Inflation, JP Morgan/BofA, a $10,000 Investment and NFT scams
Level 1 - NGMI
Welcome Avatar! At this point we’re seeing more and more news articles that are suggesting inflation will persist past 2021 and into 2022. This shouldn’t surprise any readers here as we’ve been on that train since the beginning of the year. There is no way to avoid inflation when you print ~30-40% of the entire money supply. The big problem? Unless you’re online there is no real way to compete against these headwinds.
We feel bad for everyone who works in brick and mortar (waitresses, bartenders, spas, haircuts etc.). All of these individuals are getting killed so we suggest you continue to tip them well. With that said, we can jump into some basic math here to explain why inflation is never “good” for the average person. Despite the new Onion level analysis from Bloomberg Opinion.
Inflation
Run the Numbers: According to Pew Research the median hourly wage of high-wage workers increased from $50.59/hr to $52.68/hr (about 4%) while the median for lower wage earners moved from $10.79/hr to $11.70/hr (about 8%). Now remember, all of this is *pre-tax*. If inflation is at roughly 5% it means that purchasing power for average people is likely down.
In fact, if you go back to July you can find articles from mainstream media highlighting this: Inflation Giving Workers a 2% Wage Cut
Don’t worry it’s not going to change any time soon. If inflation remains at roughly 5% you can bet a large sum of money that wage growth *on average* will not keep up with 5%. If Inflation hits 10%, then wage growth will not increase by 10%. So on and so forth.
Inflation Only Benefits Asset Holders: As mentioned many many times here, the only people who like inflation are the ultra rich and the people who do not understand asset valuation. The only people with assets are the wealthy. Instead of addressing wealth disparity they will attempt to address “income disparity”. Which of course, doesn’t impact a CEO making $1/year in annual salary (heroic!).
Since inflation benefits asset holders, you can wager that mainstream outlets will begin to push this narrative. That inflation isn’t “a bad thing”. They will then move to various spins to help the masses agree with this statement. It will be difficult but it’s one of their only hopes in keeping everyone calm.
Stock Pile Again: For the third time, we’re recommending that the average person stock piles non-perishable items. This means it is wise to go ahead and grab beans, rice and toiletries (other products) in bulk. This will lock in a “inflation protected return” since you have to purchase these items anyway.
While we were laughed at in March of 2020 for recommending this… We said it again in Spring of 2021 and now we’re saying it a third time in October. There is just no reason to suffer from price hikes especially if you have a tight budget.
JP Morgan Strikes Again!
Once again, Jamie Dimon is saying that Bitcoin is worthless. This is something like the 100th time he has said it. He has been bearish since BTC was below $1,000.
The problem? Crypto is hands down the best performing asset class over the past decade. People who understand crypto know that all intermediaries who benefit from rent seeking will oppose the asset class forever.
Loss of Confidence: Once again, we don’t see any alternative at this point. Either people lose confidence in the fiat system or they will be forced to look for alternatives as prices go up. Stuck between a rock and a hard place.
If you look at the solutions, the only real one is decentralized crypto currencies.
Structural Change in Banking: At this point, retail banks are going to struggle to compete against crypto. Their fixed costs are through the roof and a yield of 0.05% is not going to attract any significant interest if inflation remains at 4-5% (likely much worse since those are public numbers). The game is the same.
Even if you don’t believe in crypto, you have to buy assets that will increase at or *above* the current rate of inflation. If you don’t, you are getting poorer every single year.
BofA Loss of Credibility: It gets worse! Wall Street firms are now issuing equity research reports with clear and substantial errors in them. One came from BofA who used “PayPal” to represent a crypto wallet (top right of image below). This is factually incorrect. If you do not own your keys, it is not a wallet. It is a third party custody agent. Don’t even get us started on the Layer 1, 2 and 3 changes. Absolutely insane.
The good news! You’re extremely far ahead if Wall Street doesn’t even understand the difference between a third party and a wallet. Many are underestimating how far behind Institutional Investors are. Currently, most of them can only compete with the amount of money they have. (IE. they can manipulate the price up and down to generate basis points - Step by Step is here). Since they don’t have any structural knowledge, it is not possible for them to pick winners out very easily.
To emphasize how little they know, even Jamie Dimon asked “how can you prove there is only going to be 21 million of them”. Which requires very little work to prove.
Autist Note: we recognize Jamie Dimon is likely pulling a psyop to create fear. He has to be smart enough to know this is something that can be checked in five minutes.
$10,000 In Your Hand
For fun we’re going to address this question. Some people on Twitter had a hard time understanding risk reward so we’ll spell it out with a quick three bullet summary.
Low Net Worth: If you have a low net worth or low cash flows? The $10,000 needs to fund a side business/income stream. There is no other “good idea”. Throwing money into NFTs and other high risk assets still won’t come close to starting your own business. If you’re able to create a recurring revenue business at say $100,000/year, the business is actually worth $500,000 and you are generating US Tokens at the same time.
Medium Worth: If you have a medium net worth, $10,000 is likely best spent on expanding a business line. Notice… Once again, there is no real value in investing since you can generate a high ROI by purchasing more ads, expanding SKU count or even purchasing a small website that has potential. In the *rare* case that you have no other options, perhaps you could copy pasta a rich person.
High Net Worth: At this point, you already have your business income running and you don’t need extra money. As the cash on your balance sheet goes up your goal is to *get rid of it*. This means you want to keep a minimal cash balance and find ways to outpace inflation. Therefore, a $10,000 gift is unlikely significant to you. You’re better off putting it into high risk assets like a new VC style investment.
Conclusion: If you are rich or poor the game is the same. You want to convert your US Tokens into *assets*. You must start a business as it is one of the only ways to fight inflation. A business is simply an *asset*. You cannot sell your job but you can sell your company in the future.
NFT Scams Will Get Worse…
It’s getting pretty brutal out there. We’re seeing people attempt to scam the BowTied community and lying to people suggesting we backed their project. We’re not backing any project not listed in the portfolio. Therefore, if you invest in a new scam NFT, recognize that the project likely goes to zero.
The most interesting thing is seeing how much people are paying for NFTs that will go to zero. NFTs don’t have value unless they offer: 1) utility, 2) access or 3) prestige/flex. Without one of the three it’s difficult to see why anyone would purchase one. You’re effectively giving up ETH as a charity. This is fine if you want to donate money but don’t think for a single second that it will be worth anything in 12 months.
NFT Rugs: Another fun one? Watching scammers publicly rug as well. This is a larger scale scam. Instead of targeting a group of people (such as our community or another community) there are individuals who are running larger scale scams. They big up an account create hype and then just collect a bunch of SOL/ETH/(token) and ditch. Many NFT cash grabs to steal your ETH/sol/(other token).
Conclusion: Stay safe out there it is getting quite ugly! Lots of new FUD, scams and ponzis popping up every single day. Be smart. Follow people who are bright and think rationally before using your US Tokens or valuable ETH/BTC for any particular transaction.
Disclaimer: None of this is to be deemed legal or financial advice of any kind. These are *opinions* written by an anonymous group of Ex-Wall Street Tech Bankers who moved into affiliate marketing and e-commerce.
Daily Reminder: You ARE EARLY. Too much negativity/cope. Everyone reading this is extremely early. If you stay on top of technology, there is always a new opportunity.
I’m sitting on tons of public company equity yet every time I read a substack post I think “I should start a business”
Lesson in there
So banks are transitory?