Bizarro World Podcast,
with Nick and Gerardo
Nov. 14, 2022
Gerardo Del Real: I am mining investor and editor of Resource Stock Digest, Gerardo Del Real, here with my partner, Nick Hodge, who's also an investor and publisher of Daily Profit Cycle. This, as most of you know by now, is our weekly therapy session that we call investing in Bizarro World — where we talk about the markets, we talk about what we're investing in, and some of the crazy stuff going on all around us.
There is always crazy stuff going on all around us, a little bit more this week than usual. This week, we're going to talk about the cryptopocalypse. We're not just going to talk about cryptopocalypse, we're going to bring in our expert. I am no expert, Nick is a little better at it. But we have someone that is very well versed, has done phenomenal with these types of markets in the past. I'm excited to have him on and ask some of your favorite questions. We're going to get into the dollar being toppy, near term weakness. Long story short there, we told you so. What comes next? Gold has some life. Silver squeeze? We'll talk about that. Copper? We'll talk about copper and we'll touch on the midterms just a tad bit. This is episode 194 of Bizarro World.
2:20 Crypto-pocalypse
7:00 With a Lower CPI Print, Is the Bear Market Over?
10:13 Is It Time for Metals to Rally?
16:17 Midterm Election Discussion
21:03 The Crypto Carnage: FTX and the Ensuing Opportunity
Gerardo Del Real: Mr. Hodge, how goes it? Never a dull moment. Do you feel safer? Is our democracy in more secure hands now that we've had the midterm elections? How are you feeling about everything?
Nick Hodge: Oh my gosh, I feel pretty good. I was never really worked up about it, the waves and tsunamis of different colors, whatever they were supposed to be. No, I think it went pretty smoothly. I mean, I guess you want to get into it right away. The only two things that stuck out to me were I can't believe the Georgia Senate race is as close as it was. Herschel Walker's incredible to me. And hen Miss Lauren Boebert, I just was laughing at something she said because, at one of her rallies this week or last week or something, I guess it was last week, she was saying, "How many ARs would Jesus have owned?" And she said, "Not enough to keep this government from killing him." And I just laughed. Hopefully other people can laugh at that.
Crypto-pocalypse: FTX Scandal
Gerardo Del Real: You're welcome, everybody. I hope you're all getting prepared for Thanksgiving and Christmas. Welcome to Investing in Bizarro World, everybody. That is the kind of week that it was. Let's get right into the markets, Nick. The most, I think, consequential asset class, speculative one at that, if you want to call it an asset class, is the crypto apocalypse that's going on. I mean, we're taking billions of dollars of personal quote, unquote, "fortune and wealth", and it's gone from billions to a dollar.
And look, jokes aside about crypto apocalypse, and I'm looking forward to having our expert on here in a little bit. But jokes aside, there's some real carnage out there, and it's been a tough week for a lot of people that were going to the moon, that were over-leveraged, that were trading on margin, that refinanced their home because experts told them to. A lot of real pain, so I don't mean to minimize the real-world effect, especially for the people that were gambling with real money. Not house money, not fund money, but real money — people that withdrew money from their 401(k)s, refinanced their homes, and now they're stuck with maybe an adjustable rate of 7%, 8%, and, "Oh, by the way, all the money's gone," right? Real pain there, but is there an opportunity? I'm not an expert in this. You dabble more, you've actually bought some Bitcoin in the past, you've dabbled in the space a bit. What are your thoughts on it? I mean...
Nick Hodge: Yeah, I think there will be an opportunity. And like you say, I don't want to steal all the thunder from Chris Curl, who we'll have on here in a little bit, but I do think Bitcoin is going to six figures over the next five years. I've told you that. And so, conversely, I think that it needs to print a $14,000 handle sustainably. It sort of flashed there this week on the FTX carnage, and I queued it up the screen, but I didn't buy any. I want to see it... There needs to be a washout. There were still people rushing in to buy the dip, and that's not how markets bought them. Everybody wasn't scared enough, despite all the money that's been lost that you talked about. So yeah, I own Bitcoin. I continue to own Bitcoin, and I will buy more, but it's going to go to $14,000, maybe not on the nose, but it's going to go to the $14,000 range. And when it does, I'll be buying it. It probably would've gone there today as we record this on a Thursday, except we got the CPI number, which we'll talk about, which, like you said, makes everything awesome again. So if it weren't for that, which is going to be short-lived, and we can get into it, I think you would be seeing a more extended fallout from all that stuff, right?
So anyway, those are my thoughts. Yeah, there's a long-term opportunity. I think you'll see more weakness, though, still, before that opportunity comes fully to fruition.
Gerardo Del Real: Well, again, not to steal Chris's thunder, but I know he believes there's not just an opportunity in Bitcoin, but there's an opportunity to use this meltdown to position yourself for 10 fold, 20 fold, 30 fold gains once it plays out. So I am excited to speak with him. I've yet to buy myself a Bitcoin. If it touches $14,000, I may have to go flirt, hold hands, maybe even a little kiss behind the neck there with Bitcoin, because that's incredibly attractive to me at $14,000.
Nick Hodge: It's a good value. And yeah, I've got half a Bitcoin in my safe, so. And he talks about that in his letter. He helped me do that. It's not on an exchange, and really, we're stealing all the crypto content. But yeah, I have mine in a hard wallet, they call it. So it's in the safe next to my precious metals. It can't go away. You can't not let me withdraw it from an exchange that collapses. It's mine, it's in my possession.
Gerardo Del Real: Well, I'll ask him how to do that for sure, because I'm sure there's a lot of people waking up today that are looking around going, "What happened to my money? What happened to my investment? What happened to my speculation? Where is my Bitcoin? Where is my Solana? Where's my Dogecoin?" Whatever it is that you had, I know, even internally, someone that works with us had some questions about the potential scammers out there and the scams to look out for. And again, we'll make sure to ask Chris all these questions, because he's a wealth of information in this space.
Nick Hodge: And you mentioned other coins there, which I really don't dabble in. So we'll talk about those, the Solanas and the alt coins that you said he thinks have 10x potential. I don't really pay any attention to those at all, so it's... I'm a Bitcoin maxi, if that's the thing.
With a Lower CPI Print, Is the Bear Market Over?
Gerardo Del Real: I'll ask him about the MAMIs and the PAPIs and the uniswaps and the unicorns. We're going to ask Chris all the tough questions.
Overall markets. We had a CPI print that was, I believe, and correct me if I'm wrong, it was like 0.2% less than where we thought it was going to come in. And I mean, the orgy broke out, right? It was just an orgy of buying. Everything was up, the Nasdaq was up 3%, the Dow, the S&P, everything just roared, right? Including, we'll get into this here in a second, but I want to start with the major indices, including gold, including silver, including copper, and including energy. Let's leave that for our next topic, but let's get into the major indices. I say it every week, you've been spot-on about calling head fakes and bear market traps. What do you take this recent rally as? And mind you, this is Thursday, November 10th, we're recording this. We just had an 1,100-point rally in the Dow. Head fake, bear bouts?
Nick Hodge: Yeah. I shorted in Nasdaq today in my personal account. Yeah. So the narrative is this, right? The bullish narrative is, "Oh, look, inflation's coming down, the Fed is not going to have to hike as much, quote, unquote "pivot" or quote, unquote "dovishness", and that's going to lead to lower rates and a lower dollar, which is going to allow stocks to go higher and allow precious metals to go higher. You mentioned gold, but the fact of the matter, at least as I see it, is that it's going to be short-lived, so.
Gerardo Del Real: Facts.
Nick Hodge: Yeah.
Gerardo Del Real: It's all about sentiment, Nick. It's about the narrative and the story. It's not about facts, is it?
Nick Hodge: No, I mean, you had the dollar pulling back to sort of support in the 108 to a 109 level. It's going to bounce off that. It's going to go back above 110, I'm convinced. If you look back at the previous cycles of the dollar bull markets in the 1980s and in the early 2000s, we're only about halfway through the level of elevation it saw back then, the dollar still has a lot higher to go. Nothing really changed. You say inflation is what, 0.02 off what the expectations were? I mean, it's still well over 7%. The Fed is still going to hike in December, which is the next point I wanted to make. If it's a 50 basis point hike, so be it. They’re still hiking rates, and likely will again in January. And oh, by the way, the market is finally getting the message that earnings are going to be abysmal in Q4. I finally saw that market expectations are for negative earnings, which means that Q3 was the last quarter of positive earnings for the S&P. I mean, Meta just-
Gerardo Del Real: Can you make up negative earnings on volume?
Nick Hodge: No. Meta just laid off 13% of its staff this week. It's like, no, this isn't... That's not how things bottom, right? There's still a lot of trouble to work through. And everything just gapped up, which means that now there's a gap to fill back to the downside, right? And they're going to get filled down here in the next couple of weeks.
Is It Time for Metals to Rally?
Gerardo Del Real: I think you're 100% right. Let's get right into the metals. Gold put in a nice rally, silver put in a nice rally. I mentioned copper as well. We can't talk about those metals without talking about the dollar. You said 108 was support for the dollar. We said a couple of weeks ago that we thought near term, and we said weeks, not months. We said near term, the dollar looked a little toppy. And sure enough, it's come down from 115 to 113 where we called that. It's down at the 108 level right now. I agree with you 100%, by the way. I think this is going to bounce, and I think it's going to bounce pretty impressively.
I think you can see a 113 and a 115 within the next four to six weeks again. And then that's when we really need to start paying attention to real policy, not sentiment and not narrative. Because if the dollar breaks out past the 115 level, there's a lot of blue sky left there when you look at a chart, right? That has a potential to do some severe damage, especially to overseas economies that are, like a lot of the crypto traders, borrowing on margin and hoping for lower rates, and anything past the 115 level's going to cause a lot of chaos. Let's see where that plays out. With all that being said, Mr. Hodge, let's get to gold, let's get to silver. I know one's an industrial metal, one is a precious metal. Let's start with gold, your take there.
Nick Hodge: Well, you can chart them together, though, so I'll just do that for you, I guess, in real time. Gold spiked right up to sort what was its previous support, right? Or almost there. I mean, it's in the... Where did it close today? $1,758, $1,760. It really needs to get convincingly to the $1,780s and stay there, and that's a tough row to hoe. I mean, Christ, it was just at $1,600 like a week ago, right?
Gerardo Del Real: Yeah. Yeah.
Nick Hodge: For it to add $180 in a couple of weeks with... Especially if the dollar's going to turn back around and rates are going to turn back around, which I think they are, I'm not so sure it's going to have the strength to do that, especially knowing that we closed the third quarter below the level that it needed to close at. So I'm a long-term gold bull, but I think, in the short term, that four to six-week timeframe that you mentioned, I think both gold and silver turn back around. I took the liberty this week to peel out of a personal Hecla (NYSE: HL) position that I had.
Gerardo Del Real: Yup.
Nick Hodge: I was selling Franco-Nevada (NYSE: FNV), which we've been in since 2018, in Foundational Profits this morning.
Gerardo Del Real: That's a triple-digit win, right? You can pound your chest a little bit.
Nick Hodge: It was 125% since the middle of 2018. Yeah, we bought it at the absolute low, at 60-some dollars, Franco-Nevada.
Gerardo Del Real: Triple digits during a consolidation like this one isn't bad.
Nick Hodge: That's right, the S&P was up, I think, 40-some percent in the same time.
Gerardo Del Real: Yeah.
Nick Hodge: Well, we bought another gold stock. So I guess I'll give you a freebie. There's some moving and shaking going on in the gold space. Technicals aside, dollar aside, you had a bit of a bidding war for Yamana (NYSE: AUY), right?
Gerardo Del Real: Yeah, yeah.
Nick Hodge: You had the Gold Fields (NYSE: GFI) offer sort of fall through, and Pan American (NYSE: PAAS) come in there with Agnico (NYSE: AEM) to get the Malartic portion of their assets, and then you had Triple Flag (NYSE: TFPM) — which I've been watching for a long, long time, wanting to buy shares, and it's been sort of getting weaker and weaker. But that's a really high-quality company, I think, with some really high-quality assets in its portfolio, something like 15 or 16 producing precious metal assets — come out and buy MMX...
Gerardo Del Real: Maverick.
Nick Hodge: Maverick, excuse me.
Gerardo Del Real: Yup.
Nick Hodge: Yes, thank you.
Gerardo Del Real: Yes, sir.
Nick Hodge: Which I've been watching for a long time as well. So why not take this gold rally opportunity to sell Franco-Nevada, lock in those profits, roll it into Triple Flag? I'm pretty sure this deal's going to go through, unlike the Yamana one that took a while to go through, because on the Maverick side, it's 57% owned by its officers and directors and by Newmont (NYSE: NEM) and by Pan American. So anyway, that's a long-term move, though. That's not saying I think Triple Flag's going to rip in in the next four to six weeks, but if I can get 125% in a couple of years like I just did with Franco, then that makes all the sense in the world. But in the short term, I think this is a head fake rally for gold and for the indices for the reasons that we've already covered.
Gerardo Del Real: I agree with you. So folks, just to make things clear, we're long-term and midterm, I think, without putting words in your mouth, Nick, gold bulls, but near term, I agree with Mr. Hodge. I think it's a head fake. I think you're going to see a round trip down to the $1,600 level coinciding with a much higher dollar here soon.
Nick Hodge: Same with copper. Let's just knock that out. I mean, long-term bull on copper, but in the short term, I don't think it breaks out much further than it is now. I can pull up that chart for you as well while I ramble about China, which everybody is talking about. "Oh, they're going to end the lockdown." It's like no, man. The cases have been growing there in the past week. And yeah, this copper price, it needs to really break out north of $3.85, let's call it.
Gerardo Del Real: And then $4.20 is the next stop.
Nick Hodge: Yeah, and it's only at... That's funny. It's only at $3.79, so yeah, you're not going to get that either, especially with... Let's not forget we're heading into a global recession. It was just last week we were talking about the most inverted yield curve we've ever seen, right? The 10-year, 3-month was inverted, for fuck's sake. Pardon my language. That doesn't end with a one lowered expectation CPI print. That's not how that works.
Gerardo Del Real: I absolutely agree. We've talked crypto, we talked about what we're going to ask our expert, Chris, about cryptos, we talked the dollar, we talked to major indices, we talked copper, we talked gold, we talked silver a bit.
Midterm Election Discussion
Let's get into the midterms before we bring Chris on and get back to the crypto apocalypse that's going on. I joked about the midterms because, outside of a few consequential votes, I really am so apathetic during this midterm election. There's a couple of issues that are near and dear to me, and I voted that way, but outside of that, I just kind of looked at it and kind of chuckled. Again, I keep saying if I could create an ETF product that allows me to short politicians on all sides, I absolutely would right now and sleep in peace knowing that that would pay off beautifully within the next couple of years.
So look, the Biden camp is celebrating because it thinks it didn't do as bad as it was going to do. The Right seems to be done from both the media perspective and from a party perspective with some of Donald Trump's antics. That's interesting to me. Anytime I see the New York Post as aggressive to the negative side on Donald Trump, and then I see Trump lash out at DeSantis in Florida, and then I see some of the other candidates that Mr. Trump endorsed lose pretty handily, that's interesting to watch just as an observer. Not that I have a dog or a horse in the race, just as an observer, the change there in sentiment is very interesting to me. Everybody's waiting to see if the Trumpster runs again. He said he's got a big announcement in a couple of weeks. I'm curious to see where that goes.
But look, outside of that, the bottom line, in my opinion, Nick, is that you could just expect more gridlock, right? I mean, that's really all that the election said. Expect more gridlock, less to get done. Mr. Biden's done some good things. We've talked about a couple of the not-appropriately-named bills that he signed into law, but some good things inside those bills. He also keeps wanting to shake hands with nobody, and walking the wrong way, and calling out for dead people, so you got to call the good with the bad. Kamala's probably one of the worst VPs we've ever had in the history of America. That's saying a lot. Maybe not the worst, maybe inactive. I would say inactive. Let's call that that. And then the Right, I mean, the Right does what it always does, except I do see a sentiment shift there about the direction of the party. And that may be a positive thing for all sides of the political spectrum if we can get back to disagreeing civilly, and work on legislating as a country as opposed to bickering and just pandering to our fanbase. That's my rant on the midterms.
Nick Hodge: Yeah. Yeah, I'm pretty agnostic as well, so I don't have a lot to add there. I split my ticket here for our Senate and House races. Neither of the people I voted for won.
Gerardo Del Real: Same.
Nick Hodge: And I didn't vote for a lot of the other local races because I didn't know the candidates. So what was interesting to me on a national basis, first of all, cannabis. Maryland passed legal cannabis, Missouri passed legal recreational cannabis, though it still got rejected in the Dakotas, so-
Gerardo Del Real: And Arkansas.
Nick Hodge: ... not winning popular support in some really red states, but we'll see how that goes in the coming years. Tax the rich is something I should mention. Did you see that that passed in what we're now referring to as Taxachusetts? A surcharge basically on anyone-
Gerardo Del Real: For being a millionaire.
Nick Hodge: Yeah. Well, if you make more than $1 million in a year, just an added tax that was voted in for the people, which I'm not necessarily on board with. A similar measure was on the ballot in California, and that did fail. And Governor Newsom, who won re-election, was opposed to that windfall tax or tax-the-rich proposition or whatever you want to call it, but-
Gerardo Del Real: See, he does something right sometimes.
Nick Hodge: Yep. Amazing to me that you can just... Well, not amazing that you can put something on the ballot, but amazing to me that people will just vote for taxing the rich where I'm thoroughly in favor of equality, not a percentage, not an added percentage because you make a certain amount, so. And also because I don't necessarily think the government's the best steward of that capital once they get it anyway. So anyway, there's still that sort of tax-the-rich sentiment out there. And I think that's all I got on the midterms. Maryland elected its first Black governor, New York was the first female governor.
Gerardo Del Real: Yeah.
Nick Hodge: I didn't realize that. So a couple of firsts going around. But other than that-
Gerardo Del Real: Pennsylvania. First female Black senator in Pennsylvania, I believe.
Nick Hodge: Oh, wow.
Gerardo Del Real: Mm-hmm.
Nick Hodge: And Fetterman, I think that's his name, yeah, squeaked it out against the doctor that moved there from New Jersey. So there you go.
Gerardo Del Real: Is he a doctor, though? “Doctor.”
The Crypto Carnage: FTX and the Ensuing Opportunity
All right, listen, again, the carnage this week was most definitely in the crypto space. Even with the rally that we had, the 1,200-point rally that we had in the Dow today, and gold surging, and silver surging and copper surging, the crypto space didn't really participate in any meaningful way. I want to introduce Mr. Chris Curl, who is our in-house expert on all things cryptocurrencies. I know that a lot of people asked to have Mr. Curl here. Chris, an absolute delight to have you.
Chris Curl: Hey, guys.
Gerardo Del Real: I bet you've had a hell of a week, sir. I don't own any cryptos, and I'm like, "Oh shit, what's going on?"
Chris Curl: Good for you, Gerardo.
Gerardo Del Real: Every now and then I get one right, Chris.
Chris Curl: That's right.
Nick Hodge: So let's start with what happened, right? So Chris, we mentioned a little bit about the crypto carnage this week. Gerardo was calling it the crypto-pocalypse.
Gerardo Del Real: Crypto apocalypse.
Nick Hodge: Yeah, crypto apocalypse. But we didn't really get into the nuts and bolts of FTX, what FTX was, who SBF is. So give us the rundown on what sort of happened over the past week.
Chris Curl: Sure. Well, it looks like SBF might indeed be the devil.
Nick Hodge: Right.
Chris Curl: I was asking that question-
Nick Hodge: Sam Bankman-Fried, right?
Chris Curl: Sam Bankman-Fried, yeah. So I mean, this was the guy who was out there lobbying politicians and regulators in Washington DC. He was pushing for crypto industry regulations. At the same time, he was over in the Bahamas basically running what looked like a Ponzi scheme, mismanaging customer deposits, and possibly even transferring them over to his quantitative investing from Alameda, where they were doing leverage trading of crypto assets and stocks, and bailing out crypto lending platforms, et cetera. But yeah, he got his start fairly recently. I mean, he's only 30 years old, and when he started, the CEO of the world's largest crypto exchange, Binance, his name is Changpeng Zhao, he's known as CZ, he was an early investor in FTX and he was kind of friends with Sam Bankman-Fried, who's known as SBF.
Gerardo Del Real: Do you think they're still friends?
Chris Curl: Well, they were at one time. Obviously that relationship soured, or they were never friends to begin with and this was all a brilliant plot by CZ to take him down from the beginning. I don't know. But yeah-
Nick Hodge: Refresh people's memory. What is FTX? Why should people recognize that? What was it? And didn't we see some famous commercials for that recently?
Chris Curl: Well, sure. They had a big ad campaign during the Super Bowl where they had Larry David kind of pooing on all of the major innovations over the last 1,000 years. And at the end of the ad, he kind of poos on FTX and says, "Eh, I don't think so. I'm never wrong about this sort of thing." So it looks like Larry David may have been right in the end. He's-
Gerardo Del Real: He's always right.
Chris Curl: He's always right. He's wiser than he looks at any rate. But yeah, FTX was basically either the number two or number three largest exchange in the world just a couple of weeks ago, and CZ was a big initial investor in it.
So it started in 2019. CZ invested a ton of money to get the whole thing started. And then I think the relationship soured, CZ kind of saw FTX as kind of a legitimate competitor. And back in May of last year, FTX applied for a license in Gibraltar for a subsidiary, and had to submit a bunch of information about its shareholders, and CZ and Binance basically stonewalled all their requests for information. I think they owned something like 20% of FTX. So in July of last year, of 2021, SBF bought back all of CZ's stake at a cost of about $2 billion. And a lot of that was paid using FTX's native token, FTT, which is used as an exchange token on the platform. And earlier this week, CZ announced kind of out of the blue that he was selling all of his holdings of that FTT token, and he referenced the Terra LUNA collapse that happened earlier in the year as one of the reasons for doing so. He didn't want the liability of holding FTT. Because they held the Terra token earlier in the year when that collapsed, and they obviously lost a ton of money holding that.
Gerardo Del Real: Like real money?
Chris Curl: Yeah, I mean, I don't know. Billions of dollars, I would imagine.
Gerardo Del Real: Yeah.
Chris Curl: So that didn't exactly inspire investor confidence in either FTX or their native token, so it kind of triggered a bit of a bank run on the exchange, and that caused a major liquidity crunch, because obviously FTX was being funny with their customer reserves. So many customers were not able to get their funds off of the platform. And less than two days after that announcement, SBF got on Twitter and said that a letter of intent had been issued for Binance to purchase FTX pending due diligence.
So that kind of buoyed the markets a little bit. They were able to recover. People thought, "Oh, maybe CZ is going to bail out FTX and everything's going to be okay." And then, a day later, CZ announced that, after doing the due diligence, he determined that FTX was in too big of a mess to save and he just bailed out of the deal. And so, that's what caused all the panic selling. Everybody freaked out and the price of Bitcoin fell below $16,000, and a lot of other crypto assets went with it. So Sam Bankman-Fried and FTX… Their investing arm, Alameda, had huge holdings of FTT, and they were also huge investors in Solana and the SOL token. So trying to meet these liquidity demands caused the price of FTT to collapse from $26 to almost $2 in a matter of a few days, and SOL sold off massively as well from $38 down to almost $12. And that's unfortunate, because it really didn't have anything to do with the Solana ecosystem. It was just that so much of the token was wrapped up in this Alameda Research investment firm, and then they had to sell a lot of that off.
I think that was a pretty good buying opportunity for SOL because it hit so low, and that was kind of an artificial dump. But yeah, the whole thing is really sketchy, and all the details are playing out. But yeah, basically it looks like Alameda Research had lost a ton of its money in recent months just with the market downturn and all the de-leveraging that was happening in the space. And they had given huge loans out to some of the failing lending platforms like Voyager Digital earlier in the year. So Sam Bankman-Fried had taken at least $4 billion in FTX funds and transferred them to Alameda to kind of shore them up. And it looks like a lot of these funds may have been customer deposits.
Nick Hodge: Customers' funds, yeah.
Chris Curl: Yeah, which is just wildly unethical, and apparently-
Gerardo Del Real: That's one way to put it.
Chris Curl: And SBF apparently didn't even tell the company executives that he was doing these things. And I think that CZ figured out what he was doing and was like, "Hey, I'm not going to do any more business with this guy, and at the same time this is going to be the kill shot to take out one of my top competitors in the crypto space." So he kind of killed two birds with one stone there. And this is going to have far-reaching effects. So CZ is now advocating for a proof of reserves for all crypto exchanges so that customers know their deposits are safe. I think that's going to be a really good precedent that Binance sets. Other exchanges are going to follow that. But yeah, the fallout from this is ongoing. It's very unwise, but a lot of people had all of their money, all of their savings on this FTX Exchange because they thought it was regulated, they thought it was safe, it had all the celebrities behind it.
Gerardo Del Real: What could possibly go wrong when celebrities are behind it?
Chris Curl: Well, right. I mean, Tom Brady and Gizelle, what else do you need? This is probably going to be going on for a long time. The fallout from this is going to be bad. Regulators are already probing into FTX in a major way, the SEC is probing into them in a major way. It'll be interesting to see.
Gerardo Del Real: Let me put my JP Morgan top hat on, right? There's blood on the streets. Where are the opportunities, Chris? You're the expert. I have yet to buy a Bitcoin, a crypto coin, a muni swap, a PAPI, a MAMI, or whatever the heck is out there, right? Never bought any of it, haven't tinkered with it. Got close to buying a little Bitcoin, decided to wait it out. Not because I'm smart, just because I got busy with a million other things. But whenever there's carnage and blood in the streets, there is always opportunity. What coins are you prioritizing in your research, and what coins are you watching for certain levels to get in there and capitalize on the carnage and the blood on the streets?
Chris Curl: Yeah. Well, I mean, obviously yesterday was a tremendous buying opportunity, because the markets have already rebounded significantly. And we were buying some things for the Crypto Cycle portfolio this morning, early on, because I kind of saw an entry point. I mean, people probably want to throw a shoe at me at this point for recommending Solana, because I've been talking about it for a year, and the price of that along with most crypto assets have been just going down pretty substantially.
Gerardo Del Real: I did that with lithium and uranium for three, four years, and some of those stocks are triple and quadruple-digit gains now. That's just the way the game is, it's cyclical. And that's why I asked the question, right? There is nothing wrong with averaging down if the fundamentals are structurally sound. And that's really what I want to dig into, Chris. Where do you see value after this massive sell-off?
Chris Curl: Yeah. Well, Solana was one of the main players, because I think its value was artificially brought down by the Alameda liquidity crunch that happened, so I was definitely buying that up. It almost hit $12, which is extraordinary when you consider, a year ago, it was at like $280. And that ecosystem is still being developed. Solana is doing a lot of things. I don't think it's going to zero. I think they're going to come out of this bear market and be one of the few players that exist in the next crypto bull market. Obviously Bitcoin and Ethereum, anytime you can get a really good entry point on those, pull the trigger, because those aren't going away. Those are crypto blue chips. So I was buying Bitcoin and Ethereum as well. That's a total no-brainer. If those dip low enough, buy up Bitcoin and Ethereum.
But yeah, it's a really tough crypto winter, bear market. This is what separates the wheat from the chaff when you have a kind of a free market system like crypto is. When you get a recession, when you get a bear market, it wipes out all the weak players, all the scammers get taken out. And a lot of these current crypto projects that we saw have massive valuations in 2021, they might not ever see those all-time highs again. A lot of the biggest plays are going to be things that come out over the next six months, things that people are currently building that I'm going to be keeping a close eye on the markets for, because all it takes is one or two plays in the right crypto project early on, and it more than makes up for whatever losses you've had over the last year or two.
Gerardo Del Real: Now, we're going to make sure to put a link to your service, so I don't want to have you give away the levels at which you think these coins are attractive, but I encourage anybody that's reading this or watching this, listening to this, to look at Chris's background and really decide, if you're investing or speculating in any kind of significant shape, fashion, form, way, it might be worth reading this gentleman's material. Can you tell people a little bit about how you came to work with us and provide us your expertise, Chris, in the crypto space? Given that, one, for me, I know very little, next to nothing of cryptos, and Nick, though a little more experienced, certainly has many irons in the fire outside of the crypto space. Let's just put it that way, right?
Chris Curl: Well, sure. Yeah. It's been mainly through my relationship with Nick who I've known for years. And he's been a guy who's smart enough to have recognized some of the profit potential in Bitcoin over the years, going back many years. And then we were just talking about crypto. I was kind of showing off some of my gains last year in the crypto space, and it got us talking more and more about the profit potential of cryptocurrencies and how the space is not going away. And even though we're currently in a bear market, going into the next bull market, there's really not any sector where you can see the kind of gains that you get in cryptocurrencies.
Gerardo Del Real: Tell them about those gains, Chris. I know you're being modest and humble here, but I want people to kind of crystallize what the potential is here when you get a blood bath we've had in the past week. What kind of upside do you see? And not just do you see, but what kind of upside have you had personally, dabbling in the crypto markets?
Chris Curl: Well, I personally had 90x plus gains on, well, on Dogecoin. I'll just... I bought that very early on. I kind of saw that. And crypto, when you're in a crypto bull market, all the gains are almost entirely speculative. It's very much like a casino. But if you get in on one or two or three decent plays, 50x, 100x gains are very much possible. I mean, some people have had gains way larger than that. I haven't been lucky enough yet. But yeah, I mean, I've had multiple plays that were over 70x in gains. And a 5 to 10x gain in crypto during a bull market is amateur hour. So that's why it really is important to just study where in the cycle are we, and when to really start deploying capital and getting into the right projects so you can see these gains.
And I'm going to tell you right now, I always say it's super speculative. You shouldn't be mortgaging your house and putting the money into cryptocurrencies. But if you've got some extra money, if you've been making money on your and Nick’s recommendations or whatever and you don't want to pay taxes on it, you want to throw it into something fun and speculative, crypto's a really cool way to really magnify those gains in a major way in a bull market. Obviously I think we've got about six months to go until we pull out of this crypto winter. But that said, when we have a major crisis of panic selling like we had yesterday, that's always a good time to buy select projects that are fairly conservative plays. Once we get into a bull market, we're going to get way more speculative, because that's where the big gains are.
Nick Hodge: People did mortgage their houses, and Gerardo was talking about that before we brought you on, and had that money on FTX, which froze withdrawals. Do you know if they've reopened withdrawals? Are people able to get their money out, or is it still locked?
Chris Curl: Well, it appears to be largely frozen still. I think they're opening up withdrawals for some people. I mean, I don't know how they determine who gets the money and who doesn't.
Gerardo Del Real: That's going to help credibility moving forward.
Chris Curl: Yeah.SBF is asking for $8 billion, I think, right now to shore up the reserve and meet requests.
Nick Hodge: I mean the exchange, FTX was valued earlier this week at like $32 billion, and-
Gerardo Del Real: And then what happened?
Nick Hodge: And then, in the discussions this week, they were giving it a $1 price tag. I mean, that's incredible to me. I mean, SBF personally, I think, lost $5 billion or $6 billion in his net worth.
Chris Curl: Well, he was worth $17 billion a week ago, and now he's filing for bankruptcy.
Nick Hodge: Right.
Chris Curl: I don't know if he has money in an offshore account or whatever else, but-
Nick Hodge: Do you think he's going to jail? I was telling my wife last night, who has no idea about any of this stuff, right? So I was explaining to her what happened, and this is what she said. "He's either going to kill himself or go to jail, right?"
Gerardo Del Real: Well, there is a third option. I hope he can afford good security.
Chris Curl: Well, yeah, I mean, he might just stay in his... I think he has a penthouse apartment in The Bahamas with his roommates. He's just playing a lot of League of Legends and maybe taking a lot of Adderall right now, just dealing the best he can with whatever's going on, but I think-
Gerardo Del Real: You might want to get those windows reinforced, buddy.
Chris Curl: Yeah, exactly.
Gerardo Del Real: Just saying.
Chris Curl: May want to get blackout curtains at any rate.
Nick Hodge: It's worth putting a finer point on a couple of things. We don't know all the details yet, the smoke is still clearing, but it seems like he was using customer funds to invest in other projects. For a while, he was the lender of last resort all year while all these other things were crashing and burning, while the crypto winter was getting colder, and he was stepping in and saying, "I'll back that. I'll back that." And it was like, "Well, where's this guy getting the money?" And then a couple of weeks ago, Chris, you and I were talking, and I said, "I've been reading a couple of short reports, guys who have made a lot of money shorting things over the years, and they're starting to say this guy is a fraud, basically." And-
Chris Curl: Yeah, you called it, Nick.
Nick Hodge: And you... Well, no, I told you to look into it.
Chris Curl: Yeah.
Nick Hodge: And then you did, and you wrote an article and said, which you started talking about at the beginning here, is saying, "Is Bankman-Fried the Devil?" You wrote that article a couple of weeks ago. And that's the other thing I wanted to say, is, not only in Crypto Cycle have you been recommending things and alerting people to new projects, but also helping avoid the pitfalls, for example. I mean, you tell them, your subscribers, your readers, what exchanges to hold these things are and what sort of wallets to use. And that, certainly, one of them hasn't been FTX. I haven't seen you write about that at all. So I don't know if you want to add anything there. But the other thing I was telling Gerardo is that my Bitcoin is in my possession, and you helped me do that as well. I don't have any Bitcoin on any online exchange anymore.
Chris Curl: Right.
Nick Hodge: It's all on what's called a hard wallet that is in my safe along with other hard assets. And I couldn't help-
Gerardo Del Real: Like bullets.
Nick Hodge: I couldn't help but notice yesterday that, when all this carnage was going down, that Ledger was trending on social media networks. So you want to talk about that for a little bit?
Chris Curl: Well, yeah. In full disclosure, I did, I think it was back in June, I wrote an article about FTX and Sam Bankman-Fried, because that was when he was kind of bailing out all the lending platforms that were failing. And I never recommended using the FTX exchange, but I kind of was exploring the FTT token as a potential speculative investment once we come out of this bear market. I never bought any or recommended currently purchasing any. And obviously I don't recommend buying it now as more information has come to light. So I've recommended Coinbase, which is a safe exchange. And Brian Armstrong, I generally trust him. He's not playing with customer money.
And I also have recommended from the very beginning and shown people how to set up a DeFi Wallet, which uses your own keys. Only you have access to it. That way, if you're intending on holding something for a long time, you're probably going to want to put it on this DeFi Wallet and not keep it on a centralized exchange, because you never know if you're going to be able to get your funds off, like we're seeing with FTX. Some people had their whole net worth on that exchange that might not ever get the money back, or it might take, like the Mt. Gox hack, it might take eight years for a settlement to be reached, and then you only get a fraction of what you had there. And to be even more secure, you can move your crypto onto a hardware wallet, which removes your assets completely from any internet connection onto a physical device that you can store in a safe or a safety deposit box. And that's what we've done, we did a video highlighting that this summer, for Nick, because in bear markets-
Nick Hodge: Because I knew this shit was sketchy.
Chris Curl: When stuff starts collapsing you want to make sure you got your money in a safe place, your crypto in a safe place, because you can't have it in the hands of a guy like Sam Bankman-Fried, because obviously he's going to take it and go speculate with it without you knowing.
Gerardo Del Real: His last name was Free.
Nick Hodge: Well, I've heard all sorts of puns. Sam Bankrun-Freed, Sam Bankrun-Fried, all this sort of stuff.
Chris Curl: Sam Bankrupt-Fraud is the one I like.
Nick Hodge: Yeah, there you go. That's a good one. All sort of stuff like that.
Gerardo Del Real: He might soon need to be freed.
Nick Hodge: We're going to wrap up here because it's getting to our typical time where we wrap up. But before we do, you mentioned Coinbase (NASDAQ: COIN). That's a publicly traded company. They've got to file quarterly reports, there's a bit more transparency there. But nonetheless, I've seen the Grim Reaper meme, I think you know what I'm talking about, where the Grim Reaper's going door to door and just slugging people. And the most recent one I've seen is Sam Bankman-Fried just got slashed by the Grim Reaper, and then Coinbase is next. So we'll see how deep this crypto carnage goes and gets. But last point, and then we will wrap up, is, do you think positive oversight comes out of this? I know you've written a bunch about regulation, and where some people want it to be totally unregulated, I think you've argued that some form of oversight is probably prudent to give larger institutional investors the confidence they need to put larger sums of money into cryptocurrencies or DeFi projects, et cetera. So do you think we see that as a result of this?
Chris Curl: Yeah, I mean, I'm a little bit worried that regulators may come down hard on crypto after this whole affair. Although, it's important to remember that FTX was actually an international exchange headquartered in the Bahamas. Coinbase is actually a registered US company, registered with the SEC and publicly traded. And Brian Armstrong, the CEO of Coinbase, was arguing that, "Hey, we're willing to comply with any regulations, but we've got no clear regulatory framework from the SEC or anyone else." So it seems like, right now, the SEC just kind of wants to run roughshod over the crypto industry and do whatever they want, singling out individual projects, maybe taking on cases that they think they can easily win. I do think that some kind of clear regulatory framework for crypto is necessary, and that it really should come from Congress legislatively. There are some legislation being worked on now, but hopefully that'll get pushed forward and given more priority now that so many people have lost money with FTX.
Nick Hodge: All right. That's Chris Curl, he runs Crypto Cycle. He's got a $50,000 real money portfolio that he's managing with complete transparency so you can see what he's buying and selling. And he writes to you every two weeks as well to cover the markets and the things that are going on. You got anything else, Gerardo?
Gerardo Del Real: No, I would add that, as someone that's never speculated in the crypto space, with Chris’s service you get phenomenal tutorials on the most basic terms all the way up to how to set up that wallet, and how to secure it and safeguard it. And so, for anyone that's thinking about speculating in the space and kind of senses there may be an opportunity here but, kind of like me, is just afraid to get into the water not knowing the temperature. If all you do is want to learn, this service is amazing at that as well. And I think that that should be noted, because even for someone like me that hasn't allocated $1, it's worth its weight in gold just in the knowledge that I get from reading when I do take the time to do it. So kudos to you, Chris. Thank you so much for coming on. Crazy times, interesting times, but opportunity in times like these as always, right?
Chris Curl: There's opportunity.
Gerardo Del Real: I like it. Chris Curl, everybody.
Chris Curl: Thanks, guys.
Nick Hodge: I'm supposed to say check us out at dailyprofitcycle.com/subscribe. You can get free reports there as well, including one that Chris has written about the crypto space. So we hope you check it out there.
Gerardo Del Real: I don't know what I'm supposed to say, but I hope everybody has themselves a phenomenal week. I hope everybody enjoyed this week's therapy session that we call Investing in Bizarro World. It's only going to get more bizarre, everyone, I promise y'all. Wait until the bond market implodes. We'll be talking about that. Timestamp it. I'm Gerardo Del Real along with Mr. Chris Curl and Mr. Nick Hodge. This has been number 194 of Investing in Bizarro World. Take care, everybody.
Nick Hodge: See ya.