Alvin's newsletter: No. 15
Weekly newsletter on what I saw interesting in tech, venture capital and business.
📰 News
Masa, his next big bet and the ‘melt up’: An incredibly interesting couple of weeks in equity markets with the Nasdaq doing record numbers - both on the up and down side. It was a relative mystery to what cause the hoo-ha until late last week when it was revealed a ‘Nasdaq whale’ had come into the fray with huge options trading volumes in a handful of tech stocks. Traders were saying they had never seen volumes like what they were seeing in their lifetimes. And almost immediately all roads led to Masayoshi’s Softbank as the whale.
To understand all of this - one needs to understand options trading and what they call ‘gamma’ and the ‘gamma squeeze’. I won’t try (and fail) to explain it in detail - read the link. In short, it is the momentum that is created by options trading that requires market-makers to buy the underlying stock to cover/hedge their calls. What it leads to is what we saw in the Nasdaq over the last couple of weeks - huge momentum upswings without any underlying changes in the companies or environment that would necessitate such a swing. Referred to as the ‘melt-up’.
It looks like he is adapting somewhat his strategy - he has been losing billions on the VC side of things and has turned towards more traditional hedge-fund activity. At least for the time being. Whether he is cause of the ‘melt-up’ people are debating but no doubt he has had an impact.
It looks dicey as to whether the trade will work out for him. The Nasdaq started the ‘melt-down’ late last week and overnight. Let’s hope Masa doesn’t blow it up for everyone! 💣 Link
Wirecard wanted to buy DB: I’ve written about the Wirecard fraud a couple of times in previous newsletters. The news never ceases to amaze - this one doesn’t disappoint on that scale.
The Financial Times reported last week that as Wirecard was nearing its end last November, Wirecard’s CEO, Markus Braun was engaging with McKinsey & Co to hatch a plan to take over Deutsche Bank.
It looks like Markus was looking to hide the $1.9B that was missing from Wirecard’s accounts by blending a loss of that size into posts-acquisition accounting. The loss would be inconsequential on the balance sheet the size of what DB had.
Complete audacious. [Paywall] Link
📚 Reading
In Netflix’s Bill Gate’s documentary, he goes into what is required to help solve the clean energy problem. Whilst EV and other clean sources are a start, these technologies would not be able to reach the scale and reliability required to replace dirty energy. His solution after scouring past/current/future solutions - make nuclear safe and clean - and it is compelling. If are you aren’t quite there on nuclear - the doco is well worth a watch. Some related developments this week in that area (not the company he talks about in the doco) - NuScale got approval to continue its path towards becoming a reality. Link
Medium has gone through ups and downs over the last few years, and of late, has been somewhat left behind as readers and writers exited the platform. That doesn’t seem to be bourne out in the numbers as they seem to have had good growth in pageviews. Ev Williams, founder and Medium and was also the co-founder of Twitter, goes into what maybe next. Link
Trump bans are coming into effect - one of those being banning of the supply of US chips to Huawei. This is important because China does not yet have a viable domestic chip industry. They have been investing in recent years but it takes an extraordinary amount of time to create the IP and the manufacturing capability, called fab’s, to compete in this space - think decades and billions of dollars (see ARM/Nvidia/AMD). A major vulnerability for the Chinese. Here is a take on where Huawei goes from here. Link
If you are a company looking at IPO’ing, you are spoilt for choice on how you can go about doing it in today’s age. The latest new/old-comer are SPAC’s - special purpose acquisition companies. The legendary venture capitalist Bill Gurley goes into this and the other options available. Also to note is the changing nature of the role investment banks are playing in all of this. Link
Advertising on iOS14 about to get more difficult with IDFA about to get nuked. Technical but just the latest in Apple’s move against advertising and towards more privacy. Whilst good in one respect - has a relatively wide blast radius. Opt-in’s generally never work - better to not ask and remove the whole thing. Link
🦖 Entertaining & Interesting things
If you’ve seen delivery drivers clumping up in spots - well the reasons are that, one convenience and two, to ensure the routing algorithms pick you as the driver for the next pickup by you being close to high traffic areas. Amazon drivers are going next level by hanging phones on trees next to game the algo’s. 🌳 Link
We don’t normally see huge leaps in private/commercial aircraft efficiency. Maybe a few percent every time something new is discovered. Here is a new aircraft which is touting some incredible efficiency numbers and if correct - may change the face of air travel. Link
A long long time ago, Apple made a cool looking webcam called the Apple iSight. Someone hacked it up and put a Raspberry Pi in there. Cool. Link
Roku doesn’t seem to be that big here in Australia, but they seem to have done well in North America. Here’s a look into how they became major. Link
Quick fire intro into what ideal early stage rounds look like. Link
🎧 Podcasts
The best podcast episodes last week according to Bosco Tan:
The Man that Invented Modern Finance (Planet Money) - 21 mins: The Chinese were the first to use paper money, the Dutch tulip bubble is the famed early financial crisis, and the Bank of England was a juggernaut. The little known fact is that there’s a parallel story in history which brings together fractional reserve currency, a financial bubble and national debt – this episode is the story of Scotsman John Law, who put it all together in France. Link
Lab Grown Blood (WSJ’s The Future of Everything) - 26 mins: The pandemic gave rise to a supply chain crisis in a number of industries. One of the most significant has been human blood via human donations. Here’s the story of the scientific progress that’s taking place to make cultured (aka lab grown) blood a practical reality someday. Link
Why Did the US Invade Iraq (The Ezra Klein Show) - 80 mins: The ‘weapons of mass destruction’ mistake is probably the most well known part of why the war started. However there’s plenty more back story, personal history of those involved and political rationalisations behind one of the biggest geopolitical decisions in the past 20 years. Link
The Post-COVID Future of Medical Research (Freakonomics) – 62 mins: Act 1: Recaps on the latest vaccine race centered on Moderna. Act 2: Attempts to walk through rollout scenarios. Act 3: (The most interesting) Discussion on how medical research might never be the same again – possible silver lining. Link
📹 TikToks
Classic Paul Keating. Part 1. Link Part 2. Link Part 3. Link
Escaping Covid - Marvel side. Link
Drake getting mad at DJ Khaled. Link
One more Daniel Andrews conference. One more. Link