🍋 Razor Blade Trade

Short Squeez
March 01, 2022

Together With

"By the age of 7, 80% of my activities outside were business." — Gary Vaynerchuk

Good morning! Russia's invasion of Ukraine forced even the notoriously neutral Swiss to adopt sanctions against Russia. Ukraine applied for immediate membership and support from the EU while Russia closed their stock market after the Ruble went into free fall, and their central bank doubled interest rates to 20%. The teen famous for tracking Elon Musk's jet has a new target: Russian oligarchs. You can follow along here. Airbnb is doing their part to help and is offering to house 100,000 Ukrainian refugees. In local news, Target is raising top base pay to $24/hour as the battle for hourly workers heats up. A start-up, Biomason, is promising to "grow" cement and has raised $65 million.

Today's sponsor M1, a Finance Super App, allows hassle-free, distraction-free, and management fee-free way to easily invest, borrow, and spend your money. All you have to do is decide on a strategy, then go on livin’ your life while M1 takes care of the day-to-day. 

1. Story of the Day: Razor Blade Trade

ETFs have been a staple in retail investor portfolios for quite some time now. While most people might see them as simple passive investment instruments, retail investors have found their way into leveraged versions of the products to amplify returns. (ah sh*t here we go again)

Leveraged ETFs are built to provide investors 2-3x of the daily gain or loss of the index they follow. On the surface they might seem simple and easy to understand but in reality they are complicated instruments.

They're designed to deliver performance over a single day. Over a long period of time, you could actually be underperforming the index you're tracking. Dave Nadig, CIO of ETF Trends said, "What we usually tell financial advisers is, if you're going to use those things, recognize you are reaching into the drawer full of razor blades."

Regulators are afraid that a lot of retail investors don't understand the intricacies and risks of the products. Looking at how meme-stocks and crypto have played out, it's pretty obvious that retail investors have no problem putting their money into assets they may not fully understand.

Since 2018, global assets in leveraged and inverse products almost doubled to $128 billion. In the US, there were inflows of $32 billion in 2021, causing a 55% jump to $89 billion. What's crazy is those numbers might even be lowballing, as cash revolves in and out of these ETFs like a merry-go-round.

Ashley Howie, a 31 year old real estate agent in California, spends her free time breeding butterflies and buying into the risky investments. "My parents are not in the stock market and they're terrified for me." (as they should be...)

Short Squeez Takeaway: The stock market has always been full of stories where people get rich doing something that anyone can do, and that's why All American Average Joes love it. The problem is they might be approaching these more complex instruments with a very misconstrued perception. Leveraged ETFs aren't blue chip stocks that benefitted from govt stimmys and low-interest rates of the past few years. Predicting daily movements of the stock market is probably harder than finding a sh*tcoin that isn't sh*t. In a turbulent geopolitical climate, on the back of hyper-inflation and incoming rate hikes, choppy markets could lead to bloody waters for retail traders. (it's officially kangaroo szn)

Source: Bloomberg

2. Markets Rundown

As you might imagine, markets were mixed given the everchanging situation in Ukraine. People are leaving stocks shifting to safe haven assets sending bond yields lower, and possibly contributing to rise in crypto.

Movers & Shakers

  • (+) Renewable Energy Group ($REGI) +40% on news that Chevron will purchase the Iowa based company for $3.15 billion.
  • (+) First Horizon ($FHN) +29% after they announced they're also being acquired, in this case by Canadian TD Bank for $13.4 billion.
  • (–) EPAM Systems ($EPAM) -46% because the company that makes software in Ukraine said they'll be withdrawing financial forecasts for the first quarter and all of 2022.

3. Top Reads

  • Toyota will shut down all Japan plants because of supplier computer issue (WSJ)
  • Consumer watch dogs keeping an eye on abusive auto repos (MW)
  • GM calls on former Cruise co-founder to lead the business again (CNBC)
  • Bill Ackman says the US should be prepared to do more in Ukraine (Fox)
  • Derek Jeter stepping down as CEO of the Miami Marlins (Fox)
  • New data says Pfizer is not nearly as effective in younger children (NYT)
  • Samsung employees want a pay bump after record revenues (WSJ)
  • SpaceX's Starlink satellite internet dishes made it to Ukraine (CNBC)
  • Public health erred on the side of catastrophe (ZH)

A Message from M1 Finance: Get Serious About Investing With M1

M1 Finance isn’t for the day trader or the uninvested investor. It’s for the self-directed money manager who knows exactly how they want to invest, but doesn’t want to deal with bloated, confusing finance apps.

M1 doesn’t believe that speculating and day trading is a viable path to building long-term wealth, so they built a hassle-free, distraction-free, and management fee-free app to easily invest, borrow, and spend.

All you have to do is settle on a strategy, automate it, and then go on livin’ your life while M1 takes care of the day-to-day.

Investing involves risk, including the risk of loss. M1 Finance LLC, member FINRA/SIPC.

4. Book of the Day: Twelve and a Half: Leveraging the Emotional Ingredients Necessary for Business Success

For decades, leaders have relied on “hard” skills to make smart decisions, while dismissing the importance of emotional intelligence. Soft skills like self-awareness and curiosity aren’t quantifiable; they can’t be measured on a spreadsheet and aren’t taught in B-schools or emphasized in institutions. We’ve been taught that emotional intelligence is a “nice to have” in business, not a requirement. But soft skills can actually accelerate business success, Gary Vaynerchuk argues. For analytical minds, it’s challenging to understand how to get “better” at being self-aware, curious, or empathetic—or even why it’s important to try. 

In this wise and practical book, Gary explores the 12 human ingredients that have led to his success and happiness and provides exercises to help you develop these traits yourself. He also shares what the “half” is—that emotional ingredient of leadership he’s weakest at and makes the most effort to improve. Working through the ideas and exercises in the book, he teaches you how to discover your own “halves” and offers insight on how to strengthen them. 

Gary’s secret to success is using these twelve traits in varying mixtures, depending on the situation. But how do we know when to balance patience with ambition? Humility with conviction? Gary provides real-life examples involving common business scenarios to show you how to use them together for optimum results. 

This iconoclastic book will help you refine your ingredients and improve your leadership capabilities. When implemented in the proper situation, these ingredients can help leaders land promotions, retain core employees, move faster than competitors, win the loyalty of customers, and build successful organizations that last.  

“You don’t want what other people want, so why do you care about what they have?”

5. Short Squeez Picks

  • Skillful is launching a Tech Discovery Weekend. You'll find your dream role, nail job interviews and meet mentors from companies like Stripe and DoorDash. Sign up today
  • We're running out of time to save our future
  • Real personal income down for 8th time in 9 months
  • Brave Wallet is a secure crypto wallet built natively in a web3 browser. No extensions required. Store, manage & grow your portfolio, get NFT & multi-chain support, and more
  • Is reality a hallucination?

6. Daily Visual: American Fast Food in the Conflict

Number of locations by restaurant across Russia and Ukraine

Source: Axios

7. Daily Acumen: Failure

Failures are the stepping stones to success. Without failure, we’ll never learn how to succeed. So try to fail, instead of trying to avoid failure through fear.

Unlike us adults, children don’t know the possibility of a failure, so they happily keep falling down until one day they take a few steps, and then a few more. Before long, they’re jumping and running. All their trying pays off.

They fall but never fail. As grown-ups, what if we also simply choose not to fail?

8. Crypto Corner

  • Soccer teams' tokens rally thanks to partnership with UEFA
  • Very hard for Russia to use crypto to get around sanctions... at scale
  • First El Salvador, now Senegal?
  • Ukraine's coming after Russian accounts on crypto exchanges
  • US Treasury Department formally adds crypto rules to sanction guidance
  • Metaverse land sales holding steady

9. Memes of the Day

        

              

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