It got me thinking about really crystallizing my own macro views, as I do a lot of yelling about "life short VIX" to random people in the crosswalk or grocery checkout, but something is lost in translation when saying this is just short $UVXY. There is a lot more nuance that I'm trying to convey about global capital flows (fed, petrodollar), mass crowd psychology (social media, censorship), and blanketing tech structures(FANG, AWS), to the point where "short $UVXY" is an admittedly lazy way to congeal my worldview.
Ultimately my macro ideas will have to be more granular with some sectors, while keeping the long theta wrapper around positions. (ie. when I say "long" an equity I'm more referring to 'not short', and preferring to stack my downside risk there, while maxing ATM vol and theta - collars, diagonals with short call just OTM with low duration)
So what is the macro idea besides "short VIX"? I've been trying to simplify it as much as I can, and I've put together: Long Dystopia
What is "Long Dystopia?"
This stems from my original short "life" VIX articles on political risk/disruption being overpriced, as well as true institutional, structural change being a lot further away or impossible than you might think. At the top level this involves increasing Fed control of the market, and less and less to be done about it. Just below that in equities, it sees continued snowballing at the top due to network effects, and no 'return to value'/ free market competition. More specifically on that, Long Dystopia is short antitrust, as we have seen in the last few years of senate hearings on tech and banking that our government regulators don't even understand the industries they are charged with regulating. This is different from a pure "winner takes it all"/ momentum type philosophy because of the mass layer of social control/censorship built into these network effects, where I'm projecting a true end state, instead of just TA price action. Gen Z and beyond are born into a world after the permanent Pavlovian like button is embedded into every service they use. A future site/service on employment/hobbies/relationships/government/politics won't even have context without the giant likes/followers/sub count. Jack Dorsey even let this slip in the Twitter senate hearing that they didn't realize how warping the large LIKE counter would have on behavior. Ultimately this social media wrapper on every site/service the future will use enforces a layer of social compliance that I think is truly mispriced. Furthermore, since this "user" (DAU/MAU) monetization model is required for VC funding/earnings/guidance, these systems which neurologically lock users in will remain mandatory.
Along with social media engineering, where users are somewhat passively along for the ride, the increase in active censorship limits the information equivalent of price discovery (which I know is a big line in the sand for the ZeroHedge crowd). What were previously huge scandals will now not even be a tick on stock price and other metrics, as we will not even have the language of dissent. Please take this time to look into the research on language informing thought. Unlike the previous image of the conspiracy theorist being dragged away by the deep state screaming to get the truth out, we will have a next generation where its just more comfortable to retweet the narrative and be surrounded by the warm blanket of establishment likes.
So is this just long FANG? Not necessarily, although there is large overlap with any core infrastructure service that supports this ecosystem and has impossibly high replacement costs (AWS, Google search, etc). I'm not assuming an absolute blanket long tech as there is a possibility that Twitter, et al might cycle out of consensus social favor, as well as real costs/earnings mattering for DAU etc metrics in the absence of an absolute monopoly (which some of these are right on the edge of). A social influencer can move around their web presence, but as long as that is all layer 2 on top of google algos/AWS infrastructure.
"Long Dystopia" is looking for structures that create so many monetary/logistical/psychological/regulatory moats that they can't even be pictured absent from the foreseeable future.
So for an example, here are my thoughts on long Visa ($V):
As a background, please read this great history and current income analysis, which I won't regurgitate but gets into the projected revenue on transactions keeping up with inflation and the projected increase in online/digital transactions. As an addendum to the above "Long Dystopia", I would also note that it is "short cash". (At a physical and inflationary level)
With that, my big takeaway is that this could be a better way of expressing my short crypto/blockchain macro view since 2017. The fact the $1t behemoth Apple is content to put their Apple pay card onto the Visa infrastructure is the biggest bulletpoint you need for the moat I'm talking about. Short crypto/blockchain is effectively long traditional payment processing, existing network effects and regulatory structures.
If the precedent is set that any new flashy payment system can exist, bring in revenue and new users, as long as it is layer 2 on Visa/Mastercard, then how can an even smaller service than Apple make the argument to stray from the pack?
When turning this into the actual trade idea, remember "long Visa" to me is "picking my downside risk here vs SPY, etc. A sample trade with $V recently around $200 would be the 205 covered call w <1mo duration, rolling, + further OTM puts (collar), or a diagonal- several month out deep 90 delta ITM call, plus rolling short calls ~atm. (Note $V does have a dividend if you want to use the capital req to hold shares)
Anyway I hope that gets the ball rolling and gears turning on other ideas for "Long Dystopia" stocks, commodities, or ideas. Let me know on twitter! (the censorship platform which is part of my macro thesis)
