Welcome to the Tipsheet number 35.
I know all of you want to make money fast and get rich quick. This newsletter has been called The Economist and The Financial Times for getting rich schemes. As the editor, it’s my duty to ensure you become disgustingly rich, stunningly fast. So, this week, I wrote about magical money trees that just give you free money.
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Adventures in cryptoland
Magic money tree
Look, unless you've been watching Sadhguru videos or reading some book like the Monk who sold his underwear, we all want to be rich. Nut just rich, disgustingly rich. Warren Buffett rich.
See, there are two ways to make money in the markets. You can be an idiot, buy boring stocks, bonds, and believe in made-up nonsense like asset allocation, SIPs, valuations and hold till death. It's nonsense, but the odds of it working are decent in the long run. You can expect high single-digit to low double-digit returns. That is unless Japan happens. Or, you can invest in scientifically proven and verified magic money trees like crypto and make 1-5% daily. Yes DAILY! #CryptoPower
Kangana Ranaut famously said, "no risk, no rusk", and that applies here as well. You don't get rich quick by investing in stocks and bonds and starting SIPs. By the time you become rich, you'll be in your 60s. At that age, the only things you want to spend your money is on getting a rocking chair, an orthopaedic butt doughnut cushion and better medication for your gas problem.
But not anymore. In cryptoland, we now have magic money trees that can make you Warren Buffett rich in a couple of months, guaranteed.
So the way to be Warren Buffett rich is by yield farming or liquidity mining. Here's how this works. There are decentralized finance (DeFi) crypto protocols on the Ethereum blockchain. You can stake or lock in your assets to provide liquidity, and in return, you get a portion of the transaction fee and other crypto tokens as incentives. Some of these pools offer as high as 1065871.07% yearly or 2920.19% daily.
Can you name a few so-called "quality" or "value" stocks that can offer returns like this. If 1,000,000% a year is a little too risky for your appetite and you're ok with being Kamaal R. Khan rich, then there are lower risk magic money trees.
Iron Finance was one such protocol, and you could make 4-5% daily guaranteed. If you're curious about what these projects are, let me use Iron Finance as an example. In the real world, we have fiat currencies like rupees and dollars. But the crypto world hates fiat currencies, which is why crypto exists in the first place. So, they needed a digital equivalent of a dollar. Something that could remain stable and be used for parking liquidity, for example.
So, stablecoins were created. There are fully collateralized stablecoins and partially collateralized stablecoins. Each stablecoin is backed by some assets, either actual dollars, deposits, bonds, or other cryptocurrencies. For example, USDC is a fully collateralized stablecoin backed by dollars. One token of USDC (Stablecoin) = 1 dollar (USD). DAI, another algorithmic stablecoin, is overcollateralized to the tune of 150% by cryptocurrencies like Ether, BAT, COMP etc.
IRON, In crypto parlance, is what's called a partially collateralized algorithmic stablecoin. Meaning unlike a fully collateralized stablecoin like USDC, where 1 USDC = 1 dollar (USD), 1 Iron was only equal to 0.75% USDC or USD. The remaining 25% was a token they created called TITAN. It used a floating collateral mechanism to adjust the supply of TITAN tokens to maintain its peg. When was the last time your stupid fiat currencies were this innovative?
At its peak, you could make Rs 1000 a day on Rs 25000. That's how you can be Buffett rich. So the way Iron maintained its peg to the dollar was through an arbitrage mechanism described in this image by Jon Wu:
You might be wondering about the risks given the high returns. Friends and future Buffetts, there aren't too many risks, to be honest. The only risk I can think of is you losing some of your money, and that's not a big deal. You can always borrow more money, steal from your parents, become Buffett in 1 month and pay it back. So, if you think about it, there are zero risks. This is a guaranteed get rich scheme.
Now, as you start Googling, you will find out that the TITAN token went from $60 to $0 in 5-6 hours. It's true but what happened was that there was a flaw in the way the IRON finance was designed. Due to the flaw, their arbitrage mechanism failed. Otherwise, IRON would've reached the moon by now, and it was already heading there.
To ensure that you sidestep these risks, here's the gist of what happened:
The important thing to remember here is that when you're redeeming iron at iron finance you were getting an amount of USDC and TITAN token that in conjunction were supposed to sum up to a dollar. But the amount of TITAN token you were getting was based on a price that was on a 10-minute TWAP. So if you had a sudden sell-off well the TWAP price was much higher so the amount of titan you were actually getting wasn't sufficient enough to actually go out and be able to redeem a full dollar's worth. You're actually getting less than a dollar which meant that if you were trying to perform this arbitrage you actually couldn't buy a dollar's worth of IRON anymore you could not re-peg IRON token so if you get a sell-off that then invites a panic people go "oh i just went from $4 dollars up to $60, i really want to lock in my gains here and everyone starts selling and the price never gets back above that 10 minute TWAP. it's unlikely that you're basically going to get to the re-peg and that's exactly what happened and within 24 hours the titan token went from $60 plus dollars to $0.
So, if you think about it, it's not a big deal. Sure, TITAN went to zero. But if you had timed your entries and exits, you would be disgustingly rich. That's the secret of being rich, not bullshit like buy and hold. This is a small bump on the road to riches.
Some people have labelled yield farming and decentralized Finance (DeFi) as degenerate finance because of all the scams, frauds, rug pulls, and the billions of dollars lost. It's true, but today's degenerative finance is tomorrow's regenerative finance. Ignore the whining of all the so-called smart and successful people who know what they are talking about. They are clueless, and they'll be poor, unlike you!
Moral of the story
If you thought the moral of the story was that crypto is risky and that you shouldn't invest in it, then you're an idiot and deserve to be poor. The moral of the story is that crypto is risky, and you can lose your money, but you can always make it back. To avoid the risks, you need to get in get out at the right time. In other words, you need to time the market. Certain people who quote Warren Buffett will tell you not to time the market and to buy and die. That's the reason why they remain poor. You don't have to buy their nonsense.
It's the same bullshit these people tell about penny stocks being useless and that you should invest only in "quality stocks". But these people are liars. Look at the performance of your quality stocks like HDFC, Reliance, Kotak, and Unilever in the last 1 year. They've failed to beat Suzlon! Quality my ass.
The second moral of the story is that the crypto space is a brilliant opportunity to make quick money. Look, there are 4 ways to get rich. The easiest way to get rich is to be born rich, but that's not in your control. However, you can marry rich, become a fund manager, get a job, save money, and get rich. But all these things are slow as hell and lame. By the time you become rich, you'd be in your 50s. What will you do with all that money? At 50, the only desire you will have is to get rid of those damn kidney stones.
But there is a way you can get rich even if you are just 15 years old. The only thing you need to know is how to code or a friend who can code. So, here's how. You can create a DeFi project like IRON Finance. Let's call it Magic Money Tree. Give out a generous token reward. Let's call it the APUNBUFFETT coin. Now, there are plenty of crypto writers who'll write anything you want for a few dollars. Pay a few to write articles that APUNBUFFETT coin will replace the Indian rupee and US dollar. Pay some of these influencers on Twitter & TIk-Tok to talk about the APUNBUFFETT coin.
The degenerate yield farmers will flock to Magic Money Tree to get APUNBUFFETT coin, and the price will go up. Since you created the project, you can either hold a lot of the supply of APUNBUFFETT coin, sell them and make money. Or leave a vulnerability and hack it once there's a good amount of money and YOU BUFFETT. Since crypto is anonymous, you don't have to worry about getting caught.
Get rich fast and furious
Are you wondering if there's any other way to be as rich as Buffett without going through the hassle of pumping DeFi shitcoins or risking money by timing shitcoins? Dude, come on! Of course, there are. What's the one thing that more profitable than real trading? Guess. No, I'm serious. Take a guess.
Fake trading. Raees and Ameer Cajee are just 18 and 20 years old, but they are goddamn geniuses. Recently, they pulled off the largest ever crypto scam worth $3.6 billion. As the writer of the Financial Times for aspiring scams and frauds, I'm proud.
So how did they pull it off? The Cajee brothers started Africrypt as a crypto trading, payments solutions and consulting firm. Look, starting a scam company is just like starting a fraud company, you need to get the basics right. You need to pick a market with a large Total Available Market (TAM), focus on a genuine problem, and you need to find a favourable regulatory environment. The Cajee brothers ticked all boxes.
Large TAM✔: The Cajee brothers went after the oldest TAM in the world: greed. The number of greedy people worldwide is bigger than any other customer segment.
People want high returns✔: The Cajee brothers promised between 2-11% a month - risk-free.
Know your customers✔: They started in South Africa, the home market where they knew their audience.
Favourable regulatory environment✔: They didn't pick South Africa (SA) for nothing. There are no crypto regulations in SA. Here's a statement from the Financial Sector Conduct Authority (FSCA), the financial regulator of South Africa:
The FSCA confirms that it is aware of the concerns regarding investments made by the public in Africrypt (Pty) Ltd. and that we are continuing to investigate complaints for indications of whether or not a financial product or service was offered to the public, which would have required Africrypt to be registered with the Authority. At this stage we have only found evidence of crypto asset transactions. Currently crypto assets are not regulated in terms of any financial sector law in South Africa and consequently the FSCA is not in a position to take any regulatory action.
This was like taking candy from a kid. That's called having a vision. If the Cajee brothers had instead wasted their time building an honest🤮startup, they sure as hell wouldn't have made billions.
Not just this, if you remember my earlier post on how to run a Ponzi scheme successfully, I had written about the importance of a good presentation:
So the lesson from the Bernie Madoff scheme is to not commit fraud. It’s to focus on the presentation, they can make or break your Ponzi scheme. It’s all about the presentation, presentation, presentation.
And the Cajee brothers got it right.
Our AI driven trading platform is a world-class trading platform that uses complex deep learning, machine learning algorithms to effectively and efficiently trade automatically without human intervention.
All the right ingredients to attract the dumb and the greedy. The Cajee brothers also showed what to do if things go south. Unlike Bernie Madoff, who got caught, the Cajee brothers just took the money and vanished. Before absconding, the Cajee brothers used a brilliant ploy to buy time to prepare for the escape:
On 13 April, chief operating officer Ameer Cajee wrote to Africrypt clients announcing the firm had halted operations because of a hack. "Our system, client accounts, client wallets and nodes were all compromised," he wrote. The letter advised investors not to pursue the "legal route" as that would "only delay the recovery process".
Congratulations on your success Raees & Ameer.
The 'I" word
Inflation is the worry of the season...again. We keep getting these bouts of inflation freakouts once in a while, but they've mostly been false alarms.
Inflation across most developed economies has been pretty much dead for nearly a decade. But inflation rates and commodity prices have spiked across major economies this year. The rise in inflation is due to a confluence of factors ranging from pent-up demand from the lockdowns, global supply shortages, the global shipping crisis, and base effects, among others.
There's a shrill debate underway between the "inflation is back" vs the "this inflation spike is transitory" camps. Like most things, predicting inflation is hard. Just ask John Cochrane:
Is persistent inflation around the corner? Inflation and commodity prices are up sharply. The latest Michigan survey shows people expect 3.7 percent inflation next year. Shortages of everything from lumber to semiconductors have raised input prices for businesses, while the percentage of small businesses reporting that they cannot find qualified workers is at a record high. The ingredients are in the pot, and the fire is on.
But will the pot boil? Since 2008, observers have warned of imminent inflation, yet inflation has barely budged.
Inflation is hard to foresee, because inflation today depends in large part on what people expect of inflation in the future. If businesses expect higher prices and wages next year, they raise prices now. If workers expect higher prices and wages next year, they demand higher wages now.
But, inflation is showing up in some weird corners. Used car prices have soared in the US. It must be all that pent up wanderlust. Flipping used cars post-pandemic has made some serious money. Used vehicle prices were up nearly 50% year on year (YoY) in April 2021 and fell 14% over May and June. But the prices are still up 36%.
Not just vehicles.
1. There's some serious inflation in the price of Pokémon cards. If you thought NFTs were crazy, the mania around Pokémon cards is equally crazy. So much so that Target has had to get extra security at some of its stores.
PSA, the most popular grading service, has published card grading wait times of up to 10 months but collectors say they have at times waited for more than a year to get certain cards graded. BGS’s published wait times are “Approximately 9+ months.”
Meanwhile, prices for things that are ancillary to trading card collecting, including cheap plastic sleeves, hard plastic “Top Loaders,” and another type of card protector called "Card Savers" which are required for submitting cards to be graded are also skyrocketing in price. A collector I know has begun to simply buy Top Loaders from Chinese wholesale websites and sell those on eBay rather than deal with Pokémon cards at all. Target stores around the country have lines around the block every Friday morning and the company has begun to consider whether it might have to call the cops to prevent people from camping out overnight.
"Sex toys are often recession-proof," says Alexandra Fine, CEO and cofounder of Dame Products, which makes sex toys and accessories. They offer something that's especially relevant right now: "a mix of at-home entertainment and at-home wellness."
3. Grooming products, too, are flying off the shelves. With economies reopening, I think the hairy bear look that was fashionable for the past year seems to be going out of vogue.
I went down the ransomware rabbit hole a few weeks ago, and since then, there were more developments. Ukraine authorities raided and arrested 6 members of a notorious ransomware gang called CLOP. Over the years, the group was responsible for over $500 million in damages. The list of their victims included Shell, SingTel, and Stanford University, among others. But it turns out the gang is still operational. Goes to show just how hard it is to root these groups out.
Binance, one of the largest crypto exchanges, was apparently instrumental in the arrests, given that Binance is one of the leading destinations for money laundering. The crypto crazies sure won't like the news.
Kevin Beaumont had a really nice piece on just how big of a nightmare ransomware is.
In a couple of previous issues, we had seen how the global shortage of semiconductors is wreaking havoc everywhere. And we finally see the fallout as electronics manufacturers have started to hike prices.
Consumers are starting to feel the pinch. Prices of popular models of some laptop computers have crept up over the past two months, among other electronics becoming more expensive at retailers. A laptop geared toward videogamers—made by Taiwanese manufacturer ASUSTek Computer Inc. —that Amazon lists as its bestseller rose from $900 to $950 this month, according to Keepa, a site that tracks prices. The cost of a popular HP Inc. Chromebook rose to $250 from $220 at the beginning of June. HP has raised consumer PC prices by 8% and printer prices by more than 20% in a year, according to Bernstein Research.
Though there been a flurry of announcements about new chip fabrication plants by TSMC, Intel, Samsung etc., that will take years, so this shortage could last through 2022 and probably into 2023. Consumers will have to brace for price hikes in everything from gadgets to cars.
For all the degeneracy in decentralized finance (DeFi), not all DeFi projects are totally worthless. The mania in the space resembles the ICO scams in 2017-18. The whole premise is DeFi is to build an alternative financial system from scratch. Today there are DeFi products for pretty much every traditional financial product like lending, insurance, derivatives, exchanges, identity layers, stablecoins, and asset management.
Of course, a disproportionate amount of these projects are useless. They are mostly created to encourage gambling. Most of these projects are also active because of the worthless governance tokens being distributed as incentives. Tokens, which in turn are being staked again or sold for a profit. So, there's zero use to all these things.
Like the ICO mania, this DeFi wave will end in tears and just like the post-2018 crash, we will probably have a long DeFi winter. But it would be foolish to write this thing off as 100% worthless. I have a feeling we'll see some protocols that will stick around and flourish, and it's worth keeping an eye on. I'm a noob, and I've been trying to go down this DeFi rabbit hole. Here are few links that you may find useful.
Our world is infinitely complex. We are, too. That’s why we cannot predict, tame, or control the future. Therefore, an overly simplistic analysis – guided perhaps by a singular variable – is a recipe for disaster. Complex solutions don’t offer more but cost a lot more. The best we can hope for is to create and test an appropriately probabilistic outlook, recognize its limitations, and act accordingly.
Spending determines everything when it comes to reaching financial independence. Therefore, if you can find ways to be happy while spending less, you already own one of the most valuable assets in the world.
Related: Avoid these mistakes while planning for retirement
It’s the same for people. Instagram is full of beach vacation photos, not flight delay photos. Resumes highlight career wins but are silent on doubt and worry. Investing gurus are easy to elevate to mythical status because you don’t know them well enough to witness times when their decision-making process was ordinary, if not awful.
But it’s always hard to know where anyone sits on that spectrum when they’ve carefully crafted an image of who they are. “The grass is always greener on the side that’s fertilized with bullshit,” the saying goes.
For once let the volatility of the stock market work in your favor and spread out your investments at different market levels. Coming up with a process after you get out of the market will help you create a more comprehensive plan that you can use with future investments. And aligning your risk tolerance with your investment choices will allow you to stick with your plan in the future without making decisions that will make you nervous.
6. The “R” Word
My disdain for retirement, the “R” word, comes from its insidious focus on a future that doesn’t exist. A future where you are a different person who suddenly gardens or plays piano. The reality is your retired future is spent worrying about new things. Your health. Your fixed income. The dream of retirement is sold in an opiate-of-the-masses manner. Like heaven and its pearly gates. But everyone knows the anticipation of a vacation is better than the destination. Why do you think it would be any different with “retirement”?
Ethereum smart contracts are such programs. They are deployed and run on Ethereum, which is a distributed network of computers that ideally cannot be censored or stopped. Ethereum has a richer programming language, along with the notion of a smart contract having monetary deposits, and other arbitrary data. Using this setup, one can write a smart contract that represents the charitable organization that we saw earlier. In fact, back in 2016, when Ethereum was still in its infancy, exactly such an organization was deployed as a smart contract on it. It was called The DAO, or the decentralized autonomous organization.
Remains of the week
Life of a Wall Street whistleblower. Pandemic Progress. We Don't Know, But Let's Try It. Poison the data that Big Tech uses. A slice of Dual Momentum. Millennials, the Wealthiest Generation. Marc Andreessen, VC and tech pioneer. Will The Fed Keep Inflation Contained?. Avoiding Disasters with Catastrophe Bonds.
Don’t be greedy. Share this with your friends so that even they can be as rich as Buffett.
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