For the Wine and Cheese Board Refugees

creepycoug

The FTX collapse has caused one hedge fund to default on close to $40 million in debt. That's just what we know about because this is still new. Now, I'm not one who cries in his soup over the troubles of hedge funds; and have my own view about their role in a civilized society. But, I digress.

Could this be the beginning of a serious shit show? Like, when Lehman defaulted on its short term debt obligations - that it was raising at break neck pace to shore up its liquidity issues - that, in turn, caused the originators of the money market fund (the Reserve) to break the buck, with the larger shit show that followed.

Reading the background of this ... you have fucking children in charge of billions of dollars. What little I've learned in life includes the overwhelming importance of judgment obtained through years of experience. I don't care if this Binkman-Fried and Ellison chick are classic examples of Charles Murray's Super Zips; they both fucked the fuck up and neither is, I think, quite as bright as the world has suggested to them.

@godawgst @HoustonHusky @UW_Doog_Bot @anybodywithafuckingclue

@YellowSnow @DerekJohnson - this really belongs in the record shop, but Yella is a purist elitist snob.

WestlinnDuck

Bob_C

Depends on the amount of side action.

creepycoug

Bob_C said:

Depends on the amount of side action.

Was just thinking of you and adding you to the post. Vanilla gives us 15 minutes and you're done.

So, side action ... meaning how many institutions had big crypto positions on FTX that just vanished?

creepycoug

WestlinnDuck said:

Although, if I understand this correctly, FTX is just a trading platform. But the guy running it also founded Alameda, which takes positions for its own account and which was being run by the Ellison girl, who was in the FTX guy's harem of noyds. So, if I have this straight, it would be as if the NYSE were itself part of a scandal in which your equity position in XYZ corp. just vanished because the exchange was fucking around. Of course, it's a little easier to track down shares, even those held in street name. But that's the idea as I understand it.

It's being described as a run on a bank. Ok, sure, banks loan out money, so if the algo fails because some externality causes a run and everyone withdraws on the same day, then that's a problem because deposit liability does not equal deposit reserves on hand.

But FTX is a trading platform. How do they have a liquidity crisis unless they are taking positions for their own account?

Bob_C

creepycoug said:

Bob_C said:

Depends on the amount of side action.

Was just thinking of you and adding you to the post. Vanilla gives us 15 minutes and you're done.

So, side action ... meaning how many institutions had big crypto positions on FTX that just vanished?

That, but more importantly and scary is the derivative market that is very much under the table.

creepycoug

Bob_C said:

creepycoug said:

Bob_C said:

Depends on the amount of side action.

Was just thinking of you and adding you to the post. Vanilla gives us 15 minutes and you're done.

So, side action ... meaning how many institutions had big crypto positions on FTX that just vanished?

That, but more importantly and scary is the derivative market that is very much under the table.

Right. Very true.

WestlinnDuck

creepycoug said:

WestlinnDuck said:

Although, if I understand this correctly, FTX is just a trading platform. But the guy running it also founded Alameda, which takes positions for its own account and which was being run by the Ellison girl, who was in the FTX guy's harem of noyds. So, if I have this straight, it would be as if the NYSE were itself part of a scandal in which your equity position in XYZ corp. just vanished because the exchange was fucking around. Of course, it's a little easier to track down shares, even those held in street name. But that's the idea as I understand it.

It's being described as a run on a bank. Ok, sure, banks loan out money, so if the algo fails because some externality causes a run and everyone withdraws on the same day, then that's a problem because deposit liability does not equal deposit reserves on hand.

But FTX is a trading platform. How do they have a liquidity crisis unless they are taking positions for their own account?

If your equity position and bank assets can't be easily liquidated then you can't return depositors money. FTX had huge loans to Alameda which at best wasn't transparent and was being looted. If a customer of FTX said to buy Bitcoin, no Bitcoin was purchased, just an accounting entry. Like buying insurance and your agent just cashes your check but no insurance is purchased.

pawz

creepycoug said:

The FTX collapse has caused one hedge fund to default on close to $40 million in debt. That's just what we know about because this is still new. Now, I'm not one who cries in his soup over the troubles of hedge funds; and have my own view about their role in a civilized society. But, I digress.

Could this be the beginning of a serious shit show? Like, when Lehman defaulted on its short term debt obligations - that it was raising at break neck pace to shore up its liquidity issues - that, in turn, caused the originators of the money market fund (the Reserve) to break the buck, with the larger shit show that followed.

Reading the background of this ... you have fucking children in charge of billions of dollars. What little I've learned in life includes the overwhelming importance of judgment obtained through years of experience. I don't care if this Binkman-Fried and Ellison chick are classic examples of Charles Murray's Super Zips; they both fucked the fuck up and neither is, I think, quite as bright as the world has suggested to them.

@godawgst @HoustonHusky @UW_Doog_Bot @anybodywithafuckingclue

@YellowSnow @DerekJohnson - this really belongs in the record shop, but Yella is a purist elitist snob.

Given FTX is turning out to be a $$ washing machine for the @dnc and UKR, disagree.

HoustonHusky

It’s a serious shiteshow, but not for the major banks and hedge funds so it won’t be a Lehman-type scenario. You’ll see some of the shady banks (looking at you Silvergate) and lots of these crypto companies/funds blow up, but the main banks got involved in just pitching the shite and taking the commissions…their money wasn’t at risk. You’ll see a few of the crazier retirement funds (*cough* Ontario looking at you *cough*) lose chunks of money as well, but the govts will just print more money to cover those folks. And all the shitecoins will be gone in a couple of years unless the govt starts the massive money printing again.

This economic mess is/will be very different than last time as they usually are…do think the Central Banks are screwed. They have to raise rates to kill inflation and demand (we are at the tip of the iceberg there), but the amount of debt piled up limits how long they can do that. But they also can’t go and massively cut rates/stimulate, because the woke idiots of the world have created a huge global energy supply problem and if/when the global economy takes off again there won’t be enough energy to go around and you’ll get another bout of global inflation real quick (one of the main reasons China is still locked down and building a shit-ton of coal power plants right now…they know it too and the ChiComs can’t afford the unrest that inflation would likely cause internally).

At least until everyone builds another magical windmill to fix the problem or tell these woke morons to go pound sand…

I do hope the Fed finally catches a clue and chooses never to go back to the insanity of 0% interest rates again…some people think they finally learned their lesson but I have my doubts.

HoustonHusky

And yes, there are a lot of politics and govt behind FTX (does anyone really think any smart person would give that retard or his freak show of a girlfriend hundreds of millions of dollars after spending 5 minutes with either of them?). They were a front that were dumb enough to accidentally blow it up by getting greedy and stealing from it…the CIA, Democratic Party, and a bunch of other people are going to have to find new ways to launder massive amounts of money…

WestlinnDuck

HoustonHusky said:

It’s a serious shiteshow, but not for the major banks and hedge funds so it won’t be a Lehman-type scenario. You’ll see some of the shady banks (looking at you Silvergate) and lots of these crypto companies/funds blow up, but the main banks got involved in just pitching the shite and taking the commissions…their money wasn’t at risk. You’ll see a few of the crazier retirement funds (*cough* Ontario looking at you *cough*) lose chunks of money as well, but the govts will just print more money to cover those folks. And all the shitecoins will be gone in a couple of years unless the govt starts the massive money printing again.

This economic mess is/will be very different than last time as they usually are…do think the Central Banks are screwed. They have to raise rates to kill inflation and demand (we are at the tip of the iceberg there), but the amount of debt piled up limits how long they can do that. But they also can’t go and massively cut rates/stimulate, because the woke idiots of the world have created a huge global energy supply problem and if/when the global economy takes off again there won’t be enough energy to go around and you’ll get another bout of global inflation real quick (one of the main reasons China is still locked down and building a shit-ton of coal power plants right now…they know it too and the ChiComs can’t afford the unrest that inflation would likely cause internally).

At least until everyone builds another magical windmill to fix the problem or tell these woke morons to go pound sand…

I do hope the Fed finally catches a clue and chooses never to go back to the insanity of 0% interest rates again…some people think they finally learned their lesson but I have my doubts.

The phucks just gave Mr. QE Bernanke a Nobel Prize for Economics to go along with one they gave to Paul Krugman.

HoustonHusky

This made me laugh @creepycoug

https://twitter.com/Hedgeye/status/1600920808251133954?s=20&t=i5sseDAGQYV2XjAFaGc-Ag

UW_Doog_Bot

Tldr version, this is a big scandal but won't be systemic.

That said, the economy has systemic issues and is going to suck anyways.

creepycoug

WestlinnDuck said:

creepycoug said:

WestlinnDuck said:

Although, if I understand this correctly, FTX is just a trading platform. But the guy running it also founded Alameda, which takes positions for its own account and which was being run by the Ellison girl, who was in the FTX guy's harem of noyds. So, if I have this straight, it would be as if the NYSE were itself part of a scandal in which your equity position in XYZ corp. just vanished because the exchange was fucking around. Of course, it's a little easier to track down shares, even those held in street name. But that's the idea as I understand it.

It's being described as a run on a bank. Ok, sure, banks loan out money, so if the algo fails because some externality causes a run and everyone withdraws on the same day, then that's a problem because deposit liability does not equal deposit reserves on hand.

But FTX is a trading platform. How do they have a liquidity crisis unless they are taking positions for their own account?

If your equity position and bank assets can't be easily liquidated then you can't return depositors money. FTX had huge loans to Alameda which at best wasn't transparent and was being looted. If a customer of FTX said to buy Bitcoin, no Bitcoin was purchased, just an accounting entry. Like buying insurance and your agent just cashes your check but no insurance is purchased.

This is the only scenario I can understand that makes a "liquidity crisis" a relevant concept for an medium of exchange.

creepycoug

HoustonHusky said:

This made me laugh @creepycoug

https://twitter.com/Hedgeye/status/1600920808251133954?s=20&t=i5sseDAGQYV2XjAFaGc-Ag

"If there's ever a place I can be in and not get in trouble, it's FTX."

Lolz. When are they going to run that Canadian fuck off shark tank? Probably never because he and Cuban are the only really entertaining sharks.

@HoustonHusky did you see that SBF also made big loans to the Block, basically Crypto's Bloomberg? Loans to fund the management buyout, loans for operating capital and, finally, a loan to the CEO to buy property in the Bahamas.

I know a guy at Block, and he readily points out that it was isolated at the CEO level, no indication that he tried to direct how stories were written about FTX. And in all fairness, their writers were among the first to publicly ask questions about FTX and Alameda and among the first to suggest there was something rotten in Denmark. But still, a bad look to say the least.

I don't think it's going away any tim soon. But there will/should be a housecleaning.

The moral of the story for me isn't about the risk in alternative investments. The market handles that risk just fine IMHO. The real moral of the story is you don't put 20-something year olds in absolute charge of $billions of dollars anywhere anytime. I don't care if you have a PhD in math from MIT; there is no substitute or experience.

creepycoug

UW_Doog_Bot said:

Tldr version, this is a big scandal but won't be systemic.

That said, the economy has systemic issues and is going to suck anyways.

Agree. This is more about scandal and ridiculously smart children run amok and being drunk with power and getting caught with the dog.

creepycoug

HoustonHusky said:

And yes, there are a lot of politics and govt behind FTX (does anyone really think any smart person would give that retard or his freak show of a girlfriend hundreds of millions of dollars after spending 5 minutes with either of them?). They were a front that were dumb enough to accidentally blow it up by getting greedy and stealing from it…the CIA, Democratic Party, and a bunch of other people are going to have to find new ways to launder massive amounts of money…

I'd not considered the money laundering angle. God knows they had the celebrity connection, so the DNC is never far behind.

WestlinnDuck

creepycoug said:

UW_Doog_Bot said:

Tldr version, this is a big scandal but won't be systemic.

That said, the economy has systemic issues and is going to suck anyways.

Agree. This is more about scandal and ridiculously smart children run amok and being drunk with power and getting caught with the dog.

Also, don't invest in something like FTX unless you have an audit from a Big 4 accounting firm and also an audit of the internal controls.

creepycoug

WestlinnDuck said:

creepycoug said:

UW_Doog_Bot said:

Tldr version, this is a big scandal but won't be systemic.

That said, the economy has systemic issues and is going to suck anyways.

Agree. This is more about scandal and ridiculously smart children run amok and being drunk with power and getting caught with the dog.

Also, don't invest in something like FTX unless you have an audit from a Big 4 accounting firm and also an audit of the internal controls.

As much inefficiency and pain in the ass those things are, you are spot on. I'm guessing we're going to learn that part of the problem here is that the auditors aren't yet very sophisticated in this space, and so even if they're on it, they're not really on it because they're learning as they go.

In public company world, we all know that an auditor without a lot of industry experience is 1/2 an auditor.

creepycoug

HoustonHusky said:

It’s a serious shiteshow, but not for the major banks and hedge funds so it won’t be a Lehman-type scenario. You’ll see some of the shady banks (looking at you Silvergate) and lots of these crypto companies/funds blow up, but the main banks got involved in just pitching the shite and taking the commissions…their money wasn’t at risk. You’ll see a few of the crazier retirement funds (*cough* Ontario looking at you *cough*) lose chunks of money as well, but the govts will just print more money to cover those folks. And all the shitecoins will be gone in a couple of years unless the govt starts the massive money printing again.

This economic mess is/will be very different than last time as they usually are…do think the Central Banks are screwed. They have to raise rates to kill inflation and demand (we are at the tip of the iceberg there), but the amount of debt piled up limits how long they can do that. But they also can’t go and massively cut rates/stimulate, because the woke idiots of the world have created a huge global energy supply problem and if/when the global economy takes off again there won’t be enough energy to go around and you’ll get another bout of global inflation real quick (one of the main reasons China is still locked down and building a shit-ton of coal power plants right now…they know it too and the ChiComs can’t afford the unrest that inflation would likely cause internally).

At least until everyone builds another magical windmill to fix the problem or tell these woke morons to go pound sand…

I do hope the Fed finally catches a clue and chooses never to go back to the insanity of 0% interest rates again…some people think they finally learned their lesson but I have my doubts.

@HoustonHusky I think it's starting to play out as you were predicting here. Agreed on your long-term take on crypto and where it moves relative to governments cheapening their currency.

Your second paragraph depressed into drink.