🍋 The Great Reorganization

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Short Squeez
February 04, 2022

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“Nothing works better than just improving your product.” — Joel Spolsky

Good morning and Happy Friday! Hope y'all staying warm with Winter Storm Landon wreaking havoc out there, having covered a 2,000 mile long stretch of the country in ice and snow. Nasdaq is really trading like a meme stock and was down 4%. Meta led the way with a 27% drop and lost $230 billion in market cap, the biggest one-day market wipeout in history. Inflation has hit Amazon Prime. Prime monthly membership is going up from $13 to $15, and annual memberships will be hiked to $139 from the current $119. Barstool vs Business Insider action is heating up. Business Insider doubled down on its allegations against Dave Portnoy and released a second incriminating article a day before his company ($PENN) released earnings. Dave Portnoy is not going down easy and says he will be suing, and won't settle.

1. Story of the Day: The Great Reorganization

It turns out that the "Great Resignation" that everyone is so worried about may not be named appropriately. Apparently, millions of Americans that want to quit their jobs would actually be willing to continue working for their current companies... just in different positions.

According to consulting firm Gartner, 1 in 3 people searching for new jobs in the past year actually attempted to find new roles where they already worked. 

Surprisingly, employees between 30 and 45 years old resigned at the highest rate, even more so than millennials. Probably due to more financial security, but wouldn't businesses want to hold on to experienced workers?

Apparently not. The same Gartner study says that hiring managers can be biased against people who already work at a firm, and put an emphasis on finding a fresh face. Only 17% of candidates trying to make moves internally found their managers helpful, and similarly, only 20% found their peers to be supportive. At the end of the day, your work bestie doesn't care if you stay or go after all.

Short Squeez Takeaway: The jobs pickle that we're in seems to have a pretty simple solution. Promote internally, and fill in the spots for those entry-level positions with people hungry to learn skills and get compensated fairly for their efforts. But y'all try telling that to businesses and boards that care a lil too much about the bottom line. Despite the loss in productivity, if it's cheaper to let you leave in the short-term, companies will be okay with riding by on this never ending cycle.

Source: Axios, HBR

2. Markets Rundown

Meta's mishap led the fall for large tech stocks which caused a ripple throughout equity markets. Cryptos were slightly up, but no significant movement.

Movers & Shakers

  • (+) T-Mobile ($TMUS) +10% after reporting higher revenue and customer additions.

  • (+) Humana ($HUM) +6% since reporting an EPS beat of $1.24 compared to a $2.30 loss a year ago.

  • (–) Snap ($SNAP) -24% falling with Meta and other social media stocks, but posted first profits and rallied after hours.

3. Top Reads

  • Investing lessons from the NFL Playoffs (Validea)

  • SPACs starting off whack (CNBC)

  • Short cut to "Richer, Wiser, Happier" (NI)

  • Are you spending on services or goods? (WSJ)

  • Find a Valentine's Day gift alternative... Flowers affected by supply chain issues (NYT)

  • Prepping for Category 6 Hurricanes (Axios)

  • What to avoid if you want to make money (WSJ)

  • Did Meta really do that bad? (II)

  • Long COVID symptoms include: Unemployment (Axios)

A Message from Daloopa: Let AI Do Your Financial Modeling

Here's a dirty secret: part of being a finance professional (investment banker, private equity / hedge fund investor) consists of being one of the world's best-paid data-entry professionals. It's a pain—and a rite of passage—to build a financial model by painstakingly transcribing information from 10-Qs, 10-Ks, presentations, and transcripts. Or, at least, it was: Daloopa uses machine learning and human validation to automatically parse financial statements and other disclosures, creating a continuously-updated, detailed, and accurate model.

If you've ever fired up Excel at 8pm and realized you'll be doing CTRL C Alt-Tab Alt ESV until well past midnight, you owe it to yourself to check this out.

4. Book of the Day: Debt: The First 5000 Years

Before there was money, there was debt. For more than 5,000 years, since the beginnings of the first agrarian empires, humans have used elaborate credit systems to buy and sell goods—that is, long before the invention of coins or cash. It is in this era that we also first encounter a society divided into debtors and creditors—which lives on in full force to this day.

So says anthropologist David Graeber in a stunning reversal of conventional wisdom. He shows that arguments about debt and debt forgiveness have been at the center of political debates from Renaissance Italy to Imperial China, as well as sparking innumerable insurrections. He also brilliantly demonstrates that the language of the ancient works of law and religion (words like “guilt,” “sin,” and “redemption”) derive in large part from ancient debates about debt, and shape even our most basic ideas of right and wrong.

Debt is an international best-seller that turns everything you think you know about money, debt, and society on its head.

“As it turns out, we don't "all" have to pay our debts. Only some of us do.”

5. Short Squeez Picks

6. Daily Visual: Where's it cool to be short?

Sector breakdown of where short sellers have positions

Source: Axios

7. Daily Acumen: Think Probabilistically

Mathematical psychologist and a collaborator of Daniel Kahneman, Amos Tversky once said that in dealing with probabilities, most people only have three settings – “gonna happen,” “not gonna happen,” and “maybe.” You won’t be able to achieve much success as an investor if you consider probabilities of future outcomes using just these three settings.

One must constantly seek an edge, which can come from a sound process of making decisions rather than the outcome alone. The reason is that a particular outcome may not be indicative of the quality of the decision. Good decisions sometimes result in bad outcomes and bad decisions lead to good outcomes. Over the long haul, however, good decisions portend favorable outcomes even if you will be wrong from time to time.

Great investors recognize another uncomfortable reality about probability: the frequency of correctness does not really matter (batting average), what matters is how much money you make when you are right versus how much money you lose when you are wrong (slugging percentage). 

This concept is very difficult to put into operation because of loss aversion, the idea that we suffer losses roughly twice as much as we enjoy comparably sized gains. In other words, we like to be right a lot more than to be wrong. But if the goal is to grow the value of a portfolio, slugging percentage is what matters.

When you have a sound investment process and are able to understand the underlying business well, that is when you can make better probabilistic decisions. 

8. Crypto Corner

9. Memes of the Day

 

 

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