Four Filters

Public equity investor.

[Everett Stern @EverettStern1]

Dear Secretary Bessent @SecScottBessent,

My name is Everett Stern. In 2010 I was a compliance officer at @HSBC. From a back office in New Castle, Delaware, I watched billions of dollars move to drug cartels, sanctioned regimes, and terrorist organizations. The enemies of the United States. I documented it, I escalated it, and when the bank would not act, I took it to the @FBI, the @CIA, and eventually the @SECGov.

The result was a $1.92 billion settlement. At the time, it was one of the largest in American history. It was also about five weeks of the bank’s profit. Not one banker was charged. Not one went to prison.

I paid a different price. I lost my career, my savings, and my place in the industry I had trained for. I was blacklisted. Every door in American finance closed at once. I slept on a camping cot in a 300 square foot apartment because I could not afford a bed, and I waited tables at @PFChangs to eat. I tell you this not for sympathy, but so you understand that I know exactly what it costs to do the right thing in American finance, and exactly how little the system does in return.

I made that sacrifice because I believed it would change something.

Yesterday, your department fined @BankofAmerica $1.2 billion for failing to report more than $5 billion in suspicious transactions, some of it tied by your own findings to Chinese laundering networks, narcotics, and the southwest border, alongside 475 apparent sanctions violations touching Russia, Iran, and global terrorism. The bank admitted it willfully violated the Bank Secrecy Act.

Fourteen years after HSBC. A bank with “America” in its name. And once again, not one individual charged.

Secretary Bessent, I want to say plainly what I believe you already know. The fines are not working.

A fine is paid by shareholders, absorbed by the balance sheet, and forgotten by the next earnings call. Bank of America reported earnings this morning. Nobody who set the alert thresholds, nobody who decided the 2024 cease and desist could wait, nobody who chose the backlog over the law will lose a single thing they value. Their lives are untouched. That is the entire reason the behavior repeats.

This is money laundering. This is blood money. Money that reaches a cartel buys fentanyl that kills Americans. Money that reaches a terrorist organization buys the next attack. This country has fought a war on drugs and a war on terror for decades, at enormous cost in lives and treasure, and all the while we have allowed the financing to flow through institutions we charter and regulate. Cut off the money and we win. We have never seriously tried.

There is also a question of equal justice that I cannot let go.

Before I walked into the FBI building to report HSBC, I stopped in front of the Great Seal on the wall and read the words engraved beneath it: “Justice is the defense of our liberty.” I believed that. I still want to. But every day in this country, people go to prison for crimes that are nothing next to moving money for the people who want Americans dead. A suit, a title, and a corporate badge should not be a shield from the consequences that apply to everyone else. If a street dealer goes to prison for what he sells, the banker who moved the cartel’s money should be standing next to him.

I also want to raise something that is rarely said in these conversations. Why has no one inside Bank of America come forward the way I did? The answer is that everyone in American banking knows what happened to me, and to the whistleblowers who came after. The last person who spoke up is the only policy anyone believes. That is a culture problem, and it starts with leadership, in the banks and in the agencies that regulate them.

This is not a political issue. It has spanned administrations of both parties. It is a national security issue, and I am asking you to treat it as one.

Three things would change the math overnight.

Refer individuals for criminal prosecution. Not the analyst in the queue. The executives who set the thresholds and chose the risk. One banker in handcuffs would do more than every fine in Treasury’s history combined.

End “too big to jail.” An institution cannot be too big to fail and too big to jail at the same time. If it is the first, it must be held to a higher standard, not a lower one.

And if Bank of America will not act as America’s bank, review its charter. A national charter is a privilege granted on behalf of the American people. It should be conditioned on not moving money for the people trying to kill them.

Secretary Bessent, you said yesterday that these actions send a clear message that even the biggest institutions are not above the law. With respect, the institution was never the problem. The people inside it are above the law, and they know it. Until that changes, I will keep writing letters like this one, and the next bank will keep paying the next fine.

I gave up everything I had to stop this. I am asking you to use the power you have to finish it.

Respectfully,

Everett A. Stern
HSBC Whistleblower
Founder and Intelligence Director, Tactical Rabbit

[Josh Chambers @JoshChambers]

Steve Kerr says Roger Federer taught his Warriors team the secret to sustained success wasn’t outworking everyone, it was building a life around your craft you never want to escape from

“I’ll tell you a great story about Roger Federer. We were playing in China with the Warriors in 2017. Roger was in Shanghai for the Masters tournament, so we invited him to come speak to the team.”

“Draymond Green asked him, ‘How do you sustain success? How have you managed to win majors 20 years after you first won one?’ Everyone was expecting him to say, ‘I work harder than everybody,’ the will, all the clichés.”

“Roger Federer says, ‘I get up every morning and I make breakfast for my kids. Then I take them to school and drop them off. Then I go practice tennis for about two hours, and I’ve figured out a really good routine where I don’t destroy my body, but I can get all the work in I need.”

“‘Then I go have lunch with my wife. In the evening, we cook dinner together. The kids are all home from school. We ask them about school. There’s so much joy in the house. We put them to bed, and then I put my head on the pillow and go, “Man, that was just a great day.” And I’ve been doing that for 20 years.’”

“And it was like, yes. That’s it. That’s the formula. That’s what leads to sustained success. He loves tennis. He loves his family. He loves life. It’s not outworking everybody and banging your head against the wall, ‘I’m going to be better than everybody.’ It’s allowing your natural talent to shine through with a work ethic, with a great family life, with perspective, with peace, with mindfulness.”

“It’s perspective. It’s joy. It’s passion. It’s mindfulness. It’s an awareness that we are truly lucky. To get the most out of ourselves, it’s our daily rituals and experiences and love and joy.”

[Arrakis Global @ArrakisGlobal]

A few guidelines for how I like to trade, this is very personal and by no means how others should but it’s kept me out of trouble over the years of managing money, this can apply to professionals and retailer investors ! 🌅💵

Its my 10 commandments of 📖 staying in the game

[Four Filters @FourFilters]

@joecarlsonshow Performance of stocks you sold is only one metric, need to also think about the business risks (both at the time of sale and now) and are you comfortable with those risks, as well as portfolio construction/factor risks

[Endowment Eddie @endowment_eddie]

A lot of people want to know the real Eddie. Here’s a day in the life:

8:30: Open inbox. Respond to a GP that I have known since 2016 that we love the strategy and want to stay close, but will pass. They’re raising Fund IV.

10:00: ESG colleague emails me. No VC has completed our ESG questionnaire since the Biden Presidency.

11:00: IC meeting to discuss Cracked II. We debate whether a GP who deployed into 6 preseed AI healthcare voice companies over the last 14 months demonstrates evidence of elite selection. The chair nods when I describe the GP as exceptionally well networked.

12:00: GP asks me to meet his son who completed a banking internship and two years in a corp dev role and is now launching a fund. His edge is “access.”

1:00: Incoming CV. GP is crystallizing carry at 37x. We are expected to supply the next 5 years of patience.

2:15: Placement agent calls. Sends me a deck where the team has a 5x track record. MOIC is driven by a ‘21 SPAC marked at first day closing price.

4:00: Receive attribution data from large multistage firm. Learn that every loss belonged to someone who left the firm.

5:30: Decline opportunity to meet with a new GP due to “limited differentiation.” Our forward calendar consists of 6 funds that target “exceptional founders in large markets.”

6:00: Client emails me about our ongoing secondary. How can our PE book be marked where it is if we’re being offered 80 cents on the dollar?

[fred hickey @htsfhickey]

WSJ: "Anthropic more than doubled its revenue to $11.6 billion in the second quarter. To put its more than $30 trillion vision in context, the 191 technology companies in the S&P 1500 brought in $2.4 trillion in revenue last year, according to FactSet."

Another way of looking at absurdity of the $30 trillion addressable market claim: annual U.S. GDP is currently $32.5 trillion.

And yet this nonsense (wild proclamations and predictions) is allowed to continue so that Wall St. & Silly-con-Valley can extract as much money from unwitting "investors" as possible, before the inevitable stock market bubble collapses.

https://t.co/JKhlVqCizs

[Jake @EconomPic]

Chamath walked away with ~$750M in profits across his SPAC empire, while public investors lost an estimated ~$45B to $50B in peak market value across his 18 total deals.

Out of 10 sponsored SPACs and 8 PIPEs, 4 dissolved, multiple went bankrupt (Proterra, Sunlight), and 5 of his 6 completed SPAC mergers dropped 50% to 98% below their $10 issue price.

[Four Filters @FourFilters]

Big reversal. https://t.co/rRtou1PQy5

[The Transcript @TheTranscript_]

Wealth transfer:

[Miguel Dabán Baines-MDBbolsa @MDBBolsa]

S&P GLOBAL $SPGI : Bernstein 42nd Annual Strategic Decisions Conference

La dirección dejó mensajes muy potentes:
• 8T$ de deuda vencen hasta 2028, creando un maturity wall históricamente alto para Ratings.
• La emisión Investment Grade sigue muy fuerte incluso excluyendo hyperscalers.
• Además, ya empiezan a reaparecer operaciones grandes de M&A.

Hace 5 años, incluso la propia CEO pensaban que modelos como Snowflake, Databricks o los frontier LLMs podrían desintermediar Market Intelligence.

La compañía viene a decir lo contrario: cuanto más complejo es el ecosistema de datos, más valor tiene una fuente trusted.

De hecho, comentaron el caso de un gran banco que probó un frontier model en sandbox y tuvo que apagarlo rápidamente en producción porque no podían confiar en el output.

En mercados financieros regulados, una respuesta rápida pero incorrecta no sirve. El coste del error es enorme. El cliente necesita confiar en el dato y la responsabilidad reputacional acaba recayendo sobre S&P, no sobre el LLM.

Además:
• La mayoría de su IP ni siquiera es pública.
• Los clientes quieren respuestas “de S&P”.
• Y muchos seguirán usando workflows dentro de Cap IQ y las plataformas propietarias, simplemente con IA integrada encima.

El mercado probablemente sobreestima cuánto riesgo real tiene aquí el modelo seat-based:
• Cap IQ Pro es <6% de ingresos del grupo.
• Y solo ~20% de Market Intelligence sigue dependiendo de licencias por asiento.

La IA probablemente cambie la interfaz. Pero no necesariamente destruye el moat si sigues controlando el dato, el workflow y la confianza del cliente.

Y sinceramente, cuanto más escucho a management hablar del tema, más me parece que S&P puede terminar siendo uno de los grandes “AI enablers” del sector financiero, no una víctima de la IA.

[Paul Lee @iPaulLee]

Institutional LPs and HNW LPs often evaluate venture managers very differently.
The differences go far beyond check size.

🧵 ⬇️

[Greg @GS_CapSF]

A look inside $TSM Arizona fab. TSMC AZ (like almost all fabs) is highly automated and is the pinnacle of manufacturing efficiency and accuracy.

[The Transcript @TheTranscript_]

#BestOf2024 Quotes

Druckenmiller's advice to young people getting into finance:

"if they're going in it for the money, they should go elsewhere. There's too many people in the business like me that just love the game and the passion...they're not going to be able to outwork the people that are passionate in the game. And it's not a fun game. If you're losing, it's horrible

[Four Filters @FourFilters]

@compound248 @skhetpal 21% is return of their long investments, L/S fund CAGR is 13%, according to this article:
https://t.co/hOzw62L9i9

[Nikotes @dcurras1]

From 10 Blue links to Intent Search

$GOOGL new strategy to monetize Search improving by the minute 👀

[Alix Pasquet @alixpasquet]

A few thoughts on my mind as I prepare for the coming week.

- The goal isn't to beat the S&P. The goal is to beat, exploit, or take advantage of the market participants who think they can beat the S&P.

- You gotta love this game to be great at it.

- Analysts have 5 skills they need to hone/develop: recall of past patterns, mental visualization of a business within the feedback loops of its ecosystem, read between the lines, make leaps of judgment, and synthesize. AI tools inhibit or dull all these skills, especially in rookies.

- Investing (or trading) is a team sport if you want to do it well.

- You make the most money on a stock while the moat is emerging, being built, or widening. Not when it is static. The same with an analyst on your team. While her moat is being built is when she makes you the most money.

- There are tools, questions, and processes that can increase your probability of making money while minimizing risk.

- The writing process correlates with the investing process. Or another way to put it: great writing correlates/causes/conditions great investing.

- You can create culture. You can even fix a culture if you catch the cultural problems early enough.

- If you have 12 steps in your investment process, Idea Generation + position sizing are the two steps that are 80% of the value of the 12.

- Ideas where you will be able to use most of your portfolio management tools are better than ideas where you can use only a few.

- Lessons from your hobbies or passions can be applied to your investing; even better if you infuse your personal style, identity, and experiences into your investing. Mrs Market rewards authenticity.

- Competitive advantages in investing or fleeting; you have to constantly find new ones.

- The height of behaviorism is using yourself as a contra indicator.

- While researching, if you see a company you are studying do something innovative, see if you can do the same innovation in your investing, or for your investment business.

- You cannot have great results in investing without leverage or concentration.

- Keep a list of ideas you pass on, review this list at certain time intervals.

- The best filters for great ideas are smart people.

- Liquidity is the most beautiful thing. If you are wrong, she allows you to get out, and you might even have time to go short if you were long or to go long if you were short. If you are right and there is no more bear case, she allows you to buy more.

- Investors in your fund are your partners, not your clients. Your clients are actually the people, ideas, and processes that make money and reduce risk for your fund.

- There is such a thing as creativity in the investment business. Especially in field research.

- The ethos of the hedge fund business has changed. We used to be pirates (just an analogy, kids, not advocating to do anything illegal), and over time, starting in the early aughts, we became the British Navy. Are we in an age where Pirates or the British Navy will thrive? Would argue this is an age of pirates. Remember to protect your ships before they are raided by maraudeurs. Pirates attack at night, while you sleep.

Have a profitable coming week. Happy hunting!

[Four Filters @FourFilters]

@nosunkcosts Could it be lack of quality large cap stocks to attract foreign investors? Glove makers were a great early COVID trade if you timed it right

[crossdefault @crossdefault]

ATTENTION FINTWIT -- Please RT

I created an Emergency Fintwit Spreadsheet on googledocs in comment only mode. You can open this in a private browser and comment on cells in case twitter dies. I will post updates if the community reconstitutes elsewhere.

https://t.co/BXpvQlZTF8

[Four Filters @FourFilters]

P.S. This site stopped loading, funny. https://t.co/qn9ObzWFh4

[Four Filters @FourFilters]

Watching famous VCs continue pumping their winners/new investments on twitter while staying silent about their own firm's investments in FTX

[Four Filters @FourFilters]

If you don't publicly flaunt your investments, that's cool. But if you do, seems like now's the time to say something...