Here's a story that starts with Costco and ends with a broader question.
After a recent shopping trip I was telling a friend how good the Kirkland tequila anejo is. I was wondering which spirit brand they laundered the Kirkland name thru.
After some raving about Costco and how you can literally drop $300 there on a casual Friday morning and not feel bad about it my friend shared a story of Costco's buying power.
She was privy to Costco's dealings with the Hidden Valley brand. She told me that years ago Costco in an desire to be more healthy didn't want to sell a product with msg...the magic ingredient in HV Ranch dressing.
It turns out, the product has a cult following that can taste the absence of the magic ingredient.
Costco stood firm on its desire.
So HV spent nearly 2 years creating an msg-free recipe that was indistinguishable to the die hards.
That msg free version is only sold in Costco and only in those huge bottles. My friend was very impressed by Costco's power and how it wielded it.
(she also expressed regret that this new formulation didn't become the version sold everywhere but that's besides the point. Maybe the msg-free margins are terrible. Who knows)
Now this is a meatspace friend. No knowledge of Buffet-twitter-orgy over Costco. But from Twitter I learned that Costco limits its profit margin and seems to follow a sustainable strategy bc it maximizes long term value.
So is this story, or at least what I've heard, an example of ESG? Is there an ideological problem with how Costco wielded its scale in a competitive marketplace? Is this just best-case ESG used as a trojan horse to cover up less genuine examples?
• • •
Missing some Tweet in this thread? You can try to
force a refresh
Explained to a learner in my DMs who underestimates the vega risk of a near dated option:
It's true that the near term option's vega is not large. But that is counterbalanced by the fact that near term IVs move faster (ie are more volatility then longer term IVs)
A 1 month ATM option has 1/2 the vega of a 4 month option.
But if the 1 month IV is twice as volatile it's the same vega risk.
Need to consider vega and the vol of vol.
(This is a doorway to a whole discussion about term structure and vega scaling but I'm not running down that stuff anytime soon...maybe @AgustinLebron3, @Ksidiii, or @volmagorov can thread one while sitting on a toilet)
When I was a Susq I heard Jeff speak a few times. Always engaging.
They were savage in my days there but the doubling down on tech and brains thru the years probably makes Jeff the richest dude in the world you never heard of (unless you look at pol donations, then you know)
One of the talks was on the primacy of markets (Yass is an extreme libertarian, free-marketer, no fool should be allowed to keep their money type. Appealing views to many traders, esp when they are young)