Everyone makes mistakes. We just make a lot of them.

Bryce: [00:00:15] Welcome to another episode of Equity Mates, a podcast that follows our journey of investing. Whether you're an absolute beginner or approaching Warren Buffett status, our aim is to help break down your barriers from beginning to dividend. My name is Bryce and as always, I'm joined by my equity buddy, Ren. How you going? 

Alec: [00:00:33] I am going. Okay. Bryce. Oh, quiet. So well. But I am excited for this episode. 

Bryce: [00:00:39] Good. Despite COVID, your excitement levels don't wane. 

Alec: [00:00:42] Yeah, I thought COVID was done. I thought we'd go through. 

Bryce: [00:00:46] I saw a classic on Friday. Last week. I was sitting on the rooftop at Equity Mates HQ. I don't think you were there. You're away. Calming away. You were. But are you? Were you sick? Yeah. You're sick. Yeah. At the time, you didn't have COVID, and we were having this big Yahoo! About Covid's death. We don't know anyone who has had COVID in the last six months. All this sort of stuff. Whammo, bama. Two people in the office got COVID. So it is what it is. 

Alec: [00:01:11] So is your. It's your fault. 

Bryce: [00:01:12] I guess I jinxed it. Sorry. 

Alec: [00:01:15] Anyway, so it's going to be a pretty loose episode today, unfortunately, because I'm not in the studio. We can't do my book Bonanza. But that will be back with a vengeance next week. So watch this space. But it has meant that we've had a lot of time to learn and research. And I've shared a few things in the forum, so we've got a few different things that we want to talk about today. You've told me that you want to start with a confession. Yep. And then I want to talk about something that I got wrong. A company that I invested in that I was wrong about. Okay. There's been a lot of chat about metal. Yeah. I don't know if we can add much discussion, but let's try and then we're going to close it out with Carvana, a stock that's down 95% and that you have some thoughts on. Yes. So I'm going to be talking about a lot of stocks that have fallen today. 

Bryce: [00:02:03] Well, yeah, and maybe a bit about the FTC's finance drama, because since yesterday's video update that I did, there has been changes. So we might touch on that as well towards the end. There's plenty going on in that space.

Alec: [00:02:15] A lot of a lot of fallen superstars in today's episode. 

Bryce: [00:02:19] Yes. Yes. Not Equity Mates, though. Will Ren before we do some housekeeping. You've been leading the dive and we now have a new Instagram page. 

Alec: [00:02:28] Speaking of fallen superstars, the original dive Instagram has fallen, fallen at the hands of Métiers automated autocracy. And we've had to. Long story, but we've had to move to a new Instagram handle. It is no longer the dive dot business news. It is now the dive business news, all one word. So if you have been following us, if you've been enjoying getting the news headlines in an accessible, digestible way that's going to keep going. But just add a new Instagram handle for the dive business news, all one word. Go and check it out.

Bryce: [00:03:06] Don't build businesses on other platforms. That's the lesson. Yeah. 

Alec: [00:03:10] If you don't own the platform, you don't own the audio. 

Bryce: [00:03:13] Anyway, lesson learnt. We'll put a link in the show notes to the new Instagram page. 

Alec: [00:03:20] It's also just really unfortunate that we've been forced to do it in a time of mass bots where we have all these knock off accounts for all of our podcasts. But the dive business news all one word is not a bot, it's just us with new accounts. 

Bryce: [00:03:38] So what have we learnt this week? Ren. I do have a confession now. We often speak about an investment thesis and the importance of having an investment thesis, particularly when it comes to knowing when you might want to exit a position and sell. Because there really shouldn't be a reason that you sell a company, in my view, unless your investment thesis has been sort of truly broken. And that's why it's important to write down the thesis and kind of review it periodically to ensure that your thesis still stands and the reason you invest in that company still stands. Now, despite having said all of that, I am somewhat embarrassed to admit that there is a company in my portfolio that I had an investment thesis for a clear investment thesis and it has now been broken on multiple fronts. Yet I still continue to hold this stock. That's my confession now. 

Alec: [00:04:33] Well, I feel like you can love a full confession. You have to tell us what it is. 

Bryce: [00:04:37] Yes. And the company is Magellan. So full disclosure Magellan is invested in us. So we still love Magellan, the people that are there and the support that they've provided to Equity Mates. But I think for me it's been a clear lesson that my original sort of thesis in investing in Magellan, the company I do still have money in there in their global funds in the company was based around the fact that there was opportunity for balance sheet investing and the way that they were going to grow the business over the longer term outside of just the funds management. 

Alec: [00:05:12] Yeah, I think we. We spoke about that a lot a couple of years ago. Now it's like the funds management business would spin off a whole bunch of cash that they would use to invest in superstar businesses like Barrenjoey Fin, Clear, Guzman and Gomez and Equity Mates. 

Bryce: [00:05:26] And Equity Mates. That's it for superstars. And the other part of it was that, you know, funds management, business assets under management is super important. And it was growing really well at the time of investment. But both of those parts of my thesis assets under management and the sort of balance sheet investing have now sort of turned in. I would say as a result, my thesis has broken, but I haven't sold and there is no reason for that other than the fact I haven't followed my own advice and I haven't sold. I've still got it. And now I'm in this predicament where I feel like it should be. I should do it because that's what I'm telling everyone on the show. What do you think? 

Alec: [00:06:06] I guess the question is, are you going to do it? 

Bryce: [00:06:10] Yeah, I think so. I think so. Take the capital loss. Take the capital loss and and just watch the stock and watch the business. They've bought in a new CEO. They've put in new people into the business. And I'm not not saying that at all. It's not going to be something that I reconsider later down the track. But I think for the purpose of writing an investment thesis and saying that when it breaks, that's the opportunity, then I should follow my own advice. So here's my confession. I'll give you an update next week when I sell. 

Alec: [00:06:41] Nice. And just to clarify, because, you know, we have invested in Magellan multiple ways. I'm sure a lot of the audience has. So just to be clear, you own Magellan, the stock. Yeah. But then you also had money in the Magellan Global Fund. 

Bryce: [00:06:56] Yeah. Yeah. 

Alec: [00:06:56] Are you out of your mind? 

Bryce: [00:06:58] Nine and I know I'm still in the funds still appreciate their investment philosophy perspective. The people that they have they're amazing investors and I'm I'm I'm happy to give that my money to them. 

Alec: [00:07:09] Well, let me challenge you on that, because the thesis on the stock was growing assets under management and balance sheet investing. And you're saying the thesis on the stock is broken? Yeah. What's your thesis for the fund? 

Bryce: [00:07:26] The thesis for the fund really came from the people that were managing the fund and who we'd spoken to on the show. And I just really respected them as investors. And I think that some of the companies that they're invested in give me exposure to the companies that I want to be invested in.

Alec: [00:07:43] And I'm sure you can see where this is going. But has that thesis turned with the news this week that Hamish Douglass has sold two thirds of his position? 

Bryce: [00:07:52] No, because I think that's out of the business, which is kind of aligned with what I'm saying as well. So.

Alec: [00:07:58] But he's not like his role as an investment analyst. Yeah, portfolio manager.

Bryce: [00:08:03] But that's what that was, that's been news for a while. I think the people that are leading the global funds, I'm, I'm more than happy with, with who they are. So yeah, I'll keep everyone updated as time progresses. 

Alec: [00:08:15] No full disclosure, I'm still in the Global Fund as well. 

Bryce: [00:08:18] So there we go. Nice. All right. So what have you learnt this week? You said at the top you have a mistake that you've made with a stock that you invested in. Yeah. 

Alec: [00:08:27] Yeah. God, we've been very public with our mistakes today, but hey, that's 2022. That's the state of the market. So I want to share one big mistake I've made this year, just in the spirit of learning in public. And I guess I want to talk more generally about the thematic that I think is still quite interesting, albeit the company that I put that I invested in hasn't really panned out. Maybe yet, maybe at all. Are you familiar with Jumia Technologies? 

Bryce: [00:08:56] No. 

Alec: [00:08:57] Okay. New York Stock Exchange ticker JAMII. It's like a Pan-African e-commerce player. Think of it as like the Amazon for Africa. Maybe, maybe better to think of it as like the Mercado Libra for Africa. But it started as an e-commerce platform. And then in the years since, it also built out a payments infrastructure. Okay. And it was perhaps still shaping up to be the African super app. Well, one of the frontrunners there's another there's another one that may be in a better place, but that's essentially what the company is. Okay. So before we talk about what's happened to the share price, let's talk about why I like the theme of Africa, because I don't think we've spoken much about it on this show. No, but it's a continent of 1.4 billion people where Internet and mobile penetration is incredibly low. Pew found that just 41% of sub-Saharan Africans had access to the Internet or smartphones. 

Bryce: [00:10:07] Wow. 

Alec: [00:10:07] So 2/5 of the population do, 3/5 don't. And that is changing. As we speak. So there's a number of massive projects going on at the moment to give better Internet access to the continent of Africa. Google is building a massive undersea cable, the Equiano cable, which, according to their research, will improve median download speeds in Nigeria by up to six times, reduce retail data prices by 21%, and create new economic activity that will result in 10 billion being added to the economy. So Google's building one undersea cable. Metta is building another. The two Africa cables. And basically these are giant fibre optic cables put in the seabed that literally take the Internet from there, going from Europe. And then around, I think, metros going around the continent of Africa, Google's just going to the continent. Wow. These two massive projects are going to deliver much faster Internet, much cheaper Internet and hand in hand with the cheaper smartphones we are seeing, especially out of Chinese manufacturers, there's a there's a real argument that that rate of Internet penetration and smartphone penetration is going to really uptick rapidly in the next few years space. So it's obviously on the forefront of satellite Internet, but Amazon is also getting in the game with their clipper, I think you pronounce it. They're satellite Internet. We saw that massive multibillion dollar merger earlier this year between Britain's Oneweb and France's Eutelsat, which are two big satellite Internet players. Because they want to compete better with space, the world is going to be a lot more connected to the Internet. And I think the place that makes a massive economic difference is in Africa. And so Jumia, I thought, had a head start in terms of, you know, the Internet is coming to Africa, there's going to be local winners, there's going to be local companies. It would be an incredibly difficult operating environment for a company like Amazon to come in and say, we're going to take what we've learnt in America and apply it to Africa. Just operationally, it would be chalk and cheese. And so I figured there would be local winners. And so I thought Jumia was an interesting investment. There's also another if we're talking about companies that are right on the forefront of that, you know, the Internet revolution in Africa, whatever you want to call it, the other company to be aware of is M-Pesa. Okay, which is like a Branchless online banking service. I think it's co-owned by Vodafone and the African telco Safaricom. But that's another really interesting company like mobile banking. You know, for all of these massively underbanked communities, underbanked countries are a really interesting thing that is playing out as Internet penetration and smartphone usage increases. But anyway, M-Pesa not listed Jumia is I think it's the only African stock listed on the New York Stock Exchange. 

Bryce: [00:13:14] All right.

Alec: [00:13:15] The fact checks me on that, but if not the only one, one of the few. So anyway, that's the company, that's thematic, that's what I'm interested in. Vehicle The share price peaked in February 2021 above 60 bucks. Okay. Yeah, since then it's down 94% of it. Now in May this year, it was down about 88%. Okay. And SaaS like this has been smashed. It's something I've been interested in for a while. I'll just have a little dabble. And luckily it was just a little dabble because since I bought it in May, already down 88%, it's fallen another $50,000. 

Bryce: [00:13:58] I mean, is it just caught up in what's going on? And there's a bit of hysteria around it and it ran and now it's coming down. Or have there been some material changes that have driven this? 

Alec: [00:14:09] Well, there's been a big material change this week, which is why I'm bringing it today, but I'll get to that. But before then, there's a I don't know if there's a famous saying, but there's a saying in investing, what do you call a stock that's fallen 90%. 

Bryce: [00:14:24] And deny. 

Alec: [00:14:25] A stock that fell 80% and then halved? And it's just a reminder that, you know, a stock can fall 80% and it can still fall 80% again. Yeah, that's right. So has there been a material change this week? The two co-founders are stepping down. 

Bryce: [00:14:44] Wow. 

Alec: [00:14:44] It looks like they've been forced out from their board. So the co-founders and co-CEOs of the company, I think it was founded in 2012, you know who rolled it out across? I think it's in like 11 countries in Africa. Yeah. They have basically been cleared out and the okay raise and that's sort of been given for years. Jumia has said they're on a path to profitability and they've never really achieved it. And so. A lot of the reporting at the time is like now we're going to become profitable. But yeah, it's not. So I guess something you want to say.

Bryce: [00:15:23] No, but I guess the question is. So a couple of questions. So I've just spoken about an investment thesis. You obviously have put forward your thesis, which feels to be driven by sort of the larger macro theme that is playing out. And then you've gone from there and sort of said, well, which country, which companies are likely to benefit? And you've you've landed on Jumia, given that you're still so bullish on the thematic, is this something that you're going to just continue to hold? Or are you saying that this is a mistake? And given the changes to CEOs, now you're thinking of revisiting the whole thing. What's the play? 

Alec: [00:15:57] Look, it was already a small percentage of my portfolio given what happened since May. It's an even smaller percentage of my portfolio. So I'm probably not at the point of selling it yet. But I think it's just an important reminder that you can be excited about a macro theme, but you still have to do the work on the individual companies. 

Bryce: [00:16:20] Yeah, and maybe you're just too early. Maybe it's the right call. But just five years too early. Ten years too early. Who knows? 

Alec: [00:16:28] Yeah. Yeah, but, I mean, like, that's. That's the case. The company could be too early as well.

Bryce: [00:16:33] Yeah, yeah, yeah, you're right. Nice. Well, um, two, two lessons to start off the episode, but we want to cover what's going on elsewhere in the market. We've got a matter. I've got some stuff around Carvana and, and Ftec. So Ren, let's turn to, to matter where it's been in the headlines a lot lately. I was just in an interview that will be coming out this Thursday with Stephen Glass, who's an ESG investor. He was speaking about metal. And we've seen this morning that the layoffs are now in full steam, the first mass layoffs in the 18 year history of Facebook. Mark Zuckerberg admitting that he's got it wrong. 

Alec: [00:17:13] Well, if any of those software engineers want to come to a fast growing media tech, start up Australia's latest contact careers at Equity Mates dot com.

Bryce: [00:17:26] That reminds me, we do have a job opening for a business development manager here at Equity Mates to join the team full time role. If you're a hungry, results driven, passionate person that wants to help grow the client base and revenue streams of Equity Mates hit us up at careers at Equity Mates dot com. 

Alec: [00:17:43] Look all I'm all I'm hearing is that some start-ups are shedding jobs stripe twitter mata fcx and then some start-ups are adding jobs. 

Bryce: [00:17:54] That's it. Now I say, look, I think, you know, to have the so I guess the latest is that they're laying off, I think about 11,000 or between 11 and 18,000 of their employees around the world. They're facing some pretty heavy headwinds around Zuckerberg's investments in the metaverse and that's not padding out. But also they're struggling now with revenue in the advertising side of the business. And recent quarterly earnings have suggested that, you know, they're really battling with the Apple privacy policies and struggling to generate the revenue growth that they were over the past decade or so. And the stock is getting absolutely pumped. A fascinating stat is that if you invested in Facebook five years ago, five years ago, and if you think about what's happened over the past five years, we've seen some of the biggest bull runs in our investing life. You would actually be down if you invested in Facebook five years ago. So crazy stock and maybe we are starting to see a real change of the guard run. 

Alec: [00:19:03] I reckon at some point it gets true. 

Bryce: [00:19:05] What's funny say that as I was just speaking with Stephen Glass from Pella, who as I said, will be out this Thursday, great interview on RSG but he's he was really leaning into you know it's not an ESG approach but from a cheap business you know, versus the cash flow that it's generating. It's definitely a value player at the moment. But the question is like does cheap matter if the long term growth prospects of this thing don't make sense, that's what like just because it's cheap doesn't mean it's a good investment, in my opinion.

Alec: [00:19:36] So it made me think of the Ricki Sandler interview we released a couple of weeks ago. What do we call it like? Valuation is an opinion, mispricing is an opportunity. It feels like maybe this is a mispricing moment where people are just massively overweighting the metaverse side of it. And really the biggest mistake that Meta has made is the rebrand. And if it was still called Facebook and it was so this year it's lost $9 billion in its VR and Metaverse Division. But it's like $32 billion. Capital investment. I think a lot of that is in my recommendation to keep up with tick, tick tock and stuff like that. The majority of the investment is still not in the metaverse, it's in other parts of the business. If they hadn't rebranded, would they have been smashed this badly and maybe were just mispricing what this company still is because of how it's positioning itself? 

Bryce: [00:20:33] Maybe they should just call themselves Instagram. 

Alec: [00:20:36] Probably. Maybe they should split out the Instagram investment bank better. 

Bryce: [00:20:39] Yeah. That's the only sort of thing that I think about. It's like, you know, it feels like at some point they turn and say, look, just like, you know, the Wesfarmers of the world and these businesses that have great businesses within them. But one of the businesses is sucking all the capital and the others are, you know, spitting out incredible returns. And they are the ones that are generally sold off. And you keep the good businesses. It feels like at some point maybe you might see Instagram and WhatsApp separated, but who knows? But yeah, it's an interesting story, though.

Alec: [00:21:12] Never separate Instagram and WhatsApp. That stuff doesn't make enough money. Money for gram is their cash cow. Yeah.

Bryce: [00:21:18] Get rid of it. Oh, you.

Alec: [00:21:19] Mean from an antitrust position? 

Bryce: [00:21:21] Well, not just that. Like, shareholders just might get fed up with the fact that Zuck is pouring all this money into a failing metaverse business. 

Alec: [00:21:31] And that's that's the problem with, like, supermajority shares and stuff like that or, you know, like the fact that Zuck has control of this thing. Like, if you split out the metaverse, he couldn't. Then he couldn't have more money. Yeah, yeah, yeah, yeah, yeah. The other interesting thing, so we share, we've shared a couple of articles in thought starters the last few weeks, one from Ben Thomson from Strategery, who is still a Facebook bull talking about why he's a bull. And then we shared the week before a letter, an open letter from one of Facebook's longest investors. You know, the longest time period investors are basically calling for change. So you can go on our website and read them if you're interested in seeing both sides of the Facebook divide, I guess. But in the strategery article, there was this interesting point that so Facebook still is not not Facebook, the parent company, Facebook, the Blue Earth platform, the one that it feels like no one's using anymore is still reporting user growth, which is just a really interesting dynamic. Yeah, and maybe not quarter on quarter but like year on year. And the point that they were making is it's growing where the growth is, which is in, you know, like South East Asia and stuff like that. And you know, sure, it might be they might be losing users in Australia and America. I'm actually not sure about America and Australia, but the growth is coming from those emerging markets where everyone's getting really excited and trying to find opportunities to play it. You know, like a throwback to our earlier conversation. If Matter If Matters to Africa, cable connects Africa, the African continent to the Internet, but the home page of the Internet is Facebook. Perhaps the best way to play the African emerging thematic isn't Jumia or M-Pesa, but it's Facebook. That's not my argument. But that is an argument.

Bryce: [00:23:23] Yeah, I say that. Yeah, it's fair play and you would expect them to grow in those markets as more and more people come online. Does it take away from the other massive challenges that they're facing? 

Alec: [00:23:35] The one call out with that, though, is the rate that you get for advertising in South East Asia or Africa compared to the rate you get. Advertising in America is. 

Bryce: [00:23:44] Like chalk and cheese. I mean, let's move on. I want to talk about Carvana. But before we do, let's take a quick break to hear from our sponsors. So Ren Carvana we often talk about analyst ratings and price expectations that they put out there, you know, price prices that they think stocks are going to hit or prices that they think stocks are going to fall. And how? More often than not, analysts never get it right. But how's this for a bit of a boost? A bit of an embarrassing moment, in my opinion, from Morgan Stanley Carvana. You know, the stock.

Alec: [00:24:20] And the used cars. 

Bryce: [00:24:22] Used cars? Yeah. Now, Carvana was trading at $377 at its peak. Morgan Stanley analyst Adam Jonas raised the recommendation on carvana co to overweight from $377 to $420. Was his price target, implying a 59% increase? At the time it was a $309 pretty impressive price target. So that was about a year ago now. Same headline, same analyst. Here's the headline. 98% it below its high. Morgan Stanley say carvana could be worth $1. 

Alec: [00:25:13] It's a range $420 to $1. 

Bryce: [00:25:17] Currently trading at about nine. They're saying it could go to one. It's just like, guys, this is why you've got to be very careful listening to analyst recommendations and price targets, all these sorts of things. For us, it's just crazy. One headline it's going to hit for the 22nd headline. We're down to a dollar. It's unbelievable. 

Alec: [00:25:39] The argument around these broker recommendations is they're used by the investment banks to get more business. Yeah, to do the next capital raising or whatever it is. And so did you say work for Morgan Stanley? Yeah. Yeah. So like Morgan Stanley, probably. Wouldn't have liked it if he put a sell rating on it at $360 a share or whatever it peaked at. But I guess then they'd say, well, it's trading what it's like 7.50 a share. Now you can put a sell rating on it. They're not getting another capital raise. 

Bryce: [00:26:13] But I also just think it's I don't know my counter argument that it just discredits the reliability and I guess the accuracy of having those analyst recommendations. If, if an analyst came out and said it's three 2377 but hey, guys, this is nuts. This thing, this thing is probably only worth 100 and then it does fall to a dollar. Then that, I think, gives more weight to Morgan Stanley as an investment advisor than if you're just throwing things out for business. I but I get it. I get it. They do it.

Alec: [00:26:45] But that's that's that's the wholesale side by side thing. Like, if you're on the sell side, like if you're an investment bank or something, people think of you as a good investor, but you're a salesman. 

Bryce: [00:26:57] You're.

Alec: [00:26:57] Sales type. Yeah, yeah, yeah, yeah. And you sell it. You're selling yourself. You're selling what you're selling to investors and institutions and the buy side. But you're also selling. You sell to the companies. Yeah. 

Bryce: [00:27:08] Yeah, of course. Yeah.

Alec: [00:27:09] And it's like, hey, look, if we can, if we can make a case for Carvana for 20. What? Think about what you can write for yourself. 

Bryce: [00:27:15] True it. 

Alec: [00:27:17] Is. It's an interesting one. I wonder if there's any career risk for what was the analyst's name? Adam. 

Bryce: [00:27:22] Adam Jonas.

Alec: [00:27:24] Like does Morgan Stanley pat him on the back or are they like you're not you're not writing any more analysts reports?

Bryce: [00:27:30] Well, for surely it's just like, hey, mate, thanks for giving. They are for giving the price target that went well. The market's bond like nothing you can do about it. Give us another price target and these come out with the dollar. 

Alec: [00:27:45] It'll be hilarious if it comes out of rips, but it's. 

Bryce: [00:27:48] Gonna get all over this stock anyway. Ren There's been plenty happening in the world of crypto currency. We haven't spoken about it on the show for a while, but we've had some developments with FDX and Binance. Now, do you want to do it and explain it like I'm 5 to 2 may give us the rundown because it's been pretty. It's been a pretty amazing turn of events that is really scaring the world of crypto.

Alec: [00:28:16] FCX and Binance are two of the biggest crypto brokers, so think of a broker, you know, like an eToro, a Robinhood, a stake, a superhero, a CommSec, the brokers that we buy shares through you buy crypto through brokers as well. Finance and FCX are two of the biggest ones. FCX has a token that they issue. FTT and Binance owned a couple of billion dollars worth of FTT. And so last week the CEO of Binance came out on Twitter and said, We're dumping all of our FTT. And that sparked a panic about what was going on with FTT. 

Bryce: [00:29:02] Was there a reason that he did that or is it just competition? Well. 

Alec: [00:29:07] There definitely would have been a raise, but I don't know one. No one knows. But it might come out. The sort of the theory is at the time that FCX and Alameda Research, which was the founder of AXS, like a hedge fund, they were broke, right? They were insolvent. But that's just a theory at this stage. So Binance's CEO comes out and says Binance's dumping all of FTT, which then sparks other people to sell and causes a bit of a run on the bank. In some ways, people who have their money with FCX are trying to pull it out. Now FCX don't have the liquidity, they don't have the assets in the bank to make all those withdrawal requests and then they're forced into an emergency sale to Binance. And in the space of a couple of days from this first tweet, they then announce that Binance is acquiring FCX Chase. 

Bryce: [00:30:07] And isn't well. 

Alec: [00:30:08] And no, we should be sorry. We should be clear that it's a nonbinding sales agreement.

Bryce: [00:30:13] Yeah, but I think overnight didn't it come out that after doing some due diligence that Binance are now actually more likely to be walking away from the purchase of FCX because of some gaping holes in the structuring and finance of FCX. 

Alec: [00:30:31] And so the news of the day, at least the day as we're recording it, is that Binance have pulled out of the FDX merger one day after the non-binding agreement. I think the quote is beyond our ability to help. Wow is what they said when they pulled out.

Bryce: [00:30:50] Absolutely roasting FCX. 

Alec: [00:30:52] Yeah which isn't good. There's some. Conspiracy I saw when this happened a couple of days ago. That was like when J.P. Morgan, not the investment bank, but the banker. Like J.P. Morgan, he was asked to come in and backstop some other bank or bailout some other bank back in his day used it as an opportunity to say, look at, look at like look at their books, look at what positions they were in, and then just punt the counterparties to those positions and crushed the bank he was asked to bail out. Interesting. Is this the same? 

Bryce: [00:31:25] Well, I mean, they are pretty fierce rivals and finance the two CEOs. Changpeng Zhao, I think, is CEO of Binance and the 30 year old Sam Bankman-Fried is the CEO of FDX was a billionaire. I don't know how much of a billionaire he is now. 

Alec: [00:31:47] Was. [00:31:47][0.0]

Bryce: [00:31:48] Worth up to 15 billion. So anyway, a fascinating story. It has scared the market. They ran, I think over the last couple of days. Bitcoin and Etherium down over 10% as people are bit sort of bewildered with what is more can come in this tussle. 

Alec: [00:32:06] So Bitcoin to us dollars is down 25% in the last five days. It's the 15th now. Whoa. And then Etherium to the US dollar is down a third 33% over the past five days. It's 1700 at the time of recording. 

Bryce: [00:32:22] 15,000 US days. 

Alec: [00:32:24] Wow. Yeah. Wow it was, it was sitting, it was sitting pretty at 20 but yeah. Yeah, this is really spooked everyone. And the big reason to be scared is contagion. So this was the risk with 3 hours capital and, you know, the fallout from Luna and everything that sort of happened earlier this year, which was if you're. If you're borrowing this and then it goes to zero, then you are. So if you're borrowing to buy these currencies or if you're borrowing to put money into FDX or whatever it is, or or if you're lending money to Alameda Research and then they become insolvent, all of a sudden you have a hole in your balance sheet and you've got to filled out some way and that that's where you can get this contagion, where then other financial institutions are in trouble. Now, the really ironic thing, the really ironic thing is that if this wasn't crypto, if this was stocks chaos, the Fed comes in. 

Bryce: [00:33:32] Yeah, yeah. 

Alec: [00:33:33] Because and like the classic example of that 1998 long term capital management, reportedly the smartest guys in the room blew up their hedge fund. And in blowing up that hedge fund almost took part of the financial system with them. The US Federal Reserve came in and ensured that there wasn't contagion throughout the financial system. Fast forward ten years to 2008 and once again the smartest guys in the room. The US investment banks managed to blow up their banks with, you know, collateralized debt obligations on the U.S. housing market. Once again, the US Federal Reserve steps in and backstops the financial system and stops contagion. But that is what that is. That action of the Fed is what led to crypto. It was, you know, like the key driver of the original Bitcoin white paper and everything, but it is the lack of a central bank to backstop the industry that has meant that this could get so much worse. Yeah. 

Bryce: [00:34:36] Get quite messy. 

Alec: [00:34:37] So it's not like a value judgement about one system being better. Like there's plenty of arguments against the Fed, but in the way that they can ensure that this contagion risk doesn't spread, that's a pretty strong argument in their favour. 

Bryce: [00:34:49] Yeah, well, I don't know how your crypto portfolio is looking rain, but mine's looking pretty red. So although I'm not actually in a lot of crypto anymore, which is kind of good.

Alec: [00:34:59] Yeah. I mean, it's looking red. It's looked red since I bought it.

Bryce: [00:35:05] Yeah. 

Alec: [00:35:07] I guess, I guess the question is like would there be a point where you stop. Dollar cost averaging in? 

Bryce: [00:35:13] I don't think so. Not for me. This is the time to be doing it and I'm only doing it at such a small scale that it's kind of like it's just like I'm just so fine with what is going on at the moment and I'm happy catching the knife as it falls down and down. But. But my focus is. 

Alec: [00:35:31] 8 to 0. Yeah.

Bryce: [00:35:35] True. Who would have thought anyway? Anyway, we've covered a lot of ground today. 

Alec: [00:35:38] One thing before we go that ties our first story and our last story together, beware the next Warren Buffett comparisons because Hamish Douglass was anointed by the AFR and the Australian Financial Press. Australia's Warren Buffett and Sam Bankman-Fried was anointed by a thin Forbes but by a number of the US publications as the next Warren Buffett. So if someone that you're investing with is named the next Warren Buffett, so. 

Bryce: [00:36:14] Well, it's funny you say that because I'm going to reference the interview coming up this Thursday as well. Stephen said, you shouldn't read any Warren Buffett stuff. It's a mistake. Don't try to do what he does because no one can do what he could do. And to think that what he's done is repeatable is a mistake. So find an alternative way. So if you're interested in that and other quotes that there are some pretty good quotes that come out of it, i.e. you're not, you're never making money in a bull market, you're only renting it. I was like, okay, so to expand on some of these, so make sure you tune in on Thursday to hear our interview with Stephen Glass. But we've covered a lot of ground. We have run out of time, but it's great to chat. I hope you feel better and are back in the studio next week, but until then, have a great week. 

Alec: [00:37:01] Sounds good.