Bud Light's No-Win Scenario
The Kobayashi Maru Test
Star Trek II: The Wrath of Khan (1982) opens with this iconic scene. If you’re unfamiliar with it, and want to avoid spoilers, watch it before reading below.
Okay, now that everyone who wanted to has seen it, we can get to the salient point for this post, which is that “Kobayashi Maru” has come to refer to a no-win scenario in popular culture. In a previous post, our friend Isaac Simpson wrote about how to save Bud Light,
How To Save Bud Light— Portfolio Armor (@PortfolioArmor) May 3, 2023
Advice from advertising industry veteran @disgracedprop of @willtheagency
Plus: an update on a previous trading post.$BUD $SFM $WING https://t.co/0zkA3V6IrX
But in a recent thread, Auron Macintyre argued that Anheuser-Busch had painted itself into a corner with Bud Light. A viral tweet I saw afterwards suggests he's probably right. I've shared both Macintyre's thread and the viral tweet below, and following that, I have something neat to share with you: a successful use of a leveraged ETF in a small, conservative portfolio.
Why Bud Light Is Stuck
Bud Light appeals to red America, it bills itself as the beer of the working man— Auron MacIntyre (@AuronMacintyre) May 20, 2023
There’s a reason it’s called out by name in several country songs, this is the demographic Anheuser specifically targeted up until recently 2/
Corporations used to be okay with appealing to these people even though they hated them because it made them a ton of money— Auron MacIntyre (@AuronMacintyre) May 20, 2023
But now the purchasing power of red America is waning as the middle class is intentionally eroded, and the culture war turns them into untouchables 4/
Then something very unexpected happened— Auron MacIntyre (@AuronMacintyre) May 20, 2023
Red America has been pretty easy to manipulate and push towards progressive norms, but it has suddenly found its spine when it comes to the attempt to push trans ideology, especially onto children 6/
Either way, a boycott should be no big deal, red America is notorious for declaring boycotts that have no effect and are quickly abandoned— Auron MacIntyre (@AuronMacintyre) May 20, 2023
But to the surprise of many, myself included, this one stuck and has done serious damage 8/
Suddenly Bud Light became a joke, something you mercilessly ridiculed your buddy for ordering at the bar— Auron MacIntyre (@AuronMacintyre) May 20, 2023
The social stigma encoded in the meme was devastating and has made Bud Light untouchable to its core market
For once corporate America failed to manipulate its audience 10/ pic.twitter.com/irhfNWo4zK
Anheuser tried to issue a non-statement about how beer was for everyone, but once again the meme was too powerful— Auron MacIntyre (@AuronMacintyre) May 20, 2023
The statement failed to mollify red America, but even worse for the execs, it showed insufficient loyalty to the new faith 12/
So if it’s a no win situation why not just drop the trans stuff and go back to making money?— Auron MacIntyre (@AuronMacintyre) May 20, 2023
Well because making money might be the goal of a company but it isn’t the actual goal of individual executives 14/
So Anheuser executives are stuck in a downward spiral where any attempt to escape dooms them— Auron MacIntyre (@AuronMacintyre) May 20, 2023
If they don’t change course their core customer base will continue to boycott and tank their profits 16/
Basically, enjoy the show, these people deserve everything they’re getting— Auron MacIntyre (@AuronMacintyre) May 20, 2023
And don’t back down, make sure every company fears falling victim to the same backlash 18/ https://t.co/4lFECF6fde
The viral tweet that had me believing MacIntyre was right was this one, by Megyn Kelly, quote tweeting comedienne Chrissie Mayr.
No woman needs to tuck anything. We have vaginas & we are the only ones who do. Oh and we don’t need our kids seeing this sh&% when we walk down the aisle at Target. https://t.co/7cvvG0PVYb— Megyn Kelly (@megynkelly) May 20, 2023
Kelly seemed to have missed that Mayr is right-leaning comedienne mocking the trans insanity, but what's notable here is how wrecked Bud Light's brand is that she wouldn't blink an eye at tweet suggesting Bud Light and transgenderism go together like peanut butter and jelly.
Now on to that neat example I mentioned of how a conservative investor could successfully hold a leveraged ETF in a small, concentrated portfolio.
Risky Funds For Conservative Investors
I thought this was kind of interesting. The hedged portfolio construction algorithm on the Portfolio Armor website built this portfolio last November for a small investor unwilling to risk a decline of more than 13% over the next six months.
The main two positions there were the ProShares UltraShort Bloomberg Natural Gas ETF (KOLD) and Prothena Corp. Plc (PRTA). The algorithm started with equal dollar amounts of both, and then rounded down to get round lots of each. Then it used a tightly collared position in SunPower Corp. (SPWR) to absorb some of the leftover cash.
Portfolio Armor's algorithm estimated an expected return of 5% for the portfolio, with a best case scenario of a 19% return. Here's how it actually did.
In the end, the investor was up 13.4%, net of hedging and trading costs, while the SPDR S&P 500 Trust ETF (SPY) was up 5.81%. And despite holding a 2x leveraged, short commodity fund, the investor never risked a decline greater than 12%. You can find an interactive version of that chart here.
Maybe an approach for some of you to consider in addition to your precious metals.
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