Dangerous Distractions (Notes #19)
Druckenmiller, Dogecoin, Clubhouse, some good letters and podcasts
“Loss of focus is what most worries Charlie and me when we contemplate investing in businesses that in general look outstanding. All too often, we've seen value stagnate in the presence of hubris or of boredom that caused the attention of managers to wander.” Warren Buffett
Well, that escalated and de-escalated quickly. Many of the meme stocks have crashed back to earth, much faster than I expected. And it looks like WSB is going through the grief cycle. Still, social media networks hosting new global tribes remain a powerful cocktail waiting to be stirred by skillful storytellers. (Mike Nongaap touched on this in his excellent podcast appearance.)
As the crowds are moving own, the market hasn’t slowed down. Case in point: micro caps are up some 28% year to date. It’s been less than 6 weeks?! And then there’s dogecoin (created in three hours as a joke), which Josh Wolfe aptly called a thermometer, “instrument, that lets you measure what you can't see,” - a good old sentiment indicator. A gauge of pure speculative appetite. In the words of Matt Levine “Dogecoin is GameStop stripped of all the distracting reality. I do think it is pretty obvious that the internet is rewiring social relationships in profound ways, and that we are still in the early stages of that rewiring and the even earlier stages of trying to understand it.”
And what does the dogecoin indicator tell us? Nothing matters, or: “That sounds stupid, I’m buying some just in case.”
Stanley Druckenmiller gave an interview which you’ve probably seen and if not I’d highly recommend (video, notes). He is prepared for inflation, doesn’t like the Dollar, likes Asia, thinks there is silliness but it’s not 1999. You can listen to him for his thoughts on the macro:
“It's possible, even probable that all this stimulus will be in place when we unleash the biggest increase in pent up demand since the 1920s.”
"If we get 4-5% inflation in the US a few years out & bond yields rise that's very negative historically for growth stocks relative to other stocks. On the other hand the comparisons with 2000 are ridiculous.”
Or for his advice on the inner game:
“It has been a confusing environment, pitting the forces of stimulus and low rates against economic problems, pace of vaccination against mutations. Most of all, it has been relentless and fast and it’s easy to get the feeling that one is missing out.”
 “Every investor has 3-4 big winners per year. Usually you know what they are. Where you get in trouble is something you’re not terribly focused on. When you put 50, 60, 70% of your assets, or more, in one asset class, trust me, you’re focused. And you’re more risk averse than something you might have 5% or 6% in and you might have a blow up.”
That last idea is worth repeating: “where you get in trouble is where you’re not focused.” Or as Buffett said: “Loss of focus is what most worries Charlie and me.”
Because that’s what tends to happen in a market that is accelerating (it’s been called the “Mother of All Meltups”), that is filled with exciting shiny objects. It’s a market for agile traders in which process-oriented fundamental investors will get the feeling that they’re missing out. A lot.
Another source of FOMO was my discovery of Clubhouse. I had to borrow an iPhone to try the app this past weekend. It was Twitch’s “just talking” for a mix of the Twitter and LinkedIn crowds, that is: some very thoughtful conversations and some rooms stuffed with self promoters. It’s neat to have a space to hang out and chat. But without transcripts and replays it’s impossible to keep up with content. You’re missing out by design. I felt stressed out simply knowing that this place exists, that I’m missing out on interesting content every day. It’s not surprising that half the comments about Clubhouse seem to be about the need for a service to deliver notes or replays.
Anyway, I decided to put it aside for now and accept that there are many things I won’t hear, won’t know, will miss out on.
When a young Bill Gates wanted to focus entirely on building his company and coding software, he disconnected the tuner from his TV (no more entertainment, only educational tapes) and took the radio out of this car. He removed all sources of distractions.
But somehow we expect to be productive and focused while expertly designed apps tempt us with dopamine hits and an endless supply of shiny objects.
It’s not easy for me to accept that I’m missing out. Not only that: I will miss out on more things every week. As content creation continues to explode, there are just too many podcasts, too many substacks, too many videos, tweets, and tantalizing stock ideas. There’s a big pile of ‘too much of everything’ and the pile is growing every day (compounding, if you will). In Dan McMurtrie’s wise words: there are infinite things. Focus on the things that make sense to you. Find a way to let go of the others (I’ve found meditation helpful).
Greenhaven Road with a writeup of the New York Times.
“There will be a time when the myriad of electric vehicle (EV) SPACs and today's fads will be a fertile ground for shorting, but Q4 was not that time. I try to be in the business of “doing what works” and making money for our investors.”
“Despite being in the storytelling business, The New York Times has no investor presentation and has done a poor job of communicating the transformation of its revenue model and potential of the business. The best public resource is an anonymous blogger by the name of Mine Safety Disclosure. Before you roll your eyes, look at his work (link).”
Tollymore with thoughts on online and omnichannel retailers: Next plc and Farfetch.
Value Investor Insight interview of Adam Wyden.
Gator Capital on niche financial situations.
 "The return on time in of looking at proxy statements is remarkable. You can spend 30-60 minutes on this and develop thesis-changing insights. It's something you can add to your existing process that doesn't disrupt anything else."
 "Regardless of what you do, the highest conviction decision in your life should be your willingness to bet on yourself."
 "Corporate governance, in the context of investing, is exploiting unrecognized simplicity. Some very simple concepts that don't get priced into stocks."
Sequoia’s Alfred Lin on the Acquired podcast
"This is a humbling business. You can make money even if you got the investment thesis wrong, and you can lose money even if you got the investment thesis right."
Alfred: "There's just too much money in the venture ecosystem"
Michael Moritz: "Thanks for observing that. Yes, there's too much capital. I agree with you. 10 years ago, 20 years ago there was too much capital. There'll always bee too much money in the system. Back to work. It's your job to figure it out."
David Marcus of Evermore Global on European ideas, including Exor, a land-based salmon farm, Modern Times Group (owner of esports league ESL), and a shipping company selling all its ships to install offshore wind farms.
This is not a recommendation to buy, hold or sell any securities or other financial instruments and does not constitute an investment recommendation or investment advice. I’m merely highlighting people and companies worth learning about. I write purely for entertainment purposes. Always do your own research and consult your investment advisor. I may at any time transact in any of the securities mentioned.
The materials on the site are not an offer to sell any security, nor shall any security be offered or sold to any person, in any jurisdiction in which such offer would be unlawful under the securities laws of such jurisdiction.