291 - money is weird sometimes 🪙🪙🪙
and most of the time it's because people are weird sometimes...
Hey there, !
One of my favourite newsletters is Money Stuff, which writes about Wall Street and all the weird, wacky and wonderful things that financial people do with all the incentives put in front of their noses (i.e. money money money). It's a fascinating study on what people do, how people create things, and, well, get rich.
Here's one example that I wanted to try and write down because I didn't really get it, and writing things down helps me get it. I think? Anyway, trying to do my best Money Stuff impression :D - hopefully it's simple and understandable?:
People in the stock market buy and sell stocks. Buying and selling has been made real complex by finance people but boils down to 'do I think this will go up or down'.
Good start.
Buying stock reflects the belief that the $100 you put in today will be worth more than $100 in the future, so that you can get sell it for a profit. Selling stock similarly reflects the belief that the $100 you have in the market today will not be worth that in the future, and it's better that you just take the money for yourself now and go buy other things like food or boardgames or a 3d printer.
Or more stocks, I guess.
Okay, so how do people come to those beliefs?
Well, some people dive into the detail of the business and go 'oh okay they made 1m last year, and this year they made 1.2m, so maybe next year they'll make 1.4m', so they buy more stock. Or maybe they read the news one day and think 'hey the government looks like it's cracking down on electric vehicles and they'll have to pay more tax - I don't think the business will be as good anymore!' and then sell their stocks.
The fun thing is that people have different beliefs about things, so while you might think 'hey they're going to make money!' someone else is thinking 'they suck they're going to be going out of business soon'.
There's way more complexity than that but let's just leave it for now.
So why do they buy stock in the first place?
Because they want to make money. More specifically, it's based on the belief that when businesses are profitable (however they do it) and grow:
a) they'll share that profit (known as 'dividends') to their shareholders, and
b) other people will want to share in that money too, and when more people want something, they'll pay a higher price for it.
At what price? Well...the pricing of the stock starts with what it would worth if it had to be sold - like, if everything went belly-up and they had to sell it all. If it had $100 in the bank, or had a machine that could be sold in a worst case scenario for $100, then great - the company's probably worth about $100. Then, you add in your salt and pepper of 'I think it'll do better in the future!' and you add a bit on to that number. There you go, a fair price!
Simple enough, right...?
The Case of MicroStrategy / Strategy
So...there's this company in the US called MicroStrategy (now just 'Strategy'), which is a software development company which used to have a main business of providing services related to business intelligence, mobile software and like...computer things (I swear that's the technical term).
In 2023, it was trading at about $14 USD per share. Today? It's trading at $410 per share.
That's a 29x increase over 2 years. INSANE growth - looks like their business is booming! Computer stuff rocks, right?
Well...that's not really why people are buying this stock.
While they own about $33-34B in assets, they trade at a market cap of about $104-$123B. Remember how I said the price usually is pegged to what would happen if they had to sell everything? Do people really think the salt and pepper adds an extra $70B??
Essentially, it would be like a lemonade stand owning $3 worth of materials, and people paying $10 to get in on the share of the profits.
That's weird, right?
Well, not that weird I guess, because maybe it's a really hot day and the lemonade stand is gonna be real popular.
Lots of other companies own an equivalent $3 in materials, but people pay $12 or $30 for the privilege of being able to own that stock (like Google, or Amazon, or Apple). This is back to the idea that 'if businesses make money they'll share some of it with me if I own their stock'.
But crucially, all of those companies actually make things: they sell services like ads, or iPhones, or another unnecessary kitchen gadgets I'll use once and then never again. You can actually point to the stuff they sell and go 'oh okay they're making that thing - they can probably sell it for more than they paid for it - great, so I'll get to share in some of those profits!'.
Whereas for Strategy, it's all just Bitcoin.
Yes, that's right, that $33 - $34B I just told you about is ALL BITCOIN.
Their 'strategy' was to buy a crapton of Bitcoin - which now sits around ~600k actual Bitcoins - tell the market they were doing so, and people decided 'yeah that sounds great GIMME GIMME'.
It would be like using $33 billion to buy tulip bulbs, put them in a safe somewhere, tell people you've got that safe, and then have people think 'yeah that's going to get me lots of money by getting a share in that'.
And yet, it worked.
I find it super interesting because well, this feels a lot like people believing that other people will want to buy more Bitcoin just because it's Bitcoin - rather than having any productive use of it that will generate more profit that is shared. Strategy isn't saying 'hey we're going to use this Bitcoin to develop stuff with, or try new things, or sell things in the market'. They just went 'we've got a lot of it so buy our stock'. WHAT?
It just seems like such an unproductive use of money, and yet people are just like 'brrr bitcoin go up'.
No shade, I have many ways to unproductively use money - it's just an interesting study in what people believe about Bitcoin. So, while many people are thinking 'hey they're going to make money!', I'm just sitting here like 'ISN'T BITCOIN A BUBBLE? WHEN DOES IT POP?'.
Maybe you just don't understand people, Vince
Yeah okay, fair. I'm just fascinated because finance / crypto bros are copying the Strategy strategy (lol) and going into penny stock companies, buying them up, telling the market they are going to buy [INSERT CRYPTO TOKEN HERE] as a treasury, and then their share price skyrockets! It reminds me of the ICO's of days gone by, where the rug pull / pump and dump / outright scamming of people's money playbook was popular.
Agh, this got too long. Anyway, just thought it might be potentially interesting ;)
Chat soon!
(P.S. If you've got any feedback for the newsletter, just hit the reply button!)
📋Today's Attack
Results:
The Arbalest job: Draw in targets, activate explosives, and escape in the ensuing hubbub
What do you do?: Attack the team investigating the alarm
--
"Let's go," you growl, and jerk your head towards the alarm. "We'll catch them as they come back."
You keep your eyes on the light that's shining up towards your clearing, and as it sweeps around back towards the direction of the ship, you slowly back away, down the slope, towards the direction of the alarm.
In another 15 seconds, you think. Yeah, that should be about right.
The klaxon keeps wailing through the air, helping mask the sounds of your movement.
The darkness of the forest suffocates your senses, with only glimpses of movement to the left and right. Sayla's panting is the only thing you can hear as she runs ahead of you, fully focused on following the lights, and as you follow, you notice that there don't seem to be any other creatures in the forest reacting to this intense sound.
A red light on your contacts suddenly blinks on. 15 already? You stop, and whisper harshly ahead of you.
"Set position."
"Got it," Sayla abruptly pivots, and clambers up a tree. In this little recessed cave structure right at the base of the mountain surrounded by dense foliage, there's ample hiding space for you and Sayla, and a natural chokepoint to ambush from.
You slide down behind a cave wall as you see Sayla disappear from view, and...
BAAAAAAAAAAM! Your explosives activate, creating a thunderous sound that reverberates across the valley and joins the klaxon in a deafening duet. Fiery debris lights up the heavy clouds above, and is slowly followed up by a massive plume of smoke. An unearthly, painful scream emanates from that direction.
Hope that helps, Jimmy.
The harmonious cacophony of klaxon, screaming, and fire is abruptly cut short as the wailing stops. The dance of the firelight brings back memories of the Arbalest job - explosives always know best, hey?
As you wait, you strain your ears to try and hear any movement. A dull buzzing starts from the direction of the alarm, and seems to be heading your way.
That's it, come back this way you bastards.
You poke your head out to see...are they flyi-
BLAM! BLAM! BLAM! The rock wall takes big hits as something high caliber impacts from the other side. Around you, the reverberations echo painfully, and the rocks crumble. You see as the trees get ripped to shreds, and a familiar smell of iron fills the air.
Turning around the wall, adrenaline pumping, gun at the ready, you hear Sayla cry out.
"CAP!"
You turn to see Sayla throw a rope trap up at two figures zooming through in the air, bursting and latching on to one of them. They spiral out of control and crash down to earth near Sayla.
The other figure carries on, blasting the forest below, and flies past you towards the ship.
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