Tom Brady's SB Wins in Perspective

So, Tom Brady got his seventh SB, yes 7, siete, sete, sept, saba, sheva...(at 43, if that matters). Just how remarkable that is: it's more than any NFL franchise!

How does that accomplishment feel...probably dizzying, delirious? Let's just ask Tom:

Hedge Fund Payday

Sure January was tough...very, very tough, for Gabe Plotkin and a few other hedge fund managers, but they'll always have 2020. The top 15 managers collectively made $23 billion, in one case even as their open funds lost billions...Yes, we're taking about you Jim "$2.6B" Simons. Renaissance's RIDA and REIF were down 20%-30% but, of course, naturally, the employees-only Medallion was up 76%--does Medallion just trade with other two? Anyways:

So, Gabe nearly lost his firm shorting GME in January, but he took home nearly ~$900M in Dec, enough to buy a new house.

Super Bowl Sunday is Here...and it's Brady Time Again!

It's Super Bowl time and, of course, Tom Brady is in it! His 10th SB appearance is, by far, the most of any player...the closest is six by former teamate and Pats kicker Stephen Gostkowski. Among quarterbacks John Elway is the closest with five SB appearance. And of course (and more importantly) he's also won the SB more times than any player...six and counting.

Tom Brady is 43 and in his 20th year in the NFL, to get a sense of how long that is and how much has otherwise changed, here's how Tom looked in a video game in 2001 and 2020:

2001 Brady

2020 Brady

SB Nation has good story on why Brady left the Patriots...many little things, but mainly because he wanted a long-term contract and the Patriots refused to give him one. And that rejection looks to have been motivation for a resurgent Brady:

2019 with the Patriots: 4,0377 yards passing, 6.6 yards per attempt, 24 TDs, 8 Is, 88 QB rating

2020 with the Bucs: 4,633 yards passing, 7.6 ypa, 40 TDs, 12 Is, 102 QB rating

So defintely, in the Brady vs Belichick war, Tom is ahead Bigly.

Speaking of which, Brady has his fair share of detractors...basically everyone he is not winning football games for. But he does have a big fan in Donald Trump and Brady certainly appreciates the support, which led to his most recent roasting on SNL.

Good luck, Tom!

Amazon Announces New Boss

Amazon had a blowout quarter, with EPS higher by 118% over last year. But all that was overshadowed by the (somewhat) surprising announcement that Jeff Besoz was stepping down as CEO (he will remain Chairman) and handing over the reigns to AWS boss, Andy Jassy. Besoz will spend more of his time focusing on his space company Blue Origin (and beating Musk's Space X in every way).

AWS is Amazon's cash cow, responsible for 40% of its profits. And Jassy pioneered that business, begining in 2003. He's been with Amazon since 1997, almost as long as the company itself. You can check out his bio here.

Here's Jassy's memo to Amazon employees:

Hey Team. I'm assuming most of you saw the news from Jeffb today that he'll be transitioning to Executive Chairman in Q3, and that I will move into the role of CEO of Amazon at that time.

I'm excited for Jeff and look forward to watching his next chapter unfold. Seems a pretty good bet that it'll be something special. It's hard to overstate how much I've learned from Jeff over the past 24 years  - from how much I obsess over customers, to the importance of inventing and looking around corners, to the criticality of hiring and developing great people, to the value of high standards and consistently speedy, outstanding delivery. I am grateful for the opportunity to lead Amazon, and excited about what the future holds for the Company.

I'm also excited about what the future holds for AWS. Like the rest of Amazon, AWS is in a very good spot. At a $51B revenue run rate, growing 28% YoY [year on year], and with the meat of enterprise and public sector adoption starting to happen now, we have a chance to build a very unusual, long-term business. And more importantly, we continue to help millions of new and existing customers not only transform their own companies, but also entire industries. One of the amazing things about AWS and Amazon is that we're still such a small overall share of the market segments in which we address. It's still very early days.

Nothing is changing in the short term as it relates to AWS. You'll be stuck with me until Q3; and even after that I will always be passionate and connected to AWS. We have plenty of time to determine in the coming weeks who will lead the AWS business when I assume the new role. We will share those details in the future. We have unusual leadership depth in AWS that, along with all of you, are the heart of the business - and that doesn't change. In the meantime, stay giddied up - we have so many customers needing our help to transform and accomplish what they're trying to do. We won't be bored any time soon :-).

Andy

Did GameStop Just Change the "Hedge" Fund Business Model?

Like the rest of America, we've been riveted by the GameStop standoff between Redditors and hedge funds. While new short interest data suggests we may be at beginning of the end of this saga, there could be lasting damage to the hedge fund business model itself. Nir Kaissar at Bloomberg ponders the options for equity long/ short funds who may fear being targeted in the future by the Redditor crowd:

"...that leaves long/ short hedge funds with some unappealing options. If they abandon their shorts, then they lose their hedge. Who want to pay sky-high hedge fund fees-- traditionally a 2% management fee and 20% of profits-- for a long-only stock portfolio that can be had for a fraction of the cost through a mutual or exchnge-traded fund? And if try to protect their shorts using options and other derivatives, the cost will drag down returns, possibly as much as 3% to 5% per year. After more than a decade of dissapointing performance, they can ill afford to squander precious percentage points."

To be clear, hedge fund fees have been shrinking for a while now as promised returns never materialized and very few hedge funds ever consistently generated positive returns from their short book. Investors had long started to question the merits of such higher fees for an activity that never generates alpha, but now they will have to contend with the business risks (and not just investment risks) of doing so.

And regulators are loathe to be seen helping hedge funds. In any case, from what we know, there does not seem to be much they can do. The Redditors have not broken any rules and any actions taken to "help stablize markets, blah, blah, blah" will only add to the widespread perception that the game is rigged in Wall Street's favor...just look at the anger Robinhood's restriction on GME trading stoked. So hedge funds are in a bind...many will need to adopt or wither.

PS: This sober post from Naked Capitalism takes the opposite view that Redditors' actions will change hedge fund and market behavior for the worse...hurting everyone.

GameStock Shorts Collapse...End of the Run?

This morning, we wonder about the data that showed GME's short interest declining a paltry 8%, even after last week's massive (historic?) short squeeze. Were HFs stubbornly doubling down on their shorts and continuing this saga? It seemed so...but this afternoon data firm S3 Partners came out with new estimates that suggests GME short interest fell by 35M shares  (-22%) since last week. Borrowing fees have also come down substantially, easing the pressure on HFs. So we've gone from SI at 121% of float 10 days ago to a reasonable 53%...if fact, GME is not even the most shorted stock in the R2000 anymore. Not surprisingly, GME fell over 30% today.

So is the rally over? With SI and borrowing fees falling, what could be the catalyst for another short squeeze that propells the stock up? It was a great run...time to take profits and move on? Some of the Reddit crowd may already be doing so into...silver.

WSB vs HFs: The Fight Continues...Still Big GME Upside Left?

Melvin Capital is on life support. Hedge funds have lost $20 billion YTD and are de-grossing at the fastest rate since 2009 following last week's epic GameStop short squeeze. But was it that epic? Because short interest in GME apparently has only dipped 8%! What?? Every time GME shoots up, is some other hedge fund coming in and putting on a new short position in place of the fund that just got taken out? Is this still about Redditors vs HFs or just a battle royale at this point, everyone going nuts in the most exhilirating game in town? 

Who know? What we do know is that there are whole of LOT of GME shorts that still need to be covered, a lot of HFs who can put on new ones on, a lot of liquidity in the system and a lot of people stuck at home in front of their screens ready to buy...and that means GME has a lots, lots of runway to move up, Bigly. Oh, and the Biden checks are coming soon.

Also...Robinhood is in desperate need of capital. And then there are the political and regulatory angles. If a financial story is covered by SNL, its massive. And this one has so many sides. The drama has likely just begun...