Tremendous

An angel investor's take on life and business

  • Why Can’t Ken Griffin Beat the S&P 500?

    Ken Griffin’s Citadel is one of the biggest hedge funds on earth. But last year, its performance lagged well behind the S&P 500.

    From CNBC:

    Billionaire investor Ken Griffin’s various hedge fund strategies at Citadel all posted double-digit returns for 2023, but they failed to beat the S&P 500.

    Citadel’s multistrategy Wellington fund gained 15.3% last year, according to a person familiar with the returns. The flagship fund had enjoyed a stellar 2022 with a 38% gain, marking its best year on record.

    The Miami-based firm’s tactical trading fund gained 14.8% in 2023, while its equities fund, which uses a long/short strategy, returned 11.6%, said the person who spoke anonymously because the performance numbers are private. Citadel’s global fixed income fund returned 10.9% last year, according to the person.

    Citadel’s Declining Performance

    The S&P 500 trounced every fund Griffin has, posting a 24% gain for the year.

    The multistrategy Wellington fund is Citadel’s flagship. Multistrategy funds can invest in stocks, bonds, commodities, or most any other asset. If they can find returns there, it’s fair game.

    Citadel has thousands of the smartest people on earth scouring markets to find opportunities. But incredibly, it couldn’t beat a simple ETF.

    Even my personal stock portfolio, comprised entirely of index funds, blew away Citadel. And it did so for a few basis points a year in fees.

    Compare that to the typical hedge fund, which charges 2% of assets and 20% of investment gains.

    This isn’t the first time Citadel has underperformed. The Wellington fund also lagged the market in 2021.

    Too Big to Succeed?

    So what’s wrong with the hedge fund giant?

    Citadel may be a victim of its own success. Citadel’s funds have ballooned over the years.

    Despite uneven returns, it has had a few strong years. Those tend to draw in new investors. The firm now has $58 billion under management.

    As funds increase in size, returns often drop. It’s simply harder to post big numbers on a huge pot of assets.

    I have no doubt that Griffin and his people are great traders. But there are only so many gains out there in markets, no matter how good you are.

    Griffin Takes Action

    Griffin appears to be taking steps to fix this problem.

    Citadel is returning all of the fund’s 2023 profits, $7 billion, to investors. Normally, a hedge fund would hold onto that money and keep investing it.

    Griffin may be trying to shrink Citadel back to a more manageable size. This could help the firm get back on track.

    As for me, I’m sticking to my index funds. They may be boring, but they never lag the market.

    Would you invest in Citadel? Leave a comment and let us know!

    More on markets:

    Major Hedge Fund Falls 50% — Billions Lost

    Tiger Venture Chief Out in Management Shakeup

    Hedge Funds Fight to Keep Short Sales Secret

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

    Photo: Citadel CEO Ken Griffin

  • Is This the End of Manual Labor?

    A Stanford team has developed a robot that can perform almost any manual task, from cooking to straightening up the house. All it needs is a human to show it how.

    The Greatest Demo I’ve Ever Seen

    The demo, released yesterday on Twitter, is one of the most incredible things I’ve ever seen. The robot makes a 3 course Cantonese meal, completely autonomously — and it looks delicious!

    The robot’s hands crack the eggs more skillfully than I do. The chicken is perfectly done.

    After you have your delicious shrimp, chicken and greens, it’s time to do the dishes, right? Wrong!

    The robot takes care of them for you, and can even give you a high five when it’s done!

    A Flexible Platform

    Mobile ALOHA goes way beyond the kitchen. It can push in chairs, call an elevator, or complete most any physical task.

    For the robot to learn a new skill, you have to demonstrate it 50 times. The detachable arms let you train the robot on new skills or move it around.

    Today, most robots do a single task, over and over. In areas like car manufacturing, they weld the same spot all day long, often separated from humans by a cage to keep the humans safe.

    Mobile ALOHA is totally different. It can do a huge variety of tasks and safely operates right next to humans.

    Best of all, the tech behind Mobile ALOHA is completely free and open source. You can see it all on GitHub here.

    The Robot Takeover

    Having to train a robot 50 times for it to learn a new skill might sound like a lot. But imagine McDonald’s using thousands of these all over the world.

    At that scale, having to show it how to cook the fries 50 times is nothing! Staff could complete the training in an afternoon, then push the new skill to all its robots worldwide instantly.

    This may be the end of manual labor.

    Today, robots are cheaper and more reliable than humans for a few repetitive tasks. But humans are more flexible.

    What if the robot is flexible too, and can learn any new skill in a few hours? That puts a lot of humans out of business.

    The Human Edge

    The best hope for our species is to do jobs where the human touch matters.

    No one wants a robot yoga teacher. They want a person they can connect with.

    I would love to go to a concert with a great pianist. But make it a player piano, and I’m out.

    Humans still have the edge for jobs where humanity matters. But if it’s just about getting something from point A to point B, robots will soon take over.

    What do you think of Mobile ALOHA? Leave a comment and let us know!

    If you enjoyed this post, subscribe for more like this!

    More on tech:

    Elon Musk (Part 1): Overcoming the Odds

    Elon Musk (Part 2): Saving Tesla and SpaceX

    Why Marc Andreessen Passed on Airbnb

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • How to Stop LinkedIn InMail Forever

    Are LinkedIn InMail messages driving you nuts? Turns out there’s a way to stop them — forever.

    These random messages were driving me to the brink of insanity.

    So I complained on Twitter.

    What happened next shocked me. The kind folks at LinkedIn stepped in to help!

    Here’s how to turn off InMail forever:

    1) Logged into LinkedIn, click on the “Me” button next to the picture of yourself.

    2) Click “Settings & Privacy.”

    3) The settings screen appears. On the left, click “Data & Privacy”.

    4) Under “Who can reach you,” click “Messages”.

    5) Under “InMail messages,” click “No.” LinkedIn InMail is now gone forever!

    I turned these messages off because they were never targeted well. I got random proposals to invest in funeral parlors, solar farms, etc. despite saying on my profile that I’m a software investor.

    I don’t really blame them — founders have to raise money. But I also need to protect my most precious resource: my time.

    I hope this little trick helps you protect your time too!

    Are you turning off InMail? Why or why not?

    Leave a comment and let us know!

    If you enjoyed this post, subscribe for more like this!

    More on tech:

    An Investor’s Dream Cold E-mail

    Tiger Venture Chief Out in Management Shakeup

    The Fall of OpenView: Shocking Departures and an Uncertain Future

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • Tiger Venture Chief Out in Management Shakeup

    Scott Shleifer, Tiger Global Management’s head of private investments, is out. Founder Chase Coleman will now oversee the struggling unit, according to Bloomberg:

    Months before Scott Shleifer stepped down as head of Tiger Global Management’s private investments, Chase Coleman had already begun to reclaim control of the firm’s $34 billion venture-capital arm.

    Now, he’s taking over the unit that accounts for about two-thirds of the firm’s assets and has made Tiger a dominant force in startup investing. The move comes after some investors asked Coleman and other partners to get more involved in the wake of steep markdowns and has given many comfort that the firm is seeking to correct the biggest misstep in its history, according to clients.

    Party Like It’s 2021

    Tiger pumped a torrent of capital into late stage startups at the peak of the market in 2021. Now, the unit’s returns are suffering. Losses total nearly 40%.


    “Tiger essentially was trying to deliver index-like exposure to disruptive tech companies,” said Andrew Beer, co-founder of Dynamic Beta Investments. “The irony is that their aggressive investing may have fueled the bubble and hence contributed to subsequent losses.”

    As brutal as those markdowns are, they may still be too optimistic. Many major LP’s doubt today’s VC valuations.

    Moving the Market

    Tiger’s biggest fund tipped the scales at a staggering $13 billion. If you average the five years of venture capital investments prior to 2021, that fund would amount to about 10% of an entire year’s total.


    At the late stages where Tiger invested most of its money, it formed an even larger portion of the market. Tiger didn’t just make an index — it moved the market.

    Troubles with Fundraising

    Paying high prices in a bubble has predictable results — big losses. Eyeing those brutal markdowns, LP’s are closing their wallets when Tiger comes calling.

    Again, from Bloomberg:


    As of June, [a new Tiger fund] had gathered just a third of its $6 billion target, amid a difficult fundraising environment. While the firm has had another capital raise since then, many institutional investors are limiting new VC and private equity commitments because they’re already overexposed to the asset class.

    That New Year’s Hangover

    Tiger was a classic venture tourist. It saw fat returns, elbowed its way into the party, and made it rain.

    For a while, it works. The party keeps going, and the markups look yummy.

    But sooner or later, the music stops. Everyone’s getting sloppy, and it’s time to go home.

    The next day, reality sets in. “What the heck was I thinking?”

    A lot of people had that experience yesterday. Tiger’s been having it for two years.

    Wrap-Up

    As troubled as it is, Tiger’s portfolio could find redemption. The startups keep growing and eventually exit for more than Tiger paid.

    But that will take many years. The yearly rate of return, or IRR, won’t be much.

    I take Tiger’s experience as a warning. I invest in solid companies at reasonable prices — hold the FOMO.

    Would you invest in Tiger’s new fund? Why or why not?

    Leave a comment and let us know!

    Happy New Year — glad to be back!

    If you enjoyed this post, subscribe for more like this!

    More on tech:

    Number Go Up (Part 1): The Rise and Fall of SBF

    The Fall of OpenView: Shocking Departures and an Uncertain Future

    Elon Musk (Part 1): Overcoming the Odds

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

    Photo: Tiger Global CEO Chase Coleman

  • The Fragrant Curries of Karma Kafe

    The aroma of cardamom and cloves wafted up at me. I rolled up a piece of bread, dipped it in, and tasted heaven.

    Paneer curry

    This is Karma Kafe in Hoboken, NJ. For 24 years, Karma has produced fragrant curries and spicy biryanis, and today they’re better than ever.

    I perused the extensive menu, settling on paneer makhani, a close relative of paneer tikka. This creamy, tomato based curry has always been my favorite.

    Paneer makhani

    Alongside my curry, I ordered onion kulcha. This cheese and onion stuffed flatbread is hard to find — Karma is one of the few places where I’ve seen it.

    “We’d better make that two orders,” I concluded.

    My friend Tim went with the chicken vindaloo. And as ever, for Matt*, it had to be chana saag, a curry of spinach and chickpeas.

    Chicken curry and kulcha
    Garlic naan

    I made perfunctory conversation, but in a restaurant this good, my mind is elsewhere. I fantasized about my curry, contemplating its creamy deliciousness.

    Suddenly, a torrent of dishes flew out of the kitchen. Chicken, spinach curry, and my beloved paneer.

    I dunked the cheesy kulcha into the curry. The combination of gooey cheese, caramelized onion and fragrant curry cannot be beat.

    Lamb curry
    Crab cake curry

    “This chicken is really good, nice and spicy,” Tim exclaimed.

    I tried a bite. It was tender and beautifully seasoned.

    Karma’s staff does a wonderful job guiding you through menu items that may be unfamiliar. The dishes are spicy without being overpowering, and the portions are generous.

    Sitting inside the warm, beautifully furnished restaurant on a chilly winter’s evening, there was nowhere else I’d rather be.

    Chicken kashmir

    Karma Kafe is open 7 days a week for lunch and dinner. It’s conveniently located on Washington Street in the center of town.

    Drop in for a delicious curry in a friendly atmosphere!

    What’s your favorite Indian restaurant? Leave a comment and let us know!

    This is the last blog for this year. Thanks to all of you for a great year and see you on Tuesday, January 2nd.

    Have a very merry Christmas and a happy New Year!

    Paneer saag

    If you enjoyed this post, subscribe for more like this!

    More on food:

    Pizza and Homemade Mutz at Porta

    Miznon: The Professors of Pita

    The Best Bakery in NYC (It’s Not Levain)

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

    *Note: names have been changed.

  • My Favorite Books of 2023

    “A whole new world is opening up to you.” That was what my grandmother told me when I learned how to read.

    This year, I explored worlds including Weimar Germany, Sand Hill Road, and small town Japan.

    Here are my favorite books of the year, along with summaries of the others I read. I wrote blog posts about many of them, which I’ve linked here.

    If you see something that sparks your interest, pick up a copy!

    Best Non-Fiction Book of the Year: Elon Musk by Walter Isaacson. Isaacson tells the incredible story of how an abused child from South Africa became one of the world’s greatest entrepreneurs. Learning about how Elon leads informs how I evaluate founders today.

    Honorable Mention: The Power Law by Sebastian Mallaby. A fascinating history of the venture capital industry. For anyone in startupland, this is a must-read.

    Best Fiction Book: Ms. Ice Sandwich by Mieko Kawakami. A young boy in Japan is mesmerized by a woman at a supermarket sandwich counter. But when he realizes how others see her, everything changes.

    Honorable Mention: The Legend of the Holy Drinker by Joseph Roth. A homeless drunk named Andreas meets a mysterious man who gives him money. Andreas goes to great lengths to repay the debt.

    The Rest (in the order I read them):

    The Death of Ivan Illyich by Leo Tolstoy. Ivan chases money and social position until he falls ill. That’s when he realizes what’s really important.

    The Hard Thing About Hard Things by Ben Horowitz. “As a start-up CEO I slept like a baby. I woke up every 2 hours and cried.” A relatable and deeply personal portrait of entrepreneurship.

    Right and Left by Joseph Roth. A rich family falls into poverty in Weimar Germany.

    Never Finished by David Goggins. How Goggins went from overweight exterminator to Navy SEAL. Goggins emphasizes that hard work is something to be enjoyed, not avoided. “With discipline as your medium, your life will become a work of art.”

    The Lost Bank by Kirsten Grind. How Washington Mutual went from one of America’s largest banks to insolvency during the financial crisis.

    Mr. China by Tim Clissold. The fascinating story of a Brit trying to invest in China in the 90’s. Bill Gurley recommended this, and he was spot on!

    Chinese Rules by Tim Clissold. Once again, Clissold tries to make it in China, this time in green energy. Yet again, a solid business plan fails in the face of China’s peculiarities. A must read for anyone trying to do business in China.

    The Naked Civil Servant by Quentin Crisp. A poignant memoir of what it was like to be a homosexual from the 1930’s to the 1960’s, before society accepted them.

    The Secrets of Sand Hill Road by Scott Kupor. Kupor explains how venture capital works and how to get it. Clearly written, engaging, and useful.

    Startup: A Silicon Valley Adventure by Jerry Kaplan. Kaplan tells the story of founding GO Corporation, which created a proto-iPad in 1989. Unfortunately, the company went bust. Kaplan’s writing is deeply human, especially the scene in which he says goodbye to his beloved cat as it dies.

    The Contrarian by Max Chafkin. How Peter Thiel became one of the top entrepreneurs and investors in Silicon Valley. I would’ve preferred more emphasis on his business career and less on his political views, but still an interesting book.

    Heart of Darkness by Joseph Conrad. The narrator sails deep into Africa to find the mysterious Colonel Kurtz. A difficult read, but intriguing.

    Living with a SEAL by Jesse Itzler. The hilarious story of how an out-of-shape entrepreneur hires former SEAL David Goggins to train him. Their winter runs make me cold just reading about them!

    The Greatest Trade Ever by Gregory Zuckerman. How John Paulson made billions betting against the housing market in the 2000’s.

    Super Pumped by Mike Isaac. How Travis Kalanick braved corrupt regulators and entrenched interests to create Uber.

    Unreasonable Hospitality by Will Guidara. How Guidara and his team took a middling brasserie and turned it into what may be the greatest restaurant in the world. Even if you don’t run a restaurant, you’ll learn a lot about how to make your customers feel special.

    Portugal by Rick Steves. This guide really helped me get the most out of my trip to Porto last month! A great overview of the many attractions of this beautiful country.

    Number Go Up by Zeke Faux. A rollicking tour through one crypto scam after another. This book made me extremely skeptical of the industry in general. It seems to have produced little but fraud and speculation.

    Wrap-Up

    My goal at the beginning of 2023 was to read 20 books this year. I’m at 22 so far (up from 10 last year) and I might knock out a few more during my Christmas vacation!

    Holding myself accountable to a number was helpful. It gave me a reason to turn off the TV and get some reading done!

    I am making the same goal of 20 books for next year. I wonder what new worlds are waiting for me…

    What’s the best book you’ve read in 2023? Leave a comment and let us know!

    If you enjoyed this post, subscribe for more like this!

    More on books:

    My 2022 Reading List

    Elon Musk (Part 1): Overcoming the Odds

    Number Go Up (Part 1): The Rise and Fall of SBF

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

    Photo: “Elon Musk” by dmoberhaus is licensed under CC BY 2.0.

  • Number Go Up (Part 2): Crypto’s Dark Side

    Many average people lost their life savings in bad crypto investments. But the real victims of the crypto craze lost much more.

    Journalist Zeke Faux travelled 9,000 miles to meet some of them. He tells their stories in his excellent new book Number Go Up.

    A Mysterious Text Message

    The scam started with an unsolicited message, often via SMS. The scammer would pretend to be an attractive member of the opposite sex interested in a relationship.

    Over time, the conversation would drift to crypto. The scammer would tell the target she was making a fortune on her trades.

    Often, the target would want to learn how to make some easy money too. Then, the scammer would direct the target to a fake crypto trading website.

    At first, the target seemed to be making a fortune. But soon, the money would disappear, along with his love interest.

    The Fraud Factory

    In Cambodia, thousands of migrants were held against their will and forced to perpetrate crypto scams. If they missed their quota, some were beaten or even killed.

    Huge compounds filled with trafficked migrants are found all over Cambodia, and doubtless other countries as well.

    These are the true victims of the crypto bubble.

    At best, authorities are indifferent. At worst, they’re paid employees of the human traffickers.

    A Scam of Massive Proportions

    “Pig butchering” scams like this have made at least $10 billion, according to one investigator.

    The proceeds of these scams are laundered using Tether, a stablecoin. That Tether is swapped for cold, hard cash on crypto exchanges.

    This is crypto’s real use case: fraud and brutal slavery.

    Don’t Get Scammed

    The best way to stop the brutal trafficking of these innocent people is to recognize the scam when you see it. If the scammers aren’t making money, they’ll move on to something else.

    Don’t engage with unsolicited texts. Be wary of people on dating apps who will chat with you all day, but never want to meet in person.

    There’s no reason that a love interest should be selling you on investments. If you see the signs of a pig butchering scam, run.

    Wrap-Up

    I recently wrote that crypto has seen few use cases in its 14 year history. A reader chimed in that stablecoins are one common use.

    That’s perfectly true. Users perform hundreds of thousands of transactions using Tether every day.

    But time and time again, those transactions are linked to fraud. Pig butchering scams alone have laundered many billions using Tether.

    Crypto’s impact on society has been mostly negative. If a technology is primarily used for speculation and fraud, it’s not a valuable technology.

    What do you think of crypto frauds? Leave a comment and let us know!

    More on tech:

    Number Go Up (Part 1): The Rise and Fall of SBF

    What Is Crypto For?

    Elon Musk (Part 1): Overcoming the Odds

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

    Photo: Sihanoukville, Cambodia, home to many pig butchering scams. “School Days – Children playing under a tree in Sihanoukville, Cambodia” by bvi4092 is licensed under CC BY 2.0.

  • What Is Crypto For?

    “I have never cheated any honest men, only rascals. They wanted something for nothing. I gave them nothing for something.”

    Joseph “The Kid” Weil, early 20th century con artist

    The lure of easy riches is hard to resist. In 2021, I had the opportunity to invest in countless crypto projects.

    They all claimed to be the next big thing. Sometimes, I wondered if I was missing out.

    But I passed on every single one of them. Here’s why…

    At My Desk in 2021

    “How is a bunch of slides worth $100 million?”

    Me, 2021

    It wasn’t hard for me to tell these weren’t solid investments.

    The “companies” almost never had any customers or even a product. And the coins traded at absurd prices with few, if any, real use cases.

    A real business has to have a product. That product has to solve a problem for a real person, who will pay money for it.

    A real technology business is something like Uber.

    Uber gets me a car when I want to go somewhere. I’m happy to pay for that service.

    A few slides filled with cryptobabble isn’t an investible business.

    Where Are the Use Cases?

    It’s been 14 years since Satoshi Nakamoto wrote the Bitcoin whitepaper, launching the crypto craze. By now, we should all be buying our groceries and paying our mortgages in Bitcoin, right?

    Wrong.

    Almost no one on earth buys anything using Bitcoin or any other cryptocurrency. Even in El Salvador, where Bitcoin is nominally the official currency, practically no one accepts it for payments.

    The user experience is terrible. Sending crypto involves hard-to-use software and long cryptographic keys — one typo, and the money is gone.

    One of the few common uses of crypto is stablecoins. However, an enormous amount of stablecoin use is tied to crime and money laundering, not legitimate commerce.

    Uber was founded 14 years ago. In that time, it’s made its way to everyone’s phone and into the S&P 500.

    In that same period, what has crypto accomplished, other than enabling speculation?

    Wrap-Up

    As best I can tell, here’s what crypto is for: speculation and money laundering. In a decade and a half, those are the only common uses we’ve seen.

    If we want to invest in solid businesses with a long term future, a volatile asset used by speculators and criminals won’t do.

    Perhaps someday, someone will invent a great use for crypto. But it hasn’t happened yet.

    I keep a laser focus on customers and product. Forget the sizzle — look for the steak.

    What do you think is next for crypto? Leave a comment and let us know!

    If you enjoyed this post, subscribe for more like this!

    More on tech:

    Number Go Up (Part 1): The Rise and Fall of SBF

    Elon Musk (Part 1): Overcoming the Odds

    They Invented the iPad in 1989 — And Lost it All

    Save Money on Stuff I Use:

    Fundrise

    This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 with great returns.

    More on Fundrise in this post.

    If you decide to invest in Fundrise, you can use this link to get $100 in free bonus shares!

    Misfits Market

    I’ve used Misfits for years, and it never disappoints! Every fruit and vegetable is organic, super fresh, and packed with flavor!

    I wrote a detailed review of Misfits here.

    Use this link to sign up and you’ll save $15 on your first order. 

  • Number Go Up (Part 1): The Rise and Fall of SBF

    “It’s like the narrative would be way sexier if it was like, ‘Holy s—, this is the world’s biggest Ponzi scheme.’”

    Sam Bankman-Fried

    As markets ripped in late 2021, the total value of all cryptocurrency approached $3 trillion. Just 12 years prior, crypto didn’t exist.

    The boom created a wave of young millionaires and billionaires almost overnight. Crypto promised to replace fiat currencies and put power in the hands of average people.

    Journalist Zeke Faux traces the crypto boom and bust in his excellent new book Number Go Up.

    The Crypto King

    Somewhere near the top of cryptoland stood Sam Bankman-Fried. The young founder of crypto exchange FTX had a peak net worth of $26 billion and the ears of celebrities and government officials across the world.

    Despite founding one of the most valuable tech startups in existence, Bankman-Fried couldn’t really code. So he hired engineers like Nishad Singh and Gary Wang to spin up the new crypto exchange in 2019.

    In just a couple short years, FTX became the third largest exchange by volume. It was valued at $32 billion by blue chip venture firms including Sequoia Capital.

    Unusually, they did not ask for a board seat. Had they been closer to the action, perhaps they could’ve stopped what was about to happen.

    A Potemkin Village

    FTX presented a slick exterior, with star studded ads and a Miami arena bearing its name. But inside, it was a mess.

    FTX employees tracked billions of dollars worth of transactions in primitive spreadsheets. Bankman-Fried and others misappropriated or sometimes simply lost track of massive sums.

    The young founder had personal issues as well. He fidgeted endlessly, perhaps overstimulated by Adderall or other ADHD medications.

    In his conversations with Faux, Bankman-Fried occasionally dropped hints that everything might not be on the up and up.

    He openly pondered the possibility of massive Ponzi schemes throughout the crypto world. Perhaps he wanted to confess.

    The Fall of FTX

    As the Federal Reserve began to raise interest rates in 2022, problems began to bubble up in cryptoland.

    Coin prices fell hard. One project after another, from Terra-Luna to Celsius to BlockFi, imploded.

    By late fall, FTX was unable to meet customer redemptions. Their money was gone — sent to related hedge fund Alameda Research and gambled away.

    On November 11, FTX filed for bankruptcy. FTX could only withstand a down market for a matter of months.

    Soon after, Bankman-Fried was arrested and eventually convicted on numerous counts of fraud and conspiracy.

    Wrap-Up

    “Only when the tide goes out do you learn who has been swimming naked.”

    Warren Buffett

    When the price of money is zero and cash is flooding into your company, it’s hard to lose. No matter what mistakes you make, no matter how much you steal, there’s always more.

    But when the money starts moving the other way, the problems start.

    As one company after another imploded, I was struck by one thing: no real use cases were left.

    There were no happy customers using crypto to buy their groceries. There were just gamblers, and now they had packed up and gone home.

    Faux’s book traces the collapse of FTX and other exchanges in riveting detail. But there’s a lot more to the crypto crash — we’ll dig into that in part 2.

    What do you think the future holds for crypto? Leave a comment and let us know!

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    More on tech:

    Elon Musk (Part 1): Overcoming the Odds

    Super Pumped (Part One)

    Phishing Scams Skyrocket, Powered by AI

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  • Hedge Funds Fight to Keep Short Sales Secret

    Hedge funds are fighting hard to keep short sales secret. An industry association has sued the SEC to stop new disclosure rules, according to a new report in Barron’s.

    Hedge funds sued the Securities and Exchange Commission, alleging that the agency broke the law when it finalized a pair of rules aimed at collecting data on short sales earlier this year.

    The lawsuit, filed in the U.S. Court of Appeals for the Fifth Circuit by the Managed Funds Association and other groups on Tuesday, is attacking rules adopted by the SEC this fall that require the reporting of short sales and securities loans. The reports are anonymized, but the funds argue the agency ignored how the rules interact and that they harm investors.

    Why the SEC Is Requiring Disclosure

    Before the new SEC rule, funds had to disclose what stocks they owned, but not what stocks they shorted.

    Long positions must be disclosed under the fund’s own name. Given that longstanding rule, I don’t see why requiring anonymous disclosure of short positions is unlawful.

    The new SEC rules are a direct result of the meme stock boom of 2021:

    The SEC adopted the short-sale and securities lending rules in the wake of the GameStop fiasco, in which retail traders drove a huge short squeeze in the stock and caused large losses in some hedge funds that had bet against the company. The rules require hedge funds to report their short positions to the SEC and for companies that lend out shares to report those transactions to the Financial Industry Regulatory Authority.

    Hedge Funds Fight Back

    If short sales are publicly disclosed, it’s easier for retail traders and other hedge funds to attack short sellers. They can buy up shares of heavily shorted stocks, engineering a short squeeze like those in 2021.

    Short sellers are doing whatever they can to avoid becoming another Melvin Capital. That now-defunct fund lost nearly $7 billion betting against meme stocks like GameStop and AMC.

    A Systemic Risk

    However, the public has a right to know about systemic risks to the financial system. Short sales, which can trigger huge losses for hedge funds, could pose such a risk.

    In fact, the Dodd-Frank financial reforms required the SEC to collect more information on short selling. That 2010 law was designed to prevent another financial crisis.

    Wrap-Up

    Hedge funds may have some legitimate interest in keeping their trades confidential. But that is far outweighed by the interest of the public in preventing another 2008.

    What do you think of short sellers? Leave a comment and let us know!

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    More on markets:

    Major Hedge Fund Falls 50% — Billions Lost

    Pelham Capital: A Hedge Fund in Crisis

    Goldman Insider Trader Headed to Prison

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    Photo: “Alec – Mr. Money Bags” by aisletwentytwo is licensed under CC BY 2.0.