The year was 1982. The state of Illinois handed Bag a Driver’s license - and his 10-speed bike became a thing of the past. The entire Chicago-land area was now Bag’s playground. So where does a newly minted driver with a penchant for gambling choose as one of his first destinations? Riverboat casinos with all-night poker games seemed an obvious choice, except back then, the riverboats were new, and thus under considerable regulatory scrutiny. While Bag was old enough to have a driver’s license, he was not old enough to get on those boats. So, to scratch the gambling itch, Bag was forced to go where they didn’t care much about underage gamblers. For Bag, that place was the Balmoral horse-racing track in Crete, Illinois.
Balmoral was built in the 1920s, strategically located just outside Cook county; in a poorer, more desolate, and UN-regulated Will County. Without all the government oversight of the other Chicago area (Cook county) race tracks, corruption was rampant at Balmoral. They were plagued with race-fixing scandals like this one involving one of Bag’s favorite go-to jockeys. With corruption like that, it was no surprise Balmoral was willing to look the other way when an underage teen wanted to place a bet. As a result, Bag spent many nights there, often with friends, handi-capping races. We used three main criteria to pick winners: the horse itself, the stable which trained the horse, and the jockey. All potential candidates were then screened through the filter of the risk/reward being offered, aka the odds. Our best results were on the VERY rare occasions when all three criteria were in our favor, and we were provided good odds to boot.
As it turns out, Bag could not have asked for a better education than the one provided by Balmoral, as it was the perfect microcosm for modern-day investing. Consider how most people approach investing: You can bet the Horse (a specific stock, property, business, etc..). You can bet the Stable (Stocks, Bonds, Real estate, precious metals, crypto, etc.…). Or you can bet the Jockey (who is on my side of the trade). Just like with the track, it is tough to find investments with a favorable risk/reward where all 3 of those criteria are to your liking. So when it comes to Bag’s investment dollars, which he has worked hard to accumulate, unless it’s the right horse, from the right stable, with the right jockey, for the right price….Bag won’t play.
This brings us to the subject of today’s Blog, handi-capping investments. Let’s start with a no-brainer example, one of Bag’s favorites, Gold & Silver. With rampant inflation - stocks, bonds, Real Estate, and crypto all face significant headwinds, while precious metals have a tailwind. So the stable is good. As for the jockey, Central banks are accumulating Gold in record amounts, while the public despises the entire Precious metals sector. There is no trade in the planet's history in which the general public was correct while the central banks were wrong, so the jockey is good. As for the horse, well, there are only a few horses available in precious metals. Why not bet on all of them? By building a position in Gold, Silver, and Platinum (and certain types of jacketed lead as well, even though lead is technically not precious) - when the metals do take off, we are guaranteed to be a winner. With the Stable, Jockey, and Horse all favorable, the only filter left is price. Bag would suggest, by any metric you want to use, Gold at $1700 & Silver at $21 are ridiculously cheap.
Let’s now contrast metals with another investment pulled from recent headlines…FTX. As Bag has written about long before FTX blew up, crypto faces massive headwinds in an environment with rising interest rates. So the Stable is no good. As for the jockey - Tom Brady, Shaq, and Larry David - to name a few have all been pimping FTX. If Bag wanted someone to throw a football, he would hire Tom Brady. Or write a comedy; Larry David is pretty …pretty…pretty good. Or dunk a basketball, Shaq would do. But dole out financial advice??? Bag would lay a 100-1; none of these guys has a clue on how to read a balance sheet. So the Jockeys are no good. As for the horse, click on this video below to see the person in charge of investing BILLIONS of dollars worth of client funds for FTX.
Are you fucking kidding me??? Bag wouldn’t put this broad in charge of cleaning up dogshit in the backyard, let alone managing money. To put it bluntly, anyone with funds at FTX, where this woke wood nymph was making the decisions, DESERVES to lose all their money. Meanwhile, the price of FTX (tokens) and crypto, in general, have been plumbing new highs for most of the last couple of years. Anyone who sent FTX money recently was paying a record-high price, for a lousy horse, from a poor stable, with ignorant jockeys. For lack of a better term and in keeping with the theme, Bag would call that the Trifecta of stupidity.
Scarier still is the business model of FTX. In short, it was to facilitate the purchase of various cryptocurrencies. You send them dollars, and they open an account for you where those dollars are turned into FTX tokens which can then be used to purchase whichever cryptocurrency tickles your fancy, with the click of a mouse. While you are doing that, FTX takes your dollars and invests gambles with them. When you get down to it, there is no difference between the FTX business model (of facilitating transactions & investing) and that of, say, JP Morgan, Wells Fargo, BofA, or any other bank you want to name.
Circling back to the Balmoral track, it wouldn’t be a stretch to say the complete lack of oversight fostered corruption & poor decision-making, eventually leading to permanent closure in 2015. FTX is in bankruptcy court for the exact same reasons - no oversight and poor decision-making. When the great depression hit in the 1930s, laws were passed that prevented banks from speculating in financial markets with client funds. One by one, those laws have all been repealed in the last 25 years, leaving an environment where banks can freely gamble at will with client funds. The Bank’s “Daily double” of minimal regulation and the freedom to speculate with other people’s money can only end one way for these institutions: In bankruptcy court, just like Balmoral & FTX.
Always looking forward to your next article bag holder. In Germany we had a very famous book called - education - everything you need to know . An unrealistic claim but still a great piece of work. The author stated that in order to learn about an ideology it’s best to join one yourself - so you will learn the methods and arguments of both sides. I decided to follow this practice with crypto (won’t name my choice). What surprised me was that, although my choice was very technically advanced and innovative if was totally ignored by the whole crypto industry. Instead obvious scams and pump and dump schemes were given all the attention. I now understand what this market really is like and what FTX was basically selling its investors (I am not talking about the retail investors) … it’s basically a complete controlled environment which has no interest in real market developments. That’s why FTX had its fingers in every project! This is not a market but some kind of fake charade. Everything is contaminated and I hope everything crashes so real decentralized innovators can get the attention they deserve.
So they basically focused totally on the side/structure of the trade as you like to call it - that was what they were really selling. A bulletproof system where they would control everything vertically and horizontally. Basically it’s own microcosm.
So assume you control not just the biggest exchange but also every relevant Projekt in crypto. You have the power to shape reality. Everything that isn’t part of your ecosystem u can ignore and chances are high the market follows you. You are basically shaping reality or at least the perception of reality. And binance and others have no intent of changing the outlook. I strongly believe they won’t be able to assert this influence much longer but this market is clearly driven by retard retail investors so everything is possible. There is really exciting stuff in crypto happening but attention and perception is shaped by people with very suspicious motives . Bitcoin Maxis serve as the useful idiots and court jesters. Really really weird
Bag, solid piece, a fresh perspective and useful.