Nobody asked my opinion and by opinion I mean my opinion on starting, running, advising a community/content moderation/social networking site/app as a business.

And by who I mean Elon Musk, the banks, his bankers, his advisors and his text friends.

I have no doubt Twitter can grow revenues rather easily and earn significant profits, but at what cost to Elon and his real babies (human and corporate). I am not sure how this could be good for Tesla and Space-X employee morale as their leader fights with the global pseudononymous people of planet earth and soon space.

I don’t know much and I definitely don’t know Twitter scale but I do know community and content moderation and human behavior online… even if you call Stocktwits small and subscale.

Anyhow, I could not express my dread better than Nilay Patel did at The Verge in his piece titled ‘Welcome To Hell, Elon‘.

Here is one riff…

The essential truth of every social network is that the product is content moderation, and everyone hates the people who decide how content moderation works. Content moderation is what Twitter makes — it is the thing that defines the user experience. It’s what YouTube makes, it’s what Instagram makes, it’s what TikTok makes. They all try to incentivize good stuff, disincentivize bad stuff, and delete the really bad stuff. Do you know why YouTube videos are all eight to 10 minutes long? Because that’s how long a video has to be to qualify for a second ad slot in the middle. That’s content moderation, baby — YouTube wants a certain kind of video, and it created incentives to get it. That’s the business you’re in now. The longer you fight it or pretend that you can sell something else, the more Twitter will drag you into the deepest possible muck of defending indefensible speech. And if you turn on a dime and accept that growth requires aggressive content moderation and pushing back against government speech regulations around the country and world, well, we’ll see how your fans react to that.

Anyhow, welcome to hell. This was your idea.

Matt Mullenwag the founder of WordPress and someone I greatly respect had this to say (I did not know he had bought Tumblr):

I have warned friends in the ‘crypto’ and ‘NFT’ space for a few years now of the hell that awaits them with their ‘communities’.

I do want to be clear, I love building community because it is pretty much my only trick/skill. I just want to remind people that community is a terrible business for the huge time suck and stress – especially at any level of scale.

I love Twitter and will continue to share my thoughts in real-time because it’s fun and at least for me still very productive.

Good morning…

I had a too brief stay in the Grand Caymans the last couple days.  I was invited by the CFA Society to speak about investing and our firm Social Leverage.

The last time I came to the islands in nearby Bahamas, I caught Covid and was detained in my room for 8 days.

No such bad luck on this trip.

The Kimpton Hotel is wonderful, the beach is incredible and the vibe fantastic. Here is a picture of the beach at 7 am:

The CFA Society treated me like royalty (thanks Adam Butler and Amy Hubble in particular) and the turnout from the investment professional community was incredible (400 people).

I decided last minute to tell investing stories about life as a seed investor the last 20 years.

After the stories I shared the a list of things that we focus on at Social Leverage as seed investors and the trends that get me excited every day. They are copied below:

I will probably cover some of the list above in more detail, in the weeks ahead.

I am looking forward to coming back to the island to see some new friends I made and enjoy the beach.

Have a great Friday!

Good morning…

This bear market/crypto winter has allowed everyone an opportunity to catch up on the asset class, including Matt Levine who I love reading.

Matt has published a massive essay on all things crypto and so I wanted to share it here as I will be digging into his deep dive.

You can read it here.

Have a great day.

As a reminder, Marketsmith (by Investor’s Business Daily) is now a sponsor of the weekly show. All the charts you have been seeing in the videos and will continue to see are from Marketsmith. They are offering my readers a three week trial for $19.95. Click this link if you would like to try it out.

Good morning everyone.

Last week there was a little bit of relief for tech stocks and banks. Defense stocks are benefitting from the drumbeat of war and actual spending.

Here is this weeks Momentum Monday where Ivanhoff and I tour the markets looking for momentum. I have embedded the viseo on the blog here below:

While some tech bounced, the selling and rollovers continues in rails and truckers. The recession textbook is in play, but the strength in energy defies the playbook for now.

I share a couple new ideas starting at minute 13…

It is BONDS that are the big crash story of 2022 (even though China markets crash is a big one).

Here are two charts that capture the Bond misery:

I added some bonds via $AGG for the first time in my life (but I have been heavy cash and am an old fart).

Here are Ivanhoff’s thoughts and he lists the defense stocks that are strongest right now:

The S&P 500 (SPY) finally had a strong weekly close for the first time since early September. SPY has room to run to 380 where it will probably encounter some minor resistance and pullback to 375. Then, if it clears 380 from the second attempt, it can run to about 390.

Last week was chop, chop, chop, and then a strong close on Friday. It might be related to monthly options expirations. It might be connected to the Bank of Japan intervening to boost the Yen which led to a decline in the US Dollar. For the better part of this year, stocks have negatively correlated to the US Dollar. Another viable reason is the overall sentiment. People are getting very pessimistic – “recession” was one of the main trending topics on Twitter Friday morning. The markets love to play a contrarian game and react in the opposite way when something becomes too mainstream. There has been so much chop lately that almost no one believes this rally. It was the same in the summer. It is normal to behave that way. The human mind tends to extrapolate the most recent price action into the future. If it has been choppy, we expect it to remain choppy. If it has been rising, we expect it to continue to rise. The market rarely conforms to widely perceived expectations for too long. This is why the big money in markets is made not when you are right about something that everyone is right about (the consensus opinion) but when you are right about something very few are.

When it comes to individual stock setups, one sector clearly stands out. It is not biotech. There are still some Ok setups there but the sector showed how vulnerable it is to interest rate increases last week. XBI dropped 5% in one day last Wednesday and its relative strength line has been flat-lining since August – this is now how leaders behave. The sector that has been shining as of late is oil & gas. Currently, about 80% of all stocks in an uptrend are oil & gas. Many have been perking up in expectations of strong earnings. Others like SLB continued to go up after reporting earnings. I don’t know how sustainable this move in energy names is in the face of rising interest rates, but this is where many of the constructive setups currently reside. Defense stocks also had a very strong week and show notable signs of accumulation – LMT, NOC, BAH, ASLE, CW, HII, etc.

Big tech reports earnings next week and will significantly impact the indexes and the overall sentiment. What matters is has the worst has already been discounted and is Big tech still doing fine at some level. Most of the big tech companies have already slashed their guidance so expectations are low. They will probably beat earnings estimates (as usual) but the market will pay attention to margins, sales estimates, and future earnings guidance. If the market wants to rally in the short-term, it will find a reason to rally.

Have a great week.

Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security. For full disclosures, click here.

Happy Sunday…

The weather is finally starting to cool in Phoenix.

I am going to head out on a long ride this morning.

I have a busy week as I head to Vegas tomorrow for Money 2020 and the Cayman Islands for a conference.

I have been down the AI rabbit hole of late and wrote about this last week. Most of the reading is over my head but there are some very fun and practical tools that are getting built and launched all the time.

My friend Mike Marquez and I have these hilarious technology and venture capital calls all the time (too much made up gossip to make them public) where we talk about trends and companies and products. Mike was helping me on the last call understand some of the amazing AI tools he was seeing that I should try. Because I have been working on a new ‘web 3’ business they really struck a chord.

Six I am trying now are ‘Smashing Logo‘, Jasper.ai, Copy.ai, WriteHolo.com, Wombo.art and Brandmark.

I do believe that while web 2 was all about speed, scale and the more money the better (driven by low cost of capital), the next phase of the web will be more inclusive and niche. AI (artificial intelligence) and the blockchain will allow smaller teams with less engineers build profitable businesses fast.

I have NO IDEA what the prices of the S&P or Nasdaq or Dow will be next year or ten years from now, but I do know that technology keeps pressing forward in Jurassic Park ways.

I have just a couple reads and listens this week but they are really great.

First up is Brad Gerstner on the All In Podcast. Brad always has some great takes on the markets both public and private. He and all the ‘crossover’ funds have been mauled by this bear market, but that does not take away from the research he does, his process and the data he shares. As the bear market rages on, we can see the damage everyday in the public markets, but the private markets are harder to measure. There is obviously less transparency.

Brad does a great job of explaining the numbers that matter in Venture Capital – DPI. DPI is Distributions to Paid in Capital multiple. This is how much money a VC fund has sent back to LPs divided by the amount of money the LP has paid into the fund.

Here is a chart from the podcast on the return trends in venture capital:

We have worked so hard at Social Leverage to drive DPI and have crushed the top quartile averages with our first two funds.

You can fast forward past the fist 14 minutes to get to the discussion which Brad mostly leads on public and private markets.

Next up is Stanley Druckenmiller talking about the markets which is always great.

A couple of reads you might enjoy…

Ban Thompson deep dive on Microsoft coming full circle. I don’t use Microsoft products and despise the fact that Microsoft is now eating the enterprise markets with an inferior set of products (my opinion), but that is the world we live in for now.

Finally, the talented Morgan Housel with a great piece titled ‘Little Rules About Big Things‘

Have a great Sunday.

Good morning…

I continue down the NFT rabbit hole each day

Most of my current interest is in the potential utility and community and I still don’t see products, projects that interest me. I continue to hone a community idea around investing and comedy and lifestyle and it should be ready to show to the world by December.

As for collecting NFT’s as art or an an investment and/or speculation, I am way behind, but I plan to dive in soon.

I have seen some very cool hardware products that will be great to use as I start collecting NFT’s.

One for the desk is infinite objects.

For the walls, I plan on ordering a couple of Blackdove for home and office.

Fred Wilson talked about NFT screens in his recent post as well.

Way back in the early web 1 days, we joked that every web company was just taking magazines and putting them online. The web 3 era has so far been mostly the wild west and a lot of ‘let’s just build this web 2 product on the blockchain’. I have been directionally long crypto with some money but not in spirit.

I am getting now long crypto/web 3 (or web 2.5 or name of the week) in spirit, time and money and I am loving what I am seeing and learning.

Directionally long can be profitable but spiritually long is where the joy is.

Good morning you lovely lovely people.

Howard here….

I finally ordered an eightsleep mattress (the cover). I had the founder Matteo on my podcast last year. My partners Tom and Gary swear by it so it was time to get with it.

Yesterday I did my first professional bike fitting. I have trusted a mirror, my eyes and feel for way too long and getting my bike sized by a professional with machines and software and video was an eye opening experience. My measurements have been off by about 20 percent.

Onwards…

I spend a lot of time searching for and listening to ‘smart’ people and to get to them or find them I have to spend a lot of time reading and networking and curating.

After doing this very intensely along with face to face for the last 35 years and with the help of the ‘social web’ the last 16, I have this incredible ‘peloton’ of people to accelerate everything I choose to focus on. It is a miracle.

People always ask me how I keep this up and I always say…it’s a habit and I enjoy it. I never planned on doing this almost daily for 17 years. Being authentic and mostly nice is a terrible way to scale.

A good friend of mine Tadas just had his 17th year blogiversary and he lays it out perfectly for those that both are thinking about blogging and sharing and those that are doing it now and going forward…

Authenticity can’t be faked indefinitely. You can fool people for for a little while, but ultimately you will be found out. If you love what you are doing, it will seem natural and easy. That is why most creative endeavors, whether they be a blog, podcast, etc., end with a whimper and not a bang.

Don’t kid yourself that being authentic online is easy. The sad fact is that outrageous behavior garners attention, likes, retweets and the like. The algorithms that increasingly drive content consumption eat that stuff up. That attention can be seductive, but it is not sustainable.

It’s not always to recognize authenticity at first. Sometimes we mistake effort for authenticity. Putting together a twenty tweet thread isn’t easy. But if it looks like you are trying too hard, you are going to turn readers off.

If you are in the content game for more than just a quick dopamine hit, authenticity pays off over the long run. We don’t want to be influenced. We ultimately want to trust the people we interact with online. That connection isn’t easy to create or maintain, but it is the only path forward.

Congrats Tadas.

A community is not made up of just creators …a community is everyone else, the readers, the amplifiers, the superfans.

People like Tadas and I get to be more authentic and consistent knowing we have a group of people/community that appreciates hearing positive growth stories mixed with some pain and truthiness.

Authentic people/brands/companies have been doomed to sub scale which has been a curse in a world that paid for speed, growth, scale. That is changing fast as the bear market continues, interest rates rise and profitability matters sooner and faster. I think subscale is the new scale and web 3, or whatever we end up calling it, is offering the subscale companies/people/brands a way to get profitable fast and not be as beholden to Apple, Google, Microsoft and Amazon.

The circle of authenticity is at hand.

Social Leverage has been investing in emerging managers for a very long time but more formally this year.

Some may call our firm Social Leverage an emerging manager but we are investing out of our fund 4, so I would not consider us emerging.

I believe as technology accelerates and proliferates that an old financial idea (fund of funds), that was mostly created by hedge funds applied to public markets will be an attractive way for investors to participate in the next waves of growth. I have a lot of money where my mouth is as it relates to emerging managers.

The fund of funds arguments aside for now, I will share some background on managers we have selected and what we are learning.

One fund we have invested in is Swift Ventures.

Way back in 2007 I invested in Brett and John’s first company Tubemogul. They were fresh out of Berkeley. I saw them pitch at a video conference (I had created Wallstrip and focused almost 100 percent on helping my show find tools to do it better), hit them up after they got off the stage and invested. I also helped them raise some more money along the way. I served on the board for a long time and very long story short watched them build an incredible company that eventually went public and be acquired by Adobe.

As most technology investors have tended to do, Brett and John started making some seed investments in and around their passion in AI (artificial intelligence) and machine learning and the check we likely would have offered them for a next company should they start one was made out to their fund instead.

We believe AI and Machine Learning are just one area that will explode in realized value for entrepreneurs and investors in the coming decade.

I could read thousands of articles and attend weekly conferences around the globe on subjects that Brett and John have lived and breathed for more than a decade or just draft on their abilities, work hard with them as they build out their fund and ride in their peloton.

Here is a great blog post from John and Brett titled ‘The Next Creative Revolution‘ where they discuss the current AI and machine learning industry and opportunity around ‘text to image’. I had Brett on my ‘Panic With Friends Podcast’ back in November 2020 to talk about his vision and passions for investing and you can listen to it here.

You will hear me say this a lot going forward…more than I have said in the past…I believe valuations will continue to compress across all markets in this new era of de-globalization and higher interest rates so paying for expertise is something to strongly consider.