Fat Tailed Thoughts

Today's discussion is on futures and the London Metal Exchange. The nickel futures market experienced a massive short squeeze in early March, driving the price up 250% in two days. The exchange responded by reversing trades and halting trading. We discuss futures and forwards markets, why the exchange's explanation for reversing trades is mighty fishy, and what opportunities this presents to challenge a 145-year-old institution. Please enjoy this breakdown of futures and the London Metal Exchange.

Shoutout to @CliffordAsness for his unfiltered coverage as these events unfolded!

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Check out this week's letter for the full story. Join the Fat Tailed Thoughts discussion on LinkedIn and the @FatTailThoughts discussion on Twitter with your co-hosts @KleeBeard and @StevenDickens3.

For more episodes of Fat Tailed Thoughts, visit fattailedthoughts.com. Past topics include WTF is CPI, Debt Collectors Who Help Rather Than Abuse, Slow Revolutions in Financial Services, and more.

Stay up to date on all of our content by joining the Fat Tail Thoughts letter at fattailedthoughts.substack.com.

Today's discussion is on voluntary carbon credits. The market for voluntary carbon credits has been on a tear for the past year, but it hasn't always been that way. New demand to achieve net zero emissions is driving growth, but there remains a huge amount of work to do. We discuss why the market took over a decade to emerge, what still needs to be improved, and who is doing the great work of building. Please enjoy this breakdown of voluntary carbon credits.

Shoutouts to Carbon Streaming, InfiniteEarth, Moss.Earth, Pachama, and Watershed and the work they're doing in voluntary carbon credits!

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Check out this week's letter for the full story. Join the Fat Tailed Thoughts discussion on LinkedIn with host Jared Klee. Join the @FatTailThoughts discussion on Twitter with your co-hosts @KleeBeard and @StevenDickens3.

For more episodes of Fat Tailed Thoughts, visit fattailedthoughts.com. Past topics include WTF is CPI, Debt Collectors Who Help Rather Than Abuse, Slow Revolutions in Financial Services, and more.

Stay up to date on all of our content by joining the Fat Tail Thoughts letter at fattailedthoughts.substack.com.

Today's discussion is on startup equity. We explore how founders and employees alike should value and structure equity. We discuss the many varied structures including RSAs, ISOs, NSOs, and RSUs, how taxes work, and what happens when you leave a startup. Please enjoy this breakdown of startup equity.

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Check out the letter for the full story. Join the Fat Tailed Thoughts discussion on LinkedIn and the @FatTailThoughts discussion on Twitter with your co-hosts @KleeBeard and @StevenDickens3.

For more episodes of Fat Tailed Thoughts, visit fattailedthoughts.com. Past topics include WTF is CPI, Debt Collectors Who Help Rather Than Abuse, Slow Revolutions in Financial Services, and more.

Stay up to date on all of our content by joining the Fat Tail Thoughts letter at fattailedthoughts.substack.com.

When price increases, demand for most goods falls. But not all. There's a class of goods where demand rises with price. These "Veblen Goods" lead to businesses unlike any other.

We use Veblen Goods to signal - we're rich, we're successful, we have something you can't. Companies like Chanel, Montblanc, Rolex, Rolls-Royce, and Supreme have co-opted our need to signal to drive sales of their carefully curated brands.

In this episode, we explore the world of Veblen Goods and take a deep dive into watches. Co-host Steven Dickens shares insights from his 20+ years of watch collecting and opines on watches as an investment.

Check out this week's letter for the full story. Follow @FatTailThoughts on Twitter and your co-hosts @KleeBeard and @StevenDickens3 for more content.

Ukraine is under attack. The world is responding with financial warfare. It's a new domain in multi-domain operations. Air. Land. Maritime. Space. Cyber. Finance.

We explore how financial warfare happens: how SWIFT works and why Russia's been kicked off, how the US can enforce sanctions all over the globe, and what freezing Russia's central bank reserves means for Russia's economy.

We conclude with a look at what each of us can do to support Ukraine. They're small acts, but they make a very real difference.

Check out this week's letter for the full story. Follow @FatTailThoughts on Twitter and your co-hosts @KleeBeard and @StevenDickens3 for more content.

The theme of this episode is MORE. More funding, more startups, more investors, more everything.

Funding for startups has grown 10x in 10 years, an astonishing 26% annual growth rate. Money is flowing in not just from venture capitals, but from new types of investors as well. It's all been helped by an accommodative regulatory environment.

Those trends will continue to propel the industry forward. Expect more liquidity, more complex financial products, and more bundling of capabilities as the market grows.

We analyze the three big trends - more VC money, more new types of investors, and more investor-friendly regulations - before we predict the startups that will emerge to serve this market in the years and decades to come.

Check out this week's letter for the full story. Follow @FatTailThoughts on Twitter and your co-hosts @KleeBeard and @StevenDickens3 for more content.

Selling your startup equity used to be the only option for startup employees to get cash prior to IPO. But as the number of unicorns has ballooned and startups stay private for longer, a new option has emerged.

Startup employees can finance their options.

An ecosystem of lenders stands ready to lend employees money to exercise their options, take ownership of their equity, and pay the associated taxes. No money is owed until the startup goes public or is acquired.

We discuss the tax treatment of options, the tradeoffs of financing, selling, or waiting, and the growing number of lenders employees can engage.

Shoutouts to EquityBee, ESO Fund, Liquid Stock, Quid, Secfi, and Section Capital for helping employees keep their equity!

Check out this week's letter for the full story. Follow @FatTailThoughts on Twitter and your co-hosts @KleeBeard and @StevenDickens3 for more content.

The average time for a startup to go public has increased from 7 to 12 years in the past two decades. More and more early employees are left equity rich and cash poor.

An ecosystem has emerged to help. Four different secondary markets work with employees and the startups themselves to help employees, investors, and founders sell their startup equity for cash.

It's not all smooth sailing. The challenges of an illiquid startup equity market, complex regulations, and burdensome taxes are real. How to navigate is critical for any potential seller to understand.

Shoutouts to CartaX, EquityZen, Forge, and NASDAQ Private Market helping startups, their employees, and their investors!

Check out this week's letter for the full story. Follow @FatTailThoughts on Twitter and your co-hosts @KleeBeard and @StevenDickens3 for more content.

The US stock market had its worst January since The Great Financial Crisis. But investment returns don't make a lot of sense without more information around "normal" returns and the period over which performance is measured.

In this episode, we look at 100 years of stock market performance - how changing the dates over which performance is measured makes huge differences in the measured outcomes, why average returns are misleading, and how poor short-term performance can create incentive misalignment between money managers and their clients.

Check out this week's letter for the full story. Follow @FatTailThoughts on Twitter and your co-hosts @KleeBeard and @StevenDickens3 for more content.

Market makers and order books are core to how modern financial exchanges work. They're how we ensure there's a buyer for every seller and a seller for every buyer.

It's a model that works well in big markets. Jane Street, a premier market maker, traded over $17 trillion in 2020 and generated $1.6 billion in revenue. But the model fails in small markets. Jane Street's margin was just 0.009%. It's not profitable to be a middleman when trading volumes are low.

Automated Market Makers change the game. They can operate - profitably - in small markets. The model ensures there's always a price - buyers can always buy and sellers can always sell. It's a powerful new invention that's beginning to transform markets as we know them.

We explore how exchanges and market makers work, where the model fails, and the innovation unlocked by automated market makers. Shoutouts to Jane Street and Uniswap.

Check out this week's letter for the full story. Follow @FatTailThoughts on Twitter and your co-hosts @KleeBeard and @StevenDickens3 for more content.