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How to find your pleasing investment — among bitcoins, cyber-security stocks, stablecoins, spacs and other wonders of today’s booming markets

It’s my birthday. I’m 79. Old, but it feels god. I won at tennis this morning. I normally lose.

What feels less good is the nagging feeling I ought to be more aggressive — do something to finehone my “brilliant” investment strategy which actually seems to be working. God forbid. Tech stocks. Opportunity stocks. Syndicated commercial and residential real estate. No bitoin. No cannabis. et

Everyone is lauding their crypto and spac successes at me.

I’m stuck deerlike in the car lights, frozen. I’m reading, studying to find The Great Insight to share with you, my readers (and myself).

Then this aritcle.

Which comes with this incomprehensible chart:


The caption on the chart is “The total supply of stablecoins has exploded over the past year, with US-dollar-pegged cryptocurrencies surpassing $100 billion in May. Coin Metrics.”

Business Insider published the piece,. It explains:

But there is one form of cryptocurrency that is still angling to replace the credit cards and cash in your wallet. Stablecoins, which peg their price to physical assets outside the cryptocurrency space, aim to combine the best of both worlds. Like traditional cryptocurrencies, they enable users to make transactions quickly, cheaply, and privately. But like regular money, their value is fixed to currencies such as the dollar, or to commodities such as gold. That means they aren’t susceptible to the wild price swings that have plagued bitcoin. And they can be redeemed at any point for their backing assets, which makes them feel safer and more trustworthy.

The result has been what some observers are calling a “stablecoin invasion.” Tether, which maintains a one-to-one peg against the US dollar, is now the third-largest cryptocurrency, right behind bitcoin and ethereum. According to a recent report, there are now at least 200 stablecoins in the market or under development, including USD Coin (USDC), Binance USD (BUSD), Dai (DAI), TrueUSD (TUSD), and Paxos Standard (PAX). In the first five months of this year alone, the supply of stablecoins pegged to the dollar more than tripled, to $100 billion. “The pace of growth has been just astonishing,” said Nic Carter, a founding partner at Castle Island Ventures.

This gets crazier and crazier:

The financial reliability of dollar-backed stablecoins is already getting a real-world test in countries where local currencies have been rendered worthless by hyperinflation. That’s especially true in Venezuela, where decades of rampant mismanagement and corruption have fueled one of the worst hyperinflations in history. As of April, annual inflation in Venezuela was running as high as 2,941%, driving down the minimum wage to just $3.30 a month. Five pounds of chicken that cost 14 million bolivars in 2018 would still cost almost 7 million bolivars today, even after government-initiated curbs on inflation.

And the illustration:

I can’t get this chicken out of my tiny brain. It looks like it’s doing yoga pose, headless. I’m sick.

You can read more about stablecoins in Business Insider here.

Harry’s Short History of Finance

The history of finance is booms and busts.

Every boom starts with hype — often a new asset class — bitcoins, ethereum, stablecoins, spacs, tulips, dot-coms, syndicated mortgages.

Asset values skyrocket. Everyone gets rich. Until they don’t.

Despite much academic research no one knows when the party will stop and prices will plummet.

In booms you can’t apply “normal” measures — like P/E ratios or dividend yields, because often there aren’t earnings or dividends. Just enthusiasm.

Today, we have several booms — crypto currencies (e.g. bitcoin and ethereum), meme stocks (AMC, GameStop, Wendys), spacs, technology stocks (e.g. coinbase, new nuttiness (like cannabis), special situations (like Beyond Meat, Yeti, Generac, Zoetis, Moderna, and Roblox) and “opening” stocks (like the cruise lines and the casinos.)

There are three keys:

+ Don’t borrow to buy madness. I hear some people bought bitcoin on ten to-one margin. That means they put down $10 to buy $100 of bitcoin. That gives insanity a whole new meaning.

+ Take some profits. When prices go parabolic — straight up, sell something for real U.S. dollars you can buy something with. Susan just bought a beautiful new jacket from LL Bean. Big spender!

+ Don’t invest your entire life savings in insanity. You can afford to lose 10%. So, gamble with 10%.

When I Googled Bitcoin Price Chart just now, I got:

Spacs are the greatest latest craze

Remember the history of finance is inventing new ways to get people to part with their hard-earned money in the hope they’ll get rich beyond their wildest dreams.

Spacs are empty companies. Investors give them money, which the spac promoters use to buy companies, take them public, then list them on a stock exchange so you and I can buy the shares which will rise.

Spacs are the new way to go public. Their big plus is they avoid having to file all that boring, time-consuming paperwork with the regulators and get their blessing (or not) to go public. Which takes time and money.

Spacs can be faster.

For their spac promotions and hyping, the space promoters often receive a 20% fee.

Yup, 20%. you read right.

The most fascinating article ever written on spacs is from this week’s New Yorker:

It contains many delicious paragraphs. This is one of the most tasty:

Palihapitiya’s work at Facebook seems to have convinced him, earlier than most financiers, that social media offered a fast path to prominence. But the medium had to be harnessed in specific ways: it required ever-changing narratives, unexpected intimacies, and controversial declarations that spurred emotional reactions. “The simple and the most important thing I have to be is authentic,” he told me. “There’s not a thousand people reading my tweet before it goes out.” Palihapitiya nevertheless offers a curated authenticity: photographs of his six-pack abs on Instagram; lamentations that he offloaded bitcoin too early. His social-media feeds make people feel that they are glimpsing behind the curtain, but the posts are never so candid that they risk turning people off. He told me, “I’m a person that makes a ton of mistakes. I’m a person that sometimes tweets a picture of his abs. It means nothing, and it means everything. It means that I am like everybody else.” Yes and no: some of Palihapitiya’s “mistakes” are relatable, but others involve him spending millions of dollars. In any case, his brash approach was also adopted by other Silicon Valley influencers, including Elon Musk, and also by politicians. “Chamath was Trump before Trump,” a former colleague of his told me.

You deserve to read the full fascinating article. It’s totally engrossing. Click here.

The English Financial Times has a piece called “Bill Ackman’s Universal Music deal heralds the era of Space 2.0.

This is Mr. Ackman. He’s a serious young man. Rich, too.

You can read it here.

It’s my birthday. Guess what I received?

That’s Eleanor with Frisbee, their new puppy. That’s Peter, the aspiring chess champion.

Favorite church signs

How Cramer affects share prices

Last night Cramer really hyped Crowdstrike (CRWD), the cyber-security company.

Predictably, the stock exploded for the first half hour of trading today. Then dropped.

I bought some on the dip (I already have a bunch). And so far, I’m up a few pennies. I’m a genius.

Growing old cracefully

There are three keys to growing old:

+ Keep moving. Except on the bottom step.

+ Stay married to the one you love.

+ Have grandkids who pay you huge attention…

… when they’re not glued to their iPads. (Which is never.)

See you tomorrow. — Harry Newton