Tremendous

Melvin Capital Loses $1 Billion in 3 Weeks to Start 2022

Engineering an AMC Short Squeeze in Dark Pools

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Business

Melvin Capital Loses $1 Billion in 3 Weeks to Start 2022

January 28, 2022 tremendousblog 9 Comments

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Badly burned in meme stocks a year ago, Melvin Capital Management LP has lost over $1 billion in 3 weeks to start 2022.

The Wall Street Journal reports a 17% percent loss over the period. Since Melvin began 2021 at $12.5 billion under management and lost 39% last year, this year’s 17% loss amounts to about $1.3 billion.

Given that (inexplicably) more people invested in Melvin last year and few redeemed, the losses could be even greater and may have reached $2 billion.

Melvin seems to have learned little from its experience last January:

At the worst point in January 2021, Melvin Capital Management was losing more than $1 billion a day as individual investors on online forums such as Reddit banded together to push up prices of stocks Melvin was betting against. “We were in a terrible position. Stared death in the face,” Mr. Plotkin told employees in a Zoom meeting late that month. “But we’ve made it through.”

The damage, though, was severe. Melvin’s loss that month was 54.5%, or roughly $6.8 billion, one of the swiftest and steepest declines for a hedge fund since the financial crisis of 2008.

Despite the market turmoil, other hedge funds did far better, as did market indices:

For the full year, Melvin was down 39.3%, but far below the average 11.9% gain for stock-picking hedge funds, according to industry-research firm HFR. The total return of the S&P 500, in comparison, was 28.7%.

Would you rather pay high fees for Melvin to lose 40% of your money, or almost nothing for Vanguard to make you 30%?

Two other hedge fund kingpins, Ken Griffin of Citadel LLC and Steve Cohen of Point72 Asset Management LP have also been stung by these losses.

They invested $2.75 billion in Melvin last year for a piece of its fees. But those management fees are likely just $150-200 million a year in total currently, with no juicy performance fee.

Looks like they backed the wrong horse.

The bottom line is Gabe Plotkin is inept and has no business running other people’s money. To his investors, I suggest you get out while you still can.

There will be no blog on Monday. I have an acting gig!

See you on Tuesday, February 1st. Have a great weekend everyone! 🙂

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More on markets:

Engineering an AMC Short Squeeze in Dark Pools

Citadel Holding Nearly $500 Million in AMC Options

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Use this link to sign up and you’ll save $10 on your first order.

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

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Business, Technology

Founders’ Biggest Pitch Mistake

January 27, 2022 tremendousblog 2 Comments

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Every day, from demo days to pitch competitions, from LinkedIn messages to e-mail, I see hardworking founders making the same mistake. If you’re raising money today, chances are you’re doing it too.

No trend = no interest

A lot of what venture capitalists and angels are doing when they evaluate a startup is trying to find a trend. Is this company’s product catching on at warp speed, or languishing in a dusty corner of the market?

It’s the founder’s job to show us that trend. But all too often, pitches are long on ideas and short on numbers.

You must show rapid growth in revenue or, at the very least, unpaid users. But in most of the presentations I see, there is no such data at all.

Next, I ask the same question, over and over: “What is your revenue month by month for the last 3 months (3 numbers)?”

That’s when at least 80% of founders make the same mistake: giving me a single, aggregate number for the last 3 months. This does nothing to show investors a trend.

If you made $210,000 in the last 3 months, that could be $70,000 every month. Or it could be $40,000 in October, $60,000 in November, and $110,000 in December.

That’s the difference between 0 growth (appealing to almost no one) and 66% month over month growth (appealing to anyone sane).

If your growth is amazing, don’t hide it by offering up just 1 number or no numbers at all! And if it’s not, be honest about it and do your dardnest to improve it.

Investors will appreciate and remember your candor and your commitment to giving them the information they need.

I can’t emphasize this enough: without data showing a growth trend, it’s almost impossible to say whether I’d want to invest in a company or not. So guess where those pitches go?

Yep, next to the Old Navy ads and the e-mail from Svetlana seeking a husband.

There are simply too many startups doing things right for me to spend a lot of time on those that are doing it wrong, given that I am looking at 100+ pitches a month.

Arm yourself with this information and raise millions! 🙂

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More on tech:

Cana: The Star Trek Replicator for Beverages

Why I Just Invested in Deft, the Best Way to Shop Online

Why You Should Never Raise a $100 Million Seed Round

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More on Fundrise in this post.

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Use this link to sign up and you’ll save $10 on your first order.

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

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I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

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Business, Science, Technology

Cana: The Star Trek Replicator for Beverages

January 26, 2022 tremendousblog 2 Comments

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I woke up this morning and wandered into the kitchen. I opened the fridge and poured a delicious glass of tingly seltzer.

Mango flavor.

After a glass or two, I threw out the empty plastic bottle. That bottle may soon make it into the ocean and perhaps even back into my body as microplastics.

But what if I could have my yummy seltzer, along with my morning coffee or even a glass of wine…all from one printer?

This is what Cana, an incredible startup backed by David Friedberg, may soon make a reality. Cana has spent 3 years developing a 3D printer for beverages.

It can make thousands of drinks, from iced coffee to orange juice to beer. Since those drinks are 90% or more water, Cana only has to send you a tiny cartridge with flavor compounds.

The water comes from your tap!

And Cana can add unique flavors to your drink. Maybe almond seltzer is what we’ve been waiting for all along!

If it works, Cana will be incredibly convenient and should be cheaper than regular beverages. But Cana offers a lot more than convenience.

If we quit shipping heavy beverages that are almost entirely water, and quit stocking them on shelves and housing the empties in landfills, the environment will benefit greatly. Imagine all the carbon emissions of trucks and warehouses used to transport and store beverages, gone!

And drinks are just the beginning. Some day, Cana aims to print any consumable item you may need.

The device, about the size of a toaster oven, should be available within the next year, with pricing to be released in February.

I signed up for early access on their website, and I’ll knock over 10 people to be an investor too!

What do you think of Cana’s technology? Let me know in the comments at the bottom of the page.

And check out this great interview with David Friedberg on Cana from the This Week in Startups podcast!

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More on tech:

3D Printing a Human Ear

Why I Just Invested in Deft, the Best Way to Shop Online

Male Contraception With an Ultrasound Device?

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More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days.

Use this link to sign up and you’ll save $10 on your first order.

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

Every fruit and vegetable is super fresh and packed with flavor.

I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

I wrote a detailed review of Misfits here.

Business

Engineering an AMC Short Squeeze in Dark Pools

January 25, 2022 tremendousblog 3 Comments

It’s no secret that investors in meme stocks like AMC Entertainment Holdings, Inc. yearn to engineer a short squeeze. This vertiginous ascent in the stock’s price crushes short sellers, who must buy the shares to close their position and stop the bleeding.

It’s easiest to engineer a squeeze in a heavily shorted stock. Then, many shorts have to cover all at once, providing heavy demand for the shares and pushing the price higher.

If you look at the short interest in AMC shares, it doesn’t look particularly high, at 18%. But there’s another metric that tells a very different story.

AMC’s dark pool short interest is a whopping 51%…a majority of shares outstanding. If that figure were repeated in public markets, it would make AMC the #5 most shorted stock in existence.

The short sales may not show up on the NYSE, but they’re there. And in massive numbers.

So it may be a lot easier than it appears for retail traders to squeeze AMC shares.

Most retail orders go to dark pools. Since brokers tend to process their orders in the dark pools, retail traders could squeeze the short sellers even on this private platform.

To be clear, this is a high risk, speculative trade. I wouldn’t attempt it because the high risk bucket of my investments goes into tech startups.

But it just might work.

More on markets:

Citadel Holding Nearly $500 Million in AMC Options

How Did High Dividend Stocks Perform In the Last Crash?

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More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days.

Use this link to sign up and you’ll save $10 on your first order.

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

Every fruit and vegetable is super fresh and packed with flavor.

I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

I wrote a detailed review of Misfits here.

Business, Technology

Why I Just Invested in Deft, the Best Way to Shop Online

January 24, 2022 tremendousblog 9 Comments

We’re back!

Sorry I missed you guys Friday. I wasn’t feeling well.

Fortunately, it wasn’t COVID and I’m back to 100%. And I’m really excited about today’s company: Deft.

E-commerce search is broken.

Don’t believe me? Type in a simple search like “pet friendly sectional under $5000” on Google or Amazon.

The results are mostly irrelevant ads and sofa covers, not actual sofas. The brands are trusted names like HDCAXKJ.

That’s why Zach created Deft, the best way to shop online.

Type that search into Deft and you’ll see relevant results from top brands. This saves you time and money.

You can even hire a personal shopper through Deft for a small monthly fee!

I knew people would pay for a personal shopper when I noticed they pay to skip the security line at the airport (through a company called Clear). Some people have more money than time.

Deft is currently in beta. I encourage you to check it out!

One day, this will be the standard for e-commerce search and perhaps many other search categories as well. I’m delighted to be an investor!

Check out Zach on the This Week in Startups podcast!

More on tech:

Why You Should Never Raise a $100 Million Seed Round

How to Ace a 3 Minute Pitch

Why I Just Invested in Kippo, Where Gamers Find Love

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More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days.

Use this link to sign up and you’ll save $10 on your first order.

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

Every fruit and vegetable is super fresh and packed with flavor.

I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

I wrote a detailed review of Misfits here.

Business

85% of Hedge Funds Are Monitoring Retail Traders

January 20, 2022 tremendousblog Leave a comment

Retail traders were once an afterthought in the stock market. Those days are over.

Anxious to know retail’s next move, nearly all hedge funds are monitoring retail traders on social media:

Fund managers who might have once derided small-time day traders as “dumb money” are scouring social-media posts for clues about where the herd might veer next. Some 85% of hedge funds and 42% of asset managers are now tracking retail-trading message boards, according to a survey by Bloomberg Intelligence.

J.P. Morgan is offering a product to top clients that helps them predict retail traders’ next move. Those high dollar clients are likely hedge funds:

Data shared with clients include the size of retail flows, the most discussed stocks on social media and companies that are likely to face a retail ‘squeeze’ — when small investors rush to a stock that hedge funds are betting against.

This comes as retail traders form an ever-larger part of the market. From the WSJ:

Individual traders in 2021 purchased a net $292 billion of U.S. stocks and exchange-traded funds, according to Vanda Research’s VandaTrack platform, which tracks and sells data on the purchases of U.S. equities by individual investors. That is more than seven times the amount in 2019. Individual investors so far appear poised to continue similar levels of buying activity in 2022.

But it will be hard for retail traders to outmaneuver hedge funds if they always know retail’s next move. The solution may be to adopt a tool long used by crypto traders: encrypted messaging.

Applications like Signal, Telegram or Whatsapp make it easy to form groups and send encrypted messages. This could be a good way for retail traders to organize and coordinate trades.

After all, it’s much easier to burn hedge funds in a short squeeze when they don’t know you’re about to start buying the stock.

I’m curious to see if retail stock traders will adopt secure messaging technology as a weapon against hedge funds. In the mean time, remember: Big Brother is watching you.

More on markets:

Citadel Holding Nearly $500 Million in AMC Options

Solana Is the Most Popular Crypto of 2022

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This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been great so far.

More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days.

Use this link to sign up and you’ll save $10 on your first order.

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

Every fruit and vegetable is super fresh and packed with flavor.

I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

I wrote a detailed review of Misfits here.

Business

AMC Fails to Deliver Drop 98%

January 19, 2022 tremendousblog 2 Comments

After hitting over 400,000 in mid-December, fails to deliver in shares of AMC Entertainment Holdings, Inc. dropped 98% to close out 2021.

The latest data, released today by the SEC, follows a long-term pattern in the stock. Fails to deliver bounce around at high levels for much of the month, only to disappear at month’s end.

Let me be clear just how out of line fails to deliver in the tens and hundreds of thousands are for AMC. Here are the fails to deliver for some of the largest companies in the world, based on the latest data set:

Microsoft Corporation: 527

Apple Inc: 61,677

Amazon.com Inc: 57

Tesla Inc: 0

Meta Platforms Inc: 0

Keep in mind, many of these companies are hundreds of times the size of AMC by market cap. So even when AMC fails to deliver are at just a few thousand, they’re way out of line for a stock its size.

So why would such a relatively tiny company have so many failed trades?

Such a persistent pattern of large fails to deliver is often evidence of illegal naked short selling.

A persistent pattern of large fails to deliver is often evidence of illegal naked short selling. #AMC $AMC
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This involves selling short shares one does not own. Naked short selling is a powerful tactic to push down a share’s price.

If you’re not limited by having to borrow shares, you can sell forever!

So why do these fails to deliver tend to get cleaned up at the end of the month? Perhaps someone at the exchange or the SEC doesn’t like how it looks to end a month with a large number of failed trades, and insists they settle.

But they pop right back up soon after…perhaps once a superior’s back is turned.

I expect to continue to see massive numbers of failed trades in AMC shares on a regular basis until the SEC steps up and solves this problem once and for all.

More on markets:

AMC Fails to Deliver Soar Past 400,000

Solana Is the Most Popular Crypto of 2022

AMC Fails to Deliver Are a Massive Outlier

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More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days.

Use this link to sign up and you’ll save $10 on your first order.

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

Every fruit and vegetable is super fresh and packed with flavor.

I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

I wrote a detailed review of Misfits here.

Business, Technology

Why You Should Never Raise a $100 Million Seed Round

January 18, 2022 tremendousblog 1 Comment

Markets are hot. And your startup is growing fast.

Time to raise money at the highest price you can get…right?

Wrong. Lately, I’ve seen companies raising seed rounds at valuations of $125 and even $150 million.

A few years ago, a typical seed round valuation was more like $5 to $10 million. Now, that’s beginning to look quaint.

Getting the highest possible price for your company sounds great, but comes with some serious pitfalls. Here’s why you should resist the temptation to swing for the fences:

1) You don’t have enough time grow into the valuation. Companies I’ve seen raising seed rounds at $100 million or more often have little or no revenue.

Meanwhile, tech companies today are IPO-ing at about 15 times revenue. So for your company to truly be worth $100 million, you need about $6.7 million a year in revenue.

Most companies raise enough money in a fundraising round to last 12-18 months. The cash will rarely last more than 2 years.

Can you go from little or no revenue to $6.7 million a year in just 12-24 months? Doubtful.

What happens if you can’t? A down round, or raising money at a lower valuation.

This will upset your existing investors, who quickly book a loss on their stake. It also is a strong negative signal for your company that could impair your future.

2) You get the bad investors and repel the good ones. Astute investors know they cannot make money on $100 million seed rounds.

So who will you get instead? Novices who will provide bad advice and offer few connections.

Your company will be much better served in the long term if you have Sequoia on your cap table. Their name, the advice they can provide, and the doors they can open will be invaluable.

But if you’re raising at an unrealistic valuation, they’re unlikely to participate.

I know that getting a huge bag of money for a tiny slice of your company is appealing. But if you want to maximize the long term value of your startup, raising at a more reasonable valuation is the ticket.

Aim for a seed round between $8-25 million, depending on how much traction you have. Then get to work building.

There will be plenty of time to score that giant valuation later!

More on tech:

A Day in the Life of an Angel Investor

Is Fathom the Future of Blockchain?

How to Ace a 3 Minute Pitch

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Best of all: No fee!

This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been great so far.

More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days.

Use this link to sign up and you’ll save $10 on your first order.

My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me.

Every fruit and vegetable is super fresh and packed with flavor.

I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy!

I wrote a detailed review of Misfits here.

Business, Technology

Solana Is the Most Popular Crypto of 2022

January 17, 2022 tremendousblog 1 Comment

In what’s begun as a tough year for cryptocurrencies, Solana has attracted more investors than any other coin. The high speed network landed $6 million in inflows so far this year.

Larger competitors like Bitcoin and Ethereum have seen outflows in the tens and hundreds of millions of dollars.

What I find particularly striking is that Solana’s market cap is only a fraction the size of its larger peers. Bitcoin has a total value around $800 billion, and Ethereum nearly $400 billion.

Meanwhile, Solana is worth just $44 billion. Nonetheless, it managed to beat these much larger protocols in attracting investors.

This is a pattern I expect to continue long term. Solana can process tens of thousands of transactions per second for virtually nothing.

Compare that to Ethereum, where completing a single transaction costs about $46!

Would merchants accept a credit card that cost them $46 in transaction fees every time someone used it? Of course not.

Ethereum’s high fees will severely limit its use cases until the fees come down.

Bitcoin looks better at about $2 a transaction. But Solana charges mere fractions of a cent.

A new technology that’s dramatically faster and cheaper will win, regardless of the market. I expect Solana to continue to gain value relative to the older protocols.

At least until a swifter competitor enters the ring!

More on tech:

How Solana Could Wipe Out Visa and MasterCard

A Day in the Life of an Angel Investor

Is Fathom the Future of Blockchain?

Photo: “Solana Beach, CA Neon Sign” by JoeInSouthernCA is licensed under CC BY-ND 2.0

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This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been good so far. More on Fundrise in this post.

If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. With their 1% management fee, this could save you $250 on a $100,000 account.