Grift, for lack of a better word, is good
The TRUTH edition
Blow the Trump...ets
Let's say you're an aspiring income redistributor (scamster), sorry entrepreneur, and you want to become rich without doing anything, what do you do? Like I have told you many times, scamming gullible VCs, sorry, persuading them to give you their money for free is one of the easiest ways. Take Juicero, for example. The company wanted to make a juice machine; they clearly hadn't heard of a mixer & grinder. Despite that, they raised $120 million from dumbass VCs and shut down😂😂😂😂
If VCs are so stupid, sorry, visionary they deserve to be scammed, sorry, persuaded to give you their money for free. I mean, at this point, it's a sin not to scam them, sorry, it's a sin not to persuade them to part with their money. God won't look down kindly on such unethical behaviour.
So now, let's say you come with an idea to solve climate change. Your idea is to build underwear that captures all human farts and turns them into electricity. Stop laughing, human farting is a leading cause of climate change. I'm serious, here's proof You come up with a new underwear design that captures all human farts, especially after eating Shawarma Rolls and converts them into electricity.
You also add a USB port in the underwear so that people can charge their mobiles by farting. You try to raise funding but everybody laughs at you. Nobody takes your idea seriously. Now, how do you make money from this scam? Sorry income redistribution entrepreneurship?
This is why you should read all the Tipsheets carefully because I have already explained this.
The answer is a Special Purpose Acquisition Company (SPAC). SPAC also stands for "Selling Packaged Crap", so it's perfect for scamming, sorry, income redistribution. If you had fucking bothered to read, you'd know. In the last two years, SPACs have become the go-to route for hardworking scamsters, sorry, income redistributors to raise money for companies that don't believe in nonsense like having actual products, sales, revenues, profits, or even a hint of a business model. I mean, a company that wanted to build UBER for space was able to raise money!
Like a flea to a pile of cow crap
If there's a chance to scam, sorry redistribute income somewhere, you can bet your ass that Donald Trump will be sniffing around. I mean, he's the Lionel Messi of redistributing income. The man scammed his way into being the President of the United States, and he has a lower IQ than the wrapper of those McDonald's burgers he loves. He's bloody orange-coloured, for godsakes.
Despite these challenges, the man, has achieved so much. He's filed for bankruptcy six times. I repeat, six times. He ran a university to teach his real estate success secrets, charged $35,000, and scammed 1000s of people. He's laundered money for the mafia, stolen houses by evicting poor people, and 100 other things.
So, when Trump saw all the people scamming, sorry redistributing income with SPACs, he couldn't resist. After all the income redistribution schemes he's pulled from using undocumented workers, intimidating tenants, breaking antitrust rules to buying his own books😂, little orange Donnie now wants to start a social network, and he's named it TRUTH. I shit you not!
That's not even the crazy part. Even before having an actual product, little orange Donnie is taking Trump Media & Technology—the company which owns TRUTH—public by merging with Digital World Acquisition Corp(DWAC), a SPAC.
Trump Media & Technology Group and Digital World Acquisition Corp. (NASDAQ: DWAC) have entered into a definitive merger agreement, providing for a business combination that will result in Trump Media & Technology Group becoming a publicly listed company, subject to regulatory and stockholder approval. The transaction values Trump Media & Technology Group at an initial enterprise value of $875 Million, with a potential additional earnout of $825 Million in additional shares (at the valuation they are granted) for a cumulative valuation of up to $1.7 Billion depending on the performance of the stock price post-business combination. Trump Media & Technology Group’s growth plans initially will be funded by DWAC’s cash in trust of $293 Million (assuming no redemptions).
The news sent the price of DWAC to the moon. To recap how a SPAC works, a SPAC is also called a blank check company. A SPAC raises money by listing on the stock exchanges. It then has a year or two to use that money to acquire or merge with a company. If not, the money is returned to the shareholders.
DWAC is up nearly 850% in 5 days. To be clear, the SPAC has only agreed to merge with Trump Media. The deal is not done yet and can take months and can fail too. So all this is pure speculation.
That's not even the crazy part. Here are the crazy parts:
Except for a couple of screenshots, the TRUTH app yet doesn't yet exist. There's no business, no revenues😂😂👏👏
It also appears that TRUTH isn't being built from scratch. Trump is basically copying Mastodon, an open-source version of Twitter😂😂
The address of Patrick Orlando, the CEO of TRUTH, seems to be based in Wuhan, China😂😂 Oh, and he has the experience of unsuccessfully starting several SPACs.
Luis Orleans-Braganza, the CFO, is a Brazilian congressman. He also claims to be from a defunct royal family and a friend of the current president, Jair Bolsonaro. He also wants Brazil to go back to a monarchy instead of a democracy😂😂😂
The official location of the company is a WeWork in Miami😂😂
Here's the best one. One of the rules of the social network is that you can't make fun of the social network😢😭
And here's the cherry on the cake, the coup de grâce, if you will. Trump Media wants to replace Twitter, Netflix, Disney, CNN and wants to be the next AWS and Stripe. You can't make this shit up😂😂
Some users were able to access the site and one user was even able to claim the username @donaldtrump😂
Hello WSB, my old friend
I mean, this is genius. This is a grift at its best. A company with no product, shady CEO and CFO, no office wants to compete with Disney, and Amazon has already valued itself at $1.7 billion. This is income redistribution at its best. Congrats, Donnie, you did it. You out scammed the scamsters.
Oh, and to remind you why SPACs are the go-to option for income redistributors (scammers), here are some numbers. The people shilling these SPACs are making money, while the idiots who bought and held them made jack shit. Income successfully redistributed!
These subpar outcomes are not just the case with 2019-March 2021 SPACs. We ran the same analysis for the 85 SPAC mergers since March 2021, and the same patterns hold: enormous returns for SPAC sponsors, low positive absolute returns for SPAC Arbitrage investors and negative returns for everybody else.
Big bad wolves
In the previous edition—which I know you didn't bloody read—I wrote about how big, powerful companies were doing all sorts of shady shit. Now, let's say a small supermarket tries to intimidate another small supermarket nearby, that shit will land the owner in jail for sure. But when big companies fuck around, lie, cheat, steal, kill and ruin the bloody planet, they get a slap on the wrist, a fine and a fucking McKinsey Best Workplace of the year award.
When big companies swing their proverbial huge reproductive organs—metaphorical of course, companies don't have🍆s—nobody gives a shit. Forget one full shit, not even 27 grams of shit. That's a goddamn travesty! Free markets, self-correction my supple and toned ass.
In the previous issue, I had mentioned how ExxonMobil, one of the world's largest oil & gas companies, knew about climate change. Exxon knowingly buried its research and engaged in all sorts of shenanigans for decades to mislead people that climate change and global warming were a lie. Though there has been much reporting about Exxon's deception and fraud, but not much about other oil giants.
I came across this paper by Christophe Bonneuil, Pierre-Louis Choquet, and Benjamin Franta this week which chronicles at all the shady shit that Total, the French oil giant pulled to contribute to climate change denialism. The paper reads like a thriller. These oil companies are real assholes!
Total personnel received warnings of the potential for catastrophic global warming from its products by 1971, became more fully informed of the issue in the 1980s, began promoting doubt regarding the scientific basis for global warming by the late 1980s, and ultimately settled on a position in the late 1990s of publicly accepting climate science while promoting policy delay or policies peripheral to fossil fuel control. Additionally, we find that Exxon, through the International Petroleum Industry Environmental Conservation Association (IPIECA), coordinated an international campaign to dispute climate science and weaken international climate policy, beginning in the 1980s.
Early warnings and emerging accountability: Total’s responses to global warming, 1971–2021
There was also a depressing piece in the Washington Post about how climate change is leading to decreasing water levels in the Tigris and Euphrates rivers and rising salt water levels. This is making miles and miles of farmland useless and has triggered a mass migration.
Killing them softly
It's not just the oil companies who thought that kneecapping humanity with a baseball bat was a good idea. The chemical companies like DupontDow and 3M are even worse. Just like the oil companies knew that burning oil was the fastest way to ensure amazing apocalyptic movies, big chemical companies have long known that the chemicals they manufacture kill people.
And just like the oil companies, they used every trick in the book to mislead people, shift blame and cast doubt on their culpability. This precisely what Chemours, a company spun off from Dupont did when people found out that it was poisoning water in North Carolina:
In an attempt to shape the story, Chemours sponsored studies that played down the hazards of GenX. Damian Shea, a professor at North Carolina State University, produced research for Chemours that claimed that North Carolina’s limits for GenX levels in the water were unnecessarily low. Mr. Shea later said at a public event that he would let his grandchildren drink the water.
Not to mention all the brilliant legal maneuvers to ensure they don't pay for killing people. Johnson & Johnson knew for decades that its baby powder had asbestos, which causes cancer. Baby power, these despicable people were killing babies😐 When people found out and sued J&J, it created a separate company and shifted all the liabilities to the shell company using some legal quirks and that company filed for bankruptcy. This way the main parent company which has billions in cash is off the hook. That's some next level scamming right there:
Johnson & Johnson is drawing criticism after using a controversial bankruptcy maneuver to block roughly 38,000 lawsuits linked to claims that its talc baby powder was contaminated with cancer-causing asbestos. The health products giant used a quirk of Texas state law to spin off a new company called LTL, then dumped all its asbestos-related liabilities — including the avalanche of lawsuits — into the new firm.
ompanies and market concentration isn't always bad. But when they go bad, millions pay the price. All this bullshit about free markets regulating themselves is the corporate version of trickle-down economics, it's pungent horseshit. When you allow the systematic and deliberate hollowing out and capture of institutions designed to keep corporate power in check, all these horror stories of people dying painfully horrific and slow deaths is what you get. But these neoliberal beliefs are like cockroaches, almost impossible to kill.
Stuff you won't read and I won't stop sharing
Trying something new. I've cut down the number of articles and added some TLDR like commentary if you don't have time to read the articles. I've been thinking more and more about curation to help people catch up on things, so this is one small experiment. Leave a comment on what you think.
First thing first, if you missed the previous issue of The Tipsheet:
I loved this piece by Josh Brown, and it's quite spot on. All the craziness in the markets in the past two years has created a profound churning among all the smart old people, particularly the value investing true believers. Several of them couldn't take the pain, shunned the value investing religion and embraced momentum. Some went to the other extreme and embraced crypto, complete with laser-eyed profile pictures. I mean, I'm not judging them, but it's not all of them had a change of heart, based on evidence. It's because, as Josh points out, they don't want to look like dinosaurs. Several of these apostates manage other people's money. I would be extremely queasy about such managers.
The Fear I see these days is a fear of becoming a relic of the past. A fear of seeing your peers catapult themselves ahead of you. A fear of missing out, which has been well documented and has become the spirit of the times we live in.
It's hard to take these contrarians and doomsayers seriously, but I thoroughly enjoy them. They're fun. I read them because you need to know the people on the other side of the trade, but that's about it. For most investors, adventures in contrarianism can be costly. But, I have to admit, being a contrarian can be quite profitable, not from investing, but from selling contrarian themed newsletters, books, webinars, seminars and all that nonsense. These contrarians and doomsayers make more money peddling this shit than from their contrarian investment calls. And the sheep that follow them, well, I hope they can fund their retirement with the cash they sat on for a decade!
Great piece by Ben Carlson on the pitfalls of contrarianism.
Being a contrarian requires patience but you also have to be right eventually. Simply betting against the stuff that’s working isn’t a useful strategy. You also have to nail the timing and have a catalyst that’s going to cause an investment to underperform.
This one again ties in nicely to the previous post. I don't think even Scientology, one of the craziest nutty religions around, evokes strong opinions as much as crypto does. This piece reads like a funny psychoanalysis of people like Michael Burry, John Paulson and Mike Green who made money by being short in 2008. The other thing common among them is that they think Bitcoin is a scam. It makes a nice point about how dangerous it is to let yourself be defined by certain views like a bull or a bear, and how the market doesn't give a shit.
More importantly, these perma-bears command loyal followings. Think of all the gold bugs and the Fed crazies who've been bearish since 2008 and have been sitting on cash, bullish on gold, and long inflation. These people have been punched black and blue. It's one thing to be bearish and another to make money. None of the 2008 bearish geniuses have made money for over ten years. These are the people you blindly want to follow? If you had put a 200DMA on a chart and been long, you'd have more than doubled your money!
Singer, the founder of the $48 billion investment firm Elliott Management, thinks cryptocurrencies are a fraud, but is apparently tired of complaining about them. “Pulling out your hair is an option, though only if you have hair to spare,” the balding 77-year-old Singer wrote in his first-quarter letter to investors this year. “We continue to press on for the day when we can say, ‘We told you so.’”
On the other hand, I read this piece which argues that you need to have a certain irrational and dogmatic belief in your framework or investing rules. I'm not sure how I feel about this, but worth a read:
So, what I am arguing is that developing a framework, an unwavering dogma in the face of uncertainty is the surest way to tackle the vicissitudes of markets, and avoid proactive errors. Now that we have an example of what to avoid and how it masquerades in complex solutions, academic accolades, and short-term adulation, let’s now enter into the world of men whose principles will last longer than their bodies.
ProShares Bitcoin Strategy ETF became the first Bitcoin ETF to be approved by the SEC. The underlying here is Bitcoin Futures and not actual Bitcoins. Dave Nadig dives deep into the structure. Couldn't help but wonder just how crazy and complicated the structure is, not to mention all the known unknowns and unknown unknowns. But the demand for this ETF is nuts. It launched on October 10th and already has $1.2 billion of AUM.
Trillions, the book about the index fund revolution by Robin Wigglesworth, came out recently. I'm a huge proponent of index funds because a large majority of actively managed funds suck. These asset managers are modern-day rent-seekers. They are a net negative, meaning whatever alpha they generate becomes their fees, and the end investors get the🍆. Predictably, trillions have flown out of these costly, useless active funds into low-cost index funds worldwide.
This Economist piece gives a nice outline of the book, and there were a couple of interesting things in the article. There's been a lot of hue and cry, mostly by these same useless active managers, that index funds are ruing the markets, distorting prices, and reducing liquidity. I say horseshit! The real things to worry about this gigantic shift from active to passive are these two things:
An obvious one is that index funds hand power to the companies that compile the indices. Once-dull financial utilities that reflected the performance of markets, such as msci, s&p and ftse, now help shape them instead.
Another concern is corporate governance. BlackRock, State Street and Vanguard, the three titans of passive investing, together own over 20% of large listed American firms (among other things).