E54: Spread trading big tech, capital allocation, Zillow's misfire, Progressives suffer losses

Over the coming years, a spread trade that is long Microsoft (MSFT) and Google (GOOG) and short a basket of the other mega-cap "big tech" names (specifically Apple, Facebook/Meta, Amazon, and Netflix) will generate positive returns on a relative basis; MSFT and GOOG will outperform the equal-weighted basket of AAPL, FB/META, AMZN, and NFLX.

“I think the best trade on the best trade on the internet, the most obvious simple money making trade is long. Microsoft, Google short, big tech short. The rest of big tech.” View on YouTube

Following Microsoft's competitive entry against Notion (with an 80%-as-good bundled product), Notion will face persistent, significant growth headwinds in the coming years: Microsoft’s distribution and bundling advantages will materially constrain Notion’s ability to scale into mid-market and enterprise customers and to achieve full, standalone public-market valuation comparable to an unencumbered high-growth productivity SaaS company.

“This past week, Microsoft decided to go after notion, and it's going to be, I think, a very similar story where, you know, once they decide to sort of go after this product experience, they only need to be 80% as good, and then the distribution and bundling and packaging will take care of the other 20%.” View on YouTube

Over the next 4–5 years, a market-neutral spread trade within mega-cap big tech—being long the strongest names (particularly Google and Microsoft) and short the weaker mega-cap tech names (such as Apple, Facebook/Meta, Amazon, and Netflix)—will outperform the overall market by profiting from the relative performance gap between the two baskets, while largely neutralizing general market volatility.

“Here's so obvious is within big tech. Figure out which ones you want to be long. Which ones you want to be short. That's a spread. Trade that over the next 4 or 5 years where if you expect a lot of market volatility, it makes sense to maybe put some of this kind of stuff on” View on YouTube

Within a few months of this November 2021 recording, Zillow will execute layoffs amounting to approximately 25% of its total workforce, primarily in roles related to its iBuyer/home-flipping operations.

“Zillow is going to reduce its workforce by 25% over the next few months. I'm assuming that's all those ibuyers.” View on YouTube

In the November 2022 U.S. House midterm elections, Republicans will gain on the order of roughly 44–51 seats relative to their 2020 House seat count, easily surpassing the five-seat swing needed to win a majority in the House of Representatives.

“Dave Wasserman of the Cook Political Report calculates somewhere between a 44 and 51 seat gain from the GOP. They only need five seats to win the majority, so it's looking very bleak for the Democrats in 2022.” View on YouTube

If Glenn Youngkin serves a successful four-year term as governor of Virginia (2022–2025) and then runs for U.S. president in the subsequent cycle(s), he will be a dominant candidate and win decisively in that presidential race.

“If Youngkin has a good four years in Virginia, he can run for president and crush this thing.” View on YouTube

The 2020s will be a "Republican decade" in U.S. politics, meaning Republicans will generally dominate federal elections (Congress and/or the presidency) throughout roughly 2021–2030.

“I think this could be a Republican decade.” View on YouTube

Following the November 2021 elections, Republican politicians and media figures will rapidly (within months, i.e., by mid-2022) stop claiming that U.S. elections are rigged or stolen and largely drop 2020-election-fraud rhetoric.

“That's going to that's going to stop now too. They're going to stop talking. ... It's going to stop overnight.” View on YouTube

After the November 2021 elections, the pending federal infrastructure bill (the bipartisan infrastructure package) will pass Congress quickly and easily, without serious further obstruction from progressives.

“I think, I think what's going to happen in the wake of this election is that this infrastructure bill is going to sail through because one of the crazier things that the progressives were doing was holding that bill hostage.” View on YouTube

If President Biden continues to let Bernie Sanders and Elizabeth Warren effectively dominate the Democratic domestic policy agenda through 2022, Democrats will lose approximately 40–50 seats in the U.S. House of Representatives in the 2022 midterm elections.

“if Biden insists on allowing Bernie to dominate the agenda. And Warren, I think you're going to see 40 to 50 seat losses by the Democrats in 2022.” View on YouTube