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Remember This from FTX Bankruptcy and You Can Thank Yourself Later

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The fall of crypto exchange FTX is a brutal lesson in fear and greed. Not the fear of losing but the fear of missing out or FOMO. FTX founder Sam Bankman-Fried (SBM) said this on the podcast “Odd Lots” describing how venture capitalists pick investments (highlighted by Jason Zweig in his WSJ column the “Intelligent Investor”):

You get a bizarre f—ing process that does not look like the paragon of efficient markets that you might expect. [Venture capitalists] see what all their friends are chattering about, and their friends keep talking about this company…and they start FOMOing [feeling the fear of missing out] and then [they] find a way to get into that….

And all the while, you’re like, ‘How do we justify: Is this a good investment?’ Like, all the models are made up…. You’re valuing [companies] off a model built by a person who owns the thing that’s being sold. So, like, of course the number’s going to go up between now and 2025, right? It’s going to go up an arbitrary amount. And you can justify anything.

How about the A-list endorsements? How do they pick investments?


Which makes me wonder: How do you become worth $50 billion? Start with $100 billion. So far this year, tech oligarchs have lost big. But don’t worry, they’ll be able to pay the bills—the AC will still work in their tropical paradise.

Investment Concerns? Save Money. Get My Friday Email. It’s Free

But what about teachers’ pensions, 401(k)s, and 529s that were invested in this stuff: NASDAQ, crypto, and its favorite cousin, ESG? Turning $100k in family savings into $50k is life changing. And yet it happens all the time.

When I gave a talk to graduating medical students about investing, I explained the power of compound interest, saving until it hurts, working for as long as you can, and not losing money. When I opened it up to questions, I was asked: “What do you think of bitcoin?”

Action Line: The lesson? Human nature? Greed? FOMO?

Emotions are a terrible foe for EVERY investor to overcome.

When giving investment advice: They’ll never remember you when you’re right, and they’ll never forget you when you’re wrong.

I’m ok being the forgotten man.

Stick with me.

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E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West (RIP JB) and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.
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