Are we allowed to talk about Bitcoin?

He also crafts narratives around his subjects, often without a ton of nuance written into it. That is why I was wondering what the nature of the movie pitches were after he had spent six months around Bankman-Fried. I really wonder if he was about to write a book about a Crypto Jesus who was revolutionizing the world.

 

Even less.

But I get the sense from people's responses that they are thinking, "it is so small, no big deal."

It's not the complete end of the world, a pension fund is not going to become insolvent over a loss like that obviously.

But a pension plan's liabilities are fixed obligations. Pension plan managers should never be reduced to, "Well, we'll take some risks and hope we make enough to cover everything we promised."

If they take a big loss in any given year, they still have an obligation they promised to meet. And worse, that loss can hamstring their ability to meet obligations in future years.

People have gotten deluded in the era of cheap money into thinking that earning a return is easy. A lot of people didn't understand the risks they were taking, and just focused on how much a stock index was being pushed higher, because the risks were being masked by a foot being planted on the back of the scale of finance. With that foot having eased off the scale just a little now. ... you are seeing some of the excessive risk turn into pretty big losses in some places.

In the case of an insurance company or a pension plan that got sucked into having to take some of those risks, it's a bigger deal than it might seem when you hear "only $95 million; but hell, they have $100-something billion." Because in a normal environment, where their job is (and should have always been) finding adequate returns while taking very limited risk, a fraction of a basis point on a high-quality bond can be the difference between them being able to meet their obligations or becoming an underfunded pension plan. Let's assume their problems will end up limited to just FTX. That $95 million, plus the future stream of returns it is being counted on to earn, has to be made up from somewhere. Where does that money come from? Do teachers collectively give back salary to make it up? Do tax payers have to pay up? Does the province go into even more debt (which will cost everyone)? Does the fund have to take even more risk that a pension fund shouldn't be taking (and risk making an even bigger hole) to try to dig itself out of a small hole?

It's not inconsequential. Even a quarter of a basis point, a fraction of 1 percent, is a big deal when you are running that kind of money. They are typically doing things to try to squeeze fractions of a basis point out of investment products, limiting expenses, using their size to negotiate terms, etc.

 

They buried the lede in that story. Crypto.com mishandled about $400 million of its customer funds. Of course a lot of customers are getting their money back in their own pockets after that revelation.

I'll say this, though. ... I would never have trusted my money to such a relatively small, privately-owned company that is based in another country, offered little transparency, and was so new that it has no history to have built any trust. But the block chain served one purpose that has always been part of its promise. ... in that the reason we know about their screw up was that people were monitoring publicly available blockchain transaction records, and they flagged the problematic transfer.

That is the promise of the decentralized finance that blockchain offers people in action. If your bank or broker loses its customers money in some way, and they decide to cook the books rather than coming clean, they can use whatever time they can buy to screw people even worse. Sometimes the coverup creates way more damage than the original screw up.

If it's an outright scam, they can take a small robbery and turn it into an even bigger robbery while people remain in the dark. In this case, people knew almost immediatly that something was wrong, and they didn't have to wait for the company to come clean. And the company is going to pay a big price in the form of customers leaving. That is actually pretty cool.

 

Getting back to FTX. Don't think that has been covered on this thread. ...





$10 billion. When I talk about the malinvestment that central banks have unleashed (but look at my 401(K)!). ... maybe that will crystalize it better.