The Ramp Report

The Most Important Election of our Lifetime

Ramp Capital — Mon, 29 Jul 2024 14:00:00 +0000

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Can I say something without everyone getting upset?

Not anymore.

This seems to be the reality of every political conversation in recent memory. As we approach the 2024 Election, the polarization between political tribes only deepens. Each disagreement is seen as hostile or confrontational. Voting choices often reflect deeply held personal beliefs and values, so criticism can feel like a personal attack. Social media has amplified these feelings, turning political discourse into a battlefield.

The turning point seemed to come during the 2016 Election. Trump upended the decorum of debates, transforming them into something resembling a reality show rather than a respectful discussion about our nation’s future. This shift resonated with a significant portion of our society, revealing a preference for more sensationalized political interactions. Even during the most recent debate, Trump and Biden were arguing about their golf handicaps (which to be honest was quite humorous).

The polarization was further fueled by the failure of our partisan mainstream media. Watching Fox News and CNN tear each other apart is exhausting, and even more so are the viewers who consume these sources as absolute truth. You can easily spot these media consumers in conversations:

“Did you see what Biden said the other day? Dude is a vegetable. Who is running our country? Have you seen the border? It’s a mess.”

“Trump is literally Hitler. He’s going to put all of us in encampments if he wins. How can people vote for a convicted felon?”

These dialogues focus on denigrating the other side rather than building up their own. It would be far more productive to discuss the wins of their chosen party, those who can create the most jobs, fix homelessness, improve healthcare, or lower the price of medicine and groceries.

Transitioning from this contentious environment to a more personal perspective, I haven't decided who I'll vote for yet. Over my voting career, I've supported Democrats, Republicans, and Independents because the world changes and so do my views. Some people overcomplicate it, believing they must remain unwaveringly loyal to their party, which drives polarization further to the extremes. Every election season, I simply reassess my priorities and try to align with the candidate whose platform resonates with me the most.

There are tools to help with this decision. Isidewith.com is a popular quiz that seems non-biased on the surface. I took a shortened version recently, and my top candidate turned out to be Joe Exotic, the Tiger King . I didn't even know he was running!

When I have more time, I'll do more research to find a candidate I feel comfortable with. Maybe it will be an independent, and that's fine. I don't buy into the wasted vote argument, even though the Electoral College makes it virtually impossible for an Independent to win in our current two-party system.

Assuming Kamala Harris gets the nod, this election could feature the most disliked candidates since Trump and Clinton in 2016, when Independents secured 5.14% of the popular vote. RFK Jr. has garnered more attention than any Independent in recent memory. He has really leaned into his family history, social media, and making the rounds on podcasts and interviews more than I’ve ever seen. Assuming he continues to run as an Independent, I predict we will see the highest Independent vote since 1996, when Ross Perot and other Independents collectively earned 9.48% of the vote.

For those who’ve been on the fence for voting Independent, consider the following points. Voting for an Independent candidate allows voters to support someone who truly aligns with their values and beliefs, rather than settling for the lesser of two major-party candidates. It also sends a message to major parties that there is significant support for alternative policies and perspectives, potentially influencing future platforms and candidate selections. Moreover, supporting independent candidates can promote a more diverse and representative political landscape, breaking the dominance of the two-party system.

To be clear, this is not an endorsement for an Independent vote. Just rehashing some recent conversations with friends about the pros/cons of the wasted vote theory. I live in a state that is about as red as it comes but that will not stop me from voting for the candidate who most represents my beliefs.

As we head into the election, there are few key takeaways to consider (and a reminder to myself):

Vote for Whomever You Want: It might seem obvious, but you shouldn't feel pressured into a decision based on external factors. Go with your gut. Go with your heart. It is nobody’s business but your own. Whether it’s a friend, family, or a stranger, respect the decision of others and be open to their stance. You don’t know their life history or their struggles or what’s most important to them.
We Will Be Fine No Matter the Outcome: There will be ups and downs, but we will adapt, adjust, and yes, complain. This is also why the system ebbs and flows between the different parties over the years. Things go too far left then start swinging back to the right; then they go too far right and start swinging back to the left. It’s when we hit that midpoint in the cycle where it seems like we start reaching across the aisle more. That’s part of the process. Go into the vote with an optimistic and patriotic attitude.
Slow Down on the News Consumption: Even if you’re not consuming traditional mainstream media information, you’re probably still exposing yourself to too much political news that is wreaking havoc on your mental health. Walk the dog. Play golf. Do something productive in your life that you can actually control the outcome of.
Truth Lies Somewhere in the Middle: Every time you hear a story or read something online about your favorite candidate or their opponent, automatically assume it’s not as bad or good as reported and that the truth lies somewhere in the middle.

In the end, we must remember that our democracy thrives on diverse opinions and robust discussions. It’s okay to disagree, as long as we strive to understand and respect each other’s perspectives.

As Martin Luther King, Jr. wisely said, "We must learn to live together as brothers and sisters or we will perish together as fools." Let’s keep this in mind as we navigate the turbulent waters of this election season. Our ability to engage in civil discourse and respect each other's viewpoints is essential for the health of our democracy.

Ultimately, it's not just about who wins or loses; it's about how we come together as a nation to address our common challenges and build a better future for all.

🫡 🇺🇸

Unplug to Recharge

Ramp Capital — Fri, 31 May 2024 15:37:06 +0000

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This year has changed me in many ways. Transitioning to a full-time remote worker has brought immense happiness and flexibility into my life. Yet, it has also entrenched me deeper into the digital world, as it has for many of us. With every aspect of our lives increasingly intertwined with technology, I began to reflect on what I truly wanted—and didn’t want—from my work and personal life.

I didn’t want to wake up 30 years from now, in a digital haze, trying to figure out if I provided any real value to the world. I wanted to create memories and connections outside of the screen. This introspection led me to a book that had been collecting dust on my shelf for years: Cal Newport’s Digital Minimalism.

Reading this book wasn’t a profound revelation, but rather a powerful reminder of how much our lives have become dominated by the digital realm. It also nudged me towards a return to my analog roots.

Picture this: you spend your day in virtual meetings or working on a computer. You come home and “unwind” by watching TV, playing video games, or endlessly scrolling through social media until bedtime. Then repeat the cycle day after day, week after week, until time suddenly slips by and you wonder where it all went. Sound familiar?

The convenience and allure of screens have a strong grip on our daily routines. At first, it seemed impossible to break free from this digital cycle. But I knew I had to make a change. I started with small steps towards reducing my screen time. Instead of reaching for my phone first thing in the morning, I began my day with a book or a quiet moment of reflection. Gradually, these small changes started to add up, leading to a significant shift in how I spent my time.

Determined to break free, I decided to limit my digital device usage. As a result, I’ve rekindled my love for several analog activities:

Reading more books: There’s something profoundly satisfying about turning the pages of a book, feeling the paper between your fingers, and getting lost in a story without the constant distraction of notifications. I’ve even been taking weekly trips to the local library.
Getting more sleep: Without the constant blue light from screens, I’ve found it easier to wind down at night and enjoy a restful sleep.
Gardening: Watching plants grow from seeds to fully grown plants has taught me patience and the joy of nurturing life.
Woodworking: Creating something tangible with my hands has brought a sense of accomplishment and a break from the intangible digital world.
Doing projects around the house: Simple tasks like fixing a leaky faucet or painting a room have become meditative and rewarding. House projects may be tedious, but they give me a reason every day to unplug.
Walking the dog without any digital distractions: These walks have become a time for me to clear my mind and connect with my surroundings. Try doing this without your phone or headphones. Instead of listening to a podcast or music, just listen to your surroundings and be present in the moment.
Cooking: Experimenting with new recipes and savoring the process of creating a meal from scratch has become a fun new ritual. Mixing in some of the fresh vegetables and herbs I’ve grown is an added benefit.
Spending quality time with my kids: Being present with my children, without the constant pull of my phone, has deepened our connection. More time spent reading, playing board games, and teaching them new things.
Journaling with pen and paper: Writing my thoughts by hand has helped me process my emotions and reflect on my day.
Working out more: Physical exercise has not only improved my health but also provided a much-needed break from screens.

These activities may sound basic, but fitting them into a day dominated by screen time is still surprisingly difficult and takes a dedicated effort and commitment. Limiting my digital interactions has also meant less blogging. Though I enjoy writing about current events, I’ve realized how much time it steals from these enriching analog pursuits. It has also been more difficult to blog when I don’t feel like I’m always connected to the latest news on X and consuming it in shorter bursts.

The turning point for my switch to analog came when one of my kids remarked on my constant phone use. My initial reaction was defensive, mixed with a sense of shame and embarrassment. I never wanted to be that parent who relies on an iPad to entertain their kids at a restaurant, yet I was guilty of constantly checking my phone in their presence, which felt hypocritical. Also, I know their young brains are watching the way I interact with my digital devices and absorbing everything I do. So I want to be careful around them to instill good digital habits.

To curb my own digital habits, I bought a simple timed lock box. Now, when the workday ends and the kids are home, we lock our phones away until they’re in bed.

At first, I yearned to check my phone may times. But over time, I realized how unimportant most messages, emails, and social media updates truly are. They can also be condensed into short viewing windows so that you aren’t constantly bombarded and distracted from alerts and pings.

Practicing mindfulness and staying present is nearly impossible when you’re always flipping through digital tasks. Embracing analog activities has allowed me to be more meditative and grounded, while also honing new, rewarding skills.

I’ve become so immersed in the digital world that I now seek any excuse to step outside and engage in hands-on activities. Whether it’s gardening or woodworking, these simple, tactile experiences have brought back the joy I felt before our lives were consumed by screens and digital connections.

In rediscovering these analog joys, I’ve found a sense of fulfillment that the digital world can never replicate. It’s a return to the simple, meaningful moments that ground us and make life truly rich.

As I continue this journey, I hope to inspire others to find their own path back to the analog activities that bring them joy and peace. In doing so, we can reclaim a piece of ourselves that the digital world has overshadowed, finding balance and contentment in the process.

It’s time to unplug to recharge and reconnect with reality.

_{*This is a paid advertisement for Going Public. All solicitations of investors to buy securities are being made by, and all information included on the series and the website relating to the issuers and their securities has been provided by and is the responsibility of, such issuers. Should a person choose to invest or attempt to invest in an issuer, all such sales will be effected by the issuer. The company and the sponsors have no role in effecting such transactions. On Going Public, you will hear from different companies who are giving viewers an opportunity to invest through an exemption from registration with the SEC called Regulation CF and/or Regulation D 506 (c). These offerings have not gone through a registration process with the SEC and do not have the investor protections that it provides. The securities offered are speculative and illiquid, and an investor could lose the entire investment. Investors should read the relevant Offering Circular and consider the risks therein before investing. It should be noted, that just because the show is called “Going Public,” there is no guarantee that any company will in fact, go public, or ever list on an exchange. You need to know the risks going in. 17(b) Disclaimer:}_{Click Here}_._{Disclosure Regarding the Role of Going Public®, its sponsors and Crush Capital}_{. Max International and Cards & Coffee are “testing the waters.” No money or other consideration is being solicited, and if sent in response, will not be accepted; No offer to buy the securities can be accepted and no part of the purchase price can be received until the offering statement is filed and only through an intermediary's platform; and a person's indication of interest involves no obligation or commitment of any kind.}

The Risk Spectrum

Ramp Capital — Sun, 07 Apr 2024 21:21:52 +0000

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In my close-knit group of college friends, our shared passion for golf serves as both a recreational activity and a platform for friendly competition. Yet, amongst us, there's always one individual who adds an extra layer of excitement to the game—our resident betting enthusiast.

For him, the thrill of the game is heightened by the prospect of a substantial wager, transforming a leisurely round into a relatively high-stakes affair. He claims he would rather shoot a mediocre (abysmal) score of 90 and emerge victorious in the money game, than achieve an impressive score of 72 and suffer defeat in the money game.

Conversely, my own approach to betting leans more towards indifference. While I can appreciate the occasional flutter of excitement that comes with a betting game, I derive equal—if not greater—satisfaction from the intrinsic challenges of the sport itself. Golf, to me, is a personal journey of self-improvement, an ongoing battle against one's own limitations. Therefore, introducing the element of competing against others with money on the line only serves to intensify the pressure.

What continually intrigues me, however, is the recurring debate that ensues amongst us, fueled by our vastly different levels of risk tolerance. Each member of our group brings their own unique perspective to the table—one with a high tolerance for risk, another more moderate, and myself, leaning mostly towards risk aversion.

Our discussions often resemble a tug-of-war, with the avid bettor advocating for a collective embrace of his audacious risk appetite (read: degeneracy) and us on the other side of the rope who enjoy vetoing these attempts. It's a scenario not unlike a young financial advisor tempting an elderly client to venture into unfamiliar investment territories like crypto.

Seeking to shed light on the underlying dynamics of risk-taking behavior, I recently introduced my betting enthusiast friend to "Deep Survival: Who Lives, Who Dies, and Why" by Laurence Gonzales. This insightful book explores the psychological and physiological responses that determine survival outcomes in life-threatening situations.

Gonzales posits that humans are naturally drawn to moderately stressful situations, as these challenges foster optimal conditions for learning. However, the knowledge gained from such experiences tends to be encoded primarily in emotions rather than rational thought. The brain's fear center reacts swiftly to new stimuli, often preceding logical reasoning and leading to impulsive actions—akin to the phenomenon of panic selling during market downturns.

The book struck a chord with my friend, whose appetite for adrenaline-inducing experiences mirrors the survival instincts explored by Gonzales. Throughout our friendship, his fondness for thrill-seeking activities like cliff diving and ice climbing has been a constant reminder of the diversity of risk tolerance within our friendship circle.

Some studies have suggested that genetics may also play a role in shaping risk-taking behavior, but it's just one piece of the puzzle. Factors such as upbringing, environment, and life experiences also exert significant influence.

Our risk tolerance, much like our personalities, is fluid and subject to change over time—as shown evident in my highly unscientific X poll.

In my personal journey, I’ve noticed a shift towards increased risk aversion with age. This transformation partly stems from a sense of fulfillment on both physical and emotional fronts, where material wealth no longer correlates with increased happiness. As a result, my objectives now revolve around maintaining my current state of contentment and ensuring the well-being of my family.

In the end, our differing attitudes towards risk can be likened to the analogy of boiling water: while some may soften under pressure (potato), others emerge hardened and resilient (egg). Understanding and respecting these differences is essential in navigating the complexities of interpersonal dynamics and aligning our individual risk tolerances.

Whether we’re teeing off on the golf course for a high-stakes game or witnessing someone gain generational wealth off of a memecoin, let’s keep in mind the timeless wisdom of the boiling water analogy. In doing so, we can foster mutual respect for the diverse risk tolerances within our circles, embracing each individual’s distinct approach to navigating life’s uncertainties.

The Clone Wars

Ramp Capital — Fri, 14 Jul 2023 19:25:04 +0000

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The much anticipated app that shall not be named (T*reads) is now officially more than a week old and hasn’t killed Twitter yet. So far, Threads has reportedly been able to capture over 100 million signups in the first 4 days which, quite frankly, is pretty incredible even with the fact that they are starting with a ~2B user funnel from Instagram and Facebook. To put this in perspective, Threads has already achieved ¼th of the global MAU user base of Twitter.

According to the Atlantic, Twitter and Facebook each took more than four years to reach the 100-million-users milestone; Instagram took just over two. TikTok did in in nine months. ChatGPT did it in two months. And now Threads has done it in less than a week. Things move too fast now. We are entirely too connected.

As a power user of Twitter for more than 10 years, my dedication will always lie there, regardless of who is at the helm. If necessary I will go down with the ship, playing soothing melodies on my violin and tweeting to the death.

I have been tweeting and building a community under Ramp Capital pseudonym through 5 different CEOs. We’ve been through some things together. Market crashes, election cycles, pandemics, world cups, toppling of governments, and everything else under the sun that makes for good conversation and community building.

I have never been one to be extremely worried about Twitter going away or being challenged by a competitor as the network effects and social graphs were always too powerful. That being said, I do feel different about the launch of Threads. While it may not necessarily “kill” Twitter, it could kill the essence of what has always made it so great—a community that working together becomes a living and breathing organism to share ideas, politics, information and news. The result is mostly open, and many times raw dialogue no matter what your belief systems entail.

Why do I get these feelings of angst towards Threads? Because Zuck is ruthless and shameless and capitalistic to the core. He knows he doesn’t even have to kill Twitter completely but just grab enough eyeballs to turn his minimum viable product into a real machine that can start churning out ad dollars for his monopolistic empire. Some estimates have already pegged Threads at producing $3-5B in revenue per year once they turn on the ad spigot.

Competition breeds excellence. So even though Zuck has completely ripped off Twitter (and everything else he’s ever built), this will be a good test for Elon and Twitter to see how they will respond to the adversity. If Twitter can survive a direct Zuck attack, then they should be able to survive anything.

As a content creator WordChad, I took it upon myself to create a Threads account on the first day. I had no shame in it. Firstly, I wanted to see how the app functioned. The first 48 hours were pretty exciting. It was kind of interesting seeing people in my social graph’s reactions. Some were excited. Some were apprehensive. But after a week now, I can already tell my time continues to get sucked back to Twitter as the Threads feed is not robust, exciting, or real time.

CNBC is already reporting a massive drop in daily users and time spent. Time to pay the brands and celebs more money to drum up more cringe posts.

I feel I have a pretty good pulse on whether apps can achieve escape velocity or if they’ll die on the vine. Getting a massive amount of user downloads is always step number one. Step number two is to keep everyone engaged and producing content. That is the only way this thing can really thrive. Social media companies and their silos only work because of the content creators and their mediums. Zuck has already lit billions of dollars on fire chasing the metaverse dream, so I can see him doing the same here for as long as it takes to wound Twitter or the other Twitter clones. R.I.P. Bluesky.

In all fairness, I wanted to provide an honest breakdown of my initial take of what this app is doing well and what it’s doing poorly. Keep in mind Meta undoubtedly has their best team working on this right now and will likely iterate at light speed, so many of these criticisms will likely be stale in the next few days, weeks, or months.

The Good:

The onboarding was incredibly simple and part of the reason that I’m concerned it may stick around longer than other recent Twitter clones, including the decentralized ones. It took all but 1 minute to link my account through Instagram, write up a quick bio and the account was ready. Not only that, it now comes with a handy little badge underneath my Instagram handle that will direct users to my Threads account. The cross-promotion across the suite of Meta apps is a very nice touch.
So far I haven’t seen many issues with crashing or rate limits, which is pretty damn impressive considering they apparently have already added 100 million users so far. They can continue expanding rapidly on user signups from the 2B+ user funnel from Instagram. How active these signups will be over the next few weeks/months will be very telling to the stickiness of the app.
The UI/UX is relatively simple and smooth, not clunky or difficult to figure out like I’ve always found Snapchat to be.

The Bad:

No direct messaging. For most Twitter power users, we know this is where the secret sauce lies. So much of my time is spent in the Twitter DMs. Adam Mosseri has openly said they don’t plan to ever include DMs which is a huge mistake in my opinion. The “let’s move this conversation” offline is great in so many ways. If you’re rooting against Threads, then you don’t want them to include this feature.
No edit button. I don’t really care about this feature at all but many others do.
No GIF button. Really? I have to save gifs to my photo library. No thanks.
No desktop app. This hurts for a variety of reasons (mainly for older folks?) but some cannot access through a cellular device at work or who want to post charts.

The Ugly:

No chronological timeline. The feed is an absolute disaster filled with celebrities and brands being paid to promote the app. The timeline is almost unusable at this point. I’ve already had to mute/block hundreds of accounts just to try to clean up the feed to even make it somewhat usable. Many users will just want to see what the people they follow have to say. I don’t need and will never need some celebrity’s out of touch with reality point of view. The app is dry at best and incredibly boring. Every post feels fake, forced, and cringe. No one is really this happy, and Twitter isn’t really that bad. The media has portrayed this as the devil and angel on the shoulder.
Let it be known that this app will not continue to be this way in its current form. They will eventually plaster it with ads on every 4th post on the feed just like the others did and it will likely become unusable to a point of exhaustion like Instagram.
When downloading the app, it lists 14 categories of data that “may be collected and linked to your identity.” Some (most) of you may not care anymore. I don’t really know if I do either. My Google search history alone will never allow me to run for President. This is one of the main selling points of the decentralized clones and protecting your data and privacy. Zuck doesn’t have a great track record with that and there’s no reason to assume this time is any different.

What Comes Next:

Everyone is competing for your attention. Hell, even reading this newsletter that occasionally gets pushed to your inbox is competing for your attention.

I will continue to explore Threads as I do believe there is a first-mover advantage right now even though the ones who have already grown the most have successful Instagram accounts and are being cross-promoted on the “who to follow” explore page.

I have zero plans to ever leave Twitter as I’ve spent way too much time developing and curating lists and feeds and making a ton of connections that cannot just be replicated on another app. The funny thing is all of the people I follow on Threads are the exact same people I follow on Twitter. It’s the same but different.

I just want to live in a world where Twitter is great for everyone. Maybe that still happens and it coexists with the 57 other clones out there all vying for market share.

At the end of the day, Threads and all of the other clones will only be successful for the creators who can establish their own community silos and rebuild their social graphs which are likely just ported over from the already existing popular social media channels.

If Twitter wants to remain relevant in the clone wars then it really is going to have to provide some innovative features to keep their most valuable creators on the platform and not having them try to hedge their bets by reproducing content on other channels.

Twitter took a big step in the right direction yesterday as Elon finally came through on a promise he made back in February where creators would start collecting a cut of the ads that were placed in their feeds. Obviously there is a high bar for what it takes to achieve a payout and the policy seems a bit nebulous. Full disclosure: I haven’t received a notification of payment but I do believe I meet their criteria to be selected.

It will be interesting to see if people try to game the system now that people are getting paid to tweet. However, Elon did state that users will get demonetized if they start stealing content from others. You can pretty much bank on people coming up with the most cringe threads imaginable to try to drum up impressions.

To keep Twitter alive I think it all comes down to the community, the vibes, and the engagement. All three of which seem to have been tailing off for Twitter recently, or so many have said. I think it can co-exist with Threads and the other clones. It may just end up turning into specific silos of information like how we have different newspapers spitting out different points of views. And that’s perfectly fine. Every town square is different.

In the worst case scenario that Twitter folds, then I guess I’ll have to find another way to live out my fantasy life alter ego, hopefully not on Threads, maybe just in the real world town square LARPing as a boomer has-been.

Before wrapping up, I wanted to share Mike Solana’s recent post below. He echoes many of my criticisms, wants, and wishes, just much more eloquently.

*See important disclaimer

A Life Unoptimized

Ramp Capital — Tue, 09 May 2023 16:13:07 +0000

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A Life Unoptimized:

In the last month, I have come across three podcasts that I regularly listen to, all discussing the idea of optimization, or the lack thereof, in our daily lives.

The first podcast was a recent episode of Plain English, hosted by Derek Thompson, where he interviewed a couple of guests about various health fads like cold tubs, caffeine, and alcohol.

During the discussion, one line from a guest stood out to me.

“Life is about so much more than optimization. If everything in your life becomes work, then what’s the point of staying alive?”

This statement resonated with me because I am guilty of trying to optimize everything. My brain has always been wired this way. However, this approach often leaves me feeling more stressed and overwhelmed.

Framework:

To determine what's worth optimizing in my life, I now use a straightforward framework: Is the task or process enjoyable? Will I be happier (less stress) if I optimize it or if I leave it alone?

To illustrate this point, let me provide two examples on opposite ends of the spectrum.

Firstly, I spend a lot of time doing housework, from landscaping to mowing the lawn to fixing and building things around the house. For most people, this sounds like a tedious chore that they would prefer to hire someone else to do. But not me.

I find great pleasure in doing these tasks because they allow me to spend time outdoors, away from technology and screens. They provide a chance to get a workout and soak up some sun, as well as learn new things about plants and construction—basic skills that now appear to be a dying art. When I fix things around the house, it gives me an opportunity to purchase new tools and acquire new skills, which is very rewarding.

The added benefit of saving money is not the real reason why I enjoy these tasks; it's because I am drawn to them and find them creatively fulfilling. I want to point to something with a sense of accomplishment and say “I made that”.

On the other hand, there are times when optimization becomes counterproductive and hits a point of diminishing returns. For instance, I was recently reminded of this during an Animal Spirits podcast where Michael and Ben shared a story of someone who skipped vacation with their family to keep an eye on the market. While this may sound extreme to most of us, there have been times when I've prioritized the market above everything else.

Luckily, I've come to the realization early enough in my investing career that I don’t need to watch the market every second or research my individual stocks for hours on end each week. Instead, I’ve relinquished most of my control by using a financial advisor (and index funds), who helps me tackle real problems and work through issues. I've learned to give up chasing the extra percentage or two of yield and have found that my stress levels around investments have gone down significantly.

Remember that optimization is not necessarily about maximizing every aspect of your life. It's about finding a balance that works for you and helps you achieve your goals while also allowing you to enjoy your life and the people in it.

Summary:

Being unoptimized, or not constantly striving for maximum efficiency or productivity, can have several benefits:

Increased creativity: When you're not hyper-focused on optimizing every aspect of your life, you're more likely to allow yourself to think outside the box and come up with innovative ideas.
Reduced stress: Constantly striving for optimization can be stressful and overwhelming. By embracing the idea of being unoptimized, you can reduce the pressure you put on yourself and feel more relaxed.
More authentic experiences: Sometimes, when we try to optimize everything, we can lose sight of what really matters. Being unoptimized can allow you to have more authentic and spontaneous experiences.
Greater flexibility: When you're not overly concerned with optimization, you're more open to change and can adapt more easily to new situations.
More meaningful relationships: When you're not always trying to optimize your time, you have more space to connect with others on a deeper level and build more meaningful relationships.

Overall, being unoptimized can lead to a more balanced and fulfilling life, with greater emphasis on creativity, authenticity, flexibility, and human connection.

Embrace the entropy.

What Really Matters

Ramp Capital — Fri, 14 Apr 2023 17:41:57 +0000

Ramp <> Holderness and Bourne

Right now H&B is running a limited 15% off special, which you can find right here.

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A few weeks ago I was poached by a competitor. A recruiter reached out through the DMs on LinkedIn, which is ironic because I never update my bio or log in to check it.

I decided to go through with the conversation, fully well knowing it could lead me down a new career path that I wasn't sure I was ready to take yet.

The conversations went great. They were open, respectful, and candid. The numbers haven't been put on my lap but from estimates, I could likely see a 50-60% bump in total compensation if I make the switch.

Sounds like a slam dunk right? It's not.

Freedom vs Fiat

The pandemic opened up an entire new world for me. One that doesn't require my leg shackled to an office cubicle for 8-10 hours a day.

So the choice I am now faced with is flexibility (freedom) or money.

But I'm at a crossroads in my life.

I just finished building a new house. I have 3 small kids under 5 that demand my undivided attention every day. I currently have the freedom and flexibility to do my job and mostly just be left alone to let me cook.

To take this new role, I would have to give up a healthy amount of my currently enjoyed freedoms, and I'm not sure if that's what I want yet. It would also require me to go back to the office at least 4 days a week (Larry Fink golf clap).

At some point, the extra money in the bank just doesn't matter. I'll likely never own an expensive boat, or a lake house, or a timeshare in Vail, or whatever it is that the uber rich people throw their money at. And that's just fine. I've accepted that reality--a long time ago, mind you.

There's a constant battle between time, money, and the freedom both can offer. It's up to your own personal aspirations to decide what's more important to you.

If I become a workaholic and make a lot of money but never have time to spend it, what's the point? If I miss spending quality time with my kids as they grow up but I have hundreds of thousands of dollars more in the bank, what's the point?

If you are struggling to put food on the table or living paycheck to paycheck then of course money should be the main focus over time. But as you become more financially stable, your priorities may start to shift more towards gaining more time and freedom. Everyone is different.

Take, for instance, this insanely twisted post by Mr. Wonderful. (Note: Yes it is real, I had to temporarily unblock him on Twitter to take the screenshot to confirm it.) While I debated even adding the tweet to the blog post, or even mentioning his name, I decided it could be used as a good teaching moment.

Kevin appears to lack empathy and has his priorities mixed up from what a normal caring human or functioning member of society would likely say.

What truly matters is that you not only achieve success and attain freedom, but also receive unwavering support from your loved ones throughout your journey. It doesn't matter if you achieve success and become free if you have no one to share your victories with. It is a sad, lonely existence. Mostly because you begin to value objects over people, just as Kevin begins to cry looking at a god damn watch.

Another example of misaligned priorities is prioritizing work over your family. You'll never hear someone on their deathbed say "I wish I would have worked more or went to more meetings." It's always the opposite.

What really matters?

Ultimately, what holds true value in life is being present for your friends and family in their time of need, rather than relinquishing your integrity for the sake of money or material possessions. Moreover, it involves supporting others in their endeavors towards financial autonomy, rather than leveraging their potential for personal gain. It also means abstaining from climbing the ladder of success at the expense of others.

Taking a moment to pause and reassess your priorities from time to time is crucial.

Murphy's Law Pt. 2

Ramp Capital — Mon, 20 Mar 2023 00:31:50 +0000

Hello friends, and welcome to The Ramp Report. If you want to join 12,000+ other readers learning about all things markets, tech, startups, business, and of course...memes, subscribe below:

You can also check out my other articles and follow me on Twitter too, but that's probably how you found this anyways.

If you haven’t already read our previous struggles during the build, go ahead and read this first as a primer.

To be clear, both posts were not to collect sympathy from the readers. But rather I wanted to publish them because I think they have the potential to save someone unneeded stress and thousands of dollars.

Rates (Updated):

In my original post I spoke about how not being able to lock in a mortgage rate contributed to a huge part of the stress of the process. Rates finally peaked in October with the 30 year fixed rate eclipsing 7%—a far cry from the 3.05% that was available when we went under contract on the house in January of 2022.

Rates continue to stay elevated (including sales prices in many cities) making it unaffordable for millions of Americans to own a home. I don’t know how this story ends. I truly feel for everyone, especially the younger folks who are trying to purchase their first home. The market is incredibly difficult with supply essentially non-existent in some areas.

From late November of 2022 all the way until late January of 2023, I called every bank, broker, and friend I knew trying to shop the best rate. The best I was able to come up with was a 5.75% 30 year fixed with about 45 days before closing. Even some of the adjustable rate mortgages (ARMs) were unattractive comparatively.

Then along came Mr. Schwab (partnered with Rocket, more on this later). I know I had looked into them months before but never actually talked to anyone there to confirm their online rates. So I reached out as I saw they were offering rate discounts for certain tiers of qualifying assets. We had a large portion of our money tied up in TD Ameritrade so we simply initiated a transfer of funds from TD to Schwab and ended up qualifying for a 0.50% discount on a rate.

There was no catch. It was a relatively simple process. So now my 5.75% turned into a 5.25%. This image comes to mind.

Schwab only handled the transfer of funds. The rest of it including the rate lock was handled by the Rocket. During the sales process, Rocket threw out the idea of a 10/6 ARM, which after the 0.50% discount was being offered at a 4.625% rate. For those unfamiliar with ARMs, what the 10/6 means is the rate is locked for the first 10 years of the loan and adjusts every 6 months based on the current market conditions. There were also caps on the upper and lower end as well as how much it can move within a 6 month period.

This type of ARM wasn’t offered from any other banker or broker I had previously spoken with. I had asked Rocket to pull the monthly costs between the 5.75% rate (fixed, no discount), the 5.25% rate (fixed, with discount), and the 4.625% rate (ARM, with discount). It turned out that we were going to save almost $8,000 per year by going with the ARM. So even if during that first 10 year window where our ARM is locked and we never had a chance to refinance, we would still be saving almost $80,000. That would give us a very large cushion to work against (assuming we don’t spend the money beforehand).

My thought process was the same as it had been months ago. It felt like inflation in the past few months has started to cool, and that most “experts” have a similar view that the Fed will end up cutting rates before 2025. Now after the Silicon Valley Bank disaster and potential contagion with other banks, it could end up happening much sooner than expected.

Based on all of this information we locked in the 10/6 ARM at 4.625%. Luckily, we were able to lock a few days before the February FOMC announcement and unemployment report (which turned out to be very hot and caused rates to spike again). Finally, a small win.

I’d be shocked if we weren’t able to refinance again even lower at some point within the next 10 years, maybe even with a 3 handle. A boy can dream.

The lesson here: Do your due diligence on shopping around for rates. It may end up taking a ton of time but you never know what you could end up with if you have some connections or find some discounts similar to the Schwab deal. Had I never asked, I’d likely be stuck in a 5.75-6% fixed rate right now.

It’s also important to have a general idea of Fed policy as they are the ones setting the path for interest rates. I think doing an ARM at any point since 2020 wouldn’t have been a very smart decision as the Fed was already stuck on zero and there was likely only one way they could go—up. Rates could even continue spiking if a re-ignition of inflation concerns pop up. But I’m willing to take that risk to then try to refinance into a shorter duration fixed product in a few years.

Also, do not do an ARM without doing your due diligence or speaking with a financial advisor. They are not for everyone and there is a level of risk that you have to be able to handle. Everyone I spoke with about the ARM agreed that we fully understood the risks and were taking a calculated bet that will hopefully work out for us in the long run.

Shop Local:

As mentioned previously, Schwab partnered with Rocket Mortgage to do this loan. We had originally used Rocket (d/b/a Quicken Loans) on our first home purchase 7 years ago, but only because my old college roommate was working there at the time. The rates and home prices weren’t really as crazy as they are now so it wasn’t a big deal to use them.

Before getting started on the loan, our realtor warned us about using someone like Rocket, but our hands were essentially tied by getting such a good comparative rate—and she agreed. My thought was who cares if we miss the close by a few days or whatever else bad could happen, as there was essentially nothing Rocket could do to screw it up enough that would cost us more than the $8k/year we were going to save once the loan closed.

The day we locked in the rate, we submitted all of the documentation within a few hours. We were off to the races. At this point we were probably 40 days out from close. The next step was to get the appraisal ordered and executed. From day 1, I expressed concerns about our home not appraising because of some of the added material and labor inflation that was baked into our build over the past year. Every person I talked to tried to calm my fears.

One of the documents we were required to submit to Rocket was the sales agreement document of the purchase price showing all of the selections we made including allowances and overages. So I submitted that document to Rocket with the caveat that it wasn’t a fixed price build. We had made thousands of design decisions that made the price go up and down on a weekly basis.

We received a warning from Rocket that they were going to appraise the house soon. Then a few days later we received a reply saying good news your home appraised above value. Well, the value was $3k above the contract price of the house that we went under contract on 15 months ago. The catch was it was about $85k short of what we were actually in for.

What had happened was the appraiser (Amrock) never looked at the upgrades we selected. When we sent Rocket and the appraiser the list of upgrades, they raised the appraisal value by about half, still showing us $39k short. Which now meant that we needed additional funds to close. Without having our existing home on the market we likely weren’t going to have enough funds to close so we opened up a pledged asset line with Schwab to act as a bridge loan until we could collect the equity from our existing home sale. We thought this was the best move tax-wise and timing-wise.

For 3 straight weeks I went back and forth with Rocket and the appraiser saying they were doing their job wrong (and that’s putting it politely) and were completely incompetent.

For example, they said they couldn’t find any good comparables. Within 2 minutes my realtor was able to pull a list of 8 or 9 potential comparables in which the appraiser had only used 2 or 3 of them. They also used a comparable to a 20 year old house that wasn’t even in the same subdivision (of all new builds no less than 3 years old).

I sent them 3 comparables that were in the same neighborhood as us (2 on the same street!) that they hadn’t previously used in their appraisal adjustment. One of the comparables was adjusted down only about 2% but then came in roughly $300k higher than what we were under contract for. In the appraiser’s notes, they literally stated: The comp was considered an outlier because of its similarity to the subject and having a significant higher sales price.

Excuse me? That’s literally the definition of a comp. You can’t pull an outlier because it doesn’t support your narrative. Every single person outside of Rocket I spoke with said they’ve never heard something like that coming from an appraiser.

Then when I sent them more comparables, they put one of the addresses in wrong. I texted it to Rocket and triple checked it so there was either a mistake on Rocket’s end or the appraiser’s end. Regardless, they just said “the address could not be found”. Why would I send them a fake address? Didn’t anyone think to check to confirm the address that I had sent?

At the end of the day I was able to get them to finally agree to some of the comparables we sent them and get them to appraise our house for $3k higher than what we paid for it, which means I didn’t have to pull in additional funds for close.

The cherry on top was when I got the final disclosure with closing costs I noted that my appraisal fee went up 3 separate times over those 3 weeks. I’m assuming it was because I kept having to go back to both parties to show them how to do their job for them—because they had an IQ of 50. Rocket wasn’t able to help us out on a lender credit for our troubles. Had they gotten the correct documents from the first appraisal or had an appraiser that actually knew what they were doing, we would have likely not had to deal with the extra cost and annoyance.

Then, once it came time to gather the closing documents, Rocket missed the date. They acted like someone would reach out, no one ever did.

We gave them 0 stars out of 10 across the board. Absolutely horrendous communication and execution. The company is run by teenagers. They will feed you with lies acting like they care. They don’t. It’s just another transaction for them. The appraiser from Amrock was insanely incompetent. Run, don’t walk, if you somehow end up with these people.

Lesson: Shop for a local lender that knows the market in your area. Only use lenders such as Rocket as the very last resort if you are able to secure a very good discount like I was able to. Do your due diligence before hand and you may be able to find better deals out there. You can also discuss 2:1 buy downs with your builder.

We knew we were going to be eating a shit sandwich and that’s exactly what was served.

Where to save money:

There were a few areas where we were able to save some money by doing it ourselves. Buying pretty much anything through a builder seems to always be more expensive. That’s because they already have you on the hook and many people building a new house want it completely finished by the time you move in.

Here’s a short list of some high ticket items that could save you thousands:

Lighting: We were given a lighting allowance of about $3,600 that we had to use or lose. Once we hit that allowance, we put single light bulbs in all of the other rooms then purchased much cheaper sconces, chandeliers, and vanity lights online. If you are handy at all this is a great place to save some money. Ask them to put in caps or single bulbs to get past closing then come in afterwards and do it yourself.
Fence: We knew we wanted a fence for the dog. The builder was trying to charge us an additional 20% on top to do the paperwork to add the cost of the fence into the loan. I reached out separately to 2 other fence companies and was able to save almost $5k by going directly to them and avoiding the markups.
Closets: For the master we did an IKEA build. The builder grade closets were ok, but not great. We were able to upgrade ours to an IKEA buildout by doing it ourselves. It was super simple and pretty cheap all things considered.
Window treatments: You’ll likely be able to save a decent amount by not buying blinds, shutters, or specialized glass with the builder. In our master bathroom we had 3 large windows that the neighbor could possible see through. So I bought some cheap film for $20 on Amazon and covered them to make them look like frost.
Bid out anything you can: We were forced to use the builder’s vendors for cabinets, flooring, paint, landscaping, hardware, etc. If you have the chance to price shop, you’ll likely be able to save a good chunk of money between the different bidders. You’ll just have to spend more time reviewing and price comparing. It’s worth it in my opinion.

The burning question:

Would I build again?

Honestly, I’ve flip flopped on my answer many times. I think it definitely helps going through the process once before and understanding the pitfalls to avoid. Although, I’m sure there will always be new adventures on the next one.

If you asked me a few months ago I’d say hell no. However, today I think my answer is yes, I would build again. I’d make sure I get a reputable builder that doesn’t try to cut corners and can give you as much price transparency as possible. And I’d try to negotiate as many things as possible beforehand depending on market conditions. Assume you’ll go over 10-20% even if everything goes perfect. If you’re fine with that number then go for it.

Ultimately, it comes down to the fact that our first home was the traditional starter home and I spent so much time making updates to it to make it a home that fit our style. Not that I didn’t enjoy doing it but it had its limitations on what I had always wanted. Basic stuff too, like parking in a garage that could actually fit a truck, not having my clothes spread out across 3 separate rooms, having my own office that wasn’t shared with the kids’ playroom, living room, and gym, etc.

When you build a custom home you’re able to pick pretty much anything and make it your own from the start. We lived under our means for 5+ years to finally enjoy some of the fruits of our labor. While I still plan on adding my touches to this new house, we’re starting from a much more upgraded base where really nothing major needs to be done at this point. I’ll find ways to tinker with it just out of general boredom.

At the end of the day, it feels good to finally be done with it and I’m sure we will settle into it soon and love our time here. To everyone who is planning on building a home in the future or currently in the process, I’m always open to providing additional feedback via email to help you on your journey.

Godspeed.

The Office Is Killing You

Ramp Capital — Mon, 16 Jan 2023 14:00:00 +0000

Hello friends, and welcome to The Ramp Report. If you want to join 11,350+ other readers learning about all things markets, tech, startups, business, and of course...memes, subscribe below.

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Come back to the office. Now. (Please?)

We have a very fast-paced culture that needs you here (so we can keep an eye on you). If you work hard (under the fluorescent lights and carpeted walls of your cube farm hellscape), you'll eventually get noticed and work your way up to the top, maybe even become a vice president.

Sounds enticing, no?

With the pandemic seemingly coming to an end, yet, simultaneously feeling never-ending, large corporations have begun flexing their muscles trying to “force” worker bees to come back to the office, either by some sort of hybrid model or even worse yet, full time.

Just in the past week alone, Starbucks and Disney started implementing "return to office" (RTO) plans requiring workers to come back 3-4 days a week.

Reincarnated Disney CEO Bob Iger wrote to employees: “As you’ve heard me say many times, creativity is the heart and soul of who we are and what we do at Disney. And in a creative business like ours, nothing can replace the ability to connect, observe, and create with peers that comes from being physically together, nor the opportunity to grow professionally by learning from leaders and mentors.”

It's hard to argue with some of Iger's points. However, there's a difference between companies demanding RTO because they have valid justification versus trying to pacify local small businesses, governments, C-suite executives, and investors to protect a bygone era. Many of their arguments for RTO have zero basis in factual data or they are extremely shallow in logic, and they are completely ignoring the wishes of the employees.

In a Harris Poll survey in October of 2022, 73% of remote and hybrid employees said they’d probably find another job if their company forced them to work from the office full time.

The problem is the genie has already been let out of the bottle. Once granted, these freedoms millions have enjoyed over the past 3 years will be difficult to strip away again, especially if the labor market remains resilient.

As the CEO of Zillow recently put it, people are now "wrapping your work around your life instead of vice versa. It’s not sitting in hours of traffic for a daily commute. It’s being able to pick up your kids from school without anyone looking askance at what time you leave the office. It’s having your performance judged by the outcomes you achieve, not your ability to sit in a certain chair from 9 to 5."

Amen.

One of the few positive second order effects from the pandemic was this massive shift from the office to the home. Between 2019 and 2021, the number of people primarily working from home tripled from 5.7% (roughly 9 million people) to 17.9% (27.6 million people), according to new 2021 American Community Survey (ACS) 1-year estimates released by the U.S. Census Bureau.

For employers currently facing the decision to ask employees to RTO, the very first question they should ask themselves is are you hitting your goals and objectives? If yes, then why risk alienating a competent and functioning team if they do not wish to RTO? If your team is not hitting your goals and objectives, then you need to determine the source of underperformance and if working in an office setting will actually fix the issue. Don't use the office as a crutch. Use real evidence and data instead. Stop copying what other Fortune 500 companies are doing. Stand out and be different from the competition and you'll attract a larger and more diverse pool of talent. You'll also find that your employees will be happier if you treat them like adults.

I won’t argue that there aren’t tangible benefits to in-person communication/training. It’s also situational. Once trained, most employees don't need to be micromanaged non-stop. Also, it may be shocking to some, but not everyone who works at a big corporation wants to climb the corporate ladder. Some just want to do the work and stay under the radar. And there's nothing wrong with that. But what many employers are trying to do now is claw back some, if not all, of the previously enjoyed freedoms.

Personally, I don’t think I can ever go back to a corporate office setting unless it's restructured from what it used to be. I'd be fine if it was in a smaller, intimate group setting where we could actually get real work and collaboration done. But going in to the office to sit on Zoom meetings all day and sit in front of a computer is just checking the box. I need reasons to come back and they're stacked against a long list of liberties.

I had lobbied for years to get my company to go to a remote/hybrid setting. We had all of the technology to do our work without being physically located in an office. This also restricted our talent pool. Then the pandemic hit and the decision was made automatically for us.

Before the pandemic I felt a falling out with my career. But over the past 3 years of working from home I’ve realized that I didn’t dislike my role, it was the office setting that I hated. The monotony of the gray walls, the hue of the long fluorescent bulbs, the fake chit chat conversations around the break room.Everything's a copy of a copy of a copy.

It gives me feelings of anxiety and depression thinking about how I did it for so long. The office is a place that crushes your dreams and sucks out your soul. Especially if you have a family or value your work/life balance. WFH has given me the freedom to spend so much more time with my family and outdoors and living an overall healthier lifestyle, which in turn has boosted my output to new highs. It's a self-fulfilling cycle if you have restraint and commitment.

Whereas the office is a self-fulfilling doom loop that you can never get out of. Waste time getting ready in the morning to be presentable to waste time commuting to waste time sitting at a desk until the clock strikes 5pm. Can't wait to hit traffic on the way home! It's surprising so many of us did this for so long. But technology has advanced so rapidly that we don't need to anymore, if we collectively choose the path that the majority want to take.

If anyone reading this is in a position with an employer trying to implement RTO, I'd offer the following talking points:

Ask your employer why you need to physically be in the office if you can do your job effectively in a remote setting. Demand real answers.
If your employer says they want more in-person collaboration/mentoring, work with them to figure out a solution. One fix is to compress all collaboration efforts into shorter durations. If you have a week's worth of meetings spread out, maybe there's a way to reschedule them so that everyone on your team is there at the same time on the same day. Or if you have a month's worth of meetings, you could schedule an entire week of collaboration. It's doable.
Show them the quality of your work product. Show them how you are more effective outside of the office.
Ask them for a raise to cover commuting costs.
If you're not worried about the potential of them letting you go for not obeying, use it as a bargaining chip for more benefits. This is a last ditch effort.
Tell them your mental health suffers when commuting or in an office. How they respond will show how much they value you as an employee. It turns out long commutes are actually bad for your health. Commuting has been linked to higher rates of obesity, stress, and depression. One Swedish study also found that it could shorten your lifespan.

The office experience was always supposed to be about the work product, a meritocracy. Over time it devolved into a bureaucratic lust for power. Don't waste years of your life letting it drag you down.

See important Regulation A disclosures.

Embrace the Uncertainty

Ramp Capital — Mon, 07 Nov 2022 15:27:41 +0000

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Investing is incredibly difficult. It looks easy from the outside until you start adding in emotions and biases and have real money on the line. The 2021 playbook was to just buy stuff that goes up and sell when it stops going up, easy peasy. In contrast, 2022 has been an investing hellscape.

What makes investing so difficult is the vast amounts of information moving around constantly. People can build models and have price targets and do a DCF analysis to determine the value of an investment. But there are so many variables and inputs that it's hard to feel confident and remain resolute in your theses, especially in our current macro environment and high inflation.

We should never feel 100% confident in our predictions. They are calculated bets on future outcomes. This post looks at some predictions from the past year that turned out to be completely wrong. Note: This isn't to throw anyone under the bus, but rather to highlight how difficult it is to make market predictions, even for the so-called experts.

Mortgage Rates

I mentioned in my house build blog post that I knew back in November of 2021 the Fed was going to raise interest rates, Powell told us. So I did what was responsible and planned for higher rates on the new build. I just didn't think they would double in the first half of 2022. No one did. Not even the Federal Reserve or the Mortgage Bankers Association (MBA).

The 30-year fixed mortgage rate declined last week from 7.08% to 6.95%, even after the Fed confirmed its fourth 75 bps raise in a row.

Now, compare and contrast the MBA Mortgage Finance Forecast from December 2021 vs the latest release from October 2022.

Instead of highlighting the home sales numbers and 10Y treasury yield projections (that were also way off), I'd like to focus solely on the 30-year fixed mortgage rates. The MBA predicted back in December of 2021 that we would see 4% in Q4 2022, we've already hit 7%.

Now look at the future projections heading out to 2023 and later. They're showing a 5.4% 30-year fixed rate in 2023, then dropping to 4.5% for 2024 and 2025. If you only looked at this data in a vacuum and were looking to purchase a home, you could say at the current ~7% rate, it would probably be a good bet to do a 5/1 or 7/1 ARM (not investment advice at all). That is if you have any level of conviction that these predictions would come to fruition. However, without looking at the first chart highlighting how badly they missed on this year's predictions, you're just doing yourself a disservice.

Fed Pivot

Pivoting to the Fed (see what I did there?), it's time to look at how awful their predictions have been the past year.

Even with all of the data in the world, the Fed couldn't even come close to hitting any of their predictions. Trust the experts!

Take a look at the Federal Reserve's Summary of Economic Projections, published on December 15, 2021.

The only thing they got right on this chart was the unemployment rate. Not bad!

Now look at the FOMC participants' assessments of appropriate monetary policy via their famous dot plot chart. LOL. The 75 bps hike last Wednesday took the target rate range up to 3.75-4.00%, which is now higher than any single FOMC participant predicted out until 2024 and the longer run.

I'm sure it's just a transitory bad stretch and they'll earn back their credibility soon enough.

Targets

Here is a summary of some analysts' forecast for the S&P 500 index at the end of 2022 (published in January 2022):

The lowest target on the list above was 4,400. Out of the 214 trading days so far this year, only 50 of them have been above that level. In fact, we haven't traded above that level since 4/20.

An analysis by the NY Times noted the median Wall Street forecast from 2000 through 2020 missed its target by an average 12.9 percentage points — which was more than double the actual average annual performance of the stock market.

Bet on the Metaverse

Which stock do you think has the worst year-to-date return in the S&P 500? Did you guess META? Me neither. But that's what it is. Over $687 billion in market cap evaporated so far this year.

Here are the worst 10 performers in the S&P 500 YTD.

Now contrast that to the top 15 best performers in the S&P 500 this year. You can clearly see energy names have taken front stage. Just as everyone (no one) predicted.

From 0 to 100%

A US recession is effectively certain, according to a recent Bloomberg model projection.

When did models start spitting out 100% certainties even with perfect backtests and large sample sizes? What happens if this model turns out to be false, even though it's predicting a 100% chance of a recession? Probably nothing because no one is ever held accountable for making mistakes and it makes for good clickbait.

Models like this should never be 0 or 100%. They can be 1 or 99% if they're exceedingly confident but should never be taken to the extreme. There should always be a degree of uncertainty.

Summary

When it comes to predictions, whether from an economist with 40+ years of experience under their belt or your crazy uncle who watches Fox News every night, we need to be prepared to embrace the uncertainty.
Use expert predictions as one datapoint among many to build your own prediction and mental models.
When building models, our inherent behavioral biases cause us to make bad decisions and to look for meaning when there is none.

I want to leave you with a few corresponding thoughts from Thinking In Bets:

*Investing in securities involves risks, including the risk of loss. Composer Technologies Inc., SEC Registered RIA. All charts and symbols are provided for illustrative purposes only and are not intended as recommendations to purchase or sell any security and do not reflect actual market conditions, stock performance, or AI decisions. This is a paid endorsement for Composer.

The Bird Is Freed

Ramp Capital — Tue, 01 Nov 2022 18:07:51 +0000

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I've had a love/hate relationship with Twitter over the past 10 years.

There are times when the serendipitous connections and vast amounts of knowledge being shared remind me of why I log on every day. Then, there are times when I feel unproductive after spending countless hours on the app and it gives me feelings of anxiety and depression. The cyclicity of emotions is mostly self-imposed as I try to remind myself of the (non-popular?) belief that Twitter is a net positive for myself and society as a whole.

Without Twitter, my business would not exist. Without Twitter, countless new friendships would not exist. Without Twitter, this blog would not exist. I am thankful for all of it. I also understand that it could be gone in the snap of the fingers. Poof.

I'm also thankful to finally be parting ways with my Twitter shares. I've always said I would sell my Twitter stock whenever I would come to hate the product. The theory being that management would turn it into something cringe like Instagram or TikTok, make tons of cash, but at the expense of diluting the user experience. However, I didn't have the richest man in the world buying Twitter to rid me of my shares on my BINGO card.

I'm just glad I can finally allocate money to something that may actually provide value, you know, like an index fund (ok boomer). Just look at the stupid chart below.

If you bought the IPO back in 2013, you'd be up a staggering 20% over 9 years. If you bought the low in 2016, you'd have escaped with a 283% profit. I guess it could be worse. We could have actually lost money. And we surely would have if Elon hadn't come to the rescue. A sliver of hope in a downright ugly investing landscape.

So now that the Elon and Twitter takeover saga finally came to a conclusion last week, there's already a full list of new drama on his plate. Media speculation has run wild with ideas about how he is going to overhaul the company and the app itself. Aren't both long overdue anyways? I mean, how does it go 9 years with essentially zero innovative changes while the employee count ballooned from 2,300 at the IPO to over 7,500 now?

Elon and the future

I want to say up front that I am not a huge fan of Elon, far from it.

Everyone likes to put him on this pedestal as the next coming of Jesus. Undoubtedly he is a visionary. We need people like him to advance society and lead the way. But even a visionary requires help from huge teams of extremely intelligent people to make something work properly. Whether it's Tesla, SpaceX, or Twitter, he has always needed and will continue to need a diverse group of people to help build out his vision.

While I do occasionally enjoy his idgaf attitude ("he's the richest person in the world, he can't say that!") and his moonshot ideas, it's clear he often can't get out of his own way. He often puts his foot in his mouth as we saw time and again since proposing to buy Twitter earlier this year.

He seems to do things that piss off everyone all at once. The latest being the report that he is trying to revamp the Twitter verification process by making verified accounts pay up to $20/month to maintain their verification status. This is a bold move and honestly I'm not sure how I feel about it yet, even as a non-check plebe.

On the surface, I think it's a good way to separate the wheat from the chaff. Let's see who really is addicted to this platform. Would I pay it? Absolutely. Probably even up to $100/month, and so would corporations. But, I'd also want to receive value in return. I wouldn't just pay for the badge of honor. If it comes with additional benefits and user experiences then eventually it'll pay for itself as we find ways to extract additional value.

Apparently, mega celebrities like Stephen King (worth $500 million) can't afford $240/year.

Three years ago I actually wrote some brief talking points on why Twitter should be paying us. The inspiration for the post was centered mostly around watching all of these other social media platforms pay their top creators very handsomely, with nothing to show for any of us who log on to Twitter every day and produce abundant amounts of content for free.

But in a way that sort of shows the addictive nature of Twitter, and also why Elon bought it. Even as Twitter doesn't really pay us directly, we still log in for our daily brain dump. Some of us complain about the roadblocks to monetization yet we are continuously comparing it to other social media business models centered around ads (that actually work btw). Maybe switching from the ad model to a hybrid subscription model will give Twitter a chance to thrive. I guess we will never know until they try. They can always reverse course if it doesn't work.

Everyone knows the real value in Twitter lies in the connections made on the app. It doesn't need rich media to survive. It just needs ideas to survive. It doesn't need algorithms that prey on our animal instincts like Instagram and TikTok do, all while collecting our data and profiling us better than we know ourselves. It's an open stream of consciousness for the hive mind. Many thoughts are good, many are evil.

Twitter needed a new visionary to kick-start the next phase of Twitter. Regardless of your feelings toward Elon, shouldn't we all be rooting for him to succeed in building "a common digital town square, where a wide range of beliefs can be debated in a healthy manner"?

I don't care about whatever political agenda he may have. I don't care if he can turn Twitter into a cash cow for himself and other private investors. I want him to succeed in building a better user experience that many of us believe is possible.

There's an old saying: If you love something set it free. If it comes back it's yours. If not, it was never meant to be.

Elon set the bird free. Let's see if it flies back.

How Do You Measure Capitulation?

Ramp Capital — Mon, 17 Oct 2022 14:54:55 +0000

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The beatings will continue until morale improves. (The rate hikes will continue until inflation improves.)

The market continues to get spanked day after day, week after week, month after month. At some point you start to become numb to the daily beatings. Thank you Powell may I have another?

The only thing that continues to matter to the market (and the Fed) is reining in inflation. And so far the Fed appears to be doing a terrible job at it as another inflation print came in last week hotter than expected. It appears they are continuing down their path of demand destruction to no avail.

As reported by CNBC [bold for emphasis]: Minutes from the Fed’s September meeting show that policy makers have been surprised by persistently surging prices, even as they aggressively increase rates to cool off the economy. “Participants commented that recent inflation data generally had come in above expectations and that, correspondingly, inflation was declining more slowly than they had previously been anticipating,” the minutes read. “Several participants noted that, particularly in the current highly uncertain global economic and financial environment, it would be important to calibrate the pace of further policy tightening with the aim of mitigating the risk of significant adverse effects on the economic outlook.”

Yes, a soft landing would be preferred by all.

Core inflation is now at 4-decade highs.

I felt something Thursday morning for the first time since the crash of 2020. This panicky, butterflies in stomach, the-world-is-finally-going-to-end type of feeling. I was defeated. I wanted to surrender. Capitulation?

However, if felt different this time. In 2020, the market crash happened so fast if you blinked you missed the bungee jump down to earth and the subsequent bounce back. In contrast, the 2022 bear market has been death by 1,000 cuts. Every time we bounce, the question becomes is it finally the bottom or just another bear market rally? This can do damage to your psyche over the long run, as every rally so far has been denied.

The reason I felt the capitulation vibes was because the hot CPI reading gives the Fed the green light for future raises, which in turn is hurting the odds of me getting a decent mortgage rate before closing (and continuing to completely freeze the housing market). If we could just get some sliver of good news on the inflation front I think the market would at least start stabilizing (read: stop going down). But we are not there yet.

Of course the market instantly sold off in the premarket after the CPI news was released. Bespoke noted in the span of 3 hours, S&P 500 futures had a 3.9% decline and a 3.9% rally. That's not really a sign of a healthy market in my opinion.

There was also this statistic from SentimenTrader:

It got me thinking, as a self-proclaimed seasoned investor who has been through many ups and downs over the years, I know what capitulation feels like. But how do you measure a feeling?

Unfortunately, there is no holy grail, one-size-fits-all, or magic indicator to signal the all clear that the market has bottomed. There's just too much information floating around simultaneously which is what makes investing so difficult.

This week I started reading Scott Nations' book, The Anxious Investor, where he shows that the secrets to excellent investing lie in mastering the quirks of human psychology. Currently, I'm trying to master the fear aspect and make sure I don't succumb to my inherent biases.

I was searching through the book to see if he included any discussion on how he measures capitulation. I didn't find anything so I texted him. Here's his take:

To elaborate more on Scott's first point about "I know when I see it", this comes with experience. I remember my first few years of investing it felt like capitulation every time my stocks went down 3-5%. Now, I don't even get out of bed if they're down 30%.

It's not that accepting losses becomes any easier over time, your skin just gets thicker, covered by the calluses of the market swings. You essentially have to George Costanza your own brain to do the opposite of whatever your gut is saying.

It's also important to note your own capitulation feelings will differ wildly from others depending on variety of factors. For example, if you're near retirement and have most of your money tied up in a 60/40 portfolio (currently having its worst year in 100 years), you may see your future flashing (red) before your eyes. Or say you're one of the youths trading AMC and GME or some crypto shitcoin on leverage. You're subjecting yourself to a ton of volatility. Both of these scenarios are completely different but show how you could capitulate at much different times depending on market forces and your own psychological and emotional fortitude.

On Scott's second point "it's only obvious in retrospect", this is many times the painful truth. You'll either pat yourself on the back for allocating more to your retirement accounts and dollar cost averaging or you'll likely regret your panicked sales when you didn't need the cash anyways. I've been on both ends of the spectrum. At the time of turmoil, it always feels like it's the end. We are just wired to feel this way. A year or two later, you should look back and write down some lessons learned.

Here are a few more ways investors look for capitulation bottoms using a bit more measured approach:

High trading volume accompanying sharp declines, followed by a relief rally or strong reversal. Many thought this happened on Thursday after the CPI report was released but Friday was just another big down day. We haven't taken out the lows yet, so too early to write this one off.
Hammer candles in technical analysis candlestick charting. A hammer is a price pattern in candlestick charting that occurs when a security trades significantly lower than its opening, but rallies within the period to close near the opening price. By the time of market close, buyers absorb selling pressure and push the market price near the opening price. Hammer candlesticks indicate a potential price reversal to the upside. Hammer candles are for people who are also into voodoo and astrology.
Levels of investors' cash holdings (dry powder) and average allocation of money to equities.

4. Large outlier spikes on the VIX. We've essentially been hovering between 20 and 35 for the entire year. A large spike between the 35-50 range could start the capitulation cycle. You can see on the chart below, spikes above 35 have historically marked some pretty major market bottoms.

5. Stocks above/below the 200-day moving average. As you can see below, only 14.5% of stocks in the S&P 500 are above the 200-day moving average. In the past 15 years, only the GFC and Covid Crash had lower levels. The 20% level seems to be an area where buyers start stepping in.

6. Bonus: When a billionaire comes on TV and says "Hell is coming". That's usually a good sign of capitulation.

Based on some of these indicators above, I'm still inclined to believe we haven't hit peak despondency yet. But we're getting closer. The butterflies are moving. Only time will tell.

If you're interested in additional capitulation indicators, scroll through the hundreds of comments in the tweet below:

Murphy's Law

Ramp Capital — Mon, 10 Oct 2022 15:57:18 +0000

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Buckle up. This is a long one.

If you were one of the poor souls who decided to build a house this year, you're likely experiencing the same pain I am, dealing with Murphy's Law on a daily basis.

Today's piece is about my personal story about my home building process that began in the fall of 2021. I'm writing this piece for a few reasons. It's been eating at my mental, physical, and financial health for 10+ months now. I'm hoping that getting my thoughts on paper will be somewhat cathartic and that some who may be in a similar situation can find solace in the fact that they're not alone. I'm also hoping that if someone reads this piece, they can apply some of the lessons learned in the future to their own build, if they are brave enough to take it on.

Backstory

We bought our first house in 2015, nearly 7 years ago. At the time, it was the biggest purchase we've ever made in our life and it was stressful to say the least. We knew this was just a "starter home" and was never meant to be our forever home.

After having 3 kids in this house, and saving a pretty substantial amount of money by living below our means for so long, we thought it was finally time to start looking for a new house. So in the fall of 2021, we began our journey.

It didn't take but a single weekend and a few open houses to realize that the housing market had gone completely crazy. I remember going into a few homes that were listed anywhere from 50-75% more than our current estimated home price, thinking those houses were in worse shape than ours. Really the only advantages were they were bigger and in better neighborhoods and school districts compared to our current home.

Then we started touring a few more homes on the higher end of our range to see what we could get for our money. We ended up liking a lot of things about one home in particular, but didn't pull the trigger to at least throw a bid on it. It turned out they got over 20 bids, with I'm assuming most went over asking price.

This seemed to be happening over and over from that point on. Or we would see a home, message our realtor to schedule a tour as soon as possible, only to be disappointed hours later with a message back saying there was an all cash buyer waiving all inspections and contingencies. Very cool.

Based on the price range and the conditions of the homes we had looked at, our realtor suggested considering a new build. With the thought being that we would be in a similar price point to some of these higher priced existing homes, but all of our stuff would be brand new, less prone to replacement, and we could pick out all of the finishings to get exactly what we wanted. Sounds great.

We toured a few new developments. The homes were beautiful. The only real knock from my viewpoint was that it was a suburbia hellscape in some of the subdivisions we had looked at. None of the trees were mature so literally all you could see in every direction were hundreds (maybe thousands) of homes. We hated that.

Then we found a subdivision that was supposedly one of the more popular ones in the area with some very nice custom homes built on it. It was also in a good school district and we heard great things from friends who lived near the area.

After meeting with the realtor who represented the developer, and then meeting with the home builder, we started seriously considering the possibility of a new build. We sort of kicked the can down the road for a month or two as we kept our ear to the ground on the new development. We just weren't sure if maybe we jumped the gun on this incredibly hot housing market and should try to wait for it to cool off.

Then we received some unexpected news that we were pregnant with our third child, oops. Our hand was essentially forced at this point. The day we found out, we verbally agreed with each other that we were going to build the new house. We knew that our starter home wasn't big enough to fully support our growing family. Could we have made it work? Absolutely, but we were running up on the 7-10 year estimate that we said we would live in our starter home. Moreover, we both worked hard for the upgrade after saving and investing diligently for many years.

Before we went under contract we had multiple sit down meetings with the builder to go over how the process would work and also to add items to the build that we knew we wanted, in hopes of coming to a relatively firm estimate. This is why I get annoyed when people say "expect to go 10-15% over budget". While that may be the rule of thumb for new builds, we discussed all of those things before going under contract, to minimize the surprises down the road.

For example, adding in costs for the backyard fence and finishing out a portion of the basement for an office. So we added that to our contract then put down a six figure deposit in earnest money that was essentially non-refundable unless we find an out from a unique or unprecedented circumstance (defined by who and what exactly?).

Rates

Right around the time we started looking for homes, I was also talking with a local mortgage broker to discuss what we could afford at current rates. I remember going back and looking at the rates I got from her. They were all in the low 3's for a 30 year fixed rate.

I also remember around that time, discussing with her what my options were for locking in a rate on the new build. I had known around November of 2021 that inflation was starting to accelerate and Powell had essentially said they were going to start raising rates. So I went back and looked at some charts of mortgage rates over the years and said "ok, let's just run a few prices at a 5% mortgage rate". You know, as a worst case scenario. Well, mortgage rates hit 5% in the first four months after we went under contract on the new-build.

As of this writing, the 30 year fixed (per Freddie Mac) is sitting at 6.66% (devil), up from 3.22% at the start of the year. I still have not locked in a rate on the new build. We don't even have a firm closing date on the house yet. It could be mid to late January at this point. Pain.

I didn't expect rates to go from all-time lows to 20-year highs in 10 months. But here we are. If you refinanced at some point between the start of the pandemic and the start of 2022, you essentially won the lottery. However, you're also now likely to remain in your current home longer than anticipated (with higher rates and prices) unless you become a forced seller for whatever reason.

This has probably been one of the most stressful parts of the home build process, watching rates go parabolic every single week as the Fed tries to rein in inflation. Especially because had we purchased a house outright in late 2021 or early 2022 we would have locked in a very low rate. Now this has forced us to look into other alternatives such as adjustable rate mortgages (ARMs).

I had never really considered an ARM, mostly because I think they got a bad rap in the 2006-2008 housing bubble when underqualified borrowers lured in by the initially low interest rates were unable to keep up payments when they rose. Maybe it's different this time? Where do things start to really break in the housing market? 8%? Are we in uncharted territory?

My thoughts are if we truly believe the Fed, and their own dot plot projections (they're never right), that the federal funds rate will be <5% into 2025 and beyond, that they can actually bring down inflation substantially, or if they do cool off the labor market enough to cause a material recession, all of these scenarios should cause interest rates to drop. Thus, hopefully allowing a chance to refinance into a fixed product within the initial fixed rate portion of the ARM. However, a meaningful recession could also cause material weakness in housing prices as well. A conundrum indeed.

All of this being said, I'm still going to run amortization schedules on fixed products vs ARMs and understand all of the risks associated before getting into one. The timing is interesting as we are seeing the ARM meltdown play out in real time over in the UK, where millions of homeowners are about to get hit with ballooning mortgage payments.

Inflation

When we went under contract and reviewed it in detail, we had asked our builder about the escalation clause listed in the contract. The builder mentioned in more than 20 years building houses they had never had to enact the clause, until the prior year. But now that supply chains seemed to be getting better and the end of the pandemic was on the horizon, there didn't seem to be any cause for concern at the time.

Then Russia decided to invade Ukraine and everything that seemed to be getting better started falling apart again, at home and around the world.

Three to four months into the build, it was nearing time for framing and purchasing of the lumber. I had been hawking lumber futures daily, hoping to get some reprieve from the parabolic move. And by the time we were getting ready to start framing I had noticed lumber futures were down roughly 30-35% from the peak and back down to levels before we went under contract.

That week I was getting ready to write an email to the builder and ask if we would be getting a deduct on our build because lumber prices were starting to retreat. Before I could send the email, I had already gotten one from the builder saying they were enacting the escalation clause in our contract and charging us +$50k more for building materials (lumber, etc).

We were in complete shock. Not only did our home price go up significantly, it also had put us in a spot of potentially backing out of the build. The problem was, the builder said if we backed out now, they would keep our deposit until the home sold, which was still 9+ months out. Our contract wasn't very forgiving but we also didn't get lawyers involved beforehand or during this process.

We had also discussed delaying the build to see if material prices would come down (they eventually did months later), but we would have had to pay the contractor's carrying costs. The builder ultimately recommended against this decision, and us not knowing any better, deferred to them.

We are planning to have a meeting with the builder again in a week or two to discuss the path forward and what else they can do for us. It seems as if we are the only assholes still building and moving forward and that they are just trying to stick it to us on every turn. I'm not saying that's the truth of the matter, it just feels that way. We are the suckers.

Price Transparency

The biggest takeaway from this build process so far is the lack of price transparency. Maybe it's because we don't hold the construction loan. Maybe this is how it always is. This was my main concern before we went under contract. I told them I wanted to walk through everything that we wanted for the house and build in allowances to cover these.

The problem is when we met with their vendors to select the items, we didn't see the bill until after selections were made. Basically, we would meet with the vendor, they would ask us what we liked, we would pick things, then they would come back to us with pricing. It was extremely confusing because it felt like there was never a reference point to what our budget even was. Even worse yet, we carried some of the builder-grade standard finishes in our contract that we explicitly said we did not want and wanted to upgrade.

The only industry I could compare it to is the U.S. healthcare system. Where else do you go into a process and pick out things you want/like and are not given prices upfront? Moreover, because the builder has the vendors selected for us, we only had one option for everything. This made it incredibly difficult to price shop or compare. It's not like you can just google a certain light fixture and say "hey, that same one is $300 cheaper on Amazon" and they will just give you $300 back.

We were forced to go through their vendors, and most of them were pretty incompetent. I had caught multiple mistakes through backsplashes, lighting layouts, cabinetry, countertops, you name it. I caught thousands of dollars worth of mistakes.

It's also interesting how we slowly become numb to price changes throughout the build. After living in our current house for 7 years, we probably only put $20-25k into the house to upgrade certain things, with most of it being done by myself. Now I laugh when I look back and think about how much of a tight ass I was to not pay $300 to hire someone to help fix our bathtub or pay $1,500 to put in a new dishwasher, etc. Money has lost all meaning because of this build. It doesn't feel real.

What to Expect

During the post-framing walkthrough, we were getting ready to finish up when I pulled the construction manager aside and told him this was the most stressful thing I've ever done in my life, including dealing with three kids. I told him if someone were to ask me about how the build was going I would tell them to never do it, ever. He appreciated my candor, or at least that's what he said at the time.

I understand my experience is unique and "unprecedented" (I'm so fucking tired of this word), but there are still things in here you can learn from. If you are someone who is very meticulous with details, it will literally drive you crazy. If you're rich enough to not give a shit, you'll probably just continue to throw money at the problems until they go away or get fixed.

So what should you expect if you are going to build a home?

Expect delays, expect headaches, expect to pay more than what you thought you would, expect things to be wrong, expect everything. If you can at least go into the build thinking it will be very difficult, you may be pleasantly surprised if it turns out to be a breeze because you're anchored to the pessimistic viewpoint.

Murphy's Law

For the call back to Murphy's Law, here's what has gone wrong on our home build (so far):

Labor rates through the roof.
Material rates through the roof.
Supply chain issues (causing delays in the home build).
Ballooning site costs (because they didn't know what was under the soil until they started digging)
Mortgage rates went from <3% to ~7% in 10 months (which impacts our new home and will likely impact the sale price of our existing home come January 2023).
Building a house during 40 year high inflation and looming recession.
Our construction manager was moved to a different subdivision in the middle of a build.
I caught multiple mistakes by multiple vendors overcharging me thousands of dollars in materials because they are incompetent.
Being nickled and dimed constantly as they aren't able to hit our budget or "that wasn't included".
Essentially zero price transparency on the selections.

Lesson’s Learned

Every builder in every market will surely be different. Make sure you review your contract with a lawyer and understand your potential outs in case the market or other forces start turning against you. If you can, build in provisions into your contract for these outs. This may also force the builder to make certain concessions if the market turns against both of you.
Prepare for the worst. What happens if I go $100k over budget? What happens if interest rates go from 3 to 10%? Will I still be able to afford it? Will I be put in an uncomfortable or unattainable position? It’s not to say either of these will happen but they could and it’s better to acknowledge the possibility beforehand than be surprised right before closing.
Look into different type of loan options. Maybe you can get a 6-month lock that could help get you in a cheaper mortgage. Or maybe you could carry the construction loan. Talk to local banks. There are likely better options out there. Discuss them with your builder and mortgage lender before you go under contract.
Price transparency. Ask for receipts on everything. Ask for drawings on everything. Review everything. Question everything. They are working for you. They are building your dream house. Expect nothing less than perfection. Or just ignore everything and save your sanity.

We're still not entirely sure if we're going to see this through until the end. There are still risks out there. We don't have a mortgage rate locked, we don't know if it'll appraise into a vastly cooling housing market. We don't know what will happen to the price of our existing home that will be used for our new house down payment.

To use a Texas Hold 'Em analogy, it feels like we're pot committed. We have a decent hand (nice house) and paid a ton of money to see the flop (down payment) and the turn (vendor selections) but there are some potentially better hands out there that can beat us (not appraising, more inflation, mortgage rate lock). The question is do we call the market's, the Fed's, and everyone else's bluff and pay for the river in hopes of winning it all?

What's the worse that could happen now seeing that everything that could possibly go wrong already has? That's Murphy's Law.

If you've dealt with a similar situation or have any advice, I'd love to hear your story.

Some Good News

Ramp Capital — Mon, 26 Sep 2022 14:16:17 +0000

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March 2020 was probably one of the scariest moments of my life. Covid-19 was spreading across the world and finally entered the United States. Businesses started shutting down, the entire country went into lockdown (15 days to slow the spread), and the market was in a complete free fall.

On top of that, my wife was pregnant with our 2nd child at the time so we were even more concerned about contracting the disease since no one knew what could happen to mom or baby.

Bad news was everywhere. It felt like the apocalypse. Then John Krasinski launched a YouTube series called Some Good News where he decided to break the cycle of doom and gloom by only reporting good news, a welcome addition in a world revolving around fear and dreadful news.

As the pandemic continued to drag out, the fear started subsiding, replaced by the urge to get on with living life. Just as 2022 seemed to be the year that we would finally get past the pandemic, the Ukraine/Russia war began, and the stubbornly high inflation started to take hold around the world.

The Fed understanding they were behind the curve began aggressively raising interest rates to tamper down inflation. Since then the market has been a brutal drawdown across the board, with the major indices down anywhere from 19 to 30% YTD.

On Friday, the Dow Jones Industrial Average hit the same levels as it did in early 2020 before the pandemic. Two and a half years of gains evaporated.

There isn’t anything to be bullish about.

We need some good news.

Central banks around the globe are on a concerted effort to raise interest rates and bring down inflation.

Mortgage rates in the U.S. are already through 6%, more than double what they were 9 months ago.

Everyone’s concerned the Fed will push us into a recession if they don’t achieve a soft landing based on Jerome Powell's rhetoric this week. What is the Fed doing?

Again, there isn’t anything to be bullish about.

Until you ask.

Everyone knows bear markets are great for Twitter engagement. Higher the VIX, higher the clicks.

So of course I used this moment to leverage my audience to do the work for me.

Over 850 comments (and still going). I read through every single one and distilled it down into some of the best ones. You can go through the rest of them with a glass of wine or your other favorite poison.

1) Expected Rate of Returns Are Increasing

Valuations and rate of returns are like a seesaw, when valuations start contracting, the future expected rate of return goes up, and vice versa.

The good news is for those who are in the beginning or middle stages of their investing careers and don't need the money right now, you're getting in at cheaper prices than you were in the past year.

2) Seasonality

I’m not a huge fan of seasonality but after seeing the chart below, wake me up when September ends. Ari Wald via Sam Ro: “Major market bottoms have occurred in October more than any other month.”

A couple more interesting charts posted by Mike Zaccardi show the seasonality trend heading into the midterms and pre-election cycle.

3) Record Put Volume

In the time everyone was running around like a chicken with their head cut off last week, Friday saw the highest put option volume in history at just shy of 34 million contracts. The market rarely rewards such one-sided trades, so a face-ripping rally could be in the works this week as too many investors get caught offside.

The last peak of put volume occurred in mid-June, when the market proceeded to rally almost 20%. While a short term rally could be inferred from this data, many are still expecting it to be a bear market rally instead of the absolute bottom. Most are still in the camp we won't bottom until we see inflation start receding, the Fed backing off or pivoting, or the geopolitical issues (WW3) start calming down.

4) Stardust

Phil Pearlman coming in hot with the existential crisis vibes, which actually reminded me of this bit from Pete Holmes.

When nothing makes sense and you can't control it, why even worry about it? Just live in the moment and learn from it. I'm already feeling better about our messed up situation.

5) Fed Pivot

Eventually, the Fed has to pivot. We're closer to the end of the tightening cycle than the beginning, in my opinion. This was displayed in the Fed's latest dot plot (which, by the way, means nothing because it’s a compilation of guesses from a small group of people who are always wrong).

The only real question left is if the Fed will achieve a soft landing. No one thinks so. If this ends up being the case and unemployment rate begins to spike, we may see inflation drop much faster and the Fed will then be expected to turn more accommodative and dovish.

This one is bittersweet. It's good news for peak inflation, bad news for folks who will end up losing their jobs.

6) Costco Bonus

A top Costco Wholesale executive confirmed the big-box retailer has no plans to change the price of its $1.50 hot dog-and-soda combo at its stores despite months of decades-high inflation.

Costco CFO Richard Galanti reiterated the cheap price point on the fan-favorite deal would stay in place during the company’s fourth-quarter earnings call on Thursday.

Worst case scenario, Costco will keep us fed through the tough times. No more Ramen. Welcome to Idiocracy.

Light At The End of the Tunnel

I'm not saying we should bury our heads in the sand and ignore the difficult times. I'm not going to tell you things are great. Things are downright terrible in many facets of the economy.

However, I do know we've always made it through to the other side and I don't see any reason why it would be different this time, even in the face of the most hawkish Fed we've seen since the Volcker era.

Difficult times breed innovation. Innovation breeds competition. Competition breeds success.

We just need some good news to turn the ship around.

Nothing Else Matters

Ramp Capital — Tue, 20 Sep 2022 14:03:10 +0000

Nothing Else Matters

There are a few times in life when our thoughts about money mean nothing. When we’re young, we don’t know the value of it, where it comes from, or how our parents buy things for us. When we die, we can only give it away, it serves no purpose to us anymore.

This was illustrated by Lawrence Yeo in The Nothingness of Money.

I'm currently in the plateau phase, however, my ideas and thoughts about money have changed drastically over the past 5 years, and it’s because of my children.

A few weeks ago we brought our 3rd kid into the world and life as we know it will never be the same again. For most parents out there, the joy of bringing a new life into the world is unlike any other experience. It's exciting and terrifying at the same time. Am I cut out for this? What if I'm not a good parent? Do we have enough to provide for them? Millions of questions and concerns come to the forefront.

Not only do our thoughts about money change after kids but so do our thoughts on time. It’s comical to look back at how much leisure time I had available before kids. It wasn’t even really productive time. I remember coming home and binge watching 4-5 episodes of some show on Netflix then going to bed. Or doing projects around the house for hours on end. Then drinking and partying every weekend.

What I have now come to realize is these were just busy tasks to fill time slots and try to feel some sense of purpose in life. But it was never enough. When you have kids (and actually care about them and being a good parent), you spend much of your waking moments thinking about how to protect, teach, and provide for them. It is a difficult task that requires some reprioritizations around your thoughts on money.

Below are a few ways my thoughts about money have changed since having kids.

Caring Less About “Retirement”

I’ve previously written about how retirement is just a state of mind.

In my previous life before kids, I often dreamt of amassing enough wealth to retire early and become a FIRE guy. Yet I had few aspirations of what I wanted to do once "retired" (golf, garden, woodworking), I just knew I didn't want to wake up 30 years from now feeling unfulfilled.

With kids, I've realized that my home identity is much more important than my work identity. While I still need to provide for my family, there are still limitations where I will not sacrifice my home life for my work life if it means missing seeing my kids compete in sports or plays or helping them with homework. Maybe this pushes out retirement a few days, months, or even years. Who cares?

That may sound a bit slothful and apathetic, but it's really just a confirmation of my priorities in life now, ironically brought upon by the pandemic and WFH movement plus the addition of kids to the house.

Frugality Pushed to the Breaking Point

In my family, I’m the saver and my wife is the spender. In some ways this is a good thing and in some ways it’s bad. The good is I don’t always see the bills for all of the kids' things (food, school, clothes, etc). I would simply drive myself mad as I would escape the plateau and continue riding the trend upwards. Even though I know most of the things we buy for them are necessities, my brain can’t help but try to remain frugal with their purchases.

If you're one who doesn’t enjoy spending money you'll have to come to grips with the fact that you’ll always be spending money for your kids…daycare, school, activities, clothes, food, healthcare, all necessities. The non-necessities are endless too it seems.

So while I remain frugal throughout my own purchases for myself, I’ve come to realize I don’t need much to be happy (just some nice golf clubs) and get much more happiness seeing my kids enjoying their own experiences.

Frugality turns into selflessness.

Remotivation

There's nothing that can motivate a person more than bringing another human into the world. They depend on you for every necessity. The strongest feeling in the world is the need to provide for your family. Not only are kids motivators for adults to become hard-workers, they also motivate us to become better people. They watch and repeat everything we do with perfect mimetic behaviors.

While few and far between, I still have some close friends who don't have kids (yet). One of them hasn't worked in months, and that's fine because they only need to provide for themselves. They have some savings that they can work off of and can live on ramen noodles if necessary. That would be an incredibly tough situation for them if they had to provide for children on top of that.

While it hasn't happened yet and hopefully never will, if I ever find myself in a similar jobless situation, I can promise that I would go work at McDonald's the next day if it meant bridging the gap to continue providing for my family.

Fight or flight mode activated.

Reallocation

Before kids, I was focused on paying down student loans and credit card debt, and contributing to a 401k and Roth. After kids, the focus turned more towards allocating money to child care, 529s, HSAs, life insurance, and emergency funds.

A new Brookings Institution estimate recently put the total for raising a child through age 17 at $310,605. Let’s do some quick math: $310,605 x 3 = $931,815. Divide that by 17 years and you get $54,812 per year. Divide that by 0.65 to account for taxes and you have $84,327 per year, which is the salary you’d need to make (on average) before tax to support 3 children. Take these numbers with a grain of salt as they're likely individualized, just know it's a lot.

Congratulations! Here’s your $300,000 bundle of joy! As your mind starts thinking about what you could have spent that money on. A yearly 2-week trip to Europe for the next 25 years. A new RV. A few new rental properties. Comparing everything to how much you spend on childcare is a great way to drive yourself mad.

Now you’ll be spending that on experiences with your family that will create memories that will last a lifetime. It’s a rite of passage.

Budgeting

When I was single and before any budgeting apps like Mint were really mainstream, I created an Excel spreadsheet to track all of my expenses and put them in different categories (food, bars, utilities, clothes, etc.). It did take a little bit of grunt work to pull my credit card statements and copy the information into the spreadsheet, but in the end it helped me to stay under budget on certain items when I saw them get out of hand in previous months.

Once I got married and we started using individual and joint credit cards it just got too complicated to use the same old spreadsheet to track our spending habits. Then once kids entered the picture it became even more convoluted.

While we now keep our personal spending on ourselves to a minimum, we have pivoted back to budgeting again to make sure at a minimum we are saving more than spending each month. This is obviously important because kids are already expensive and stressful enough without the added pressure of piling up credit card debt on top.

The Future

While I want my kids to thrive, I do believe there's a fine line between giving them the best opportunities to succeed and spoon feeding them.

I don't ever remember discussing the concept or value of money much with my parents. And even if we did discuss it, I'm sure I wasn't listening at the time. I will make it one of my top priorities to ensure my kids understand the value of money, how to make it work for you, and the importance of being frugal during life's inevitable ups and downs.

But for now, I need to focus on teaching them letters and numbers. Then we will move onto money, blockchain technology, and stocks.

I want to leave you with an excerpt from a WSJ opinion piece that I saw a month ago that has stuck with me since.

We should think of our children as assets, not liabilities. They are truly priceless.

Moonlighting In The Spotlight

Ramp Capital — Tue, 16 Aug 2022 15:58:14 +0000

Over the past 2 years, I've been fascinated by the working from home (WFH) movement and the second order effects of it. For many, WFH has allowed workers to spend less time commuting and putting in face time at the office and spend more time being productive and doing things they are passionate about—such as playing golf, exercising, spending more time with kids, traveling, or running a side hustle.

Today, I want to talk specifically about side hustles, those who work multiple jobs, and those who do either while WFH. This post was actually inspired by a tweet I saw a few months ago from Jason Calacanis which has lived rent free in my head ever since.

On the surface, Jason's tweet has the "old man yells at cloud" aura to it. As if a vast number of people who are WFH are overtly taking advantage of their situation, to which he clarified in a follow up tweet that he didn't think the majority of people were abusing their WFH privilege. What if employers were the ones who were taking advantage this entire time and the power is finally moving back to the people?

Moonlighting

While doing research for this piece, I was curious to see how many people had multiple jobs and the reasons why, and I stumbled upon this chart from the U.S. Bureau of Labor Statistics. Even though the chart is 25 years old and the sizes of the pie surely have changed since then, the overall reasons for moonlighting still likely hold true—particularly for meeting regular household expenses during 40-year high inflation.

According to the BLS, 4.8% of employed persons in the U.S. hold multiple jobs, with 430,000 of them working two full time jobs. Even though the percentage is near the all-time lows (sans the Covid drop), the total number of people with multiple jobs is at the highest level ever, from the beginning of the dataset in 1994.

The BLS defines a multiple jobholder as a person who had two or more jobs during the survey reference week, at least one of which was a wage and salary job. Self-employed people with multiple businesses and people with multiple jobs as unpaid family workers are not classified as multiple jobholders. Side hustles would also not be included in this dataset.

It's also interesting to look at the breakdown between primary and secondary jobs being part time vs full time. Multiple full time jobholders still represent a small portion or the total working class that has stayed relatively constant over the past 30 years.

As noted by Heidi Shierholz, president of the Economic Policy Institute, "Historically, the share of workers with multiple jobs goes up when the labor market is strong and goes down when the labor market is weak. It's basically a question of job availability. We are seeing this increase in multiple job holdings as the labor market has strengthened."

Additionally, workers have held multiple jobs just to make ends meet with inflation continuing to rage. According to a survey from Primerica, three quarters of middle-income workers feel their income is falling behind the cost of living. Many of the trends below are going in the wrong direction.

Depending on the role and market sector, one could argue the majority of workers take on multiple jobs because they feel they have limited control on their upward mobility at a company. Take for example a salaried employee who every year gets the standard bonus, standard raise, and can work anywhere between 30 and 60 hours a week. The only true incentive for them to go above and beyond is a promise of something better in the future—becoming a partner, climbing the corporate ladder, a bigger bonus, whatever it may be.

However, none of those promises are ever guaranteed and many workers waste years chasing one of these outcomes with an employer who never planned on giving it up anyways. Big corporations love these types of employees who just keep their heads down and accept the status quo without ruffling any feathers or asking tough questions, mostly because they know they can just be replaced.

One must look through the lens of an employer and as an employee and come to some sort of compromise. At the end of the day, employers want dedicated employees who work hard. The problem is it's tough and expensive to find those employees and even more difficult to retain the best talent. Smart employers want to keep their employees on a relatively tight leash, but give them enough slack so they don't choke. The compromise lies within the employer giving the employee enough time and freedom to follow their true passion and give them the creative outlet to explore entrepreneurship.

Follow Your Passion (In Your Spare Time)

How many people do you know who went to college for a degree that they currently don't even use?

A recent survey from Finder shows about 2 in 5 people don't use their college degree. Why do you think that is? My guess is it's a combination of indecision of what they want to do in the future and because they were told to follow their passion as they were growing up. What those mentors neglected to tell them is that for the vast majority of workers, passions don't typically pay the bills.

Imagine your art teacher in high school telling you to go to college to get an art history degree. You go to a prestigious university for 4 years, then graduate with +$150k of debt and a salary in a field that can never substantially work down that mountainous debt load. At this point you only have one choice, take the only job available at the time to start paying off your debts—often times leading you down a completely different career path and abandoning your passion altogether.

In a talk about his book The Algebra of Happiness, Professor Scott Galloway goes off in the video below about the career myth advice of "following your passion" and how he thinks it's complete bullshit.

I hate to say it (because it's cool to fade him) but I agree with Galloway. You have to first follow what you're good at, then make time for your passion. Do your passions on weekends and nights to fill that gap. Then, when the unit economics on your side hustle start to become more attractive and close replicating your full time wage or salary, you can turn your passion into reality.

Moreover, having your passion as a side hustle allows you to take advantage of certain employer-provided benefits such as health care and retirement plans without the added cost or risk.

Encouraging Entrepreneurship

Going back to Jason's tweet at the beginning, there's a feeling out there that employers should expect their employees to be fully committed to the task at hand. That's noble, but also unrealistic in today's exceedingly digital and connected world.

Employers should be encouraging entrepreneurship for a multitude of reasons. Every job or career will be lacking something—pay, growth, excitement, soft skills, sales, etc. When employers encourage and allow their employees to have side hustles, it allows a creative outlet for the employee while the employer acknowledges the missing gap within their own culture. The result is a happier and more fulfilled employee.

What really matters at the end of the day? Having reliable and productive employees, not disgruntled ones.

During my time supervising younger folks, I have been clear with many of them from the start. Get your work done when it's due. If you get it done in half the time and I don't have more work for you to do, then I don't care what you do for the remainder of the time. Go take a nap. Go for a walk. Play video games. Do something that makes you happy. But come back ready to work again when the time comes.

You're probably thinking that sounds ridiculous. Give them more work. But people forget how much downtime and fluff there is in any given day. When this exact situation occurs in the office setting, you typically don't have those luxuries of doing something you enjoy. Instead, you're stuck on your computer screen, doomscrolling through social media or reading the news—arguably unhealthier habits—which leads to mental fatigue and disgruntled employees and the ouroboros continues.

Instead of condemning employees for pursuing their passions, employers should embrace the entrepreneurship and give more freedom to retain the best talent.

Live, Work, Die

Ramp Capital — Mon, 25 Jul 2022 13:39:02 +0000

Together With:

3 Days Left To Own A Slice Of This Money Pie

The $155 billion pizza industry is about to get a full-scale upgrade, and one private startup is leading the way with robotic pizza kiosks.

(It’s called Piestro, and they’re taking investors right here until July 28th.)

Here’s why renowned brands like 800 Degrees and Fast Fired have already preordered $580 million in Piestro’s pizza pods:

Operates in most high-traffic areas
Slices the pizzeria budget in half for 3X higher margins
Cooks the perfect pie in 3 minutes

You can become a shareholder before they spread to stadiums, office buildings, college campuses, malls, and street corners around the world.

Invest in Piestro before the July 28th cutoff.

A few weeks ago, I was hit with some unfortunate news that a former coworker passed away.

He was my supervisor and mentor for a few years while working on two big projects together. An extremely bright mind and freakishly organized, you could tell he loved what he did throughout his entire career.

He was one of the first 100 employees in a multi-billion dollar company that has been around for a long time. He came straight from school and proceeded to work for more than 45 years at the same company—a trait you just don't see anymore. He would have worked until he was 100 years old if he had the choice. He was built different.

About 6 years ago we were going through a rough patch and rumors of layoffs were swirling around the office. As it was relayed to me at the time, he was approached by management and asked if he was planning on retiring soon. He said no and was laid off a few months later—essentially put into a forced retirement. He was promptly marched out of the building by security and I never saw or spoke with him again.

I have always been upset about how he was let go from the company—as such a well-respected and wise man who was absolutely devoted to the company. That event changed my view of corporate America forever. Everyone is replaceable.

When I heard of his death, I tried Googling his name to see if there was an obituary. Nothing. I couldn't even find a picture of him on the Internet. Knowing him and his quirks, this is exactly how he would have wanted it. He never wanted to bask in glory or have people remember his name. He just wanted to help others out. From my foggy memory I can still see his face and smile and remember his belly laugh, although the finer details aren’t as crisp as they once were.

The sobering news of his death was a reminder of how much of our time is centered around our work lives and how we should strive to find meaning in our work.

For many of us, work is just another place to earn a paycheck. We can’t all run tech startups that are trying to change the world. Many are doing what they can just to get by. Others may want to climb the corporate ladder if that’s their choice. Others let their work lives consume them, alienating themselves from their families and friends, in pursuit of something that will never fully satisfy them.

If you feel stuck in this cycle, there are ways to realign your priorities to get more meaning out of your work.

Make yourself meaningful to others

Some of us don't have to try to find meaning in our careers because it's already built-in to our job title. For example, if you're a surgeon, firefighter, or financial planner, you're already helping people in need on a daily basis. You're hopefully already getting a profound sense of meaning from your work.

But maybe you're a waiter or work in the service industry. It can be difficult to change someone's life in a role like that but it just requires a bit more effort and a different mindset. You can make yourself meaningful to customers by having a positive attitude in everything you do. Your positivity will spread and the customers and coworkers will remember your efforts for a long time. Research has shown that strong relationships enhance our sense of meaning in life.

Don't focus on the money

Wait, how can you not focus on the money? That has to be the most important reason to wake up every day to go to work.

Don't let money be the sole driver of your career choice.

Eventually, the shine will wear off and you will be miserable in your role, looking for deeper connections and meaning. Moreover, many of the people I know who make a lot of money in their roles are very stressed out because of the daily demands and responsibilities they have. They barely even have time to spend all of the money they make. Even when they do find time to decompress, they dread going back to work in a highly stressful environment.

One tactic I've seen firsthand is people slaving away for a few years at a job making ridiculous money, then they leave and use that money to bootstrap their own startup, creating something they're passionate about. I like this strategy. My only advice for this would be don't overextend yourself or get burnt out in the process as it could lead to some psychological damage.

Become a mentor

Mentoring someone is one of the top ways to find fulfillment in your work. It’s also a great way to retrain your brain. Doing certain work tasks may start to become second nature to you. But when you get a fresh young mind watching you and asking questions, it opens up a new world of opportunities for both of you. Sometimes the person who needs help the most is you.

Don't fall into the trap of refusing to help younger workers because no one ever helped you out. Break the cycle and form a new trusted relationship. This is especially true for interns and new hires who are working remotely and need guidance and someone to look up to.

Refuse to climb the corporate ladder

Climbing the corporate ladder isn't for everyone. You slave away at a company putting in 60 hour weeks for 20 years, all while politicking your way to the top. For what? More money? Power? It's never worth it. In my experience, these people are the most despised people in every company. Empty shells of a human that can’t be trusted.

Focus on creating new relationships in lieu of destroying old ones on your way to the top.

Balance

If the Great Resignation and the working from home movement taught us anything, it's that life is all about balance. People quit in droves because they were unhappy with their work situations and thought better opportunities laid elsewhere.

Many people who started working from home realized how much happier they were. For me, it was a function of spending more time with friends and family and pursuing other passions without the need to constantly show face time at the office—especially when I could increase my output and quality remotely.

Walking the dog, taking a nap, playing golf, and spending more time outside gave me a sense of freedom that will be hard to ever give up, especially when we have the tools to stay connected in a digital world. I realized very quickly I was one who thrived working remotely because I can handle myself without succumbing to distractions and am driven to work harder to earn time to pursue other passions.

At the end of the day, you should love what you do and do what you love.

The Scapegoat Mechanism

Ramp Capital — Mon, 11 Jul 2022 15:19:15 +0000

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Last Month To Make Automatic Pizza A Thing

Invest in Piestro before their raise closes on July 28th.

The human hands tossing America’s favorite food are getting more expensive.

The solution? Robot hands.

Piestro’s 24/7 fully-automated gourmet pizza kiosks can:

Slice pizza labor budgets in half
Boost profit margins by 3X
Cook a perfect pie in 3 minutes

In other words, the easiest food to eat just became the easiest food to make.

So don’t be surprised when you find Piestro kiosks covering every high-traffic area in the world: stadiums, office buildings, college campuses, malls, street corners, and beyond.

And it’s not just Piestro benefiting from the pizza automation movement. They’re also launching “Powered by Piestro” units to give other pizza brands a piece of the money pie.

The tech company already has $580 million in pre-orders from global brands like 800 Degrees Pizza, and you have less than one month left to become a shareholder.

Invest in Piestro before the cutoff.

A month ago, we were vacationing in Florida with another couple and their 3 kids. Every morning we would wake up early, eat breakfast, go to the ocean or pool, then head home to take a nap and hang out for the rest of the day. Every night, the adults would stay up late to have a few drinks and catch up.

The first night, my friend and I stayed up late and we started discussing investments and then out of the blue my friend said: Yeah, I am getting killed on that stock XYZ you recommended to me.

I honestly didn't remember "recommending" anything to him. We hadn't seen each other for at least 2 years and rarely text, so I figured I must have mentioned it to him flippantly during the last vacation while we were playing golf.

My friend didn't mean what he said in an accusatory way. He was just making a statement and said he took full responsibility for adding it to his portfolio (this rarely happens). I had mentioned to him it wasn't doing great in my portfolio either as I had been holding it for years and watched the erasure of gains over the past 6-12 months.

That conversation we had on the first night has stuck with me for a few reasons.

First off, my immediate reaction was a sense of remorse and shame. I would have never mentioned the stock if I hadn't believed in it. The fact is, I still do believe in it. But my time horizon is forever. What is his time horizon and risk profile?

Secondly, it brought back memories of other times I've nonchalantly mentioned stocks or strategies to friends in passing or even on Twitter with a large following, not fully realizing others may have piggybacked the investment, setting me up for future criticism.

Thirdly, it solidified in my mind that it's against our human nature to take accountability for the wrongs we've committed and instead project our worst fears onto a scapegoat.

This scapegoat mechanism tends to happen in times of instability. The markets have been unstable since the start of the year, really since the start of the pandemic. Who should we blame? The Fed? Trump? Biden? The CDC? Putin? Ramp Capital? There's just too many easy targets to choose from. Make sure you're not looking in the mirror when you pick your target.

If you want to see this happening in real time on Twitter, just look at how the mob has turned on Jim Cramer and singled him out. You've probably recently noticed the most low brow engagement technique on Twitter and it doesn't involve writing Wikipedia threads. The technique is to quote tweet or reply to Cramer and say something snarky about doing the opposite of everything he says. They're winning easy internet points and at the same time deflecting the blame for their own problems.

As Luke Burgis eloquently puts it: We can't predict when the wisdom of the crowd becomes the violence of the mob.

This isn't about defending Cramer, but rather highlighting him as the most recent scapegoat for the market's misfortunes. Cramer has an impossible job. He goes on CNBC nearly every day and has to provide commentary on hundreds of stocks every week. He's an easy target with an extreme personality that draws viewers in. While he may not know it, all scapegoats actually have the power to unite people and defuse the mimetic conflict.

The mimetic behavior and scapegoat mechanism surrounding Cramer can be compared to a biblical story of a stoning event that never happened because Jesus intervened and said "Let anyone among you who is without sin be the first to throw a stone." Except in this scenario, the stones are tweets. Without the mimetic model of the first viral tweet and dopamine hits of the engagement that follows, there's a chance Cramer wouldn't currently be labeled the market scapegoat. But, alas, mimetic contagion has already taken hold.

Unfortunately, nobody is safe from becoming a scapegoat but it is possible to take steps to minimize the impact once you realize it is happening to you or someone else.

One simple way is to just stop talking about your investments around family or friends or your social media channels. I've seen it first hand, people will only remind you of the losers, never giving congratulations for the 10x winners.

Or just stop giving advice, period. You shouldn't be giving any type of investment "advice" anyways unless you're a registered investment advisor. Everyone’s personal finance situation and risk profile is unique and should be treated as such when constructing a portfolio.

But we all know how this works. You come home for Thanksgiving to visit with family or you're on a bachelor party with some friends and somehow the topic gets brought up. You're the expert and also the potential scapegoat. People crave guidance from experts but also aren't willing to put in the work themselves.

An alternative way to approach these situations is to say something along the lines of: I bought XYZ stock because of these reasons. There's a chance this investment doesn't work out for these reasons and you will lose all of your money. Do whatever you want. This is not investment advice. Hire a financial advisor you cheap ass. Blah blah blah.

At the end of the day, unintelligent people always look for a scapegoat.

Intelligent people are hungry for continual guidance and mentorship, take responsibility for their actions, and can control their emotions in times of instability.

Everything Is Broken

Ramp Capital — Mon, 20 Jun 2022 15:53:40 +0000

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Stop Wasting Your Time Looking For Investor Data

Every portfolio manager and hedge fund analyst wants to generate alpha, otherwise why would they be working in this business?

The hardest part about alpha? The time and effort needed to find real, actionable insights.

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Everything is broken.

Crypto, stocks, bonds, housing, consumer confidence, inflation, the list of bad news seems never ending.

Let’s take a look at some of the best charts I came across this week and provide a little more color.

Fed Up:

Investors who’ve been around the block a few times know that corporate earnings and macroeconomic data drive the medium and long term trends of the stock market. Short term trends tend to be driven more by the combined psychological responses to these data points. And right now, the Street is finding it difficult to get any more bearish.

In 2010, fresh off the lows from the GFC, the biggest driver of the market seemed to always be centered around the monthly jobs report. It was the highest profile event that all investors paid the most attention to as they were using it as a gauge to determine when they thought the Great Recession was finally over.

Looking at the US Unemployment Rate since 1950, you can see how every spike in unemployment coincided with a recession and every peak marked the end of it. Unemployment hit a peak of 10.1% in October 2009 and subsequently declined all the way down to 3.5% for the next 10 years.

Because we’re in such a tight labor market and the unemployment levels have been in a steady decline since the GFC (sans the Covid spike), it feels like this economic data point just hasn’t had the same impact on markets that it had over the previous 10+ years. However, this could change based on how hawkish the Fed gets with regards to hiking rates to battle inflation.

It seems that it’s only when datasets get completely off trend and out of line that we become hyper-focused on what the data is trying to tell us. Especially, if we think it will impact collective sentiment and future earnings.

Inflation and the Federal Reserve’s policy to deal with it are the two main focal points during this current cycle. We didn't really care much about inflation since the GFC because it was maintained in a 0 to 4% bound. Now that the genie is out of the bottle, we are dealing with a whole new set of problems.On Wednesday last week, the FOMC increased the Federal Funds rate by 75bps, the largest hike since 1994. This was predicted by many Fed watch tools and traders after last week’s inflation data came out hotter than expected, again, and the information of a potential 75 bps hike was leaked to the WSJ.

Many were saying the market was giving the Fed the opportunity and invitation to hike 75 bps, even though during Powell’s previous statement he said, “A 75 basis point increase is not something that the committee is actively considering."

This just goes to show how far behind the curve the Federal Reserve is with regards to taming inflation with their policies and "available tools". In fact, as pointed out by Simon Ree, once inflation goes above 5%, it has never come back down without the Fed Funds Rate exceeding the CPI.

The problem is the current inflation rate is 8.58% and the effective Federal Funds rate is only 1.58%. A 7% delta leaves a lot of room for the Fed to continue hiking until it starts seeing inflation roll over. Their goal would then be to slow down the magnitude or frequency of hikes (and to get further off of zero in preparation for the next easing cycle) while inflation rolls over so as to encourage the so-called soft-landing.

By the time the Fed catches up, it will likely turn out that they reacted too slowly to start this tightening cycle, and we may have already entered a recession. However, Powell made it clear during his presser last week that they are not trying to induce a recession.

The problem is there are already signals saying we may already be headed for a recession if not already in one. Take a look at the latest GDPNow estimate. It’s currently at 0% with the next update coming on Monday, June 27th. GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available economic data for the current measured quarter.

While the consecutive quarters of declining GDP would signal a technical recession (to be confirmed later by NBER), eyes will likely shift back to closely watching the unemployment reports to see if the job market can remain healthy with the Fed pouring cold water on economic activity.

Sam Ro gave a slightly rosier outlook on inflation and the Fed policy in his most recent substack:

Bear Market Official:

The bear market is finally official based on the last few weeks of drawdowns.

The Dow has still somehow managed to not enter the -20% threshold but it doesn't matter at this point. You can see this has been an incredibly tough year for investors with really nowhere to hide unless your crystal ball said to go 100% long energy.

Ryan Detrick shared the table below that lists out all of the bear markets (and near bear markets) since 1950 and how long it took for them to bottom out. As you can see, the average length until bottom is 11 months and the median is 7.2 months. We are currently 5.4 months into this current bear market and it feels like it’s only going to get worse from here. But that’s what they always feel like.

One thing to remember on this table above is it’s the average and median time to hit the bottom. The chart below from Morningstar and BMO shows visually how long it takes for the full recovery to occur.

The magnitude of wealth that has been destroyed during this latest rout has now dwarfed previous declines.

Crypto Winter:

The entire crypto market has been annihilated, falling below $1T total market cap. For reference, it hit nearly $3T total market cap in early November of last year. Which makes the chart on wealth destruction in the previous section even more frightening.

While many cryptonerds who’ve been around long enough will say “first time?” it does seem to have a “it’s different this time” feel to it. That’s due mainly to depegging of stablecoins and deleveraging liquidations which have sent shock waves throughout the entire crypto ecosystem.

Will Hershey, CEO of Roundhill, gave his take on the recent collapse of the crypto markets. He echoes my recent sentiments that the bad actors will hopefully be forced out and the builders will win. But many people who invested in this space are gone forever.

One thing I know is that there are lessons to be learned during these tough times, and they apply to both crypto and stock markets. Have a read through some of these if you haven’t already come up with your own.

My biggest takeaway, which is cliché but still holds true, is that if it looks too good to be true it probably is. Nick Maggiulli summed this up perfectly in a recent blog post.

Too Good to Be True – Of Dollars And Data

On separating fact from fiction in financial markets.

https://ofdollarsanddata.com/too-good-to-be-true/

The most annoying part of this recent boom-bust cycle in crypto was the "have fun staying poor (HFSP)" movement on the way up and boomer schadenfreude displayed by nocoiners on the way down. It sucks in people on the way up and spits them out on the way down.

I don't know if this will end up being the bottom for crypto, but I think it will be tough for coins to increase in value if financial conditions continue to tighten, as they are currently viewed no different than unprofitable expensive tech stocks.

That's all for this week. Thanks for subscribing and sharing.

Sportswashing and the New Game in Town

Ramp Capital — Mon, 13 Jun 2022 13:02:54 +0000

Together With:

Did White Castle And Jack In Box Find The Secret to Bigger Profits?

You have 11 days left to invest in the robots keeping the fast food industry alive.

Most restaurants won’t make it on an average 3-5% profit margin. And rising labor costs sure don’t help.

That’s why the top names in fast food, including Jack in the Box and White Castle, are turning to kitchen automation solutions to boost their bottom lines.

Robotic kitchen assistants from Miso Robotics cost just 1% of total restaurant spending.

The result: 3X higher margins, happier customers, and restaurants everywhere wanting these AI solutions in their kitchens.

286,000 restaurants across America need this cooking and drink-pouring tech. With industry superstars piling in, it’s only a matter of time before they all call on Miso.

Get shares in Miso Robotics before their funding round ends on June 23rd.

For those who’ve followed for a while know I am passionate about the game of golf. I’ve previously written about it here and here:

Golf’s Most Game-Changing Innovations Throughout History by Ramp Capital

Technology touches everything human. How we cook, sleep, love, work, and play — including how we play sports. Stick-and-ball games scored by fewest strokes are probably as old as humanity. They’ve likely been around since, well, humans could swing sticks and count. But the modern game of golf, played with a club across

https://checkout.rhone.com/blogs/pursuit/golf-s-most-game-changing-innovations-throughout-history-by-ramp-capital

The Most Expensive Golf Gear Sold Throughout History by Ramp Capital

Hi, I'm Ramp Capital, and you might know me from lighting up your Twitter feed with the latest and greatest takes on all things finance (and memes). I'll be collaborating with Rhone over the next few months to provide fun and interesting articles on golf, finance, and how those topics intersect. I hope you join me for

https://checkout.rhone.com/blogs/pursuit/the-most-expensive-golf-gear-sold-throughout-history-by-bullish-studio

The game of golf has swiftly picked up steam since the pandemic began over 2 years ago—as it was one of the few sports that requires no physical contact, is played outdoors, and there is no sharing of equipment—unless you let your buddy borrow your driver after witnessing you hit a 300-yard bomb. However, even these self-isolated features of the game didn’t stop most clubs from putting foam noodles in the cups so people weren’t grabbing the flagstick and spreading the ‘Rona—because science. To this day it is still arguably one of the dumbest and laughable responses to stopping the spread—but I guess it did help my back so we will allow it.

While the pandemic was the catalyst to reinvigorate and renew a love for the game, a more recent event kicked off this week that turned the game of golf on its head with unknown impacts for years to come.

The LIV Golf tour kicked off its inaugural event (of 7 regular season events) with a few high profile names such as Dustin Johnson, Phil Mickelson, and Sergio Garcia defecting from the PGA Tour. It was recently reported that Patrick Reed and Bryson Dechambeau will also be joining the new league soon.

The format is set up for 48 players on 4 teams where there are guaranteed payouts for individual and team scores—the first time this arrangement has been tried. Each of the 12 teams has a captain that chooses the remaining 3 players via a snake draft before each event begins. A few additional differences to the PGA Tour regular season format are the shotgun start (meaning every group of players will start on a different hole so that they all finish simultaneously), the 54-hole setup in contrast to the PGAs 72-hole format, and no cuts for the LIV Golf players.

This all sounds great so far. Live scoring, course heat maps, team and individual scores, 4-5 hour window—sign me up. So why has this new league garnered so much criticism by the PGA Tour and golf purists?

Well for one, the players who joined LIV are getting PAID big time. Here is the prize purse for the first event that kicked off Thursday morning at London’s Centurion Club. I’d love to shoot 85 for three straight days and make $120k.

It’s great that the players on LIV are making guaranteed money with no cuts. If you miss a cut on the PGA Tour you don’t make a dime. Some argue this is still a good thing as it reiterates the meritocracy. But comparing it to bench players in other major sports makes it look borderline criminal. Imagine being the best in the world then “working” a few days for free because you didn’t have your best stuff. Better luck, try again next time.

Jack Raines discussed golfer's pay further in a new post, mentioning golfers don't have leverage, because they lack both a players union and an alternative league.

The problem expressed by many isn’t the amount of money being distributed out but rather where the source of funds is coming from. The LIV Golf tour is backed by a huge investment from the Kingdom of Saudi Arabia's Public Investment Fund (PIF)—which has a $620B war chest according to the FT. Saudi Arabia has been publicly criticized for its poor human rights record amongst other atrocities.CEO Greg Norman recently secured a backstop of $2B from the PIF which would fund LIV Golf for years to come—even with the large signing bonuses and tournament payouts and no real business plan. There’s actually a word that describes what we are witnessing and it’s not the first time it’s been done. That word is sportswashing. Sportswashing is when a government or group tries to garner goodwill and repair a tarnished reputation through the use of sports. So far it’s working. Everyone has a price.

Norman doesn’t see it as sportswashing but rather as a way to turn around a country for the future generations that want a clean slate and a brighter future. He went on further to discuss other Saudi investments in startups and companies that Americans love to use yet refuse to boycott after “following the money”:

Whether the money is coming from blood or oil or both, it’s a tough look for any player who accepts it while turning a blind eye. Watching a few of the pre-tournament interviews, it was eye-opening how many of the players were clearly uncoached on how to respond to taking this tainted money.

Moreover, you’d think that some of the players who’ve defected already have net worths in the tens or hundreds of millions would have chosen morals over money. It’s easy to say what you would do until offered a blank check. Rory McIlroy (who just won this week’s RBC Canadian Open and won it back-to-back) had his own thoughts on the matter.

It is unfortunate that this new league couldn’t have been backed by “cleaner” money from the likes of an American billionaire such as Elon Musk, Bill Gates, or Jeff Bezos. Then I believe the PGA Tour wouldn’t really have a leg to stand on with regards to how it currently pays the players or operates their league.

The PGA Tour has responded critically to the new tour and players who defected by banning them from playing both tours. It is still unclear if the LIV players will still be allowed to accrue points in the Official World Golf Rankings as well as play in the major championships. Regardless, I’m sure the defectors are extremely distraught and will wipe their tears with the cases of $100 bills.

As Kyle Porter from CBS put it:

When It Comes To Prize Money, LIV Golf’s Debut In London Blows Away The PGA Tour

All seven regular-season tournaments in the Saudi-backed LIV Golf Invitational Series will beat the PGA Tour’s all-time-high purse, with fewer players divvying up the pie.

https://www.forbes.com/sites/brettknight/2022/06/09/when-it-comes-to-prize-money-liv-golfs-debut-in-london-blows-away-the-pga-tour/?sh=70673c98cb6e

Dustin Johnson signed a $150m deal to defect and it’s reported that Bryson Dechambeau is being paid $100m to join. This is huge money for golfers. For reference, this is more money than Tiger Woods made in his entire golfing career (not including sponsorships).

Another problem noted by many is the dilution of the game. When you think about any major sports league, whether it’s the NBA, NFL, MLB or other, they are known as the premier league where the best in the world come to play. LIV Golf wants to be that competitor but unless it attracts the best golfers in the world (via more boatloads of tainted money) it will continue to be subpar to the competitiveness of the PGA Tour.

The LIV Golf slogan of “Golf, but louder.” is a feeble attempt of refreshing and rebranding a sport that to most is considered extremely boring to watch. If you want golf but louder just go to the Waste Management Open in Phoenix or go play a muni course and drink 50 beers.

After watching the kickoff event, my initial take is LIV Golf appears to be a mashup of the PGA, XFL (has-beens and never-was), and F1 (concerts, cool, and how do you do fellow kids vibe). While it has the possibility of being entertaining, we won’t know how sticky it will be to viewers yet. We want to see the best in the world compete against each other on one main stage, not Charl Schwartzel and Hennie Du Plessis duke it out for $4m. No matter how many PGA Tour players eventually defect, it will never take away the spirit and excitement and legacy of golf’s major tournaments.

Pros:

The team format is actually an interesting twist for the weekend warriors who are used to playing in scrambles and other team formats.
The shotgun start is good because everyone starts and ends at the same time. This is a much more interesting format to those who don’t feel compelled to watch 10 hours of golf and follow specific groups.
The competition and deep pocketbooks of the Saudis and potentially other new investors could force the hand of the PGA to update some of their Draconian and conservative values that many players (especially Phil Mickelson) have complained about over the years.

Cons:

Dilution of the top golf league in the world. While at the moment LIV Golf is mostly comprised of lesser known players or ones past their prime, it nonetheless detracts from the activities taking place on the PGA Tour.
Morals vs Money. The tainted source of funds gives the PGA Tour the moral high ground.
It's distracting to all players and viewers involved. The bans handed down by the PGA (and future major championships?) will likely be taken to court.

Undoubtedly, the PGA Tour needs more competition and an updated business model for the times and to keep the sport moving for the next 100 years. LIV Golf is unlikely to ultimately be that answer but we won’t know until we see the next few events (and years to come) play out.

Competition is good. Nonetheless, many have found the new format enjoyable to watch. More shots. Less talking. Less commercials.

At the end of the day, money can't buy glory.

Recession Bells

Ramp Capital — Mon, 02 May 2022 13:09:39 +0000

Together With:

We are down bad folks. Sentiment is in the toilet.

Every headline published in the past few weeks has been something to this effect:

The Worst Start to the Year Ever for the Nasdaq
Nasdaq Caps Worst Month Since 2008
Inflation Hits 40 Year Highs
A Rough 4 Months For Stocks: S&P 500 Books the Worst Start to a Year Since 1939.
Mortgage Rates Skyrocket at Fastest Pace Since 1994.
Worst Start to the Year for Bonds Since 1990

And every chart looks like this:

This is just the tip of the iceberg but you get the point—bad news is seemingly everywhere you turn. It feels never ending.

Many of us non-permabears, including myself, figured the snapback rally in mid-March would have at least marked the bottom for the year after the velocity of the selloff we saw in the first 2.5 months of the year. But as soon as April hit, we were quickly reminded that this was just a bear market rally and that more pain was in store for investors.

The 3 major indices performance in April was downright abysmal, with the Dow -4.9%, the S&P 500 -8.8%, and the Nasdaq Composite -13.3%. In fact, it was the Nasdaq's worst monthly performance since October 2008.

Any time you get a reference back to 2008, 1999-2000, 1987, or 1929, you just know it's bad. The YTD chart doesn't look any better as we've now hit fresh lows on the year heading into another Fed meeting next week.

Even though the Nasdaq Composite is in a bear market (20% off the highs) it's still up nearly 90% from the March 2020 lows. It just shows how far we've come and how timing is everything. Someone who started investing in the past year and a half has had a much more difficult investing journey compared to someone who started even just 3 or 4 years ago.

Many market participants are expecting the Fed to hike 50 bps next week. The CME FedWatch Tool now predicts a 97.1% chance of a 50 bps hike. Yields will continue to go higher until morale improves.

Expect volatility to remain extremely elevated next week as everyone looks for additional clues to how the Fed will react to the latest GDP print, low unemployment, high inflation, and if they will formally announce their plans for quantitative tightening. The Fed is definitely in a tricky spot and pretty much every critic expects them to fail spectacularly.

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Recession Bells

To pile on with more bad news, as if the recent yield curve inversion wasn't scary enough, on Thursday the Q1 GDP Print contracted at -1.4% (attributed to temporary trade and inventory challenges). We are now only one quarter away from entering a recession if using the financial press definition (traditionally defined as two consecutive quarters of declining GDP).

The National Bureau of Economic Research (NBER) is generally recognized as the authority that actually defines the starting and ending dates of U.S. recessions. NBER has its own definition of what constitutes a recession, namely “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.”

So while the NBER does still recognize that most of the recessions defined by their procedures do include two or more consecutive quarters of declining real GDP, it does not happen in all instances. NBER has also stated that they are focused on a host of other economic indicators and also consider the depth of the decline in activity (such as the most recent decline from the onset of the pandemic).

As reported by Axios:

Trade subtracted 3.2 percentage points from overall GDP growth, as exports fell sharply and imports soared. This reflects a U.S. economy with significantly stronger domestic demand than the rest of the world.
Inventory adjustments subtracted 0.8 percentage points from the overall growth number. Businesses built up their inventories less rapidly than they had in the fourth quarter, which in the arithmetic of GDP amounts to a negative — but historically does not presage weaker growth going forward.

For more information on the breakdown of the GDP print, check the BEA link below.

Gross Domestic Product | U.S. Bureau of Economic Analysis (BEA)

https://www.bea.gov/data/gdp/gross-domestic-product

When was the last time the Fed hiked 50 bps into a negative GDP print? According to Matthew Miskin: Looks like big rate hikes in '74 and '82 into negative GDP prints, but they reversed course fast into cutting after those periods. Of course the usual sequence is they hike until GDP flips negative.

Tech Root Canal

There really hasn't been many places to hide for tech or growth investors. Even the generals have taken a large hit this year. Just take a look at the FANMAG (such a stupid acronym, can we change this?) stocks below.

FANMAG stocks have combined for a $1.37T loss of market cap in April alone and a total market cap loss of $2.18T since the start of the year. That's a lot of value lost in only 6 names.

As noted by my friend Jay Woods, Meta (I still call it Facebook) is now dangerously close to falling out of the top 10 market cap after losing roughly half of it's value in the past 8 months.

What about everyone’s favorite overcrowded trade ARKK? It has lost all outperformance vs the QQQ since inception and is close to flipping SPY.

In fact, it actually trades closer to the MEME ETF, with more than a 93.5% correlation.

No matter which way you slice it there is pain at every turn. For those with a long enough investing timeline, I'm sure you will look back at this most recent dip as a blessing in disguise.

The simple solution to a bear market is to just continue working forever. We will get through it. Or maybe we will just tweet through it.

That's all for this week. Thanks for subscribing and sharing.