Month: May 2021

Roughly one-third of employees at Basecamp are quitting after the company instituted a ‘controversial’ ban on wokeness in the workplace, according to TechCrunch.

After CEO Jason Fried announced in a Monday blog post that employees would no longer be able to openly share their “societal and political discussions” at work, around 20 of the company’s 60 employees simply couldn’t handle minding their own business and focusing on what they were hired to do.

About one-third of Basecamp employees accepted buyouts today after a contentious all-hands meeting. I’m told more are coming.

— Casey Newton (@CaseyNewton) April 30, 2021

“Every discussion remotely related to politics, advocacy or society at large quickly spins away from pleasant,” Fried wrote in the blog post. “You shouldn’t have to wonder if staying out of it means you’re complicit, or wading into it means you’re a target.”

As TechCrunch notes, several employees took to trigger to signal their virtue over the decision.

After 7 years, today is my last day at Basecamp. I plan on taking a little time off, but if anyone is looking for an iOS engineer, I would love to chat, my DMs are open.

— Zach Waugh (@zachwaugh) April 30, 2021

I resigned today from my role as Head of Marketing at Basecamp due to recent changes and new policies.

I’ll be returning to entrepreneurship. My DMs are open if you’d like to talk or you can reach me at andy@detroitindie.com

— Andy Didorosi (@ThatDetroitAndy) April 30, 2021

As a result of the recent changes at Basecamp, today is my last day at the company. I joined over 15 years ago as a junior programmer and I’ve been involved with nearly every product launch there since 2006.

— Sam Stephenson (@sstephenson) April 30, 2021

More via TechCrunch:

The no-politics rule at Basecamp follows a similar stance that Coinbase CEO Brian Armstrong staked out late last year. Armstrong also denounced debates around “causes or political candidates” arguing that such discussions distracted from the company’s core work. About 60 members of Coinbase’s 1,200 person staff took buyouts in light of the internal policy change — a ratio that makes the exodus at Basecamp look even more dramatic.

…

“If you’re in doubt as to whether your choice of forum or topic for a discussion is appropriate, please ask before posting,” Basecamp CTO David Heinemeier Hansson wrote in his own blog post, echoing Fried.

According to Platformer, Fried’s missive didn’t tell the whole story. Basecamp employees instead said the tension arose from internal conversations about the company itself and its commitment to DEI work, not free-floating arguments about political candidates. Fried’s blog post does mention one particular source of tension in a roundabout way, referencing an employee-led DEI initiative that would be disbanded.

“We make project management, team communication, and email software,” Fried wrote. “We are not a social impact company.”

Bitcoin and crypto markets have been rebounding this week after the prior week’s sell off.

Source: Bloomberg

A combination of de-leveraging, Bitcoin falling below its 50-day, notable Wall Street firms forecasted a major correction to $20-30k sparking retail fear and the Biden tax plan were all events that took us lower last week.

But market have stabilized and bounced since then.

As FundStrat mentioned in a note two weeks ago, we thought a “crypto market cooling off would be healthy”. We’ve seen the price of Bitcoin retrace a little over ~25%, which would qualify as a major correction for traditional markets but is par for the course in crypto during bull market cycles. While we’re not technical traders, Bitcoin falling below its 50 day gives us less concern given this has happened several times during the prior bull market cycle, and it’s the 200 day that Bitcoin has historically maintained during prior bull runs.

As FundStrat discussed in their prior week’s note, they believe the bull market remains intact, and are maintaining our $100k Bitcoin price target.

Via FundStrat.com,

We think the macro backdrop remains bullish for crypto assets. The Fed’s recent guidance that it plans to remain accommodative should be supportive for risk assets like crypto.

In our January 2021 Crypto Outlook, we predicted corporates would be entering crypto in a bigger way this year.

We think this is starting to happen more and will be one new source for capital flows into the crypto economy.

Tesla grabbed news headlines by announcing it had purchased $1.5B of Bitcoin earlier this year and again drew the spotlight the other day by announcing that they had sold a relatively small amount for a $100M profit to, in Elon’s words, “prove the market liquidity”. Rumors were even flying around that Facebook may be reporting Bitcoin on its balance sheet with its earnings release – this proved to be untrue but we even if Facebook didn’t buy Bitcoin, the corporates are coming, and it may not be reflected in earnings announcements yet.

Why do we think this? Based on the Q1 2021 Market Observations Report that was published yesterday, the OTC trading firm reported a notable jump in Corporates as a share of volume to ~27% from ~0% in the quarters prior.

As one of the largest U.S. OTC desks, we think this is telling of what could be to come. Genesis reported a little over $30B in trading volume during the quarter, implying that roughly $8.5B came from corporates. Even if we back out buys and sell from Tesla, MicroStrategy and other corporate, we think this says that more corporates bought crypto this quarter than has been announced, unless Tesla is day trading its position, which we think is unlikely given corporates tend to be longer term holders.

We think announcements from other corporations in the weeks to come could offer catalysts for the market.

Remaining overweight Ethereum and maintaining a price target of $10.5k as ETH reaches new highs and continues to outperform BTC

Ethereum reached a new all-time high of $2,900 this week.

We’re maintaining our overweight Ethereum vs. Bitcoin recommendation (as we detailed here) from April 2020 and reiterating our ~$10.5k price target from January this year.

Ethereum’s market cap has risen to ~30% of Bitcoins over recent weeks.  During the last market cycle, Ethereum broke this level and head as high as 80% of Bitcoin’s value – we’re not predicting exactly this but its a useful frame of reference.

When new investors come to crypto the first asset they generally hear about and buy is Bitcoin before learning about other assets and allocating across the space.

We think the same learning curve is playing out with institutional investors right now where the crypto narrative is shifting from Bitcoin to Ethereum and other segments like DeFi and Web 3 apps.

One reason we remain bullish on Ethereum is the large amounts of development happening there and the resulting economic activity in its digital economy

As we discussed in our Bitwise Decentralized Finance (DeFi) report, Ethereum and others are enabling new financial applications which have grown significantly in scale over the last year.

These applications are generating ~3x the fees for the Ethereum network vs. Bitcoin which trades at ~3x the market cap.

We think fees are an important way to look at Ethereum given the upcoming changes to its network economics with EIP1559. Ethereum is transitioning from a currency like Bitcoin to a crypto capital asset where a portion of the network transaction fees are used to buyback (burn) and retire (treasury stock) ETH supply.

In crypto accounting terms, this is the same as a company using revenue (fees), less operating costs (stock comp supply issuance), and earning profit (net supply burn) that is used to buyback stock (share repurchase). This means the network would become “profitable” like a company once ETH supply reduction from burned fees outpaces inflation.

Our price target of $10.5k from January 2021 looks at Ethereum this way and values it on a revenue multiple basis.

Although the price has doubled since our target was issued, Ethereum annualized fee revenue growth has nearly doubled as well, while the price to revenue multiple has remained roughly the same.

Given the correspondingly strong improvement in fundamentals, we think Ethereum still looks as cheap as it did 3 months ago at half the price.

We continue to view Ethereum as a Cloud 2.0 crypto stock as we discussed in our prior ETH report. Given this dynamic, we think it’s reasonable to compare Ethereum against the Bessemer Venture Partners (BVP) Emerging Cloud Index. On a revenue multiple basis, Ethereum is about twice as expensive as the cloud index, but on a growth adjusted basis, its ~13x cheaper.

Comparing the individual cloud stocks in the index vs. Ethereum, we can see that on a growth adjusted basis ETH is “off the chart cheap” relative to cloud 1.0 comps.

Our $10.5k target from January applied a growth adjusted price to sales multiple based on the cloud index.

Although we’re maintaining our current target on Ethereum, updating that same analysis based on the fundamental improvements since would imply an ETH price of ~$35k. Given the high implied multiple due to Ethereum’s rapid growth rate, we’re applying a 70% discount to the comp implied price to let the network continue to grow into its valuation – as it has been. Although the price has risen and we’re being a bit more conservative compared to our prior analysis, we think meaningful upside remains.

FundStrat continues to see more upside in higher beta altcoins vs. Bitcoin as crypto markets are on pace to hit $5T

We remain bullish not just on Bitcoin and Ethereum but on the entire crypto space. From our January 2021 Crypto Outlook, we forecasted the total crypto economy reaching $5T in market cap.

We recognize crypto reaching $5T may sound crazy. And we are aware of where this would put the market in relative terms compared to other assets. We haven’t forgotten that the dot.com bubble topped out at $4.5T. But, as we have written about extensively, we think crypto is the next wave of the internet economy and given how much larger that market and every market has become since then (including M2 growth), we humbly think our forecast remains reachable.

Thus far, we’re 3 months into that forecast and we’re on pace to hit $5T with the total crypto market cap having already risen by $1T or 1/4th of the way there. We compare the actual market prices from our forecast issue date against current prices and our forecast below:

Bitcoin dominance has continued to fall in line with our forecast as Etherum and other alts have had strong performance during 2021. During the prior cycle, bitcoin dominance fell ~55% from 85 to 38 before having a mid-cycle bounce. Thus far this cycle, Bitcoin dominance has fallen ~33% from 70 to 47, implying alts have room to continue outperforming if we see a similar trend as we did during the prior cycle.

We think if Bitcoin can have a healthy consolidation around these levels, capital will continue flowing to smaller assets within the crypto economy and other assets will benefit.

Liberals are getting so sick of Elon Musk, they literally can’t stand being anywhere near him. It’s a stark change from heralding Musk as their hero just years ago, isn’t it? 

This is now why the snowflakes on Saturday Night Live are being offered a “safe space” by their show and “won’t be forced to appear alongside controversial billionaire Elon Musk when he hosts the show”, according to the New York Post. 

One source told the NY Post: “Speaking historically, if a cast member has been that unhappy, they don’t have to do it. [‘SNL’ boss Lorne Michaels] won’t ever make them do anything they don’t want to do.”

Things already look like they’re kicking off well with Musk and the cast. When Musk tweeted days ago “Let’s find out just how live Saturday Night Live really is”, cast member Bowen Yang fired back on Instagram: “What the fuck does this even mean?”

“Only CEO I want to do a sketch with is Cher-E Oteri,” wrote writer Andrew Dismukes. Cast member Aidy Bryant reposted a Tweet by Bernie Sanders that called it a “moral obscenity” that “the 50 wealthiest people in America today own more wealth than the bottom half of our people.”

Musk, as a reminder, saw his net worth rise by over $100 billion in 2020 while Tesla stock mooned for reasons that, we would guess, have yet to fully be explained.

NBC announced Musk would be hosting last weekend. It made the announcement “just hours” after the SpaceX Crew Dragon capsule docked with the International Space Station. 

🚀🚀🚀 pic.twitter.com/WyTGhSsSVg

— Saturday Night Live – SNL (@nbcsnl) April 24, 2021

As we noted last week, the show isn’t well known for having businesspeople host, but Musk’s crossover into the realm of celebrity appears to have afforded him the opportunity. Musk has also made guest appearances on CBS shows Young Sheldon and The Big Bang Theory, as well as voicing a part on South Park, The Simpsons and Rick and Morty. 

For better or for worse, it’s going to get eyeballs on the show, which is NBC’s endgame. The news at the time also triggered the lot of liberal SNL viewers, who lashed out at the program on Twitter, which became a group “cancel” effort/therapy session for snowflakes:

Having Elon Musk host SNL seriously feels like the show’s biggest misstep since having Trump host

— Joshua Benton (@jbenton) April 25, 2021

idk how much communication you have with lorne or the higher ups, but someone needs to tell them that absolutely no one wants this. i can not think of a single person who wants this.

and i don’t mean miley

— Your Tall Friend Jord (@TallGuySchmidt) April 24, 2021

This is dumb.
This is really dumb.

— Jo (@JoJoFromJerz) April 24, 2021

I’d rather have a root canal with no anesthesia than watch Elon Musk pretend to be human.

— 🙈🙉🙊 (@toddkimmelman) April 24, 2021

Elon can fuck himself. Miley deserves better. The writing’s been shit this year but this takes the cake. Deleting SNL from my DVR ASAP.

— Ang (@angelamusings) April 24, 2021

Are you SHITTING ME? Elon Musk, seriously? Not funny. Bloated billionaire babyman. (Another one, that is.) Stop this!

— ABL in Madison (@AmyBarlowLib) April 25, 2021

Or which skit will feature Elon telling his wife she’s way too emotional and should stop being sad about their child that died.

— Katie Tuohy 🍲🐀 (@katieroo_25) April 24, 2021

Authored by Bryce Coward via Knowledge Leaders Capital blog,

Last week we wrote how interest rates may have room to come down a bit before ultimately heading higher later this year and into next year. This line of thinking was reinforced this week at the Fed’s meeting release and press conference. Powel’s messaging/guidance was squarely unchanged in suggesting 1) an asset purchase taper is not imminent and 2) rates will remain at zero through 2023.

Now, that guidance can always change, primarily if inflation (and particularly core PCE) gets well above 2% and remains there for many months or quarters. But, we aren’t there yet. In fact core PCE released just today came in at 1.8%. All this means that direct and indirect market wagers that the Fed will raise rates sooner than late 2023 are literally “fighting the Fed”.

And, just to be clear, market participants are still betting that the Fed will be well into liftoff by the end of 2023 despite the Fed’s continued messaging to the contrary. For example, the Fed Funds market still expects 50bps of rate hikes (or 2 rate hikes of 25bps each) by the end of 2023. This is derived by subtracting 99.53 from 100 in the chart below.

The eurodollar market is expecting 100bps of rate hikes (or 2 rate hikes of 25bps each) by the end of 2023. This is derived by subtracting 98.94 from 100 in the chart below.

Even if the market is fighting the Fed on these particular trades, does it mean the broader reflation trade (i.e. the one that correlates nicely with a rising 10-year yield and steepening yield curve) is also offsides?

We don’t necessarily think so.

First, if the Fed does what it has been signaling, then rate hike expectations will need to migrate from 2023 to 2024.

It’s more of a temporal shift in expectations than a change in expectations all-together. As we can see from looking at December 2024 Fed Funds and eurodollar futures, that temporal shift in rate hikes has not happened yet. If and when it does, we could see some minor pressure on 10-year yields all else equal, but not the kind of pressure that takes 10s down significantly or derails an overall uptrend in longer-term rates/curve steepening. This, again, is because it would simply be a temporal shift in rate hike expectations and not a removal of those rate hike expectations all together.

Secondly, there is nothing set in stone about the relationship between the yield curve and reflation trades.

We have an excellent example from the 2002-2003 period. During this period the Fed was not hiking rates and the 10Y-2Y Treasury curve (red line in the charts below) generally steepened. Yet, typical reflation trades like value vs growth and copper vs gold (blue lines in charts below) showed basically zero correlation to the steepening in the curve even though one would have expected those trades to be highly positively correlated.

All this is to say that yes, the market may be fighting the Fed currently and expecting the Fed to tighten sooner rather than later. When those expectations change – and they will indeed change if the Fed keeps its word – it will require the market to stop expecting as many rate hikes in 2023 and instead expect more rate hikes in 2024. This could put some continued modest pressure on longer-term rates. But, we need to be careful about expecting that to derail reflation trades. 1) the pressure on rates should be modest, so curve flattening should also be modest and 2) as we see from the 2002-2003 example, there can be prolonged periods of time when “reflation” trades “should” do one thing, but actually do another.

By now, if you’re active on FinTwit, you probably know that CNBC staple, Tesla uber-bull and “financial advisor” Ross Gerber, is on record has having received PPP money for his firm back when the program was first put into place in the early stages of the pandemic. This was, of course, after publicly railing about the program and calling it “another big Trump scam”.

But what you may not have known is that is appears it wasn’t just Gerber’s firm who was approved for a PPP loan – it also looks like Ross Gerber himself was approved for a $20,833 loan as a sole proprietorship, according to information on ProPublica. 

The website lists a “Ross Gerber” as “approved” for a PPP loan of $20,833 as of March 29, 2021. The loan is earmarked for “payroll” of Gerber’s sole proprietorship. The status of the loan says “not fully disbursed”.

Though the website lists the location as Pacific Palisades, CA, we were unable to independently confirm that it was the same Gerber. However, Gerber’s bio on his company’s website says he resides in Pacific Palisades, CA. 

Recall, back in July of 2020, we pointed out that Gerber’s firm, Santa Monica-based Gerber Kawasaki, was among the many firms nationwide to take PPP money. 

The disclosure came as part of a broader disclosure of firms who took PPP loans and confirmed that Gerber’s firm took a loan ranging from $350,000 to $1 million through Wells Fargo Bank. While PPP loans were given out in exchange for “retaining jobs”, in the case of Gerber Kawasaki that particular number is unknown as the excel cell is empty.

The irony, of course, came from the fact that on April 27, 2020, just 6 short days before his firm’s loan was approved, Gerber virtue signaled to the #resistance by tweeting that “this whole PPP thing looks like a scam. Another big Trump scam”.

… A scam which Ross Gerber had applied for weeks prior and was eagerly waiting approval.

Then, during the same thread about “another Trump scam”, when Gerber was called out for having Trump derangement syndrome, he doubled down and said “you can correlate PPP loans and Trump supporters” before suggesting “they should publish the list of companies and amounts.”

Well, Ross, they did. And your firm is on it as receiving up to $1 million in PPP grants.

This thread, posted days ago by popular FinTwit account @keubiko, lays out the timeline behind Gerber’s first PPP cash grab.

Let’s take a little trip down memory lane now that @Gerberkawasaki is gaslighting on his PPP loan, implying that because of the loan he “was able to keep my whole staff employed last year” 1/n pic.twitter.com/OWdkdKQnxk

— Keubiko (@Keubiko) April 29, 2021

And now, Ross, we have to ask: could it be possible you are trying to grab another $20,000 in taxpayer funded bailout money – all while constantly crowing on Twitter about how great your firm’s returns are and how rich you are?

Authored by Paul Joseph Watson via Summit News,

In the latest hysterically contrived moral panic, a Jeopardy! winner is now facing cancellation by the mob for doing a “white supremacist” hand sign despite the fact that it was actually supposed to indicate the contestant had won three games.

“A group of 467 purported former participants on the show posted an open letter on Medium on Wednesday accusing the syndicated game show’s producers of failing to catch what they allege is a white power hand gesture,” reports Hollywood Reporter.

“On Tuesday, when winner Kelly Donohue was introduced as having won three games, he “held his thumb and forefinger together with his other three fingers extended and palm facing inward, and he tapped his chest,” the letter noted.”

@TimScottSC says America isn’t a racist country while this guy flashes the White Power Symbol on Jeopardy. #TimScott #JointAddress #Bidenspeech pic.twitter.com/GuVyLIzkKs

— Mannwell D. Glenn (@theclassixjawn) April 29, 2021

In reality, Donohue explained on Facebook how the gesture actually represented the fact that he’d won three games, with the contestant adding that he had displayed one finger and two fingers to denote victories in previous rounds.

“Regardless of [Donohue’s] stated intent, the gesture is a racist dog whistle,” the letter absurdly argued, blaming the producers for allowing it to be broadcast.

“We really hope to see a statement and a disavowal of both of this week’s events, and we would like to see Jeopardy! address Kelly’s behavior,” said the letter.

Instead of the proper response to this weaponized idiocy, which is to laugh it out of the room, the media is actually treating it as a genuine issue.

Donahue performed the usual ill-advised stunt of apologizing to the mob and appealing to their reason, a futile effort since they don’t have any, by prostrating himself in a Facebook post.

The hysterical moral panic over the ‘OK’ hand gesture began when 4chan created it as a troll to bait gullible leftists into thinking it was an actual thing, and now because of their unchecked paranoia, it is.

“I’m truly horrified with what has been posted about me on social media. I absolutely, unequivocally condemn white supremacy and racism of any kind. People who know me personally know that I am not a racist, but for the public at large it bears repeating: I am not a racist and I reject and condemn white supremacy and all forms of bigotry for the evil they are. It’s shameful to me to think anyone would try to use the stage of Jeopardy! to advance or promote such a disgusting agenda. During the taping of my fourth episode, I was simply raising three fingers to mark my 3rd win. There was nothing more I was trying to indicate. I deeply regret this terrible misunderstanding. I never meant to hurt a soul and I assure you I am no friend of racists or white supremacists.”

This story belongs in a Babylon Bee tweet, not in major news publications.

Forget clown world.

At this point, we’ve entered circus galaxy.

*  *  *

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Over a decade into the biggest metaphorical massacre of value investors by the Federal Reserve (which sadly was also literal in the case of Charles de Vaulx, a renowned value investor and co-founder of International Value Advisors, who last week jumped to his death from a Manhattan skyscraper), people still seem to care what the biggest value investor of them all, Warren Buffett, does. Or at least some people.

To satisfy their curiosity – even as an entire generation of traders no longer cares, or has heard, about the 90-year-old Oracle of Omaha and instead wants to know which stock to squeeze to generate overnight tendies – this is what Berkshire Hathaway reported earlier this morning when it filed its first quarter 10Q:

• Q1 operating profit rose 20%, to $7.02 billion, or about $4,600 per Class A share, from $5.87 billion a year earlier. This was the second-highest level on record (going back to 2010) and was only surpassed by the third quarter of 2019. The gains were fueled by the firm’s insurers and its group of manufacturers, servicing businesses and retailers.
  • Insurance underwriting operating profit $764 million vs. $363 million y/y
  • Railroad, utilities & energy businesses operating earnings $1.95 billion, +12% y/y
  • Insurance float $140.0 billion, +7.7% y/y
• Q1 net income of $11.71 billion, or $7,638 per Class A share, compared with a net loss of $49.75 billion, or $30,653 per share, a year earlier.

The near-record operating profit suggests that the Omaha conglomerate has already suffered through the worst effects of the pandemic, including the loss of tens of thousands of jobs, and the company said many businesses are now posting “considerably higher” earnings and revenue despite the negative impact of February winter storms, though some businesses are still suffering.

Last year’s results reflected a $55.62 billion loss on investments and derivatives, as global stock markets plunged before Powell came to the rescue of billionaires – such as Buffett. Accounting rules require Berkshire to report gains and losses on stocks it owns even if it does no buying and selling.

Manufacturing operations boosted pre-tax profit by 15%, with earnings nearly doubling at the Clayton Homes mobile housing unit as sales revenue increased and credit losses fell. Pre-tax profit from retailers such as the Nebraska Furniture Mart and See’s Candies more than doubled, as Berkshire’s auto dealerships sold more vehicles and some results surpassed pre-pandemic levels despite supply chain disruptions.

One unit still struggling is aircraft parts maker Precision Castparts, which in 2020 took a $9.8 billion writedown and shed 13,400 jobs. Buffett has called that particular purchase a mistake. Berkshire said Precision’s quarterly revenue fell 36%, and revenue and earnings should remain “relatively low” in 2021 because aircraft production is unlikely to grow significantly.

Berkshire’s solid operations notwithstanding – since they naturally benefit from every economic recovery, no matter if it comes from trillions in fiscal stimulus or otherwise – what we found more interesting is that not only did Berkshire’s stock-buying drought extend for one more quarter, but the conglomerate’s stock sales in the first quarter were the second-highest in almost five years…

…. confirming that once again, there is nothing in the market that Buffett finds worth buying.

Well, there was one exception: Berkshire itself, although while Berkshire bought some $6.6BN of its own stock in Q1, this was down from a record $9BN in Q3 and Q4 of last year and a total of $24.7 billion for the full 2020 (that said, Reuters noted that Berkshire’s share count fell from March 31 to April 22, suggesting that the company repurchased more than $1.2 billion of stock in that period).

This helped push Berkshire’s cash pile up 5.2% from three months earlier to a near-record $145.4 billion at the end of March.

Class A shares of Berkshire closed Friday at $412,500, after hitting a record high a day earlier. They have risen 19% this year, topping the 11% gain in the Standard & Poor’s 500, but trailed the index by 36 percentage points in 2019 and 2020.

Buffett will join his longtime business partner, Charlie Munger, 97, for Berkshire’s annual meeting Saturday. The pair will field questions from investors for hours during the virtual event. The livestream can be watched after the jump (or by clicking here).