#131 - Inflation Kills The Canadian Consumer, Billionaires Build by PG, Best Performing Industries in Rate Hike Cycles, and The Crypto Superbowl
In this week's episode of Reformed Millennials, Broc and Joel discuss Canadian Inflation, Putin’s Next Moves, A few interesting Canadian Startups and why rich people often do know what regular people want…
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👉 For specific investment questions or advice contact Joel @ Gold Investment Management.
The latest CPI readings came at 7.5%; a bit higher than expectations. The market brushed off the initial selloff on the news and we even saw software and biotech stocks leading the bounce which to me was a clear sign that the 100-200 basis points increase in interest rates was probably already discounted. Then Friday’s Ukraine headlines came and the tech was poleaxed while commodity-related groups shone.
Oil & gas: XLE, XOP,
metals and mining: XME,
fertilizers: CF, MOS NTR, SQM;
Are currently the leading stocks in the market. It’s not ideal when basic materials are rising and tech is in the gutter but we have to work with what the markets provide us.
Trends are trends no matter the asset.
Commodities are cyclical. Their outperformance is not from yesterday. It started more than a year ago. It’s anyone’s guess how long the upswing stage is going to last. The narrative and earnings growth is on their side right now. Rising inflation expectations, reopening after Covid, and Russia/Ukraine crisis are driving oil prices. Financial markets always overshoot. Less than two years ago, no one wanted to touch energy stocks. The world was under Covid lockdown and WTI oil even went negative for a brief moment. Fast forward to today, people can’t get enough energy stocks.
Thursday and Friday were big distribution days for the S&P 500 and the Nasdaq 100. Both made lower highs. SPY tested its 50-day moving averages and reversed lower. QQQ tested its 200-day moving average and pulled back. Both seem headed for a test of their January lows. If this happens, I will be watching for bullish divergences. Will fewer stocks make year-to-date new lows if the indexes revisit their lows? This would be a foundation for a more sustainable bounce. The alternative would be another leg lower. If QQQ cannot hold 340, it will probably test 320 which would represent about 20% drawdown. If 320 doesn’t hold, the next level of potential support is 300. Keep in mind that markets rarely go straight down or up. There are usually vicious rallies that interrupt downtrends.
The silver lining is that the bigger the correction, the bigger the opportunities afterward.
💸Reformed Millennials - Post of The Week
The Rock is building the fastest-growing tequila brand of all time.
It’s on pace to ship 1,000,000 cases this year.
But it launched in March 2020 and could have failed if not for one key decision.
A THREAD FROM NATHAN BOUGH ON THE STORY OF THE ROCK:
Recently, he dove into entrepreneurship.
Teremana Tequila looks like his biggest win to date…
Celebrity-founded liquor brands have crushed over the last 10 years.
• Proper No. 12, Conor McGregor – $600M exit
• Aviation Gin, Ryan Reynolds – $610M exit
• Casamigos, George Clooney – $1B exit
But The Rock knew nothing about the spirits industry:
When he got interested in tequila, the first thing he did was travel to Mexico.
“I planted my boots on the ground in Mexico to understand the tequila making process as much as I could.”
He partnered with the Lopez family known for growing agave in the city of Jalisco.
The distillery is running. The launch campaign looks great. Tequila tastes incredible.
The only issue?
It’s March 2020… quarantine hits.
He scraps the polished marketing campaign.
He realizes it won’t resonate with people who are stuck in their homes 24/7.
Instead, he pivots to ‘Teremana Tuesdays’ – The Rock legit drinks tequila live with 1000s of fans on FB & IG.
It’s a massive hit.￼
TEREMANA TUESDAYS BECOME A STAPLE OF THE BRAND’S MARKETING.
They connect The Rock, Teremana, and fans in a very intimate way.
And give each an event to look forward to every week.
They carry the brand through 2020, and set it up for an insane 2021…
In 2021, Teremana sells over 640,000 nine-liter cases.
Casamigos, George Clooney’s tequila, was doing 170,000 cases per year in 2017 — when it was acquired for $1 billion.
But The Rock and team have bigger ambitions:
Teremana just announced a huge deal with industry giant Jägermeister for global expansion.
After a record-setting 2021, 2022 looks like it’ll be even bigger.
The brand expects to ship 1,000,000 cases.
It’s the fastest-growing spirits brand EVER.
The Rock shows us 3 truths of entrepreneurship:
Partner with great people who complement your skillset
Trust your instincts
Distribution is the ultimate advantage
“I believe in being hungry, being humble, and being the hardest worker in the room.”
Our Favourite Concepts from GS Bhogals Viral Twitter Megathread
When unsure how to act, people copy others, outsourcing their decisions. When Sylvan Goldman invented shopping trolleys, people didn’t want to use them because they seemed silly. So Goldman paid actors to use trolleys in his stores, and everyone quickly followed.
Institutions will try to preserve the problem to which they are the solution. It’s the best way to ensure their survival and growth. Examples include planned obsolescence and the various “industrial complexes” (military, prison, pharmaceutical, etc).
“For every PhD, there is an equal and opposite PhD.”
In matters of law & policy, anyone can find a subject-matter expert who supports their view, because having a PhD doesn’t necessarily make someone right, it often just makes them more skilled at being wrong.
In virtual spaces, people become like their avatars. For instance, using a "sexy" avatar tends to make a person more flirtatious. This suggests people's personalities are largely a performance choreographed to social expectations.
News & commentary are products, so they follow market pressures. The more a story fits a fashion or meets a strong consumer demand, the more likely it has been crafted purely for audience engagement, and the less you should trust it.
Moths evolved to navigate by the moon, a good strategy until the invention of electric lamps, which now lead them astray. Equally, humans evolved to be tribal, a good strategy until the Digital Age, where it now leads us to act like polarized goons online.
Just as objects far away seem smaller, so do things far into our future. As a result, we are inclined to choose immediate rewards over future ones, even when these immediate rewards are much smaller. To overcome this bias, use @naval’s Compass:
We judge a message by the messenger. In 2002, researchers Moaz et al showed Israelis a Palestine peace plan. When told it was authored by Palestinians, the participants rated it as far less fair than when told it was authored by the Israeli government.
To create original output, consume unusual input. Avoid trending videos, NYT bestsellers, widely cited papers. Instead. read ignored texts, plumb the past for forgotten ideas. Step outside the zeitgeist so you can see it with fresh eyes.
Harmless substances can make people feel ill if they think the substance is harmful. According to a recent meta-analysis, most adverse effects of Covid jabs are not caused by the vaccine but by fear of the vaccine!
THE OPINION ECONOMY:
The rise of social media as the primary mode of interaction has caused us to overvalue opinions as a gauge of character. We are now defined more by what we say than what we actually do, and words, unlike deeds, are cheap and easy to counterfeit.
Our social behaviors are calibrated to demonstrate our genetic fitness to other humans, primarily to the opposite sex so we can fulfill our biological imperative of procreation.
Essentially, each of us is just a marketing campaign for our DNA.
Fundamental Divide In Politics:
Rogan has become the witch. Cancel culture warriors are those with the stones.
If their stones don’t kill, they lose their power...
Solution to free speech is more speech not less.
Spotify increased the funding of underrepresented groups to the tune of 100mm. Funnel increased.
if you don’t like someone you will throw a ism label on them that sticks.
Sadly everyone has an ism that can be attached to them.
From the book of John:
In the law adultery was against the law but only for the woman. So society was about to stone a woman for adultery and Jesus stood in drew a line.
He who is without sin should cast the first stone.
He who is moral absolute can throw the first stone.
If we’re going to judge people on past transgressions, is it selective or does it apply to everyone?
I think its pretty clear that rogan isn't a racist. and it also seemed like his apology was sincere.
Super bowl ads worth the money?
Huddle up from Joe Pomp did a fantastic job comparing all the economics. Check it out here.
Crypto dominated everything outside of the actual game itself.
Companies like FTX, Coinbase, eToro, Crypto.com, and others collectively spent nearly $50 million on just a few minutes of ad space, and most of them also ended up giving away millions of dollars in free Bitcoin on Twitter.
FTX: The company hired Larry David for the 60-second spot, who plays a time-traveling skeptic that scoffs at inventions like the wheel, forks, a toilet, lightbulb, and portable music players.
And it ends with someone eventually trying to interest him in crypto, and Larry David saying, “Nah, I don’t think so,” and “I’m never wrong about this stuff. Ever.”
It had a good mix of creativity, entertainment, and star-power, while also shining a pretty positive light on the crypto industry in general, not just FTX specifically.
You can watch the extended cut version here.
But the FTX team also intelligently timed it up with a giveaway on Twitter.
They offered up 7.54 Bitcoin (~$340k), and the only requirements to enter were watching the advertisement, retweeting the tweet, and following them on Twitter.
The results were insane:
But here’s the craziest part — the FTX Twitter account gained nearly 200k followers over the weekend, a 52% jump in followers for an already three-year-old account.
In total, including the cost of air-time, production, talent, Bitcoin, and more, the Super Bowl advertising campaign probably cost FTX between $15 million to $20 million.
But for a company that has accrued over $31 million of enterprise value every day over the last three years—going from a $0 valuation in 2019 to $32 billion today—that certainly seems like a drop in the bucket for some solid growth and good publicity.
Thoughts On Disney:
Disney DTC: Integration
In response to the Q4 FY21 results
“Over the course of the past 6-12 months, Disney has faced some lingering questions from the investment community about its strategic decision-making… and I’ve come to believe that this skepticism is warranted. For that reason, I believe the appropriate decision is for management to seriously consider whether it’s time to pursue a different approach.”
That comment was focused on the company’s U.S. DTC strategy:
“I think the time has come for a change: Disney needs to collapse Disney+ and Hulu into a single app… As we saw with Hamilton, Disney+ has the ability to attract millions of new subscribers who may be outside of the Marvel / Star Wars / kids demo; the question is how they can convince these subs to keep using and paying for the service (‘One month later, almost 30% of users who signed up to watch Hamilton had cancelled Disney+’). I believe the consolidation of Disney’s U.S. SVOD services is the answer to this problem.”
While the company’s DTC results were actually quite strong in Q1, with Disney+ reporting a sequential increase of nearly 12 million subscribers, it’s becoming apparent that management agrees with the logic for making some strategic changes (the opportunity to take the next step from a bundled approach to a single offering). Over the past few years, Disney+, Hulu, and ESPN+ worked well as standalone services - but adoption and engagement across the company’s U.S. DTC services will benefit greatly from this change. (That said, while I’m convinced this will happen, it will take some time; the biggest remaining hurdle is Comcast’s 33% stake in Hulu).
🌊 Canadian Companies To Peruse 🌊
Potentialmotors.com - The TSLA of off road vehicles
🔮Best Links of The Week🔮
The $40 Billion Company That Won Super Bowl Sunday - Huddle Up
Billionaires Build (How to raise money from Y Combinator) - Paul Graham
All In Podcast - Canadian Truckers etc.
Mike Green podcast - Macro Contrarian from Bill Brewster
What's happening with the protests? - The Line
UPS on Business Breakdowns: Leaders of the Package