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Sam -- until recently, was the CEO of FTX. He screwed a lot of normal people by taking their investments and speculating with it via his adjacent firm, Alameda Research. Here's some mildly / moderately painful anecdotes:

Mr. Gibbs, a musician in Thailand, said he tried to withdraw his money Tuesday ... he had “a bit over one bitcoin” at FTX, with one bitcoin worth about $17,800 as of Thursday.

Julian Figueroa, based in Vancouver, British Columbia, had been using FTX to trade digital assets ... previously lost money in the collapse of QuadrigaCX, once Canada’s largest crypto exchange, which made the problems at FTX particularly frustrating ... has about a year’s worth of salary tied up at FTX ... “It hurts but I’m a young guy,” said the 27-year-old. “I have time to make back a year’s salary.”

Gianluca Giuffra, a 25-year-old investor from Lima, Peru, used FTX to trade digital assets and picked the exchange because he thought it was a safe bet ... “Sam looks like a very honest person,” he said, “He doesn’t look like the type of guy that would do crazy stuff behind users’ backs.” ... The experience has left him disheartened about the whole industry ... “I guess regulation is not that bad after all,” Mr. Giuffra said.

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I feel bad for the ordinary people who put money into cryptocurrency. This is why it is important to study at least some history: the crypto world is effectively reproducing the scams of ages gone by with the only difference being these online "currencies" (which are actually more commodities than currencies).

On a different note, what do people think about investing in funds that have dual purposes: to make money and also to move the world in a specific direction? Most of the big investment platforms have these now (here's an environmental one from Vanguard as an example). The good part of this is that if it works as intended, the investors would make the world a better. The bad parts is that these funds have much higher fees (because they need active management) and they're also riskier than an ordinary broad index fund (because they invest in a specific sector rather than in the economy as a whole and possibly not even the whole sector).

Does anyone have an opinion on this sort of investment?

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27 minutes ago, Altherion said:

On a different note, what do people think about investing in funds that have dual purposes: to make money and also to move the world in a specific direction?

Altherion -- I was considering this line of thought just an hour ago, in reaction to learning about Sam and the fall of FTX / Alameda Research. Players like him are -- at best -- naïve; and -- at worst -- exploitative in their effort to make the world a better place. Normals who practice the same, who have no chance of making a beneficial global impact, are also -- at best -- naïve; and -- at worst -- arrogantly stupid. I acknowledge their good vibes, though; as I maximize my own returns.

I suspect a high proportion of Millenials and Gen Zs are getting decimated due to this line of thought, aggravated by the ongoing / lingering effects of a bad timeline (e.g., the GFC, SMC, COVID-19, Ukraine War and associated energy crisis, et al.). I've exploited every single one of these events, with no thought to making the world a better place beyond what's within my capacity to influence, which includes only me and my family.

The most efficient / effective way to invest is through self-interest. Anything less than this (e.g., incorporating the principles of ESG) would have moderated gains while providing the globe nothing beneficial. Note, this is not advice; and, self-interest isn't enough.

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2 hours ago, Wade1865 said:

FTX / Alameda Research -- rumor had it that Sam fled for Argentina, but he and a couple other former FTX executives remain in the Bahamas under Bahamian supervision, hahaha. Which exchange is next? Coinbase, Binance, Kraken, or another out of the hundreds that exist?

It’s not a certainty that we will see a lot of contagion from the FTX collapse. It looks to me like the problems were relatively idiosyncratic in that the exchange had loaned client monies Alameda. I wouldn’t assume that other exchanges are engaging in this sort of behaviour.

But you are quite right that FTX is increasing “run risk” across the entire crypto system. 

Edited by Paxter
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12 minutes ago, Paxter said:

It’s not a certainty that we will see a lot of contagion from the FTX collapse. It looks to me like the problems were relatively idiosyncratic in that the exchange had loaned client monies Alameda. I wouldn’t assume that other exchanges are engaging in this sort of behaviour.

Paxter -- yes; I think you're right in that a systemic collapse is unlikely. Assuming cryptocurrencies survive to become trusted and useful for the mainstream, which I think they will, one or two legitimate exchanges would be needed. In fact, the situation feels like the dot.com bubble to me. Thus, out of the major exchanges remaining, which do you think has the best chance of turning into something as healthy as an AMZN, EBAY, or BKNG?

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I think the healthy thing about crypto issues is that they're still largely disconnected from the mainstream financial system. Apart from some venture capitalists who've had to take a haircut on their investment in FTX (note investment, not actual accounts) the pain is largely being felt by retail speculators and alternative money managers.

While there will always be bargain hunters out there propping up the Bitcoin price (more than the other cryptos), I think the downtrend is going to continue for a while. It's shown it doesn't work as a store of value, and it also doesn't work as a transactional thing, so its use is limited to speculation. The exception to this being in places like Turkey and Lebanon where apparently there is more adoption of crypto as it's the only thing that holds its value as compared to the rapidly devaluing home currency. Previously people with the means would use US dollars as the hedge against their own hyperinflationary economies, but I guess crypto is a lot easier to get a hold of, so maybe that's one genuinely useful part of it.

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TOP TEN MOST EXPENSIVE ZIP CODES -- USA

Amusingly, Beverly Hills, 90210 made it to third spot. It was also a popular 90s television show in the US; couldn't stand it but was part of my generation, and I even wore sideburns for awhile...

8 out of 10 zip codes are located in New York or California; 1 each, Massachusetts and Florida.

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1 hour ago, Jeor said:

I think the healthy thing about crypto issues is that they're still largely disconnected from the mainstream financial system. Apart from some venture capitalists who've had to take a haircut on their investment in FTX (note investment, not actual accounts) the pain is largely being felt by retail speculators and alternative money managers.

While there will always be bargain hunters out there propping up the Bitcoin price (more than the other cryptos), I think the downtrend is going to continue for a while. It's shown it doesn't work as a store of value, and it also doesn't work as a transactional thing, so its use is limited to speculation. The exception to this being in places like Turkey and Lebanon where apparently there is more adoption of crypto as it's the only thing that holds its value as compared to the rapidly devaluing home currency. Previously people with the means would use US dollars as the hedge against their own hyperinflationary economies, but I guess crypto is a lot easier to get a hold of, so maybe that's one genuinely useful part of it.

Some pension funds too had exposure to FTX equity which was…dumb. Ontario Teachers (one of the world’s largest funds) is on the hook for $100m. But yeah, regulators have largely done a good job of ensuring limited exposures on this occasion.

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I have a workmate who left his coin on FTX.

He was not sucessful at completing any of his transfer attempts, which were all met with NSF (No Such Funds) messages.

With the exchanges bancruptcy he's well on the path to being an unsecured creditor, left holding a bag of confetti.

Watching this guy eschew any prudence warnings and his general arrogance over the last several months, has been gratifying for me as I've feined surprize and concern with his stories of how "China has stole his marbles!":lmao:

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Ron Insana on his lack of surprize at the FTX collapse-

https://www.cnbc.com/amp/2022/11/10/insana-the-manic-speculation-behind-the-fall-of-ftx-is-as-old-as-the-markets-themselves.html?recirc=taboolainternal

"Crypto, in my humble — but seasoned — opinion has been a Ponzi scheme all along. There is no there there."

 Whether it's manias in Sumerian grain markets, Dutch tulip bulbs, railroad bonds and everything from internet service providers to digital currencies, leveraged speculation is as old as markets themselves.

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I thought this was an excellent, funny indepth analysis of what ftx did and why it was so incredibly shaky. It reminded me a lot of the Big Short and how that walked through how sketchy it all is. And yeah, it is super sus. Come for the approachable explanation, stay for the Visage of a bloody clippy warning you of the eldritch horrors you committed on the balance sheet.

https://www.bloomberg.com/opinion/articles/2022-11-14/ftx-s-balance-sheet-was-bad?leadSource=uverify wall

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  • 2 weeks later...

The market rally is starting to run out of steam now as earnings season concludes and investors start to look forward to next year. We are hitting the key technical upper bound (around 4,000 on the S&P) and just sort of sitting there. 

While inflation is easing a little, most economies are still performing well (even Germany has surprised a little to the upside recently). I wouldn't be surprised if we are a year away from seeing the full impact of all this tightening. 

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Well, there was a big rally on Wall Street based on Powell's comments but I don't know what the fuss was about. He basically said that they would probably look to have a smaller hike in December but I thought that was already baked into expectations, so the rally seems a bit silly to me - people are desperate for good news, I guess.

I think the consensus is that there will be a Christmas type of rally over the next month but things will get decidedly bearish next year. A contrarian might still buy in but valuations are not looking as cheap now. The big unknowns are how the oil price is going to go in the future (in the face of EU cap on Russian oil) and how China deals with its constant lockdowns.

Everyone assumes that China is going to eventually reopen, but the timing is quite uncertain, and if they botch the reopening and have lots of deaths and political unrest, that will be lethal for stocks. 

I'm mostly sitting tight for now. The core part of my portfolio is unchanged as its a fairly defensive mix anyway (telco, bank, mining, energy, global ETF), has slightly lagged the market in the past two gangbuster months but if there's a drawdown or sideways move to quality it should perform well. The core represents about 70%, cash is 15% and the remaining 15% are small holdings (consumer discretionary, gold, small cap fintech, small cap miner).

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These face-ripping rallies after Fedspeak are always a good laugh.

You can see that the market is still trying to price in the odds of a soft vs. hard landing for the global economy. Any time a soft landing seems more likely (like today), people pile back in. My view is that, even with a soft landing, we will still see a material slowdown in the economy and some sort of associated market adjustment. And as you say, if oil/energy and China don't co-operate, there are plenty of other perils outside of core inflation. 

Edited by Paxter
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It's the old investor conundrum, investing on the basis of fundamentals or investing based on expectations and crowd psychology, because the two can have very different outcomes. The crowd can be "wrong" for a long time like Wile E Coyote running off a cliff before they fall, and there's every chance they can run onto another piece of solid ground so they don't have to fall at all.

Personally I've worked out that I would have the most regrets if I followed the crowd and then the fundamentals proved me wrong rather than the other way around. And at least in the short term, I'd much rather miss out on a rally than buy into a correction. So the current time is probably a textbook case (at least for me) for remaining mostly cautious and not chasing things too much.

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1 hour ago, Jeor said:

It's the old investor conundrum, investing on the basis of fundamentals or investing based on expectations and crowd psychology, because the two can have very different outcomes. The crowd can be "wrong" for a long time like Wile E Coyote running off a cliff before they fall, and there's every chance they can run onto another piece of solid ground so they don't have to fall at all.

Personally I've worked out that I would have the most regrets if I followed the crowd and then the fundamentals proved me wrong rather than the other way around. And at least in the short term, I'd much rather miss out on a rally than buy into a correction. So the current time is probably a textbook case (at least for me) for remaining mostly cautious and not chasing things too much.

I agree. This is more an occasion to just dollar-cost average rather than try to time the market. 

Things could get very ugly if we get a hard landing.

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On 11/2/2022 at 10:26 PM, Wade1865 said:

TOTAL. Higher, -14% to -2%.

TOTAL [100%]. Higher, -2% to +0.2%. I'm once again barely one asthmatic nostril above water; though, I'm confidently (and intently) expecting to return underwater during 2023. I feel like I'm on a roller coaster (experiencing butterflies in the stomach), nearing a peak, just before the plunge. This is me now, the center image; however, given the anxiety on Wall Street, I'll eventually resemble the bottom image.

***

T [29%]. Higher, -2% to +2%.

MMM [19%]. Lower, 0% to -1%.

KHC [18%]. Higher, +6% to +11%. Like XOM, before realizing capital gains, KHC is now primarily (albeit more moderately) responsible for keeping me above water. I suppose it represents flight from tech to safety. I don't know, but if so, it's been informative.

AMZN [13%]. Lower, -6% to -7%.

DOW [8%]. Higher, 0% to +2%.

WBD [2%]. Lower, -32% to -43%.

CS [1%]. Lower, 0% to -4%. This bank has been decimated as a result of scandals and bad practices. I'm expecting it to recover as something being too big to fail (e.g., BAC, BP, et al.). Still, I consider it my biggest risk and won't be surprised if I lose the entire holding.

CASH [10%]. Almost depleted after adding DOW, MMM, and CS. The intent is to restore CASH to 45-50%, ready to exploit a potential stock market crash during 2023. Unfortunately, liquidating real estate hasn't been a quick process given how everyone seems to be holding their breath while anticipating a housing crash. Thus, with time running out, I may have to retain the bulk of my assets in real estate, sacrificing the certainty of greater stock market gains.

***

TWR. Despite approximately a decade and a half of reckless exposure, I'm still technically a noob and probably misunderstood my cumulative return. And to be honest, I'm not sure if my updated reading is correct: all-time high at +36%; now lower, +29%.

STRATEGY. I've come to accept that I may not actually have a concrete investing strategy, hahaha. My understanding of stock fundamentals is negligible beyond dividend yields and P/E ratios. More, my actions are based mostly on global events and the crowd, though I have a reliable understanding of social behavior especially when there's chaos. I suppose my investing strategy is nothing more than winging it by jumping in when conditions are so bad that recovery will result in gains no matter what; of course, this prevents me from realizing maximum profits. Pray for me.

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On 12/8/2022 at 4:27 PM, Wade1865 said:

STRATEGY. I've come to accept that I may not actually have a concrete investing strategy, hahaha. My understanding of stock fundamentals is negligible beyond dividend yields and P/E ratios. More, my actions are based mostly on global events and the crowd, though I have a reliable understanding of social behavior especially when there's chaos. I suppose my investing strategy is nothing more than winging it by jumping in when conditions are so bad that recovery will result in gains no matter what; of course, this prevents me from realizing maximum profits. Pray for me.

The starting place for a strategy would be to determine your investment goals and your risk appetite, and then the rest tends to write itself. I have a one-page summary that I revisit each year. In investing terms I'm still relatively young (36) so I'm prepared to dabble in equities which tend to be the riskiest of assets (I'm not counting crypto as an asset!).

I have a double goal, (1) to beat the returns of the ASX200 and (2) to beat my mortgage rate, the latter of which is kind of obvious given the opportunity cost of investing in stocks means I'm not paying down the mortgage as much. This second goal is going to get tougher in the future, I think. And in terms of the first, in order to beat the ASX200 that tends to indicate stock-picking as the main strategy.

There are a lot of tactics after that - how you make investment decisions, allocate your capital, what other investing rules you might have. But I reckon start with a goal, examine your risk appetite, and then go from there.

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