Some things and ideas: February 2022
Some random thoughts on articles that caught my attention in the last month. Note that I try to write notes on articles immediately after reading them, so there can be a little overlap in themes if an article grabs my attention early in the month and is similar to an article that I like later in the month.
My monthly overview (Monthly recurring piece)
I consider YAVB my “empire” with four core pieces: this blog / substack (the free side), the premium side of this blog, my podcast (also on Spotify, iTunes, or YouTube), and my twitter account. You can see my 2022 vision and goals for the empire here. If you like the blog / free site, I'd encourage you to check out the pod, follow me on twitter, and maybe even subscribe to the premium site!
I try to be as helpful as humanly possible to anyone whose research / writing I enjoy. In almost every post I do, you'll notice I link to other subscription services or investors who I like. I don't get referral fees or anything for that; these are almost always organic links and highlights that I do not because I was asked to but because one of my goals with the (very small) platform I have is to shine light on other people who are doing good work and make sure they have a platform big enough to encourage them to keep doing good work!
If you're launching a subscription service, or a new blog, or you're an investor who has done some really good research and wants to get some more eyeballs on it, please drop me a line and let me know. If the quality is there, I would love to link to your blog post or subscription service or research (and if the quality isn't there, I'm happy to provide feedback! I have done so with several services and I think my advice is good / appreciated / helpful!), and I'd love to have you on the podcast to talk about all of it. I can't promise anything, but most podcast guests / people I've linked to have been very happy about the reception / feedback they've gotten (I've even been called the king of the sub bumps / almost as good as Twitter / a big sub bump, and I've generally heard from investors with LPs who come on the podcast that they're delighted by the response). My DMs are always open, so feel free to slide into them if I can be helpful!
Russia, going slow when the world is panicking, and a reminder that anything can go to zero overnight
I did a mini-thread on this thought, but wanted to expand a little further. The Russian ETF is down about 50% in five trading days (and, honestly, I’m surprised it’s not worse given the degree of sanctions over the weekend, though I have absolutely no expertise here!).
It’s a wild drop, and I think it’s interesting that it happened so fast. We’ve known for months that Russia was putting troops on the border of Ukraine, but the ETF didn’t start really falling until the invasion had literally started happening.
I’m not a macro expert and I’m not going to pretend to be, but the super quick drop did remind me of a few things.
First, look at the chart of the RSX above. Again, despite all the warnings, the ETF didn’t really drop until the Russians actually went into Ukraine.
My takeaway: This reminds me of COVID back in Feb. 2020. If you were paying attention, you knew there were huge risks, yet the market barely had sold off and vol was low. One thing I’m going to be pressing myself harder on hoing forward: when there’s a situation with a big tail (either upside or downside) and the market has barely moved, I’m going to look harder. My instincts are always “o, that’s down 5%; it’s priced in.” But here we’ve got two earth shattering global events (COVID and the Ukraine invasion), and the market clearly hadn’t priced them correctly until the world was actually in the throes of the crisis.
Second, it’s a reminder that anything can go to zero overnight. I know that seems trite, but it’s easy to forget the world has massive tail risk. RSX just shows it to me a little more; I mean, an entire country’s ETF going down 50% in five days! I know that you take that type of risk with emerging markets, but to see it happen in real time is a powerful reminder.
My takeaway: I’ve been particularly thinking about this as it relates to China. I haven’t done much investing in China (a few small special situations) for a variety of reasons, but the rapid drop in RSX makes me think about the chances we have that happen in China one day.
You can apply that thinking to domestic stocks too. Lots of people (including me sometimes) like to look at a stock and say “well, it’s at $25; if things go wrong it trades to $20, if they go right it goes to $40. $15 up, $5 down for a 3:1 risk/reward.” That can be a useful framework, but this is a reminder that the downside is always zero in a tail case!
It’s also a reminder that things can go way, way worse than you expect quickly, and your money is always at 100% risk in the stock market. Think of all the companies that have reported earnings this year and seen their stocks drop >20%; the second you put capital at risk in the market, all your money is instantly at risk. I can’t tell you the number of times I’ve taken a small position and said “looks like a good risk / reward; I’ll put a little on and keep ramping up” and watched the position get cut in half in no time. Maybe it suggests I shouldn’t be putting those small positions on (though there have been some that really worked too!), but just a reminder that small speculations can really add up if they get crushed and they absolutely can!
Third, I know a lot of people who “bought the dip” on RSX last week and have gotten slaughtered. I’m not here to dunk on them; Lord knows I’ve made worse trades! Plus, it’s still early; it’s never fun to be down 50% on a position, and it’s hard to see a way this snaps back to break even or better in the short term, but it’s possible! Anyway, not trying to dunk on anyone, but I do think that a lot of people who bought the “Russia dip” had very similar political and world views that probably skewed them to believing Russia would be a winner in all this because their leaders are “strong” and the West’s leaders are “weak” / not trusting what the Western world was telling them. We all bring our own biases into every investment we make or action we take, but the Russia situation was probably a little more overt than normal and the quick initial drop fog of uncertainty probably exasperated it in this case (If something’s down 20% in a day, it’s way more tempting to quickly give in to biases and say “buy now before it snaps back!”; if something’s down 20% over a few months, it’s easier to take it slow, think things through, and do lots of work on it because you don’t feel that same pressure that the thing is going to snap back instantly).
My takeaway: I’m certainly not a political or macro expert; maybe you are. But if you’re not, don’t trade on macro / politics. And, if you are, make sure you’re actually trading macro / politics, and not just buying into what your political believes are. And if something down huge in a day, it might be a sign to step back and think the situation through a little further, not quickly buy the dip before it snaps back!
I think something similar could apply to big drops in stocks you own. A lot of time, the instinct is “this is an irrational panic; buy the dip!” Sometimes that works out…. but maybe big drops should be met with a “I can’t trade this for 48 hours; I need to coolly recollect my thoughts and reassess this position.” IDK, I can see an argument for both sides (I’m assuming you’ve already done tons of work on the company, so you could argue you should know exactly where the market is wrong on a big drop, or that you really do need to go back to the drawing board and reassess).
Anyway, nothing new here, but good reminders. I’ve been tihnking about it with my own portfolio recently. I run reasonably concentrated, but I’ve got a few smaller event trades. One of them is NTP, which I wrote up earlier this year. The stock had gotten hammered when I wrote it up, and I put a small position on thinking it was from forced selling and “the bottom was in.” Guess what? Since then, things have gotten worse, and the stock is down >30%. Obviously, that could change, and there’s a lot of asset value at NTP if shareholders are allowed to realize it, but I can’t help but look at the fact pattern and know that I was attracted to NTP only because of the quick drop / forced selling angle.
And the funny thing is: this could all be recency bias when saying “think slow”. When I tweeted this out as a thought bubble, several readers pointed out (and I remembered!) of several examples where the right answer was not “act slow” but “the market is way under reacting to this; buy / sell everything now!”
Bottom line: Investing is hard.
A mini-rant / you can tell someone to go to hell tmr
One of the most frustrating things about having a (small) public presence is the negative feedback you get from random strangers. Every now and then, I’ll do a post on a company and I’ll get an email from someone that says "“I don’t care about that company; never mention them again.” It’s just so frustrating; these are random strangers who are reading free content that they voluntarily signed up for and they’re telling me what to write (or not write) about.
Anyway, my temptation is always to tell them to go to hell. But, a quick reminder for both myself and any readers out there who find themselves in a similar situation: you can always tell someone to go to hell tomorrow. The internet is a big place. Don’t read the comments, delete negative commentary from people you don’t know, and just move on.
PS- sort of unrelated, but while I’m complaining: another thing I’ll often find is the most vocal negative people on articles often haven’t bothered to read them.
This is a small example, but for my cable deep dive someone said “I wish you’d put a tl;dr in these posts”…. there was a tl;dr literally in the fifth paragraph in bold type.
When I posted on retailers, I got dozens of responses saying “can’t use trailing numbers because of the COVID environment!” That risk was discusses extensively multiple times in the post, and many of the things people were telling me to watch out for in terms of trailing numbers were specifically addressed throughout the post.
Spending time with loved ones (How Covid Stole Our Time and How We Can Get It Back)
Ok, that was kind of depressing. So let’s bring it back up for a second. I’ve read variations on this theme before, but this article was really powerful to me talking about how precious time is and making sure to invest / appreciate it when you can spend time with your loved ones.
Sports Rights follow up
Last month I mentioned sports rights as undervalued for streaming services. Right after I posted, I saw this article on Disney+ and other services getting waves of subs from movies and having trouble keeping them after.
The price for sports rights have been rising. But sports rights give you a huge amount of content that will make passionate fans sign up for your service and keep them coming on a weekly basis. Compare what you would pay for a sports rights outside of the NBA / NFL to the cost of making a view movies, and I continue to think sports rights are dramatically undervalued.
Podcasts (Monthly recurring piece)
I launched the Yet Another Value Podcast in August 2020 and provided a longer piece on my vision for the podcast at the start of 2021. They've been a blast so far.
A big update: I have created yetanothervaluepodcast.substack.com; I’ll be posting each podcast there as well as a transcript of the podcast. Would very much appreciate feedback on the site if you have any; I’m still trying to figure it out!
This month’s podcasts
I also went on TIP podcast; we discussed DISCA as its deal near the finish line and my top predictions for 2022.
Nerd Corner (Monthly recurring piece)
There’s no hiding it; I’m a massive nerd. I read 3-4 fantasy books a month, my favorite past time is playing board games with my wife and friends, and I religiously watch every new entry in the Marvel Cinematic Universe (MCU) and listen to fantasy show recaps on Binge Mode (so much so that I even did a Twitter Space talking about the MCU!). I figured a few of you are nerds like me, so I’m starting this segment to give recs of what I’m nerding out over currently, with the hope that you’ll either try it and enjoy it or recommend me similarly nerdy things that I’ll enjoy. This month’s recs:
Well, unfortunately, I looked at everything I read and watched this month…. and I don’t have any recs! A lot of dry holes this month. I’m starting a few new series this month, so hopefully I have something next month.
In the meantime, if you have any recs, I’m very open to them! Some of the best series I’ve read have been recs from readers, and I generally get through ~5 books a month so I should be able to squeeze recs in an some point.
Other things I liked (Monthly recurring piece)
Nothing crazy new from the podcast I did with Artem on Burford, but still enjoyed!