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
496 implied HN points β€’ 10 Mar 23
  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.
81 implied HN points β€’ 12 Jan 24
  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.
29 implied HN points β€’ 23 Feb 24
  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.
36 implied HN points β€’ 09 Feb 24
  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.
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29 implied HN points β€’ 16 Feb 24
  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.
18 implied HN points β€’ 01 Mar 24
  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.
40 implied HN points β€’ 06 Jan 24
  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.
7 implied HN points β€’ 15 Mar 24
  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.
8 implied HN points β€’ 08 Mar 24
  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.
13 implied HN points β€’ 02 Feb 24
  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.
24 implied HN points β€’ 13 Oct 23
  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.
34 implied HN points β€’ 18 Aug 23
  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.
25 implied HN points β€’ 07 Jul 23
  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.
30 implied HN points β€’ 17 Mar 23
  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.
22 implied HN points β€’ 21 Jul 23
  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.
23 implied HN points β€’ 24 Mar 23
  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.
23 implied HN points β€’ 19 May 23
  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.