Moontower #59

That’s what I love about these high school girls, man. I get older, they stay the same age. – Wooderson

Many might recognize the Moontower “branding” of this email and my website (pic) as a tribute to the 1993 comedy Dazed and Confused. I first saw it when I was about 16 and have fond memories of having the VHS play in the background during a Florida vacation as my sister and her friend Deez Nutz (sorry Diana, we were young) ran games of Monopoly back-to-back late into the night.

Back to Wooderson. He was that creeper who hangs around the HS crowd years after he’s graduated. Guessing he didn’t pay much attention to the commencement speech. And here’s irony coming around the corner — my favorite all-time commencement speech is by the guy who played Wooderson, Matthew McConaughey.

Presidents, great scientists, Steve Jobs. I can’t imagine the pressure of having to deliver timeless wisdom in the tradition of such minds and achievers. And yet McConaughey, at ease, perched on a barstool, delivers a talk worth your 45 minutes. Watch it with the fam. Even better if you have a grad in your house.

His lessons are both earnest and earned. His stories are fun, relatable, and scratch a behind-the-scenes curiosity too. (Link)

If you can’t wait to get to it, there’s a transcript, but you are missing out on his masterfully droll delivery. (Link)

My Favorite Tips From Wooderson

#1:  Life’s not easy…don’t try and make it that way.

“It’s not fair, it never was, it isn’t now, it won’t ever be. Do not fall into the entitlement trap of feeling you are a victim, you are not. Get over it and get on with it. And yes, most things are more rewarding when you break a sweat to get em.”

#3:  The difference between happiness and joy.

“Happiness is an emotional response to an outcome — If I win I will be happy, if I don’t I won’t. An if-then, cause and effect, quid pro quo standard that we cannot sustain because we immediately raise it every time we attain it. You see, happiness demands a certain outcome, it is result reliant. If happiness is what you’re after, then you are going to be let down frequently and be unhappy much of your time. Joy, though, is something else. It’s not a choice, not a response to some result, it is a constant. Joy is “the feeling we have from doing what we are fashioned to do,” no matter the outcome.”

#4: Define success for yourself.

“How do I define success? For me, it’s a measurement of five things — fatherhood, being a good husband, health, career, friendships. These are what’s important to me in my life. So, I try to measure these five each day, check-in with them, see whether or not I’m in the debit or the credit section with each one. Am I in the red or in the black with each of them?”

#5: A roof is a man-made thing

“You ever choked? You know what I mean, fumbled at the goal line, stuck your foot in your mouth once you got the microphone, had a brain freeze on the exam you were totally prepared for, forgot the punch line to a joke in front of four thousand graduating students at a University of Houston Commencement speech? Or maybe you’ve had that feeling of “Oh my God, life can’t get any better, do I deserve this?” What happens when we get that feeling? We tense up. We have this out-of-body experience where we are literally seeing our self in the third person. We realize that the moment just got bigger than us. You ever felt that way? I have. It’s because we have created a fictitious ceiling, a roof, to our expectations of ourselves, a limit — where we think it’s all too good to be true. But if we stay in the process, within ourselves, in the joy of the doing, we will never choke at the finish line. Why? Because we aren’t thinking of the finish line, we’re not looking at the clock, we’re not watching ourselves on the Jumbotron performing the very act we are in the middle of. No, we’re in the process, the APPROACH IS THE DESTINATION… and we are NEVER finished. Bo Jackson ran over the goal line, through the end zone and up the tunnel — the greatest snipers and marksmen in the world don’t aim at the target, they aim on the other side of it. We do our best when our destinations are beyond the “measurement,” when our reach continually exceeds our grasp, when we have immortal finish lines. When we do this, the race is never over. The journey has no port. The adventure never ends because we are always on our way. Do this, and let them tap us on the shoulder and say, “hey, you scored.” Let them tell you “You won.” Let them come tell you, “you can go home now.” Let them say “I love you too.” Let them say “thank you.” TAKE THE LID OFF THE MAN MADE ROOFS WE PUT ABOVE OURSELVES AND ALWAYS PLAY LIKE AN UNDERDOG.”

#12. Give your obstacles credit.

“Instead of denying your fears, declare them, say them out loud, admit them, give them the credit they deserve. Don’t get all macho and act like they’re no big deal, and don’t get paralyzed by denying they exist and therefore abandoning your need to overcome them. We’re all destined to have to do the thing we fear the most anyway. So, you give your obstacles credit and you will find the courage to overcome them or see clearly that they are not really worth prevailing over.”

More Graduation Inspiration

1) James Clear’s list of great speeches. (Link)

That David Foster Wallace “This Is Water” speech is in there. Wallace was a famously tortured soul who took his own life. I see this speech cited all the time. Justifiably. The bit about driving to the supermarket has always resonated with me. Not because I have a short fuse but because I explicitly don’t.

2) Alexey Guzey’s What You Should Do With Your Life? Directions and Advice is a compilation of amazing resources. Even if none of the resources suit you, at least some of the recommended assays will. (Link)

3) Investor Howard Lindzon’s bullets of advice (Link)

My three favorite:

  • If you can’t code, write.
  • If you can code…don’t forget to write.
  • There is no retirement anymore. Pace yourself.

4) Quotes I keep in mind

  • You are the average of the 5 people you spend the most time with
  • If you never fail, you’re only trying things that are too easy and playing far below your level.
  • Kipling: “If you don’t get what you want, you either didn’t really want it, or you tried to negotiate over the price”
  • Galloway: “The ratio of time you spend sweating to watching others sweat is a forward-looking indicator of your success.”

The Money Angle


My friend and former colleague Jason took exception to the viral tweet I referenced last week about how shorting a bi-modal company is like an option. Not because it isn’t but because all equity is an option.

In short, the entire viral tweet is a tautology.

Jason joined Twitter to respond to it. Jason’s gripe was that all equity is effectively a call option struck at zero (you can argue that a positive book value sets the call strike higher but it doesn’t materially change the point).

Jason argues that if the viral tweet pretends it is saying anything beyond “being short stock is like being short an option”, you are mistaken. There are several reasons why, and I’ll use my intro to twitter to go thru them…(Jason’s reply)

Where do I stand?

I liked the original @HedgeDirty tweet because I am just a fan of presenting ideas in different ways. The flaws in the tweet are real and technical but it conveyed a correct impression even if it got there incorrectly. To Jason and @HedgeDirty the riskiness of shorting a bimodal company whose equity is probably worthless is obvious. I appreciated the narrative style which reinforced that point. Even if it’s self-evident to anyone who shorts stocks.

But I also see learning opportunities in deconstructing the flaws in the tweet.

You can read Jason’s reply to see the flaws he found. Especially resonant was the observation that the 0 strike call is a 100 delta call. It has no gamma or theta. The original tweet claimed otherwise.

What would I focus on?

1) Let’s do a little math to find the annualized vol. The first thing to note is how the bi-modality creates a very volatile stock. 125% per year standard deviation.

(Warning: it doesn’t make much sense to use standard deviation based on a normal looking return when we already stated it was bi-modal but the obvious takeaway is “damn, this thing is going to make large moves in return space.” If you know nothing else, you know going short this thing is like barebacking a bucking bull. Size appropriately.)

2) My biggest gripe with the example. The stock doesn’t trade for $185 because it’s hard to be short stocks.

If the stock is trading for $185 the market is implying different distribution. Either the 80% and 20% are not true, the stock’s upside is more than $250 (1.25B EV), or the recovery value is much higher.

It’s not trading for $185 with a theta that pushes towards zero or anything like that. We don’t need to invoke Greeks for an alleged $50 fair stock trading for $185. If it’s trading $185 the market doesn’t agree with the assumptions that compute a $50 fair value. Full stop.


Despite the flaws, I enjoyed the original tweet. You can read plenty of @HedgeDirty threads and see it’s a good account to follow. For example, the Why You Should Never Hold Levered ETFthread is great. I’ve written about the brutal math of levered, especially inverse levered funds before.

Shorting bi-modally distributed stocks is hairy. If it feels like it’s being short an option it’s only because the stock is volatile, equity is an option, and being short options is volatile. Nobody shorting stocks should have needed an education from that tweet. For everyone else, they should be aware of errors in mapping it to option theory even if I think overall the thread was net positively educational.

As for Jason who has been trading options since the late 90s, I imagine he felt that @HedgeDirty borrowed his bass and played it with a pick. Only Paul McCartney gets away with that.

Last Call

  • I’m a big fan of Gary Basin’s Thinking Toys. I cataloged my favorite ones in Notion. These play well with the commencement theme. (Link)
  • The gap being studying how to do something and actually doing it is wider than we usually think. A reminder to “do the real thing”. (Link)
  • Praying mantises will save us from murder hornets. NSFW? (Link)
  • Cutting the deathbed fallacy down further. It’s the proverbial “dog that caught the car.” (Link)

From my actual life 

Yinh and I are big fans of Patrick O’Shaughnessey’s Invest Like the Best podcast. One question he asks every guest, “What is the kindest thing anyone has ever done for you?”. Listen to the show enough and it’s impossible to not wonder how you would answer if you were in the hot seat. I think I know my answer.

In the fall of 1995, I visited Cornell’s campus. For years I had known about Cornell. For whatever reason, as I was growing up my mother always spoke of me going to Cornell. I don’t know why. It’s almost like Cornell was the last name of the immigration officer when she arrived in the U.S. and when she heard there was a college with the same name it meant destiny. Whatever the case, her dream became mine. So when I visited the campus I felt like it was already familiar.

I applied early decision to maximize my chance of getting in. My safety schools were Villanova (it was a popular destination for kids in my HS) and Rutgers, my state school. In reality, my strategy was Cornell or Rutgers. Dream school or good value. I got into both and here’s where the twist came. Rutgers offered me a full scholarship. And on the other side of the ledger, Cornell sent hard numbers of what this private education was going to cost. The price spread between my two choices shook me.

I picked Rutgers. I knew I could get some loans from Cornell but I also knew my mother was going to need to come up with about 10k per year. That felt impossible. Prioritizing education my whole life, I went to Catholic school for K-12. This was going to cost 2x and things were already super tight especially with my sister about to enter HS herself.

As the day to send my letter of intent approached, my mother simply couldn’t bear this decision. She called me in to say that she’d find a way to make it work. It was a rare opportunity. Jump. If there’s a will there’s a way basically. We agreed we’d split the costs (I never worked as many hours as I did during my college summers) and she treated getting grants like a full-time job. She was tireless in writing letters about financial hardship and calling the aid office. Her persistence was epic.

That was the kindest single thing anyone had ever done for me. Not because it was Cornell. Because this was an example of what she always did. Everything she ever did was to give my sister and me a shot (my sister would attend Cornell 4 years later).

In truth, I have a bigger example of her sacrifice. But it’s not a story I’ll tell. But if she’s reading this she’ll probably know.

5’2″ and a force of nature.

Happy Mother’s Day to all the mama’s out there.

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