
You Can Pay Credit Suisse Not to Work There - dsalzman
https://www.bloomberg.com/opinion/articles/2020-05-29/you-can-pay-credit-suisse-not-to-work-there
======
fossuser
I loved this indictment of Movie Pass (or WeWork) style companies:

> "There are other business models. For instance you could make a product that
> people kind of want, or that they would want if it were affordable. Then you
> convince people to buy it by selling it for much less than it costs you to
> make it, or by paying them to buy it. If you do this well, you will have
> high revenue and rapid revenue growth, because lots of people are buying
> your product. You will not, however, get rich, because you’ll be spending
> more money making the product than you get from your customers. Your revenue
> will be high but your net income will be negative; it will cost you money to
> run this business.

> But then you will go to investors, and you will say “look, I have a company
> with rapidly growing revenue, that’s worth something, you should pay me for
> a share of my company.” And they will agree—“we love rapid revenue growth,”
> they will say—and you will sell stock in the company for hundreds of
> millions of dollars. And then it will cost them money to run the business,
> and you will be rich. There are various possible endgames; in some of them
> you go to prison but in quite a lot of them you just stay rich and become an
> elder statesman admired for your business acumen."

The later part about the Chinese coffee company fraud also getting caught by
motivated short sellers was also great:

> "The thing about inflating your revenue by pretending that you sold more
> coffee than you did is that people can go to your stores and watch you sell
> coffee. It is a reasonable bet that they won’t do that, because it’s
> incredibly boring. “Who is going to send 1,500 people to our stores to watch
> us sell coffee all day, count how much we sell and compare it to our
> financial statements,” Luckin could reasonably have thought. 1 But the
> answer was “short sellers”! They actually hired people to sit around
> watching the coffee get made, so they caught the fraud."

Matt Levine is a good writer (often funny too) - I'm impressed he can
continually write up these high quality newsletters almost every day.

Between this, Stratechery, and Preet's podcast I find it _really_ hard to
actually read all of this.

How do other people do this?

It's hard to really have the time for even just one newsletter or podcast (at
least with the podcasts you used to be able to listen in the car, back when we
still drove places).

~~~
echelon
> But the answer was “short sellers”! They actually hired people to sit around
> watching the coffee get made, so they caught the fraud."

Is it legal to report negatively on a company you're short selling? Wouldn't
that count as market manipulation, even if your reports are true? Or will
simply disclosing that you have a position while simultaneously disclosing the
information make it safe and legal?

~~~
mason55
Yes, that is the whole point of the markets in fact and the reason we allow
short-selling. You _want_ information from both sides to be incorporated
because it will give you much better price discovery. You _want_ people to
figure out that companies are frauds and to tell the world about it and to get
people to do that you incentivize them financially by allowing them to go
short.

Look at recent private fundraising and VC to see what can happen in markets
with no short selling.

~~~
londons_explore
Wonder why VC firms don't come up with some structure to allow short selling?

If they believe a company will do well, yet someone else believes otherwise,
there is money to be earned by whoever is right.

------
empira
My previously employer offers just that : you could spend money to 'buy' up to
10 (more) days of holidays per year (for context, you start with 20 mandatory
days, plus 10 to 15 depending on your seniority and your age). It would cost
you exactly what it would costs the company to pay you, and seems redondant
with simply taking un-paid holiday. They were several benefits to this though
: those extra days would become part of your offical compensation, so you are
entitled to take them in the year, and you do not need his approbation. It is
also slightly better for your pension and your taxes to buy those days rather
than take un-paid holidays.

~~~
dathinab
But doesn't this cost the company more due to taxes and salary side costs.

At least in Germany this would either not be a good deal for the employee or
employer.

Also I'm not sure how legal it would be in Germany and other EU countries.

~~~
wjnc
It's a regular feature in NL. You can even do arbitrage. Buy extra vacation
days, save some of the days you regularly get in excess of the legal limit
(the legal days expire in 18 months, those above in 60 months). Sell those at
a later date for your then current income. Beats saving.

Edit: thanks, spelling

~~~
Smaug123
Off-topic nit: I think you mean "arbitrage", the practice of buying something
where it's cheap and selling it where it's expensive. "Arbitration" is a
method of resolving disputes by having a neutral third party decide what the
correct outcome is.

------
wging
It's always tough to figure out which part of a Matt Levine article the OP
wanted to talk about, since the title just covers the first one. They're all
interesting. If I had to guess I'd say the Luckin Coffee one, since it also
mocks certain startup business models.

~~~
kgwgk
And shows another reason why companies prefer not to go public and are happy
to take money from private investors instead. You don't need to publish your
accounts and you don't have to worry about someone looking into them to make
money showing you're a fraud.

~~~
skrtskrt
That's definitely a theme that Matt Levine touches on a lot, especially when
he talks about the WeWork and Uber IPOs: basically in the private VC market,
your investors either pass on the investment, or they invest. They cannot
short.

So the investors participating in your market (not the ones who chose to sit
on the sidelines) are already selected for being the people that are overly
positive or at least believe in the vision. Even if they have suspicions,
their incentive is to pump pump pump the valuation and the narrative so they
can ultimately dump the company onto the public markets. This largely worked
for Uber, but not for WeWork.

Once you're public, you're exposed to short sellers and 10000x the scrutiny.

To expand more, if you're in the private market and don't believe in X
company, you could invest in a competitor Y instead of shorting company X, but
only if you think the market opportunity is legit and company X is going about
it wrong _and_ that company Y is any good. Pretty narrow case.

Matt Levine has a half-funny half-serious suggestion for essentially shorting
in the private VC markets if you think the whole market is crap: found a
company and have VCs pay you a shit ton of money to run it, and take a golden
parachute before the house cards falls.

------
naringas
> They have a fixed life, some number of months, and then they end and, if you
> still own them, you have to take delivery of oil.

so far so good, this creates stability for companies depending on oil.

> You can build a perpetual strategy around them—buy next month’s futures,
> wait, and as they get closer to expiry sell them and buy the following
> month’s futures, etc.—but then the thing you are betting on is not quite the
> thing you want. You are betting on the relative value of different futures,
> the shape of the curve, the cost of rolling futures, all this technical
> stuff.

this looks more like gambling than real economic activity, how does this
create new value?

in any case in the end, this is not what the market actually has because "that
product is actually impossible to manufacture"

~~~
xyzzyz
_this looks more like gambling than real economic activity, how does this
create new value?_

It creates liquidity, which is very useful to oil producing companies, which
can sell their product months in advance of it being actually produced.

------
xenocyon
This is also true of academia: you can buy your way out of the stipulated
teaching load. Some faculty members with large research grants or side
businesses (and little interest in teaching) find this well worth it.

Meanwhile adjunct faculty - who used to only account for a small fraction of
higher ed - today do the majority of college-level teaching (generally with
low pay and benefits and nonexistent job security).

------
wizzwizz4
I don't like the straw-man near the end:

> I feel like “quickly doing math on lots of different potential combinations”
> is actually a specialty of computers? Usually when I read defenses of floor
> traders they are focused on the humans’ calm common sense, not their
> superior ability to rapidly do complex computations.

in response to:

> Because of the sheer number of possible combinations when every underlying
> futures contract, expiration month and strike price is taken into account,
> human market-makers shouting and flashing hand signals can work faster and
> at lower cost than robots, according to the humans.

I mean, sure, we've got algorithms that can short-circuit combinatorics
problems for certain _specific_ categories of problem, but the human brain is
still the most powerful general-purpose parallel processor known to humanity.

------
hwestiii
We lose a dollar on every unit, and make it up in volume!

------
whyhow
In response to the article about USO:

If you wanted to build a financial entity to track oil prices, couldn't you
just form a company that just buys a warehouse and stores a large amount of
oil? Then its value would be roughly equivalent to the amount of oil it has
stored?

Then I guess at the end of the month, the company would buy or sell more oil
to align its value. Maybe operate like an etf that tracks an index?

~~~
zacherates
That strategy is discussed in footnote #2. Though one of the interesting
things about such a physical oil fund is it makes it clear that you're just
frittering away investor money on storage costs (discussed in footnote #4),
which are more abstract/less obvious when you're spending the money trading
futures rather than on a big bin to hold the oil.

~~~
mrfredward
And so the difference between May and June futures should be constrained by
the cost of storing oil for a month (the price of oil for June should be <=
may + 1 month storage). Of course, storage facilities take time and money to
build and shutdown, so there ends up being supply and demand based
fluctuations for the cost of storing oil, and so if we run out of storage
space (as happened at the end of April), you can get a huge difference in
prices for futures that are a short time apart (which also happened at the end
of April).

------
dsalzman
A podcast version of today's newsletter. [https://anchor.fm/talking-money-
stuff](https://anchor.fm/talking-money-stuff)

~~~
1stcity3rdcoast
This is great, thanks. I'm always behind on Matt's daily email and this will
help me catch up. I do wish he would guest on more podcasts!

------
basseq
This is an interesting way to spin an unpaid furlough... which many people are
being forced to take right now.

It's basically equivalent. "You are going to be furloughed for 2 weeks without
pay" means, "You have an additional 2 weeks of vacation, but we're going to
cut your annual salary by 1/26th."

Which is the same thing as, "Give us back 1/26th of your annual salary, and
we'll give you 2 additional weeks of PTO."

------
gowld
Levine can spin the most mundane things, like unpaid time off, into salacious
stories.

------
bryanmgreen
This is a particularly entertaining article.

On one hand, capitalistic systems are clearly optimizing for peak efficiency
during global instability which is reassuring in some minor or maybe not so
minor way.

On the other, just be nice and give your employees some extra official time
off because they're obviously not working as much. Life is slowly returning to
normal, but it's still wacked out and stressful - just be nice. Giving
kindness when it's needed most pays long-term dividends.

~~~
JadeNB
> Life is slowly returning to normal, but it's still wacked out and stressful
> - just be nice.

I think that the most privileged (of whom I, and I expect many of us on here,
am one) are experiencing less of the hardships associated to coronavirus than
they did in the first flush of the reaction, and that, in the US at least,
there is a rush to try to _act_ as if things are returning to normal, but I
don't think that there's much realistic sense in which things are _actually_
returning to normal, slowly or otherwise.

------
kylec
No thanks, I’m already not working there for free

