- Mark joined legendary financial author Addison Wiggin for a chat.
- They covered gas, diesel, and FTX, among other topics.
- We’ll show you a snippet of their conversation with respect to FTX.
This is piece is part of a conversation I had with Addison Wiggin this past Tuesday. We covered a few topics, but I thought I’d shift gears for a second and talk about FTX and how it’s impacting the market.
Enjoy!
On FTX:
Addison: FTX just declared bankruptcy. They went from 35 billion to zero in what? Eight days or something like that. That impacts the market outside of any kind of speculative area.
People are betting on cryptos. That's their own choice. They can do whatever they want. But when something big like FTX happens, it impacts other areas of the market.
Mark: 100%. Because when you look at those billions of dollars, that was money that went to FTX and not to another industry or company.
We were talking before about somebody that didn't invest with me back in November of 2021.
Instead, they doubled down on FTX and it's like, well…
And their comment to me was, well, in three months I can more than double my money, and you are telling me that you're going to have unlevered returns of 17%. So why would I go with you at 17% unlevered where I can go over here, and I can get 50% every three months?
And my comment was, well, that ends when rates go up, and it's absorbing capital.
And I'm just speaking from a small position.
But if you extrapolate that out and you look at the companies that were invested in FTX, from SoftBank down to Renaissance, you're looking at massive capital that was absorbed. That capital could have gone somewhere else, somewhere more useful if literally anybody did an ounce of due diligence.
But regardless, apparently some 29-year-old was going to unseat the US dollar. With what Navy?
I don't know. But that was the mindset. And you had this movement of capital.
But now as people are forced to do more diligence, I think you're going to get that redistribution of capital, which happens in the business cycle, which is why we have business cycles to send these dumpster fires, for lack of a better term, into bankruptcy.
And then if there's value there, you'll come out of bankruptcy a better company. And if there's not, you go into liquidation and people take their lumps and bruises and they go invest a different way.
Addison: So, let's talk about value itself. What is it that people saw in FTX first, and then what is it that you look for when you're investing in… In terms of intrinsic value is probably the best way to say it, right?
Mark: It’s funny. I'm not really quite sure what people saw in FTX, but it was the view that exchanges were going to be a means of transactions.
It was going to be a means of movement, of product and move crypto into the mainstream as a free movement of capital.
But when I heard somebody describing yield farming, I kind of looked at them and I was like, “You just described a Ponzi scheme.”
And they're like, “Oh, no. It's yield farming.”
I said, “No, I heard you. That's literally a Ponzi scheme.”
Now you're seeing it in terms of the knock-on effect bankruptcies because there was so much cross-communication, so much doubling down of collateral, that this was never real money.
It was essentially this built-up nonsense where everybody was relying on everyone else's balance sheet and then doubling it down to show reserves.
When I'm looking at something, I'm old school, which has probably worked against me over the last couple years.
I want physical assets.
And the reason why I say that is because when I look at the world right now, we're going from an inflationary into a stagflationary basis and then likely a deflationary cycle.
So, I want to own things that are going to be cash yielding and be what I like to call “recession resistant.”
I hope you enjoyed that snippet of my conversation with Addison.
There’s lots more where that came from. But the YouTube video isn’t out yet.
So, I’ll keep sending out snippets of our conversation until it comes out.
Until then, have a wonderful Thanksgiving!
All the best,
Freedom Financial News
