Dirty Texas Hedge
@HedgeDirty
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Just here to say things which are true but too unprofessional to put my name on #EFT "I've been ballin' since we had to take the TAAS test" - Lil Flip
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Joined April 2020
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IT'S LIVE
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A competent GOP would cut a campaign ad that's just alternating clips of protestors at 60k+ tuition schools and clips of biden promising loan forgiveness and blanket it to every middle-middle to lower-middle class demo
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A GENTLEMAN’S PRIMER ON SHORTING INSOLVENT SHITCOS
So you’ve found a ShitCo. It’s such an ugly zombie it couldn’t be an extra in season 19 of The Walking Dead
But it’s still got a $185m cap
And you want to be the one to mung the last rancid, putrefying drops out of that corpse
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Michael Lewis may have fallen from previous esteem, but the detail in The Big Short about Lehman's mortgage model being in excel and unable to input a negative change in home values has been confirmed to me by someone with direct knowledge of it
what single excel file lead to the most destroyed capital in human history?
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There is no privilege like British Accent privilege. Americans will grant you 20 IQ points for nothing
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Either you ration with price or you ration with time. There's a real price for everything even if it's not quoted in currency
peak Canadian healthcare is lining up in the cold for 2 hrs at 7am just to get a spot for the day
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Any Millennial who looked at their peers with open, cold eyes saw this coming 15 years ago
NEW: my column this week is about the coming vibe shift, from Boomers vs Millennials to huge wealth inequality *between* Millennials.
Current discourse centres on how the average Millennial is worse-off than the average Boomer was, but the richest millennials are loaded 💸🚀
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There are only 3 phases of life where NYC beats generic suburbia:
- early/mid 20s either entering a high-powered career or with high-powered parental subsidies
- married, pre-kids with 2X professional income
- wealthy empty nester
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Being comfortable placing a 20-year irrevocable bet against inflation for somewhere between 1/3 and 1/2 your lifetime earnings is maybe the most Japanese thing ever
Ohtani, per
@TheAthletic
, is deferring $68 of his $70 million dollar salary every yr of his contract. It will be paid out w/o interest from '34 to '43. It's much cheaper for the
@Dodgers
than it at first appeared. Remarkable, but I wouldn't worry abt Ohtani given endorsement $$$.
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I really hope Westerners understand that Russians protesting the war are taking risks 99% of Western protestors would get an aneurysm thinking about
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Perhaps my most middle-aged, grow-up-and-accept-responsibilty opinion:
If you personally make >$200k, you are high class. You should accept the personal, professional, institutional, and social leadership obligations that come with being high class.
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Shooting -5 on a day you had a mugshot taken at 7 AM will be an impossible standard held over the heads of every junior finance person for a generation
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today is probably the time I've been most disgusted with a rally in the stock market
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In 1994 Ukraine became the only country ever to give up nuclear weapons (~2000 of them), in part because the United States guaranteed its territorial integrity
what country would take that deal today?
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@mister_shroom
Why does that surprise or disturb you? The MBA degree is literally "Master of Business Administration". The entire point of the degree is to teach people how to be managers of businesses, not individual contributors to them. That's literally what an "MBA type" is supposed to be
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Never let yourself get out of shape one you hit ~30 or ~32. The road back gets harder and harder
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holy shit closing a refi 8 weeks ago really was catching the last chopper out of saigon
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I can't think of a single time a CEO losing his cool against a sell-side analyst in an earnings call has ever had a good outcome for the CEO. Even if it's the most insufferable twerp imaginable, the takeaway is always 'temper loss means stress, means something must be really bad'
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wheat limit up again on CME open
reminder: this is way scarier for the world than $125 oil
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@Steinernomics
When someone evades taxes, treasury stops collecting revenue. That's it. Nothing else happens and it has no discernable effect on anyone except the tax evader other than the tax evader having more money to spend, save, or invest. NO ONE ELSE PAYS FOR IT. Not you. Not me. NO ONE.
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Beware any company whose CEO is 6'3" or taller
6'3" is the 96-97th %ile of adult men (and 98-99th of men+women). If a CEO is that tall it's probably because the company promotes people for the wrong reasons
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If you ever feel like an idiot, just remember: there are professional investors who loaned $CVNA $750m sr unsecured at 4.875 in August of 2021
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So. You want to mung ShitCo’s twitching corpse
Your options:
1: Short it knowing it will be 931 days until Justice
2: Short it in denial and become a divorced, anti-Semitic, Xanax-addled lunatic
3: Light your money on fire avoiding short gamma
4: Leave it be
Happy Hunting
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I'll take the contra: Adam Neumann took nothing from "society". He took money from SoftBank, who gave it to with their eyes open. He defrauded zero mom & pop retail investors, and indeed "society" successfully thwarted his attempt when the S-1 was laughed into oblivion
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I think one of the basic life expectations problems professional class Millenials have is that because their professional class parents waited longer to have kids, their childhood memories only start when their parents were early-mid 40s, at the peak of their earnings power
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In six months, you will go from normal, well-adjusted, shrewd investor to garden variety antisocial cynic to Rand Paul crazy to Ron Paul crazy to Zerohedge crazy to Alex Jones crazy and then into darker, really unsavory types of crazy
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I'm generally not a 'you're paying attention to the wrong thing' guy, but at current prices:
-oil is a 'rich countries have below trend growth' problem
-Euro gas is a 'whole sectors shut down & ppl die next winter bc no heat' problem
-Ags is a 'how revolutions start' problem
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Long gamma traders know in their bones tail events are not only more likely but will happen sooner. Bleeding theta doesn’t bother them because the asshole on the other side is a complacent laxbro who will get what’s coming. They have contrarian streaks and Taleb shrines
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Long theta traders know in their bones neurotic pussies overpay for metaphysically impossible tail risks. Short gamma doesn’t bother them because the asshole on the other side is an over-Zerohedged paranoiac. They have colossal egos and insurance execs for fathers
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Why on earth would a company whose debt trades at 80 still have any equity cushion left?
Because the equity has become an option, and options retain value until they expire, no matter how far out of the money they are
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Among my many pet theories is that Musk is trying to sell as much TSLA as he can in ways that make it look like he is 'forced to' in order to avoid the bad look
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The truly interesting bitcoin failure case is not "price falls, paper hands get liquidated"
The interesting bitcoin failure case is "price falls far below breakeven mining costs, becomes totally illiquid becuase there aren't enough miners to clear transactions"
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It will be hilarious as hell when investors realize cannabis is inherently destined to be a low-margin ag business with high taxes and a lot of long-term legal liability and then it all gets rolled up into Philip Morris, Altria, and BAT
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Interesting fact: $AMZN has been a public company since 1997
Cumulatively, of its entire corporate history, it has brought in 52% of revenue, 81% of earnings, and 87% of FCF in the past three years
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WHY YOU SHOULD NEVER HOLD LEVERED ETFS
This one is actually pretty simple and can be reduced to a straightforward math statement:
1.03 * 0.97 < 1.02 * 0.98 < 1.01 * 0.99 < 1
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An interesting feature about AI is how dramatically more capital intensive it is vs nearly any other software. Among the reasons software can/could/did produce such huge investment returns was because of how little capex it needed
Anthropic’s CEO Dario Amodei says compute is more than 80% of their expenses on a podcast. Salaries of 600 employees are much smaller expense
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I will once again get on a hobby horse of mine: paying someone else to supervise young children is inherently a high class luxury. There are no economies of scale. The economic value depends on a giant wage spread between parent and caregiver. Subsidy only creates a baumol beast
Make no mistake: President
@JoeBiden
and I intend to cap child care costs at $10 a day for the average family and make preschool free for all four-year-olds.
To do that, we need Congress to act.
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If you want, as an American, to have a European material standard of living with a European quantity of vacation & leisure, that option is available to you: become a schoolteacher
Americans: Working 60 hour work weeks until they inevitably get laid off
Europeans: Already on their 4th “holiday” of the summer
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The best risk mgr I ever worked with said "in a crisis, all correlations go to 1"
I've made this point before, but it seems likely that as crypto becomes a greater component of institutional/diversified portfolios, its correlation with other assets will grow, particularly in risk-off periods when investors need to raise cash by selling whatever's available.
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It's not a "fossil fuel"
it's aged, organic, all-natural, solar energy
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Random bit of career advice: one of the things you need to know--really know-- about yourself is how much you expect/want to be rewarded for effort and how much for results
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@mister_shroom
Yes. You have correctly described the MBA Type. I am not a fan of this type, nor am I defending them. I'm just saying that expecting anything different from them is like going into a bar and being upset at how hard it is to find teetotalers
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Remember:
McKinsey does not sell advice
McKinsey sells permission
McKinsey upped their data center forecast: now expect "83GW is up from ~56GW in from the prior September 2023 modeling. Overall McKinsey now forecasts US data center energy consumption in terawatt hours (TWh) rising to 606TWh in 2030, representing 12% of total US power demand.
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You will blame everyone except your own self for being unprepared for short gamma
And before you know it you will be mining ReichCoin with your 3rd videocard and shitposting Rothschild memes on 8chan while spaced out on the Xanax you stole from your teenage daughter’s hot friend
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This does not stop being true if you live in a high-cost city. This does not stop being true if your social circle makes more than you. This does not stop being true if you are 'behind' where your parents were at your age.
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It's so bizarre seeing nuclear power going from unreasonable negative fear vibes to unreasonably positive solve-all-problems vibes in 2-3 years without anyone at all explaining how the construction costs and timelines are going to be brought under control
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What's most jawdropping about the Ackman/BI fight is that Ackman was *this* close to overplaying his hand and being Petty Rich Jerk and now there's almost nothing he can do to look like the bad guy. When you have a beef with a man and you pick on his *wife* it's Deguello time
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Obligatory Throat Clearing:
You are indeed performing a valuable service
You *do* make capital market more efficient. They *do* need you to function well
You are Righteous Vigilante, policing the bullshit no one else will
But you need to understand the trade you’ve put on
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US median *household* income is ~75k. US median houshold, *conditional on a college degree* is ~120k.
200k is the cutoff threshold for top 12% of households, of which a substantial number are dual-income. If you by yourself are >200 you're well into the top 10%
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Joe Biden is the last vestige of the Kennedy-vintage Democratic party built around a base of blue collar Catholics
For Ds to get knifed by a union when he's on the way out, protected by his nostalgia for a coalition that no longer exists, is symbolically meaningful somehow
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The pager and walkie talkie thing is doubly awesome because not only are a bunch of terrorists getting what they deserve, it makes extremely clear to Americans why nothing made by Huawei should ever be permitted in backbone infrastructure systems
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"Naked short selling" is a phrase used exclusively by people who do not know what actually it means
What other phrases are like that?
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They don't have any memories of the 20 years it took their parents to get there, and so have a skewed sense of just how long you have to grind before deferred gratification pays off
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“Expiry” for an insolvent ShitCo is when they become *illiquid*. Only banks and trade shops go BK immediately because only they become *illiquid* immediately
Normal companies are not like that. Normal companies have fixed debt maturities and revolving lines of credit
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Everyone outside of that class had no idea that the competition was even ongoing. They showed up to the labor force having no clue they'd already been lapped 3 times by the striver kids before they turned 25
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@mister_shroom
Nope. I am not an MBA, for this exact reason. My point is merely that if you're looking at MBAs for an individual contributor who wants to earn their stripes, you're fishing in the wrong pond. The whole point of an MBA is to transition into social climbing corporate politics
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If the GOP had had the sense to nominate literally anyone else they would be looking at house and senate majorities big enough to basically redesign the government
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Being able to start a business without having to ask permission to see if it aligns with the 20-year plans of city bureaucrats is called "freedom"
Maybe a decade ago we shouldn’t have let the Uber tech bros just randomly start a taxi company without figuring out how that was all going to work for our towns?
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This is purely a gut feeling rather than any kind of serious analysis, but I don't think Europeans get how rapidly their place in the world is going to erode in the next few years, largely because they don't realize how quickly American interests are centering on Asia-Pac
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Time to expiry: 931 days
Did you really think execs with a captive board and vague performance targets will file before they have to?
NINE HUNDRED THIRTY ONE MOTHERFUCKING DAYS
That’s a looooong time ‘til midnight. Until then, you get to be short a 20-delta, 30-vol option
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Stocks for optimists, bonds for pessimists. Value vs growth investors
The options dichotomy is long gamma / short theta vs long theta / short gamma
Both styles make money, but most traders can only do one effectively. You have to know your natural style
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The power of Excel is the enormous number of things it does adequately without requiring knowing a programming language. For any particular thing you want to do there is a better tool, but none of them have anywhere close to the breadth of use Excel has
"Why Microsoft Excel won’t die" > because it has long been, and remains, the best piece of software ever written. I am always deeply sceptical of Excel haterz.
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One of the recurring features of bureaucracy is that they will enforce trivial but legible rulebreaking much more severely than egregious but illegible rulebreaking
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You will blame the Fed
You will blame dumb and/or greedy bankers
You will blame previous Fed presidents who have been gone for a decade
You will blame hopium-smoking bagholders
You will blame THE **UNCONSTITUTIONAL** FEDERAL RESERVE
You will blame Gypsies
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The WSB/GME business is a perfect distillation of populism: people with a vague but correct sense they get a raw deal but who respond with self-destructive nihilism aimed at purely symbolic targets because they are too ignorant and vain to prefer reality to self-righteous fantasy
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Unpopular take: I'm straight-up, unironically, pro- American imperialism. The world's either going to run by our rules or China's
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To summarize:
You lose money if the price of oil for Dec 2022 goes up
You lose money *at an increasing rate* if oil goes up
You lose money if the *volatility* of Dec 2022 oil goes up
You make money at the rate of 0.3 cents per barrel per day
That is your position
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Periodic reminder: one of the best risk-adjusted trades is finding a 3x levered & 3x-inverse levered ETF on the same underlying thing and short them both
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An Illustrative scenario:
$SHIT has with 80% prob an EV of $750M, but with 20% an EV of $1.25B. E[EV] = $850.
However it has $1B of debt. At expected value (and median outcome), the company is insolvent. Which is why you’re short it. The equity should be worth nothing
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You are a long gamma trader
You are in a short gamma trade
And it will drive you insane
Because being short gamma for two and a half years just to collect 0.3 cents per barrel per day is a shitty, shitty way to live
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Having done some merited slagging of MBAs, it's only fair I make clear the other side: who *should* get an MBA?
3 categories:
@mister_shroom
Why does that surprise or disturb you? The MBA degree is literally "Master of Business Administration". The entire point of the degree is to teach people how to be managers of businesses, not individual contributors to them. That's literally what an "MBA type" is supposed to be
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But that’s also not right, because options are not priced on expected value. They’re priced on volatility of the underlying and time to expiry. They’re worth quite a bit more than expected value.
The equity is not a 20% 1-shot chance but a 20 delta option
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No president could do this even if he wanted to. A modern president can never take even the slightest risk of becoming unable to command the nuclear deterrant
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One the things that was sociologically new about Millennials is that being the first generation raised after women entered high-achieving professions, it was the first to contain large cadre of people raised in double-professional-income households
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There is a general point here:
If you are a retail trader of *anything* you are completely, hopelessly outgunned by pros on the quantity, quality, and detail of data available from specialized vendors that you probably don't even know exist
Your edge has to come from elsewhere
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SADDLE UP, COWBOY
You may be short
But you’re in for a long ride
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A short gamma trade feels like prudently saving a little bit of money every day. Except every now and then a flashmob of delinquents pins you against a wall until each balltags you. They laugh because this shit is funny. Then they vanish with your wallet and the cops are nowhere
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This is the essential difference between investing and trading. If you don't put on risk until you've done enough homework to have p=.95, you miss the trade. Trading is about putting on risk at p=.6 when the market is only at p=.3, then adding as your confidence grows
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All that said, "We can stay retarded longer than they can stay solvent" is hands-down the quote of the decade
The WSB/GME business is a perfect distillation of populism: people with a vague but correct sense they get a raw deal but who respond with self-destructive nihilism aimed at purely symbolic targets because they are too ignorant and vain to prefer reality to self-righteous fantasy
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Is there a deeper humiliation for a CEO than to have the news of your resignation rally your stock?
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The earliest pieces of writing known to mankind are Sumerian agricultural forward contracts
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The simple guide to which private school in TX to send your kid when they don't make the top 6% cut for UT:
If they love Jesus: Baylor
If they love cocaine: SMU
if they love both: TCU
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Can someone explain to me why companies are piling into what appears to be unsecured, zero-interest consumer financing in a high inflation environment?
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As a big, longstanding fan of Michael Lewis I'm legitimately unsettled at the possibility he's Malcolm Gladwell
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@quantian1
The one thing I never understood is that there's a category of student who is so committed, diligent, and systematic about cheating that they could just learn the material honestly for half the effort
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He put on your trade, made the money you should have made, and YOU PAID HIM to do this
Because he is a hardened psychopath long-theta guy with a FUCKING TITANIUM sack
And you chose to be a neurotic pussy who overpays for tail risk
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RFK jr is one of the very, very few people whose career impact on the public discourse and public opinion in the United States is worse that Donald Trump's
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This is not to dunk but to highlight an important point:
There are a lot of jobs and careers that are the secular equivalent of going into ministry, but unlike actual ministry it's never made clear you're signing up for a life with around 1/3 the income of your social peers
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Gettting to run a TBill money market fund in a ~5% rate environment and not pay any interest to the fund shareholders because you called it a "Coin" might be the best scam-in-plain-sight I've seen in a long time
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An unfortunate and frustrating but very real phenomenon is that your first employer has replaced your school as the principal reputation filter people use to vet you. The rational, safe move is to maximize the prestige of your first employer, then later hop to something riskier
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I don't think there's any way to know for sure how Donald Trump would have handled the war in Ukraine, but the one thing I am absolutely certain of is that he would be apoplectic jealous of Zelensky being the star of it
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Who are you?
You are Righteous Vigilante, delivering to capital markets the justice no one else will. Vigilantes know in their bones justice must not only be merciless and dramatic enough to set an example, it must also be swift. Justice delayed is justice denied
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appreciate all the new follows but I need some time and some cigs before I can perform like that again
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Next, the revolver
10% drawn. Secured by the assets. 25 random regional banks, led by the Big Bank that also underwrote the notes and advised the M&A deal that’s sinking them. Renewed 2/15/2018, matures 9/15/2023
Fuuuuuuuuuuck
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An advice-for-youngins-starting-out thread, which I'll add to sporadically
1. Most industries are cyclical, and because booming industries hire the most aggressively and indiscriminately it is likely you are fated to get your start in an industry at a cyclical peak
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20-delta, 30-vol options with 931 days to expiry have meat in them. That’s why the market cap is $185m rather than $50m or $0
Ugh. OK.
Wait, where’d that vol come from? Back up further. What’s the underlying?
Oh, right… Duh
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If people three handovers later are still using your sheets, then you have built a legacy
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OK then. When’s expiry?
The fuck do you mean, “expiry”? It’s an insolvent company! It should be in BK!
RIGHT THE FUCK NOW
Oh, no. You silly child
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You have not understood just how much cognitive dissonance the human brain can handle without impeding functional operation until you've met a very good petroleum geologist who is also a young-earth creationist
On some level it's kind of amazing how well society functions despite people believing a lot of super dumb and fucked up shit.
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An idea I'm throwing against the wall to see if it sticks: is
"At age 40, could/can/will you be able to afford to live where you did at the age of 10?"
a reasonable benchmark for career over/under-performance relative to whatever advantages/disadvantages someone inherited?
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Selling big stake in family biz at the top, diversify to S&P, buy back family biz at lows when it's now acceptable concentration risk is Ultimate Dynasic Goals
Nordstrom Family Offers to Take Out All $JWN Minority Shareholders at . . . . (checks notes) the Current Price.
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