the US as the bastion of global capitalism can get away with private sector appropriation on such a grand scale. #Fanniegate
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Swiss regulator on US regulator: "We're not like them."
European regulator on Swiss regulator: "We're not like them."
15 years of cooperation and it's all breaking down.
🇪🇺 .@EU_SRB , @EBA_News and @ecb Banking Supervision statement on the announcement on 19 March 2023 by Swiss authorities
srb.europa.eu/en/content/srb…
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Enjoyed writing this one. Inside the stock lending market by way of Dumb Money. netinterest.co/p/the-five-fa…
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Blackrock. Few others can keep the lights on with a 0.17% fee rate. They cover a $10bn cost base and still have a 38% margin left over. netinterest.substack.com/p/t…
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This matrix shows probability of final rank depending on where you are now, again based on last year’s data. So if you are in top 100K there’s a 23% chance you’ll break into top 50K and 2% chance you’ll break into top 10K.
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Franklin disclosed details of its OSAM acq'n alongside earnings today:
• $300m purchase price + earnout
• $6.9bn AUM (of which Canvas $2bn)
• "Canvas has grown almost twice the industry just since we even announced it."
Great deal @patrick_oshag and @jposhaughnessy !
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For more comment on financial companies like Enron, subscribe to my newsletter netinterest.co …
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CEO of UBS doesn't rise to the bait.
Analyst: "If I look at your valuation against Morgan Stanley…you traded a 30% discount and at times even 40% discount… How do you explain…that material discount?"
CEO of UBS: "Maybe you should actually answer that question for us."
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"If you are a regional bank and the president of Goldman Sachs comes in and says “hi I’d like to make an $11 million interest-rate bet with you,” you are getting adversely selected." h/t @matt_levine
bloomberg.com/news/articles/…
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