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Private (Tech) Investors | Red Lobster Bankruptcy

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“When you were picking berries from bushes, we had cholesterol.”

Red Lobster Bankruptcy

Speaking of high cholesterol… According to the WSJ, the patrons of Red Lobster have eaten the U.S. restaurant chain into bankruptcy. The article reads like an SNL comedy sketch:



Sometimes it's difficult to explain to people unfamiliar with American society and culture that it's about fat-tailed distribution outcomes. Where one chooses to focus their energy is more a reflection on themselves. When outsiders cease to make fun of Americans, it's a sign of a multipolar world order. Our US readers should be happy and proud that they're still winning.

Over here, we just prefer to fit a safety valve so things don't build up and boil over. SNL is still universally the best comedy.

Morgan Stanley Flips Bullish on US Equities

Yes, he who shall remain unnamed at Morgan Stanley flipped bullish again on US stocks near the all-time highs. We stopped tracking him at the end of last year; however, our customers keep us in the loop in case we miss the news. They like to feed the beast. The last recorded entry we have against his name was at the end of 2023, calling for a sharp reversal from bearish to bullish on the S&P 500, and large caps to outperform small caps. At the time, we broadly agreed with his assessment, but for different reasons.

In fairness to him and Morgan Stanley, based on the press reports, the dramatic shift in view is a revision to the S&P 500 year-end target, albeit too slow and late. We won't repeat for the millionth time the shortcomings in equity index valuation models, nor the reasons why there are currently no viable alternatives. Except to say, no reputable analyst or market strategist should hinge their entire investment thesis on a single model or framework. Valuation models which closely mimic dominant trading strategies present a better short-term alternative.

We understand why Wall Street banks are obliged to publish year-end target forecasts. Also, why they should not be interpreted too literally.

The Tech Industry Veteran Investor

Imagine yourself as a (non-AI) C++ programmer at a US tech giant who has seen the cycles and is fortunate enough to grow in seniority and personal wealth after 25 years at the firm. Namely, a well-to-do middle-level manager who has ridden the wave, but also has no major ambitions to climb the corporate career ladder. At some stage, perhaps post-IPO, you agreed to outsource your personal finances to Morgan Stanley to focus on the day job. The management of the company has been reducing headcount in your department to hire a new, younger generation of AI specialists, while insisting it will be for the better.

Moreover, imagine your private banker has bet against your industry/sector for the past three years, leading to dismal returns relative to the market. That's fine; you already have plenty of exposure to US blue chip stocks and have steadily accreted more by virtue of your job. You've been told that your portfolio has underperformed for nonsensical reasons, all of which can be readily proved or disproved by a numerically literate individual with an internet connection.

Today, the private banker has finally capitulated on a bad investment call and is advocating for you to invest in AI and crypto. Would you respond:

A) That sounds very promising and exciting, count me in!

B) I don't pay you to recommend Bitcoin and AI investments. I'm a reasonably numerically literate person and can't understand your quant analysis, which is obfuscated with technical jargon. I'd rather pull my money and spend my increasingly free time to manage a greater portion myself. If I'm going to pay for anyone's lessons, it would rather be my own.

Who is Doing Well These Days?

As best as we can tell, there are two sets of market participants doing well these days:

1) Those very close to markets, providing technology/infrastructure, part of the price formation and transactions processes.

2) The people with longer investment time horizons who are more thoughtful and deliberative regarding their actions. They are not beholden to any single model or theory, instead able to access a broad range of tools and frameworks for basing their investment decisions. This includes a growing cohort of private individual investors taking more active roles in managing their personal finances.

The rest of us are embroiled in a cycle of mediocre returns relative to benchmarks or peers, window dressed as otherwise. Few money managers have a very robust investment outlook, let alone one they are able to communicate clearly to investors.

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Private (Tech) Investors | Red Lobster Bankruptcy

MS flip again? Who is doing well these days? Patrons eat restaurant chain into bankruptcy