Random Ramblings FEB 2025: Libra, changing your mind, lucky vs. unlucky stocks, hands-on research
Summary
Andrew Walker sees political meme coins as a dangerous new way to convert attention directly into wealth. After Argentina’s president launched and promoted LIBRA, Walker estimated that investors lost roughly $250 million while insiders made about $180 million. Unlike the old book-and-consulting circuit, this model may reward attention-grabbing politicians without the same reputation safeguards: “The payday for being in office is potentially billions of dollars through memecoins and this type of stuff.”
Walker is reconsidering his long-held view that buying merger targets after a deal breaks is a repeatable source of alpha. These companies should have willing-to-sell boards, proven strategic value, breakup fees and strong balance sheets, plus forced selling by arbitrage funds—but recent outcomes such as Spirit Airlines, Capri, and Rite Aid look more like “carcasses” than opportunities.
His emerging explanation is that merger agreements leave targets unable to adapt while business conditions move faster now. Targets generally cannot make major layoffs, strategic shifts, or other out-of-course changes, leaving them with “two hands tied behind their back.” The unencumbered buyer may therefore exit stronger, as Walker believes happened with Tapestry after its Capri transaction was blocked.
Some companies appear persistently lucky or unlucky, though Walker stresses that he has no anecdote or data for the idea. Certain businesses repeatedly “step on a rake” through plant failures, platform changes, or new competitors, while others keep pulling rabbits from hats. He wonders whether culture, middle management, or institutional relevance creates an underlying propensity for apparent luck.
Hands-on research can uncover decisive facts that filings and spreadsheets cannot. Walker’s examples range from counting trucks outside a facility to visiting casinos, questioning franchisees, or simply calling a government regulator. The edge is often mundane: “If you’re just willing to pick up the phone,” you may learn something the average market participant has not established.
Owning a small operating unit could deepen research, but personal experience can also corrupt the thesis. A fund with a $2 billion position in Burger King’s parent could theoretically buy a $500,000 Burger King and gain real-time operating insight, yet one badly run store may chiefly reveal the investor’s own incompetence. Walker’s warning: vivid experience is valuable evidence, not necessarily representative evidence.
Deep dive
1. Meme coins turn political attention into a potentially enormous payday
Walker recorded on February 22 and recalled—uncertainly—that Argentina’s president launched and promoted LIBRA on either February 14 or February 7. The coin surged after being pinned on the president’s Twitter profile, then suffered what Walker described as a rug pull. He estimated roughly $250 million of investor losses and $180 million of insider gains; he emphasized, “I’m not an expert on everything Libra.”
He contrasted the episode with Donald Trump launching a meme coin the weekend before assuming office and also mentioned Melania Trump launching one in the before-taking-office period. Walker is not a lawyer, but thinks launching before assuming the presidency may carry a different legal standard from becoming involved while serving. His concern is broader than the precise LIBRA facts: prominent politicians have now shown that political attention can be monetized almost instantly.
The old post-presidency system—consulting, books, and media production—at least required maintaining a reputation. Meme coins may invert that incentive by rewarding whoever captures the most attention, making flamethrowing more lucrative than quiet competence. Walker’s fear is that public-policy considerations move even further down the priority list when officials can “launch a meme coin or monetize it in some way, shape, or form.”
2. The classic post-merger-break thesis no longer looks repeatable
Invoking Charlie Munger’s idea that failing to change one major belief in a year means you learned nothing, Walker revisited what he once considered his best career-long strategy: buying acquisition targets after deals break. He now increasingly suspects it may generate “the worst alpha.”
The old thesis had four strong legs. The board had already demonstrated willingness to sell; a strategic or financial buyer had validated value, usually at a premium; the target often emerged with a pristine balance sheet and usually a breakup fee; and merger-arbitrage or event investors became forced sellers as soon as the deal ceased to be an event.
A blocked first buyer did not necessarily end the story. Walker’s example was Time Warner Cable: after regulators stopped Comcast, Charter tried to buy it six months later. A company denied permission to sell to the largest player might still sell to a mid-tier rival, perhaps at a smaller premium but with strategic interest already proven.
Recent evidence has challenged that template. Spirit Airlines fell into bankruptcy after its JetBlue deal was blocked; Rite Aid was already in distress and went into further distress after its Walgreens transaction failed; and Capri performed disastrously while would-be buyer Tapestry rallied. “When I look at the recent past of deal breaks, I see a lot more carcasses than I see T-Mobiles.”
3. Deal restrictions may leave targets strategically frozen
Walker’s developing explanation is that the world now moves too quickly for a company to spend years under a merger agreement. Targets generally cannot undertake major layoffs, change strategy, or act outside the ordinary course. Instantaneous competitive shifts, AI, and harder operating conditions can therefore make two years of constrained decision-making unusually damaging.
The Capri–Tapestry split illustrates the mechanism. Tapestry could keep competing, making strategic shifts, and conducting layoffs, while Capri operated with “two hands tied behind their back.” Once the deal broke, Tapestry had also escaped what Walker considers an overpayment; if the FTC was right that the combination would have been a monopoly, its standalone competitive position may itself have been valuable.
He preserved AT&T’s blocked acquisition of T-Mobile as a counterexample: the breakup fee and spectrum helped lay the groundwork for T-Mobile’s subsequent performance. But Albertsons made him cautious in the present regime. After roughly two years tied to Kroger, it looked cheap and proposed an interesting plan, yet Walmart had invested heavily, technology was getting harder, and Amazon was coming. Walker bought a couple hundred shares around the break, then sold and currently has no position.
Walker explicitly allowed that the recent pattern might be an N of 1, that he could be imagining the past five years, or that the companies involved were an unusually dodgy and vulnerable sample.
4. Persistent “luck” may conceal durable organizational traits
Walker has followed several companies where every improvement seems followed by a gas leak, explosion, platform-policy change, or powerful entrant: “They just step on a rake.” After watching the pattern recur for five years, he sometimes cannot bring himself to invest even when the latest setback appears genuinely external.
Conversely, a few companies repeatedly pull rabbits from hats despite his skepticism. He offers no conclusion—“I have no anecdote, I have no data here”—but wonders whether middle management, culture, or relevance within the broader economy makes certain organizations structurally more likely to benefit from apparent luck.
5. Fieldwork creates an edge only when experience is interpreted carefully
Walker recalled a 1960s Warren Buffett story in which someone was hired to watch a company’s parking lot and saw a truck arrive every five minutes, confirming heavy business activity. That observation was legal; breaking into a warehouse to see whether inventory was moving would be material nonpublic information and could mean jail. Today’s satellite tracking extends the same legitimate instinct to observe visible activity.
For a concentrated investor, Walker considers site visits table stakes. He says he is long Full House and called it his 2025 idea of the year; visiting its casinos would be part of the work, and a visit could expose problems absent from filings. Franchise research can go further through conferences and direct questions about whether operators would open more or fewer units, what they are hearing from peers, and their worries about the future. In another situation viewed as 50/50, investors could call the relevant government regulator and hear that the contract was happening.
He then pushes fieldwork toward ownership. A fund managing a $2 billion position in Restaurant Brands International, Burger King’s parent, could buy a $500,000 Burger King, see weekly results, and speak to other operators as a peer. An IWG investor might similarly buy an office building and have IWG franchise it. The operational stake is tiny relative to the investment but could produce better questions and more candid answers.
The danger is mistaking a personal sample for the market. A friend built a $1,000 home gym and therefore views gyms as shorts, overlooking apartment dwellers, parents, and lunchtime users. Restaurant enthusiasm can be equally deceptive: concepts hailed as the next McDonald’s or Burger King have traded for 100 times earnings, failed when expanded beyond their home market, and ultimately sold for roughly $20 million. If Walker’s own McDonald’s struggled, the answer might simply be: “Guess what, dummy…you’re a terrible manager.”