If you’re like me, you’ve been put off from digging deeper into DeFi by the terrible signal-to-noise ratio of anything crypto-related on the interwebs. That’s why I found this DeFi primer (using Maker DAO as a specific example) by ET contributor and banking analyst Marc Rubinstein to be so fantastic.
Yesterday, one of Softbank’s largest portfolio companies – Katerra – filed for bankruptcy.
Katerra was at the heart of the relationship between Softbank and Greensill, and I think it’s the most viable path by which the Greensill fraud and financial crimes can be shown to be Softbank fraud and financial crimes.
You can read our full take on Greensill and Softbank here …
… but the skinny is this:
in 2019, Softbank put ~$3 billion into Greensill, turning it into the Vision Fund’s private bank. In 2020, Greensill lent Softbank portfolio company Katerra $435 million. When Katerra ran into trouble, Greensill wrote off the $435 million loan in exchange for 5% of common equity. LOL. A $435 million senior secured loan – which had been packaged and sold to Credit Suisse – was exchanged for a 5% equity position in a bankrupt company.
Credit Suisse has announced that they are filing suit against Softbank over this and all of the other Softbank/Greensill shenanigans. And in the WSJ article describing the Katerra bankruptcy filing, you can see how Softbank is going to try and spin this (all caps mine).
When Katerra ran into financial difficulties last year, Greensill forgave the loan.
SoftBank, in turn, invested $440 million into Greensill, EXPECTING THE MONEY TO GO TO CREDIT SUISSE’S INVESTORS.
Instead, Greensill put the proceeds of the SoftBank investment in a bank it owned in Bremen, Germany, according to a bankruptcy administrator’s report. The report said Greensill had used money it received from SoftBank, including the $440 million, to boost its bank’s capital position and fund Greensill’s overall operations.
The Softbank defense is going to be that their back door pay-off to Greensill for forgiving the Katerra loan was really intended to be a back door pay-off for Credit Suisse, but that rascal Lex just kept the money. Who knew!
As always, the best way to rob a bank is to own a bank.
— Ben Hunt | June 7, 2021 | 11:41 am
The Deadly Theatre of corporate signaling on Pride Month continues to run rampant, with feel-good rebranding pop-ups in all the geographies where this is a marketing advantage … and nothing in geographies where it isn’t.
What is Deadly Theatre? It’s a performance that is so deeply abstracted from its source material that it has become painfully, obviously artificial to anyone who is paying attention.
And yes, there’s an Epsilon Theory note on that.
— Rusty Guinn | June 4, 2021 | 10:34 am
P&C insurer Lemonade (LMND) went public last year and now has a $5 billion market cap. They’re not just a sleepy insurance company, of course. No, no … they’re actually a cutting edge AI Company! TM.
They’ve deleted the tweet above and issued a classic non-denial denial on their blog:
Let’s be clear:
AI that uses harmful concepts like phrenology and physiognomy has never, and will never, be used at Lemonade.
We have never, and will never, let AI auto-reject claims.
LOL. So their AI Jim textbot + video recognition program (I am not making this up) isn’t using phrenology and it can’t auto-reject claims. No, no … the supervisor will reject the claim. BITFD.
— Ben Hunt | May 28, 2021 | 7:47am
Honestly, I kinda like Chamath-the-CNBC-talking-head. He’s iconoclastic and smart. A little too much Ben Shapiro / college debate team-esque with the “if I talk really fast maybe you’ll just ignore that jaw-droppingly stupid thing I just said”, but better than the usual CNBC fare regardless.
But Chamath-the-portfolio-manager? Raccoonery in action.
Here’s the Social Capital 2020 annual letter, published five months into 2021. There’s no mention of the disastrous year to date, which demands that you ask the core Epsilon Theory question: Why am I reading this NOW? But even taken on its own terms – hey, let’s talk about 2020 performance going into June, 2021 – this is just a complete crock.
Chamath describes his fund’s performance as “gross IRR” over aggregated multi-year periods. We have no idea of the fund’s performance in 2020, even in “gross IRR” terms, but are required to compare 2011-2019 average annual return to 2011-2020 average annual return. Then Chamath compares his “gross IRR” to S&P 500 total return over the same periods. Then he compares that to Berkshire Hathaway over “the first nine years” of the two investment funds. LOL.
The final picture below – a tweet I put out after a Chamath tweet storm in early March – highlights the rest of his Raccoon math.
When I think about all the compliance pushback I’ve gotten on investor letters and marketing decks over the years … when I think about all of the SEC and regulatory proctology exams my funds have endured … this just makes me so angry.
— Ben Hunt | May 27, 2021 | 10:25 am
Good chart out from Barclays this morning showing the key problem for investors and financial advisors as inflation fears take root: bonds no longer provide portfolio diversification.
— Ben Hunt | May 26, 2021 | 11:35am
Recent major media stories that feel to us like they’re part of a larger narrative campaign.
Modeling common knowledge by analyzing Missionary statements and their reverberations works. Except when it doesn’t.
What do you get when you give a raccoon billions of dollars AND invisibility from regulators? Collusion and insider trading.
Most of us are under the impression that a protracted conflict within China will increase national unity. Not this time.
Recent Notes
Cursed Knowledge #29: Allergies
Allergies. We either have them or know some one who does. Ranging from life threatening to mildly irritating, they’re one of life’s constant annoyances. And they’re getting worse. We have more allergies now than ever before. Rusty Guinn joins Cursed Knowledge to talk about why allergies are more common, and if there’s anything we can do about it.
Manufactured Consensus
The more we believe the lie that social networks democratize Narrative formation, the more systematically we make ourselves part of their manufactured consensus.
No, the world doesn’t hate America
The global mass love for the US and its culture is genuine, and isn’t being forced on people from above, but because US culture – despite all the showy glitz – is about how everyone’s story matters.
Intentional Investor #14: Drew Dickson
In this episode of The Intentional Investor, Matt Zeigler sits down with Drew Dickson, founder of Albert Bridge Capital. Drew shares his fascinating journey from self-proclaimed “world’s least focused student” to successful investor and writer. Drew’s journey illustrates the power of curiosity, relationships, and perseverance in building a meaningful career in finance. His story will inspire anyone looking to grow personally and professionally while navigating life’s ups and downs. This episode provides a fascinating glimpse into the mind of a seasoned investor, offering lessons applicable to both financial markets and life in general.
Generative AI is a Resurrection Machine
Each of us has a unique story. A story that makes you you. A story that is the engine of your consciousness. A story that is your thread of life.
A story that today can be inferred from your words by generative AI and restored computationally, so that the thread of life remains uncut.
Everything is about to change.
Well, I’m Not AI (As A Strategy): WInAaaS!
We think it’s a human art vs. AI art problem, just like when my music friends and I thought it was an alternative vs. mainstream problem. The simple truth is, it’s a relationship-with-itself versus a relationship-with-yourself problem.
The Contentapocalypse is Coming
AI is flooding our timelines with so much content that we won’t even find content very interesting anymore. It’s too much. Or, at least it will feel that way.
That’s when it will hit us; we don’t want this stuff at all. We don’t want content. We want art.
The Mr. Beast Memo is a Guide to the Gen Z Workforce
“Lots of people are like nooo it’s not the phones. It’s the phones. Come on.”
No one gets the Algorithm and the way Gen Z is trapped by it better than Kyla Scanlon.
Donald Trump and the Common Knowledge Game
The question is not whether Trump will accept the election result if he loses. He won’t.
The question is whether a missionary with actual power will join him.
The ETF Market: A Zine
ET contributor Dave Nadig is not only singlehandedly bringing back the zine, he’s using it to explain ETFs better than anyone!
Intentional Investor #13: Mike Green
The Intentional Investor with Matt Ziegler welcomes Mike Green, a veteran investor and financial thinker. In this wide-ranging conversation, Green offers a candid look at his journey in the financial world, blending personal anecdotes with thoughtful analysis of markets and investing. His stories highlight the unpredictable nature of both markets and life, and the importance of continuous learning and adaptation.
This episode provides a fascinating glimpse into the mind of a seasoned investor, offering lessons applicable to both financial markets and life in general.
Intentional Investor #12: Jim O’Shaughnessy
On this episode of the Intentional Investor, Matt Zeigler welcomes legendary investor and entrepreneur Jim O’Shaughnessy. Jim shares fascinating stories from his childhood, including memories of his influential grandfather, his early interest in magic, and how rejection shaped his mindset.
The discussion covers Jim’s journey into investing, his thoughts on education and critical thinking, and his experiences on Wall Street. Jim offers insights on topics like the power of journaling, the importance of empiricism, and his excitement for AI and new technologies.
The Intentional Investor #11: Eben Burr
Join Matt Zeigler as he sits down with Eben Burr, a financial professional with a fascinating journey from the D.C. punk rock scene to the world of behavioral finance. Eben shares his unique perspective on investing, shaped by his diverse experiences in music, architecture, and finance.
Breaking News #27: When Common Knowledge Trumps Reality
In the latest episode of Breaking News, we are joined by Epsilon Theory Co-Founder Rusty Guinn. We cover the latest developments in the 2024 election and explore how narratives are shaping the political landscape. We delve into the transition from Biden to Harris and examine the strategic implications and how it’s pushing us into what we’re calling our first “vibe election.” We also tackle the Fed’s independence and the potential for rate cuts, regardless of who wins. In our Tweet of the Week, we examine how AI-generated images and rapid narrative formation are changing political discourse, potentially disconnecting us from factual reality. We wrap up with a surprising deep dive into Chumbawamba, using their story to reflect on the importance of folk culture and being “more mid” in our increasingly polarized world.
Metametastasis
We are all concerned about how Gen AI may untether us from reality.
We are not nearly concerned enough about how media will have the ability to do the same through mature social networks.
The Intentional Investor #10: Grant Williams
In this episode of The Intentional Investor, Matt Zeigler talks with Grant Williams, a veteran of the finance industry and creator of the popular newsletter “Things That Make You Go Hmmm…” Grant shares fascinating stories from his career journey, from trading Japanese equities in the 1980s to founding Real Vision. He discusses his approach to writing and interviewing, emphasizing the importance of building trust with an audience and focusing on quality content rather than chasing numbers. Grant also reflects on his experiences living and working around the world, the challenges of moving his family internationally, and his passion for sports. Throughout the conversation, he offers valuable insights on communication, community-building, and maintaining curiosity in both investing and life.
Make, Protect, Teach with Scott Bradlee: Part 1
In our Saturday conclusion, Scott Bradlee of Post Modern Jukebox @postmodernjukebox joins Epsilon Connect 2024 to lead the conversation about what Make, Protect, Teach means to him. And show off his incredible musical talent!
Breaking News #26: The Biden Harris Swap
In this episode of Breaking News, we cover the recent developments in the Democratic party, with Biden stepping aside and Kamala Harris becoming the presumptive nominee. We discuss how reality seems to be proclaimed rather than acknowledged, and how both parties seem more interested in conflict than actual policy solutions. We also touch on the SEC’s case against short-seller Andrew Left and the selective enforcement of rules in finance. We also debate the merits of giving green cards to foreign college graduates and how systems can be exploited by those with money. Finally, we explore the themes in Charlie XCX’s album “Brat,” relating it to the myth of Narcissus and broader questions of self-worth and community in our current cultural moment.
The Weird Thing
The weirdest thing about this “weird” campaign is how convinced some are that it represents a thoroughly directed, planned, systematic propaganda effort.
That’s not how this works. That’s not how any of this works. Not any more, anyway.
We Are Losing Our Minds
Your brain evolved to perceive symbols.
Symbols evolved to be perceived by your brain.
Human society is evolving around a technology which exposes our brains to a barrage of seductive symbols.
And it’s making us lose our minds.