How Monzo Grew

  • Interesting first hand account of how Monzo grew from nothing to 1 million users in three short years.
  • Tom credits – a great product (compared to competition) that was a delight to use, a brightly coloured card, and network effects – “if you had 3+ friends on Monzo when you joined, you had a 70% chance of being a WAU [weekly active user] by day 90, versus only a 50% chance if you didn’t have any friends on the platform.

Open Access Research

  • Strikes me as a very important move by the US towards “open access” academic research.
  • By 2026 all US federal agency funded research must be free to read immediately on publication.
  • This has been talked about for a very long time.
  • In a recent transcript from Stream by AlphaSense (sign up for two free weeks here), a former Elsevier Director, argued the effect on RELX business will be a “small negative” as they will find ways to charge for ancillary parts of research (reviews, data etc). The hit to smaller publishers will be worse.
  • h/t Ben Evans.

Biotech VC

  • The venture landscape has changed in general, and this is also true in Biotech.
  • A new crop of VC investors in the sector have been taking share from more established players in Series A funding markets.
  • These comprise techbio, crossover and corporate VCs.
  • What is interesting is the downturn has actually seen them stand their ground.

Stream by AlphaSense

  • Making investment decisions increasingly requires primary differentiated information. 
  • These insights often live in the experience of experts.
  • One of the problems with expert networks – what to ask is itself interesting.
  • In comes Stream – they get expert interviewers to interview experts.
  • It hosts 20,000+ transcripts which one can search via the best investment search engine – AlphaSense. 
  • The next month of Snippet will be sponsored by Stream by AlphaSense, a service we have admired and used for a while.
  • Stream also provide summaries of key points of each call which are brilliant. 
  • If you are an institutional investor you can get a 2 week free trial here (just a business email and name required). 

Cost of Sanctions in Russia

  • The first comprehensive economic analysis measuring the impact of sanctions on economic activity in Russia.
  • The team relies on “using private Russian language and unconventional data sources including high frequency consumer data, cross-channel checks, releases from Russia’s international trade partners, and data mining of complex shipping data”.
  • Results are grim – “From our analysis, it becomes clear: business retreats and sanctions are catastrophically crippling the Russian economy.”

Communication Cost History

  • Meet one of the most dramatic changes in communication costs in history.
  • The introduction of the first modern postal system in Britain in 1840.
  • A 1839 Act of Parliament created the Uniform Penny Post – a single low postage rate and the first adhesive postage stamp, replacing a complex distance based system.
  • The results were monumental and, as this paper finds, also improved innovation.
  • Today, 73% of people in the UK consider post as essential or fairly important.

China Property Developers

  • The Chinese property market is the biggest asset market on earth (worth $60 trillion).
  • Its potential crash has been one of the key narratives in financial market for the past two decades.
  • There are now signs of things cracking, as written up so brilliantly in this Net Interest piece.
  • This chart, for example, looks at property developer cash flow – where the picture has turned decidedly negative.

Index Inclusion

  • According to Morningstar data, inclusion into an index no longer attracts the usual rise (on announcement) and then fall in stock price.
  • Indeed, the up-and-down trajectory that was once the fingerprint of the index inclusion effect now resembles a flat line that runs from announcement date through the weeks following inclusion in the S&P 500.

GAAP vs. Real Losers

  • This chart shows the performance of three groups of firms.
  • GAAP losers – firms where expenses exceed sales, but once an intangible investment adjustment is made they turn profitable. In other words they are investing.
  • Real losers – these are firms that even after the adjustment is made are still loss making.
  • Profitable firms – at the outset these firms are profitable i.e. sales exceed all expenses.
  • From 1980 – 2017, GAAP losers substantially outperformed
  • NB the outperformance vs. profitable firms really shows up post 1996. “The message is that the market ultimately recognizes and pays for intangible investments that create value, even if they create losses in the short term.
  • This chart comes via Investment Talk, a brilliant curation of all manner of investment resources.
  • Source, Original.

Value Stocks Valuation

  • The cheapest stocks are no longer that cheap.
  • Source.
  • Footnote: Empirical Research Analysis, National Bureau of Economic Research. As of June 30, 2022. Cheapest quintile refers to the most undervalued 20% of stocks in an analysis of large-capitalization US stocks. Standard Deviation is a measure of dispersion of a data set from its mean. Prior to 1952, the spread is measured using the price-to-book data of the largest 1,500 stocks. Current Level refers to the valuation spread as of June 30, 2022 which is 0.4 standard deviations above the mean.

Or are things going to get a lot worse?

  • Here is a counter to a collection of positive charts posted a few weeks back.
  • The article takes a pessimistic position that, if nothing changes, we have already crossed the point where it is certain things will get worse.
  • Megafires, inflation, pandemic, heat – all could be signs of extinction.
  • Alarmist but nonetheless sober reading.
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