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The big lessons from the big crypto crashes. It’s us.

Crypto crashes say nothing about crypto.

They say all about us.

We are desperate investors desperate to believe.

Charismatic promoters step in to fulfil our needs, also called our fantasy.

We convince ourselves. The promoters help.

Sam Bankman-Fried had a bunch of new wrinkles including big charity gifts, giving money to politicians,  and a quirky personality that some confused with genius.

He was stupendously successful at raising money. Wrote the New York Times, “As recently as July 2021, FTX raised $900 million from, among others, Sequoia Capital, Daniel Loeb’s Third Point and SoftBank Vision Fund, which had previously written down billions of dollars in investments in Uber and WeWork. In January, a Series C round raised an additional $400 million.” …

“Six months ago, Bankman-Fried looked to the outside world like some mix of George Soros and Bill Gates, Laurene Powell Jobs and Leonard Leo. Now the comparisons are less flattering: to Bernie Madoff, of course, and to Elizabeth Holmes of Theranos, even though Bankman-Fried has not been charged with any crimes; also to Adam Neumann of WeWork, Travis Kalanick of Uber and the other iconic start-up hucksters of this strange venture-capital era.

“But those founders were, for all their delusions and sociopathy, pitch-deck visionaries — persuasive proselytizers for not just new products but whole new worlds that could be simply invested into being.”

I’ve had my share of Bankman-Frieds — in biotech, in distress real estate, in bottled water, in crappy hedge funds, in the Internet in China, in fintech. In all, I really wanted to believe. Really, with my heart.

They don’t sell. I believe.

Yet none produced anywhere near the returns I generated with businesses I thought of, managed and then sold.

Many I invested in with impeccable credentials and lost 100%.

I’ve been calling my friends. “How do you know if someone is honest and competent?”

The answer I’m hearing is “You don’t.”

You can check references. But how about this, which I just read here in a piece called  Top 26 Warning Signs Of Investment Fraud:

You also can’t trust an investment just because someone you know made big profits. Con artists will often pay the first few investors large returns so that they will refer the investment to their friends.

Many investment frauds spread like a virus because self-deceived investors “talk up” their great returns at social gatherings. Don’t be deceived.

Go back to my dear honest friend, Todd Kingsley, whose famous mantra is “When in doubt, stay out.”

The upshot for me  today, Fall 2022? I’m sticking with my successful managers, putting money into treasuries and selling VGT short.

I’ll write more  on this gruesome subject again.  But I’m past my afternoon nap time.

Meantime, please read the New York Times brilliant article, “What Stage of Capitalism Is Sam Bankman-Fried?” Click here.

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+ You need a fifth covid shot and a flu shot. Without them, you won’t have a happy Christmas.

+ Watch out for the last step going down. I repeat this endlessly because we keep falling on the last step going down. We’re in a hurry. We think we’re invincible. Kapow! We twist an ankle.

See you soon. —Harry Newton