Bucket Shop Capital
@bucketshopcap
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Private investor. Former allocator and buyside TMT analyst.
Joined January 2021
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People see "allocator" in my bio & DM on what it takes to start an equities HF. My views below. These will sound painfully obvious to most of
#Fintwit
but are difficult in practice. In my experience most managers, even those w/ pedigree, are upended by violating 1+ of these.
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I never thought I was the kind of person to fall for a scam, but then I found myself paying 2/20 for this.
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More convinced than ever that most 20/30-somethings living in Manhattan, especially below 14th St, have parents subsidizing their lifestyles. Any other conclusion seems pretty implausible given the price of [anything].
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If you’re debating whether you can retire on $10M: either you have no clue how to live within your means or you don’t have the concept of “enough”. Both cases over time lead to being miserable IME of observing my social circle over a few decades.
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Got a call from a generalist this morning who told me "semis aren't cyclical anymore." Never been more afraid in my life.
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Since I'm not a pro investor anymore & don't have an incentive to defend the job, time to get real. 80% of buyside seats prob don't need to exist anymore. Many of you are obsolescing your workflow w/ AI & admitting your process is essentially just chasing momentum.
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I haven't been on the buyside in several years but talked to a recruiter friend today just for kicks. Unless you're a top decile senior PM or a 25 y/o model monkey, opportunity set seems bleak. Godspeed to all of the mid-career L/S talent; again, prob best to keep your seat.
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Hearing a lot more ppl want to leave the buyside. Prob makes sense given changes in mkt structure/skill set rewarded today. But also a bit confused tbh b/c thought more ppl in the biz would understand that you can't invest the same way forever & expect to stay competitive.
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For PE to public mkts transition, my recommendation nowadays is simply don't do it, unless you are good enough to work for a $3B+ SM (duration) or major MM. Otherwise you get paid less, work 3x as hard & have to be an emotional tampon for ppl you will pretend to be dumber than.
Anyone have recommendations on breaking into L/S Equity from LMM PE?
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Frankly, I 100% used to take the interviewer's side here but funds always looking for free ideas/work & ghosting candidates afterwards makes me understand the "Gen Z" viewpoint more. Not trying to paint with a broad brush but I don't blame good candidates for this behavior.
Me: really enjoyed the call. Please see attached financial modeling test
Gen Z applicant: this looks like a lot of work. Without knowing where I stand in the process, I’m not comfortable spending 90 minutes in Excel
Me:…well…I can tell you where you stand now
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Funny but still hard to watch the rug-pull of a junior analyst earnestly going into public markets for "intellectual stimulation" and "deep fundamental research"...only to discover the job is all calling quarters and factors.
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"Anti-Pod"...except it's a...*checks notes*...pod?
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The average HF guy is terrible at understanding consumer trends. HF guys assuming their tastes represent the overall population is how funds historically blew up in crap like Peloton and Restoration Hardware...
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This is a truly amazing thread.
I asked, “What company is worth less than $10 billion today but you think could be worth $500+ billion in a few decades?”
I received 710 answers
Here are 20 top stocks that have 50x+ potential:
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I'm confused when analysts tell me they "cover" significantly >50 stocks. IMO that is way too many to have a top-tier understanding of both the biz & the stock trading dynamic. Maybe they're referring to superficial understanding/know the basics...but that's not "coverage"...
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Overthinking/being "smart" has nothing to do with making money. Anyone who believes otherwise has not been paying attention esp for the last 5 years (prob longer at this point). Today's mkt structure should teach you this pretty quickly.
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Does Gen Z drink alcohol? These ppl seem absolutely miserable to hang out with. Overhearing some horrid convos at adjacent tables while out to dinner.
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Lol, imagine if investment analysts were held to plagiarism standards. The only finding would be the already-well-understood lack of original thinking in markets.
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Sometimes I go back to read write-ups/memos I did years ago & want to crawl into a hole & die. Good way to keep your ego in check, if you ever need a reminder.
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Pretty clear no one here has any real clue what's going on. So it's just turned into a massive therapy session with L/S folks bitching about shorts & LO droolers replying with galaxy brain math/running AI hyper-growth assumptions out 5+ years.
SO BACK.
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Caught up with a sharp analyst whose fund I was invested in. Sounds like many PM/analyst relationships are strained even more than normal after 2022. As someone who has dealt with egomaniac PMs my entire career, DM if you need help navigating your situation or just want to vent.
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Having moron shareholders is probably the best moat of all.
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There’s absolutely zero reason to own small caps anymore. I get this is consensus but probably is for a reason at this point.
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Reece Duca interview was great. Nearly impossible to recreate his approach. >99% of ppl are too preoccupied w/ living complicated/expensive lives, chasing complex investments, thinking about quarterly earnings, etc. But if you can think independently, his model is the dream.
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Caught up with a SMID-cap manager I know recently. 2nd consecutive year now of negative returns (& 2021 wasn't good either). Still trying to pitch LPs for $ & convince his analysts to stay. Unfortunately delusion is one of the attributes you need to build a biz, esp. a SM HF.
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If you can stay in a seat that lets you chase momo at scale through cycle, I’d recommend it. Just doesn’t seem like there’s much incentive to think independently/critically anymore. Momo —> invent narrative —> push narrative to others —> profit.
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Some of you have already gone full r*tard with the ozempic theses. Feels like the threshold for what’s considered intelligent thought has gotten pretty low in markets.
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And btw, if you DO have parents willing to subsidize you far beyond college graduation, you're very lucky. I hope you're extra nice to them.
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You have to admit, Pabrai is built different. Pays up for lunch with Buffett (which we'll never hear the end of), gathers AUM & YOLOs into total shitcos. Funny he never thought to shamelessly clone WEB's AAPL buy.
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FWIW hear a lot of L/S investors in my network suddenly want to interview at LOs. Right on schedule.
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I'm sorry to say, but underwriting the positive outcome of being sustainably profitable investing a $1-5M PA & supporting an average+ lifestyle shows a naive understanding of the risk case. Most are neglecting the opportunity cost for a money maker, which is very significant.
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One of the biggest disgraces in the investment biz is the glorification of ultra-concentrated garbage factor clowns. It's pure comedy that any were ever considered good investors. They are feeling emboldened to poke their heads out again so...fair warning: I still remember.
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The longer I invest in public mkts, the more I'm convinced there are a lot of idiots in the biz. So many pros doing a couple hours of research & concluding something is an "obvious" trend.
Only thing "obvious" to me is these ppl should not be managing OPM.
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Semi regular question: Which <$1B emerging HF is worth watching/has a real shot? TMT/Consumer focus preferred.
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Judging by recent discourse here, it sounds like the PM-Analyst relationship at most shops is worse than it's been in a long time. And right in time for EOY comp discussions. Good luck to all.
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If you're begging people for sellside research and not paying interns, please don't start a hedge fund.
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VCs have to be the dumbest investors by miles. Read the Altcap PYPL post again & see comments like "NEED A FOUNDER MENTALITY"/"A FOUNDER CEO WILL FIX THIS".
I hate to break it to you but that would not change anything for a scaled incumbent public co that has lost its way.
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Earnings outside of mega-cap tech have been pretty disastrous TBH. Don't tell me about sentiment/positioning nonsense either; the numbers just haven't been good. So again I ask, what's going on??
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Not picking on anyone specifically but tbh a lot of the L/S SMs I talk to don’t really seem to understand the short side. It’s 2024; why should you be paid for shorting universally deemed garbage? Bar is so high on timing/path. Find less brain damage short ideas?
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The cognitive dissonance to bid NVDA b/c “infinite demand bro” but be concerned on META capex is…humorous.
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Caught up w/ a L/S TMT recruiter friend. Good news for anyone looking, it sounds like there'll be a lot of seats opening up at the large MMs in Jan-Mar. Bad news [his take] is lackluster candidate pool at senior level so seats w/ strong PMs even more limited than in the past.
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I've learned some things from Fintwit. But mainly I confirmed what I already knew, which is human behavior is why there will always be alpha. AI will not fix this. Perceived mkt efficiencies will continue, on balance, to actually be inefficiencies.
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Between the victory laps from retail & career crisis vibes from L/S ppl, feels like 2024 is going to be anything but boring.
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Peak pod starting to play out, just like every Fintwit consensus idea.
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Reminder: DG ADYEN PYPL MTCH etc will not be obvious longs until everyone stops posting about them.
We've seen this movie a million times here & the hit rate is absurdly high. Sentiment is not THAT poor when the average investor is trying to bottom tick these every day.
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Dmitry B tempted fate with the podcast appearances. I don't make the rules.
More names added to the Hedge Fund 2023 leaderboard
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@CAGR_Party
20+ year public investor. Today’s Day 1 advice IMO would be focus on the tactical/ST debate first, then fill in the historical depth of work later. 80%+ of whether you’ll make $ in stock is positioning/ST catalyst related vs “deep reality of business”.
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Maybe stock picking is just not that serious of a business. Only rational conclusion one can come to anymore.
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Scanning a lot of MS TMT transcripts & listening to some presentations. There’s nothing really that incremental going on at 90%+ of companies to justify recent momo IMO. If you want to buy “AI vibes” then sure but a lot of mgmt teams sound fundamentally tapped out NT.
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Don’t think I have heard buysiders complain this much in my entire career. My take at this point is, if you have a seat that’s not terrible, stay put. Things will get better & if not, many of you will have options.
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Many 40+ year-old PMs either a) have no idea or b) don't care about how market structure has changed in the last several years (passive, quant, pods, etc.). The conversations are both funny and disturbing.
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@GavinSBaker
The two watershed moments for me were $NVDA q1 eps and guide and $MSFT co-pilot announcements. Both wake-up calls to rapid deployment of AI. Latter demonstrating immediacy of crucial enterprise deployment. Ignore at your peril.
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Munger’s quote about incentives & outcomes is so simple/obvious yet elegant. Explains pretty much 100% of human behavior but at times ppl think there’s more to the story.
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Took the mkt an entire 4.5 hours to realize that per usual, every development is bullish Big Tech.
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See many L/S pros tweeting in despair & I get it. Pain threshold for equity investors is low. Just 18 months of no visibility in mgmt forecasts...to now confidently projecting 3-5 years out again, which in most cases makes no sense. Fundamentals don't matter anymore.
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When you find out Stevie is fading you in the center book.
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Based on what I'm hearing, the larger Tiger funds & similarly scaled tech beta strategies are faring better with LPs than I expected. Maybe sampling bias at work but feels like, contrary to common narrative, LPs are willing to forgive 2022 in many cases.
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Seriously, if Copilot quality doesn't massively improve within the next 6 months how are AI-based valuations not in trouble. Ppl have been focusing on the supply side of the equation a bit too much...
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Btw the whole pod/SM discussion can pretty much be reduced to "Capital Returns". What do you think will happen as Tier 2/3/4 MMs keep accumulating capital & talent to scale up? From crowding alone, returns will deteriorate; it isn't rocket science. Nothing good lasts forever.
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What exactly is driving the garbage rally? Please explain like I'm 5 y/o.
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Sorry to inform you, but nowadays there's no need for any of this work. Get Yipit to tell you what's happening, find out where the bogey is & load the trade.
If you are trying to improve your forensic accounting skills.
You should absolutely read this short pitch on VIC from 2002 on Orthodontic Centers of America.
Btw, the author ended up getting a job in a fund as result of this pitch.
Full pitch:
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My timing is impeccable, lol. Literally one of the few non-MM TMT funds that people regarded highly.
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Lol. Too good.
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Any time you publicly victory lap or decide a big part of your job is marketing, you open yourself up to criticism. The best investors I've ever met are very private ppl. They may not run $10B+ but they are still wildly successful by any measure. Prob a lesson in there.
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A lot of brain-dead accounts are suddenly posting portfolio returns. Everything seems to be just fine.
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Opened IBKR to check my YTD & saw the usual chart was replaced by this.
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Unfortunately we are squarely in one of those times when you're highly likely to lose respect for someone you held in high regard b/c they didn't think a few more times before posting something they have no clue about.
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What's it called when everyone in the mkt invests exactly the same way & is still rewarded for it, i.e. wait for the turn/chase momo, sell every negative data point, nothing is ever priced in, wait for the turn again/chase momo? Not hating, legitimately curious.
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Hate to break it to people but victory lapping a stock call, as much of this audience seems to do, is a sign of immaturity. Literally no great investor I've ever known does that; the right mentality is always "Great, that worked, what next?"
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Good for all long these stocks, which at this point is literally everybody. But the smugness is off the charts at this point, which can only mean one thing.
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Generalists investing in sectors that require specialization is a decent predictor of lighting $ on fire IME. When did the average person become an expert on semis???
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Hearing a lot of pods are getting the shoulder tap. Probably nothing.
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Everything gets a lot easier when you accept that “price drives narrative” is the only universal truth of markets.
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Trump is obviously insane but I’m legit not sure I can handle another 4 years of Biden & his clown car. Mkt isn’t broken but politics certainly is.
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Biggest complaint in mkt from pros seems to be, well this sucks b/c absolute idiots are making $. To which I’d ask, how is that any different than what’s been going on now for years?
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What’s the deal w/ pod investors who blow up repeatedly & still land?? They’re not all making up PnL #’s, ppl know the truth. Hate to be that guy but see $ thrown at questionable ppl these days makes me wonder. Makes sense if they’re winners but not based on what I’m hearing.
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Homeless/migrant situation has gotten out of control in downtown NYC.
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Funny thing is how few PMs will raise their hand & take the L, even when it’s actually their fault. Analysts would be blamed & careers threatened. If you want to be more like Buffett, my guidance would be start with the basics like this.
Buffett at
#BRK
2024: We sold the entire stake in Paramount and we lost quite a bit of money. It was entirely my decision to go into it, not Todd or Ted.
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Have not seen a poorer risk-reward for much of the TMT universe in quite some time tbh. I get none of that matters these days but still amusing.
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If Druckenmiller thought there was a raging asset bubble/mania before, what exactly does he call this??
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TBF this is both buy & sell-sides now. Everyone riding the same momo train. Pod brain at ATHs for both groups. "Cadence of the exit rate" type thinking & extrapolating, then seeing the stock go up & extrapolating more. It is what it is but let's not pretend it's not everyone.
Clients have lost all intellectual honesty over the past 60 days. Conversations going from fundamentals to just flat out saying “yeah but it’s up this month” as a rebuttal to the thesis. Super stimulating stuff guys. Nice work
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Based on what some of you talk about, I can only conclude you think there's a formula for everything. When to show up on the desk, when to eat lunch, how many hours to work, what font to use, what water temperature to bathe in, etc. Not sure any of this drives success tbh.
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One of the funnier things I see pro investors do is try to fit smart-sounding logic to an investment decision ex post. Like dude, it's fine you're just buying shitcos with good looking charts...no need to dignify it with talk of moats, scale economies shared, etc.
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Chamath was just another ZIRP phenomenon. Who cares what the letter says.
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Strange to think it's been 3 years since Plotkin/GME debacle. Feels like eons. And here we are still talking about mkt structure change like it was some unforeseen shift. Remember to stay humble; Plotkin was untouchable for a long time & it all came to an unceremonious end...
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Retail & the buy-side get one step closer to being the same every day.
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<6 months ago I could post anything about launching a HF & a bunch of aspiring public mkt investors would engage/reach out. Crickets now. Tells me a lot.
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I'm confused when ppl say L/S investing has TOTALLY changed. Process will always evolve around the edges, today that means more incorporation of positioning/sentiment, mkt structure & "alt data." But what else? You still model companies, meet mgmt, follow earnings, etc.?
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Some analysts would benefit from writing "qualitative must = quantitative" on a chalkboard repeatedly. There's a tendency for analysts to go down rabbit holes on topics (can be a good trait) but the best know how to spend time on the knowable/quantifiable.
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Really hope none of these software companies get acquired at silly mkt caps/multiples. Will just confirm what we knew all along: even a whisper of lower rates means price drives narrative & most tech company capital allocation is undisciplined at best and reckless at worst.
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~3 months later and am hearing of some complete morons getting hired at these Tier 2/3 shops, it's actually insane to me. Absolutely will not end well.
@liensofnewyork
Hearing lower tier places like Everpoint at P72, Hudson Bay, Verition, Walleye, Crestline etc. keep looking for ppl. Quick glance at who they're hiring suggests they're already reaching for "talent". The model is limited by human capital far more than consensus thinks.
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Real mentorship is lacking in HF industry today. I believe a key reason the original Tiger Cubs (pre-crossover silliness) were successful was the intensely competitive training ground Julian provided & the network built thereafter. This kind of mentorship is unheard of today.
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Sorry if you’re long but I’m glad some of these nonsense speculative names are blowing up. Lazy momo riders thought they could hide in high multiple concept stocks w/ dramatically slowing growth, little to no FCF & a crappy macro. About time they learned a painful lesson.
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