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- No Bs. Just Bullish.
No Bs. Just Bullish.
Betting | Lessons
The Wall Street Skinny
October 24, 2024
This Week on The Floor
We are so glad to be BACK!!!!
After a whirlwind week in LA and nonstop 2-3x/day podcast recordings, we have tons of great content for you.
For those of you interviewing, don’t miss our 60 minute “express workout” covering the top 5 technical concepts for Investment Banking interviews here!
What’s up with people betting on the US election?
Lessons we learned at the CAIS Summit
Week 4 of teaching you how to read the financial news
Markets Recap / Deal News
Interviewing this week? Here’s some content for your conversation.
This Saturday, we hope to accomplish the impossible.
We are going to do a non-political podcast about the upcoming US election.
Our goal is to explain the theoretical fiscal, monetary, and asset price implications of various potential election outcomes.
Specifically, we’ve had many requests to explain the role of election futures markets — something the markets had previously altogether ignored, but which seems to be having an outsized impact on the markets this past week.
How much do the markets care about the odds in election bets?
The election prediction market is relatively small, often crypto-currency based, and — most importantly — restricted to users outside the US.
Polymarket (perhaps the best known name) has seen something like $2.2bn in trading volume year-to-date in betting on the US presidential race.
Sounds like a lot? Well, not really.
The average daily trading volume for US Treasuries is close to $1tr, for context.
Yet this behemoth of a market appears to be REACTING to reports of “whale-sized” bets on exchanges like Polymarket.
These bets are sized in the $15-25mm range. That may sound like a lot, but it’s minuscule by institutional trading standards.
This isn’t the tail wagging the dog…it’s the flea on the tail of the dog.
Polymarket also does not allow for US users to participate in the betting. Which begs the question — who is taking these positions?
And WHY is the Treasury market listening to them?
US Treasuries have been selling off (meaning, yields are higher across the curve) with many market pundits suggesting that it’s a reaction to a shift in the odds on these betting exchanges in favor of Trump winning the election.
The theory there is that a continuation of tax cuts from his prior term in office, combined with tariffs he has proposed, would be inflationary and lead investors to demand higher yields from US Treasuries.
But it seems strange for one of the world’s most massive, deeply liquid markets to react to the whims of a few coin flips from foreign interests.
We’ll be talking about this — and more — on Saturday’s podcast episode with Mosheh Oinounou of Mo News!
Lessons from the CAIS Summit
We missed you all last week while we were in LA for the third annual CAIS Summit.
It’s a conference that brings together independent advisors (read: wealth managers) and alternative asset managers (read: private equity and private credit). Basically, if you’re a private wealth manager and want to invest in things like private equity and private credit, this is the place to be.
Here were the highlights of our trip:
Highlight: Kevin Costner talking about getting rejected — twice — when he brought Dances with Wolves around to all the Hollywood studios. He ended up directing & starring in the movie himself, and went on to win best picture, best director, and best leading actor at the Oscars.
Lesson: Your rejections don’t define you. The biggest winners all suffered through countless rejections…you may just never hear about them.
One of my favorite all time speakers I’ve ever heard live!
Highlight: Marc Rowan addressing the perception of Private Equity and Private Credit as “volatility laundering” (he was of the view that private markets investing is not). We’d never heard this term before. While he didn’t invent it, it’s a great way to sum up concerns about relatively opaque investments with long holding periods relative to their public market counterparts.
Lesson: With the explosion in private markets investing, many are concerned about concealed stress within the system that isn’t being aired out through the price discovery mechanisms that govern the public markets. If you don’t have to mark your assets to market in a daily public forum, how can you truly say that you are achieving higher returns with lower volatility? This may be a continued theme for discussion as alternative asset managers seek more retail investors.
Highlight: Our conversation with Alona Gornick, Senior Investment Strategist at Churchill Asset Management, where we got a crash course in the direct lending side of Private Credit investing.
Lesson: You’ll have to wait til the episode airs in a few weeks!! We learned SO MUCH from this incredibly talented, eloquent, brilliant woman. Make sure you’re subscribed to our big podcast so you’re the first to get the skinny.
Highlight: Kristen telling a random wealth manager from Kansas that he looked like Jason Momoa.
Lesson: He did. Shoot your shot, ladies and gentlemen.
Just kidding, Kristen is a happily married woman 🤣
This Week in the Markets
We’re helping you learn to read the financial news.
Last week, we asked you to take a long or short position in one product, track it for one week, and calculate how much money you would have made or lost on a minimum $1mm investment (ignoring carry and roll, where applicable).
This week, we want you to follow that same position for 7 more days and identify three key risk factors that should impact the price of that product.
For example, if you chose McDonald’s stock — what earnings reports, news stories, commodity price changes, or deal activity might impact the value of that equity?
If you chose 5-year US Treasuries — was there an auction cycle, Fedspeak, risk-on or risk-off news that might impact pricing?
If you chose a Shell corporate bond — was there news about that company, geopolitical risk, debt issuance, or a change in sentiment towards that type of credit risk that might cause spreads to widen or tighten?
Over the next seven days, scour news sources and see what journalists are saying about those risk factors. Write down any and all words you don’t know, and look them up.
Try to predict whether they should cause the price on your investment to go up or down.
See you next week!