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- 🍋 This CEO Likes Inflation
🍋 This CEO Likes Inflation
Short Squeez
April 14, 2022
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"The lesson of Buffett was: To succeed in a spectacular fashion you had to be spectacularly unusual." — Michael Lewis
Good Morning! Elon Musk is being sued by another Twitter shareholder for allegedly making "materially false and misleading statements and omissions by failing to disclose to investors" the fact that he owned stock in Twitter. You can lease an apartment, a car, and apparently, a dog. In Massachusetts, the AG Maura Healy wants to crack down on dog leases where people pay monthly to have a pet. In a settlement Wednesday, a California company agreed to waive $700,000 worth of payments due from 211 dog leases. Beefy Boyz have entered the chat. The CEOs of the largest beef producers are set to testify before Congress in regards to rising prices.
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1. Story of the Day: This CEO Likes Inflation
CEO of Rent the Runway, Jennifer Hyman, says the company will rake it in as customers are looking for value and stability during these times of high and erratic inflation. On top of that, the record amount of weddings this year, which we reported on earlier, will be a huge boost to the business.
Americans are being hit where it hurts with higher gas prices, higher grocery bills, and of course higher price tags on their favorite clothes. Rent the Runway presents a more affordable option in a lot of cases. I mean, it's still important to look like a million bucks, even if a million bucks isn't worth what it once was.
The company plans on raising prices for membership plans as they have to pass down their own increased costs somehow. However, they are very positive on near-term outlook. "We're entering into one of the strongest environments for rental we've ever seen. The inflationary environment is basically a competitive advantage for Rent the Runway," said Hyman.
Yesterday, the company reported fiscal Q4 revenue that beat analysts expectations, and a smaller than expected loss. Shares fell almost 4% after rising roughly 10% in after hours trading. The stock is down around 31% YTD, making the current valuation $360 million. With hybrid work, summer around the corner, and all those weddings/parties around the corner, there could be some good business headed their way though.
Short Squeez Takeaway: The business model seems to correlate with the experience economy that has exploded in recent years. People say they'd rather go see a show than buy a new video game console. Rent the Runway interestingly combines the two, with your experience being the rental of a very superficial... I mean nice physical product. With fees ranging from $94 to $235 a month, it's still not exactly shopping at the Bargain Bin, but in the current environment, it might make more sense than paying that much for one dress that will barely get worn to WFH. Users see that considering their number of subscribers is up 110% to 115,240 from a year ago.
Source: CNBC
2. Markets Rundown
All markets rebounded after a rough couple of days. Inflation is still on everyone's minds, but Treasuries were a bit softer yesterday.
Movers & Shakers
(+) Antares Pharma ($ATRS) +49% after the company agreed to be bought by Halozyme Therapeutics for $960 million in a cash deal.
(+) Sierra Oncology ($SRRA) +39% because GlaxoSmithKline is buying the firm for $1.9 billion.
(–) Genius Group ($GNS) -36% in a correction after soaring on their trading debut a day ago.
3. Top Reads
Dubai making a major IPO push (Axios)
Stagflation risks bring out the hedges (BB)
Inflation may have peaked already (Axios)
Starbucks set to expand worker benefits to all but unionized staff (WSJ)
Americans flying to plane tickets despite price increases (Axios)
Beauty firm L'Occitane has kept Russian stores open (BBC)
Corporate profit is beyond what we've seen, and should keep growing (MW)
Bird flu hit the top US egg region (BB)
Traders are getting ready for $2 trillion option expiration (BB)
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4. Book of the Day: The Signal and the Noise: Why So Many Predictions Fail - but Some Don't
Nate Silver built an innovative system for predicting baseball performance, predicted the 2008 election within a hair’s breadth, and became a national sensation as a blogger—all by the time he was thirty. He solidified his standing as the nation's foremost political forecaster with his near perfect prediction of the 2012 election. Silver is the founder and editor in chief of the website FiveThirtyEight.
Drawing on his own groundbreaking work, Silver examines the world of prediction, investigating how we can distinguish a true signal from a universe of noisy data. Most predictions fail, often at great cost to society, because most of us have a poor understanding of probability and uncertainty. Both experts and laypeople mistake more confident predictions for more accurate ones. But overconfidence is often the reason for failure. If our appreciation of uncertainty improves, our predictions can get better too. This is the “prediction paradox”: The more humility we have about our ability to make predictions, the more successful we can be in planning for the future.
In keeping with his own aim to seek truth from data, Silver visits the most successful forecasters in a range of areas, from hurricanes to baseball to global pandemics, from the poker table to the stock market, from Capitol Hill to the NBA. He explains and evaluates how these forecasters think and what bonds they share. What lies behind their success? Are they good—or just lucky? What patterns have they unraveled? And are their forecasts really right? He explores unanticipated commonalities and exposes unexpected juxtapositions. And sometimes, it is not so much how good a prediction is in an absolute sense that matters but how good it is relative to the competition. In other cases, prediction is still a very rudimentary—and dangerous—science.
Silver observes that the most accurate forecasters tend to have a superior command of probability, and they tend to be both humble and hardworking. They distinguish the predictable from the unpredictable, and they notice a thousand little details that lead them closer to the truth. Because of their appreciation of probability, they can distinguish the signal from the noise.
“We have a prediction problem. We love to predict things - and we aren’t very good at it.”
5. Short Squeez Picks
Thousands of Etsy sellers are shutting up shop this week to protest against a 30% increase in fees charged by the online marketplace. Modeling guru, Daloopa giving away ETSY's detailed financial model for free if you want to do some analysis yourself, and see how this will affect the stock price
Tech workers are fleeing Russia
Substack moving from the background, to the front lines
6. Daily Visual: What Recession?
US GDP, Quarterly from Q1 2018 - Q4 2021
Source: Axios
7. Daily Acumen: A Few Lines to Make You Think
Everything feels unprecedented when you haven’t engaged with history.
My definition of wisdom is knowing the long-term consequences of your actions.
The best arguments in the world won’t change a single person’s mind. The only thing that can do that is a good story.
Comforts, once gained, become necessities. And if enough of those comforts become necessities, you eventually peel yourself away from any kind of common feeling with the rest of humanity.
All behavior makes sense with enough information.
Young brains are designed to explore; old brains are designed to exploit.
8. Crypto Corner
9. Memes of the Day
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