Net Interest

Net Interest explores the dynamics of the financial sector, focusing on the collapse of banking institutions, the intricacies of loyalty and reward programs, the strategic investments in infrastructure and fintech, as well as the challenges and strategies within the hedge fund and newsletter industries. It also examines the impact of financial decisions on market stability and growth, underscoring the risks and rewards inherent in financial innovation, management, and regulation.

Banking Sector Dynamics Financial Risk Management Investment Strategies Fintech Innovations Financial Sector Regulation Market Stability and Growth Financial Innovation Hedge Fund Management Infrastructure Investing Newsletter Industry Trends

The hottest Substack posts of Net Interest

And their main takeaways

Trading Catastrophe

5 implied HN points • 21 Feb 25
💰 Finance Investing Insurance Risk management Capital Markets Asset Classes
  1. Hurricane Andrew changed how insurers think about risks. They realized they needed better coverage and to assess risk differently.
  2. Catastrophe bonds, or cat bonds, became popular after Hurricane Andrew. They allow investors to earn interest while helping insurers cover major losses.
  3. Today, cat bonds are expanding into retail markets, making them accessible to everyday investors. They have shown good returns, even as disasters become more frequent.

Robinhood’s Smile

12 implied HN points • 14 Feb 25
💰 Finance Investing Market Trends Financial Services
  1. Robinhood changed the investing game by making it easy and fun, allowing people to trade with no fees. They even added features like free stock for completing tasks to keep users engaged.
  2. After a boom during the meme-stock craze, Robinhood faced challenges as the market dropped, causing many users to lose money and stop trading. Despite this, they found a new way to earn money through higher interest rates.
  3. Now, Robinhood is at a point where they need to decide their future. They can keep focusing on trading like a game or expand into a wider range of financial services.

AI Eats Equity Research

13 implied HN points • 07 Feb 25
💼 Business Equity Research Artificial Intelligence Financial Analysis Investment Trends Technology impact
  1. AI tools like OpenAI's Deep Research can now quickly gather and analyze financial information, making research much faster than before. This is changing how equity analysts do their jobs.
  2. Instead of relying on research assistants, analysts can use AI to find critical insights in real-time during meetings. This allows them to ask smarter questions based on the latest data.
  3. As AI technology improves, it could take over more of the research tasks that analysts do. This raises questions about the future roles of these analysts in the finance industry.

Financing the AI Boom

17 implied HN points • 31 Jan 25
💼 Business Finance Investment Startups Private Equity Technology
  1. The demand for data centers is skyrocketing due to growth in AI and cloud services. Companies and investors are putting big money into building these facilities to meet future needs.
  2. Major tech companies like Meta and Microsoft are planning to invest heavily in AI infrastructure this year. This indicates that there's a big race to develop the necessary resources for AI technology.
  3. Recent developments suggest that new AI models can be produced with less infrastructure than before. This raises questions about the future profitability of data center companies, as they might not be as essential to AI advancements.

Catch Me If You Can

15 implied HN points • 24 Jan 25
💰 Finance Investing Market Trends Asset management Economic Analysis Global Markets
  1. The US stock market has significantly outperformed Europe over the last 15 years, with US stocks providing much higher returns compared to European stocks.
  2. European companies lag behind in major tech innovation, lacking equivalents to successful US companies like Amazon and Google, which has contributed to their slower growth.
  3. Recently, there has been a shift in sentiment among investors towards Europe, with increased interest and consolidation in the asset management industry, indicating potential for future growth.
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Replicating Buffett

13 implied HN points • 17 Jan 25
💼 Business Investing Corporate Structure Market Analysis Financial Services Entrepreneurship
  1. Warren Buffett took control of a struggling company, Berkshire Hathaway, after realizing its potential value despite its problems. He initially bought shares to gain influence.
  2. Buffett's experience with Berkshire taught him important lessons about organizational structure and the value of permanent capital for investments.
  3. Now, investors like Bill Ackman are trying to create companies similar to Berkshire Hathaway, but it's hard to replicate its successful model because it takes time and patience.

Cement Wars

12 implied HN points • 12 Jan 25
💼 Business Industry Trends Market Analysis Advertising Investment Economics
  1. India is the second-largest cement producer in the world, making around 410 million tonnes in 2023. The growing demand for housing and infrastructure is leading to significant investments in cement production.
  2. Cement companies in India are consolidating due to low pricing power and increased competition. Major players like UltraTech and Adani are expanding their capacities through acquisitions and investments.
  3. Despite the cement industry's growth, they are spending more on advertising to capture market attention. With the industry's consolidation, advertising may shift to other sectors in the coming years.

Animal Spirits

15 implied HN points • 13 Dec 24
💰 Finance Investment Regulation Market Trends Corporate Finance Economic Policy
  1. There's a feeling of optimism in the finance world right now, with a lot of excitement and positive energy among investors.
  2. Many financial leaders believe that changes in regulations could lead to better conditions for banks and companies, making it easier for them to operate.
  3. Executives are hopeful for the future, driven by recent strong performances in the stock market and a more patient regulatory environment.

Check, Please

10 implied HN points • 20 Dec 24
💼 Business Payments Restaurants Finance Technology Economics
  1. A restaurant payment system started when Frank McNamara created the Diners Club after running out of cash in a restaurant. This invention allowed people to pay by card instead of cash.
  2. Today, companies like Toast and Edenred are leading the market by providing technology and meal voucher services to restaurants. They are crucial in shaping how payments are made in dining establishments.
  3. Despite the rise of technology, many diners still prefer using cash for their meals, showing that tradition still plays a role in the way we pay.

Pub Landlord

16 implied HN points • 29 Nov 24
💼 Business Hospitality Entrepreneurship Management Finance
  1. Buying a pub can be a great opportunity if you have the right team and concept. In this case, a popular chef and manager helped attract more customers.
  2. It’s important to adapt to market demands, like adding lodging to increase profits. This idea allowed them to earn more money alongside the pub's main offerings.
  3. Running a pub can lead to highs and lows, especially in the hospitality business. Success can come with great rewards, but challenges are always around the corner.

BlackRock’s Barbell

13 implied HN points • 06 Dec 24
💰 Finance Investment Asset management Market Trends Economic Analysis Business strategy
  1. Warren Buffett believes that being both a businessman and an investor is beneficial. Learning from each role can help improve performance in the other.
  2. Many investment firms, like Schroders and Pimco, struggle when they focus too much on one area and lack diversification. These issues can hurt their profits and reputation.
  3. BlackRock, the largest asset manager, successfully mixes passive and alternative investments. They are moving into higher-margin areas to boost profitability and adapt to market changes.

The Demise of Silicon Valley Bank

496 implied HN points • 10 Mar 23
💰 Finance Banking Regulation Deposits Securities Bailout
  1. The demise of Silicon Valley Bank was caused by a collapse due to interest rate risk management and significant deposit outflows.
  2. Silicon Valley Bank's strategy of investing in securities was affected when rising interest rates led to significant unrealized losses, making the bank technically insolvent.
  3. The bank faced challenges in managing deposit outflows and was unable to satisfy demands due to a concentrated customer base and limited options like tapping into its securities portfolio.

Lindy Bank

12 implied HN points • 15 Nov 24
💰 Finance Banking Investments Mergers Economics Government
  1. European governments are selling off their stakes in banks after a period of crisis, with billions of dollars worth of shares being returned to private ownership.
  2. Monte dei Paschi di Siena, the world's oldest bank, is showing signs of recovery and profitability after facing multiple near-failures over its long history.
  3. Management changes and a new business plan at Monte dei Paschi di Siena suggest the bank is optimistic about future growth and possibilities of mergers and acquisitions.

Trump's Banks

13 implied HN points • 08 Nov 24
💰 Finance Banking Investing Economics Financial Markets Corporate Finance
  1. Trump has had a complex and fluctuating relationship with Wall Street, relying on banks for significant funding throughout his career. His ventures often led to defaults and bankruptcies, causing lenders to hesitate to work with him later.
  2. Deutsche Bank played a crucial role in Trump's financing, lending him over $2 billion despite his previous financial troubles. This close relationship also implicated the bank in legal issues related to Trump's financial practices.
  3. Trump has shifted his main banking relationships over time, now primarily working with a smaller bank called Axos Financial. Following his election win, his creditworthiness improved, benefiting both him and the bank.

Lutnick Goes to Washington

8 implied HN points • 22 Nov 24
💼 Business Finance Commerce Investment Banking Economics
  1. Interdealer brokers connect traders without revealing who they are. This helps big companies make deals quietly, without affecting the market price.
  2. Even in a world dominated by technology, many traders still value personal interaction and market insights from human brokers. These brokers can find the best prices and handle complex trades in ways machines can't.
  3. Howard Lutnick's story is compelling, especially given his background and experiences. His role as a leader in interdealer broking may influence his approach as Commerce Secretary.

All the Devils

10 implied HN points • 01 Nov 24
💰 Finance Banking Investments Market Trends Economic History
  1. Credit Suisse faced many scandals over the years, with problems ranging from excessive leverage to internal fraud. Many employees engaged in unethical behavior, which contributed to the firm's reputation and difficulties.
  2. During the 2000s, Credit Suisse grew and achieved record earnings, but underlying issues were present. The firm made risky acquisitions and ignored warning signs that would later affect its stability.
  3. A historical perspective reveals a pattern of mismanagement and scandal within Credit Suisse. Key figures in the company made questionable decisions that ultimately led to its downfall.

The Points Guy

81 implied HN points • 12 Jan 24
💼 Business Travel Finance Economics Marketing
  1. Frequent flyer programs are a big business that started as a way to retain customers.
  2. Airlines uniquely benefit from loyalty schemes by catering to both business and leisure customers, offering perishable products, and providing various service tiers.
  3. Points schemes generate money through ticket sales, partnerships with card companies, and marketing services.

Funding Mr Bates

36 implied HN points • 09 Feb 24
💼 Business Finance Legal Entrepreneurship Investing Litigation
  1. A TV series sparked public attention in the UK by shedding light on the Post Office scandal and the struggle of subpostmasters for justice.
  2. Litigation finance, as seen in the case of Mr. Alan Bates, is an important avenue for funding legal battles when individuals lack resources.
  3. Specialist funders, like Therium, provide financial support for legal cases in exchange for a share of the compensation if the case is won, creating a growing industry of litigation financing.

The Business of News

40 implied HN points • 06 Jan 24
💼 Business Media Newspapers Business Analysis
  1. Warren Buffett sold his newspaper business in 2020 after decades of ownership.
  2. Business newspapers like the Financial Times and the Wall Street Journal have shown sustainability despite industry challenges.
  3. The future outlook of traditional business news sources, like newspapers, faces competition from new platforms like Substack.

The Third Network

29 implied HN points • 23 Feb 24
💼 Business Finance Technology Retail Network Effects Competition
  1. Network effects are a powerful competitive advantage that can drive exponential growth.
  2. Overcoming the cold-start problem is crucial for new platforms to gain traction and reach a tipping point where growth becomes self-sustaining.
  3. Building a network requires strategic partnerships, operational efficiency, and continuous innovation to maintain and expand its reach and impact.

The Ackman Discount

29 implied HN points • 16 Feb 24
💰 Finance Investment Funds Capital Structure
  1. Bill Ackman sought to raise permanent capital for his investment strategy by creating a closed-end fund called Pershing Square Holdings Limited in 2014.
  2. Closed-end funds like Ackman's often trade at a discount to their Net Asset Value, which can impact investors' returns.
  3. To address the discount issue, Ackman has taken various actions like buying back shares, offering dividends, and considering merging the fund with an operating company.

October Mixed Bag

3 implied HN points • 25 Oct 24
💰 Finance Banking Investments Markets Economic Policy Financial Services
  1. Compensation structures in firms can impact employee performance and morale. It's essential to find the right balance to keep people motivated.
  2. Understanding net interest income is important for assessing financial health. It reflects how well a company manages its income from loans and investments.
  3. Mixing insights from different financial areas can provide a broader perspective. This can help in making smarter decisions in finance and investments.

Tony Robbins’ Favorite Asset Class

18 implied HN points • 01 Mar 24
💰 Finance Investing Wealth Management Private Equity Asset management Financial Education
  1. Tony Robbins has invested in over 100 privately held businesses with combined sales over $7 billion, leveraging his brand to immense success.
  2. Robbins emphasized the concept of 'GP stakes', where investors buy minority positions in asset management firms, such as what he did with Blue Owl through CAZ Investments.
  3. The GP stakes business model focuses on buying into asset management firms and can be highly lucrative, providing exposure to various private asset management firms.

LTCM: 25 Years On

34 implied HN points • 18 Aug 23
💰 Finance Risk management Leverage Financial Models
  1. The collapse of Long-Term Capital Management had significant implications for the finance industry.
  2. One possible reason for LTCM's downfall was overreliance on sophisticated modeling.
  3. Although LTCM had managed its leverage tightly, it still faced a perilous downfall due to a combination of factors.

Risk of Ruin

24 implied HN points • 13 Oct 23
💰 Finance Risk management Investing Behavioral Finance Portfolio Management Cryptocurrency
  1. Participants in a study about managing financial risk did not fully exploit their edge in a coin-flipping game.
  2. Proper position sizing is crucial in gambling and financial markets to maximize returns and manage risk effectively.
  3. Understanding and applying formulas like Kelly's criterion can help in making optimal bets and improving performance in investing.

New York State of Mind

13 implied HN points • 02 Feb 24
💰 Finance Banking Regulation Market Analysis Asset management
  1. The Federal Reserve's oversight of banks is divided by size, with different divisions supervising banks of varying asset thresholds.
  2. Regulators reacted swiftly to New York Community Bancorp surpassing the $100 billion threshold by implementing capital preservation measures.
  3. New York Community Bancorp's stock fell significantly after taking actions to strengthen its balance sheet, raising concerns and prompting discussions about reviving a retired series on banking crises.

150 Not Out

25 implied HN points • 07 Jul 23
💼 Business Newsletters Market Finance Research Industry
  1. Net Interest is a successful finance newsletter with impressive growth and subscriber numbers.
  2. Paid newsletters in the finance market have a rich history and potential for revenue generation.
  3. The newsletter industry is growing while institutional investment research is shrinking, showcasing different market trends.

The Parable of Angelo Mozilo

22 implied HN points • 21 Jul 23
💰 Finance Banking Mortgages Financial Crisis Insider trading
  1. Angelo Mozilo was a key figure in the mortgage industry, starting Countrywide Financial and seeing its rise and fall.
  2. Countrywide's shift towards subprime lending led to risky practices, with Mozilo's ambition for growth overriding concerns about risk.
  3. Despite the financial crisis fallout, Mozilo personally profited from insider trading but faced legal repercussions, highlighting the recurring issue of trading risk for growth in financial services.

Contagion

30 implied HN points • 17 Mar 23
💰 Finance Banking Market Analysis Regulation
  1. When a bank fails, it affects the entire industry differently than other types of companies.
  2. Contagion in the financial sector can spread through customer confidence more than asset or origin similarities.
  3. Market reactions and indicators can be key in predicting and reacting to potential banking crises.

Big in Japan

8 implied HN points • 08 Mar 24
💰 Finance Investing Market Trends Stock Market
  1. The Nikkei 225 Index in Japan has experienced a significant rebound, becoming the best-performing major stock index in the world, largely due to the country's anticipated exit from negative interest rates.
  2. Foreign investors have shown significant engagement in the Japanese market, attracted by economic improvements and corporate governance reforms.
  3. Japanese retail investors are slowly returning to the market but still hold a small percentage of assets in equities compared to the US and Europe, showing potential for growth with government initiatives like the NISA scheme.

Capital One: Buffett’s Latest Banking Pick

23 implied HN points • 19 May 23
💼 Business Finance Banking Investing Economics Marketing
  1. Warren Buffett bought $1 billion worth of Capital One stock in the first quarter of this year.
  2. Capital One started as a credit card business, then expanded to become a full-fledged bank through innovative pricing strategies and aggressive marketing.
  3. Capital One's performance depends on various factors, including the unemployment rate, which impacts charge-offs on their credit card portfolio.

The Last Challenger

7 implied HN points • 15 Mar 24
💼 Business Finance Competition Banking Mergers Market
  1. In the aftermath of the 2008 financial crisis, the UK government allowed a significant bank merger to ensure financial stability despite concerns about competition.
  2. The idea of promoting competition through challenger banks was embraced but has struggled to reduce the dominance of the Big Four banks in the UK.
  3. Despite efforts to increase competition, mergers between existing players, like Virgin Money and Nationwide, have become a significant strategy to challenge the Big Four banks.

The Demise of Credit Suisse

23 implied HN points • 24 Mar 23
💰 Finance Banking Investment Legal Market Risk
  1. Credit Suisse faced financial downfall despite strong past performance.
  2. Mismanagement of assets and poor decisions led to diminishing returns for Credit Suisse.
  3. Regulatory changes and loss of competitive edge in private banking contributed to Credit Suisse's decline.