Goodbye, Golden Eggs and Flying Unicorns

The latest example of Sam Bankman-Fried's lousy judgment... He doesn't agree with FTX's bankruptcy... Tracking the 'Bull Club' losses... Cathie Wood is 'buying the dip' in cryptos (again)... Meet the newest Bull Club inductee... Once you do this, you're allowed to fail forever... Goodbye, golden eggs and flying unicorns... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] The latest example of Sam Bankman-Fried's lousy judgment... He doesn't agree with FTX's bankruptcy... Tracking the 'Bull Club' losses... Cathie Wood is 'buying the dip' in cryptos (again)... Meet the newest Bull Club inductee... Once you do this, you're allowed to fail forever... Goodbye, golden eggs and flying unicorns... --------------------------------------------------------------- Sam Bankman-Fried just keeps trying to distract us... [In Monday's Digest]( I (Dan Ferris) discussed Bankman-Fried's money-incinerating debacle. FTX, the crypto exchange he founded, recently blew up in his face... In short, it couldn't afford to meet customers' redemption requests as cryptos sold off. It had lent out $10 billion in customer deposits, so it didn't have enough reserves. Finally, last Friday, FTX had no choice but to file for Chapter 11 bankruptcy protection. At the same time, Bankman-Fried resigned as the company's CEO. But Bankman-Fried hasn't escaped the limelight just yet. Now, he's trying to get past an alarming series of Twitter direct messages that news and opinion website Vox published. Showing his now-trademark lousy judgment, Bankman-Fried thought he was just chatting with a friend on Twitter this week. Unfortunately for him, the friend is also a Vox reporter... Based on the chat, it's pretty clear that Bankman-Fried wasn't in favor of the bankruptcy... During the conversation, which lasted more than an hour, he called it "maybe my biggest single f---up." Bankman-Fried claimed that if FTX hadn't taken that step, "withdrawals would be opening up in a month with customers fully whole." And he accused that "the people in charge of it are trying to burn it all to the ground out of shame." Bankman-Fried also implied that FTX didn't exactly lend out the $10 billion in customer deposits to affiliated crypto-trading firm Alameda Research. Instead, he said that FTX's customer deposits went to Alameda because FTX didn't have a bank account. And that FTX "basically forgot about the stub account that corresponded to that and so it was never delivered to FTX." Seriously. FTX's shortfall is reportedly about $8 billion. Imagine your spouse saying, "Honey, do you remember the $8 billion that came in over the past three years? Have you seen that? I just can't find it." Bankman-Fried told Vox that his top priority is raising the money to repay everyone. In the Twitter conversation, he said... I have 2 weeks to raise $8b that's basically all that matters for the rest of my life After the Vox reporter seemed skeptical, Bankman-Fried replied with... well a month ago I was one of the world's greatest fundraisers now I'm the fallen wreckage of one but there's a thing about being fallen— there are people who know what that's like, and who want to do for someone else what nobody did for them That sounds like a noble cause. But why should we believe him? After all, in the same Twitter conversation, Bankman-Fried also suggested that his "effective altruism" philosophy – which says one should act for the benefit of others as much as possible – is just a way to make as much money as possible for whatever purpose. Bankman-Fried gave the distinct impression that he believes it's impossible to avoid "doing unethical s--t" to achieve good ends. He clearly implied that it's all a cover-up for an amoral "ends justify the means" attitude, when he said... I feel bad for those who get f---ed by it by this dumb game we woke westerners play where we say all the right [shibboleths] and so everyone likes us OK, that's enough about Bankman-Fried today. Sure, it's easy to get caught up in all the soap-opera drama. But ultimately, he's just diverting us from more important happenings. We can't waste any more of our time... For example, Bankman-Fried briefly distracted us from keeping up with 'Bull Club' members' losses... On Wednesday, in the ARK Fintech Innovation Fund (ARKF), ARK Investment Management founder Cathie Wood bought 81,950 shares of crypto exchange Coinbase Global (COIN). She also bought 163,672 Coinbase shares for her flagship ARK Innovation Fund (ARKK). So in other words, with the FTX bankruptcy ripening like a baby's diaper on a hot day... Wood is buying the dip in crypto. Coinbase lost money before 2021. It made $3.6 billion that year in crypto's frenzied heyday. And now, it has lost more than $2 billion in its past three quarters and is cutting staff. It seems like the company's business model was simply to go public during a crypto bubble (in April 2021). That's kind of like [Peloton Interactive (PTON) going public]( six months before a global pandemic. About 54% of Coinbase's revenue comes from trading bitcoin and Ethereum. So if the bottom isn't yet in for both of those cryptos, its revenue will likely drop further. Perhaps the ugliest piece of the Coinbase picture is that its "junk" rated bonds all trade below $600 today. That's deep in distressed territory. ("Par value" is $1,000 per bond.) It's one thing when a company's stock is down. But when its bonds are getting killed, that's a clear sign that Wall Street's most influential investors are concerned about its future. Coinbase's roughly $12 billion market cap seems totally unjustified. It's crypto roadkill. Stay away. Now, if the words "Fintech Innovation Fund" didn't make you grab your wallet a moment ago and sprint from the room, you're brave and should be rewarded. As a reward, I'll introduce you to the newest Bull Club inductee... I can't believe we haven't yet said a word about Korean-Japanese billionaire Masayoshi Son... Son has been lighting large sums of money on fire for at least two decades. He should've been in the Bull Club a long time ago. So let's correct our oversight today... Son founded Japan-based SoftBank in 1981. He still serves as the technology holding company's chairman and CEO. During the dot-com boom, Son invested in Internet startups. His biggest moves included a stake in Yahoo in 1995 and $20 million in Chinese e-commerce giant Alibaba (BABA) in 2000. Those bets made Son the world's richest man for a few days. But then, it all fell apart. SoftBank's shares fell 99% in the dot-com bust. Son then bet big on telecom. Among other moves, he acquired British mobile-phone provider Vodafone's Japanese unit for $15 billion in 2006 and renamed it SoftBank Mobile. In 2008, SoftBank Mobile became the only official seller of the iPhone in Japan. However, none of Son's telecom deals could prevent SoftBank's stock from plunging again in the global financial crisis. From 2006 to 2009, the stock fell 87% from peak to trough. Still, losing billions of dollars in shareholder value yet again didn't keep Son from bouncing back. And the biggest bet of his career took shape in September 2016... Then-deputy crown prince of Saudi Arabia Mohammed bin Salman (now crown prince and prime minister) flew to Tokyo to meet with Son. Bin Salman wanted to diversify some of his country's investment holdings out of the oil industry. At the end of the 45-minute meeting, bin Salman gave Son $45 billion to start the largest technology startup fund in history. They announced the creation the following month... It's called the SoftBank Vision Fund. SoftBank contributed $28 billion to the fund. And additional investors joined – including iPhone maker Apple (AAPL), semiconductor giant Qualcomm (QCOM), Taiwanese electronics maker Foxconn, electronics firm Sharp, and the United Arab Emirates' sovereign wealth fund Mubadala. Altogether, the SoftBank Vision Fund raised about $93 billion. That sounds like one heck of a dinner party. Perhaps Son gave all the investors one of his flamboyant presentations. The presentations reportedly featured whimsical slides comparing SoftBank to a goose laying golden eggs and touting growth in artificial intelligence as an upward-sweeping chart with flying unicorns. Son apparently flashed enough of his megalomaniac personality to charm the prince... In a 2004 shareholder meeting, Son sounded a lot like fellow Bull Club member and WeWork (WE) founder Adam Neumann when he told SoftBank investors... I would like to count company profits in trillions. And then, in May 2017, he made an even bigger claim for investors... We only live once, so I want to think big. I have no intention of making small bets. But that wasn't all. During the COVID-19 pandemic in 2020, with SoftBank's net asset value and stock price cratering, he deemed himself as being "misunderstood, like Jesus Christ." A second SoftBank Vision Fund was announced in 2019. This fund reportedly planned to raise around $108 billion. But the underwhelming performance of the first fund left the second one with no interested parties. So SoftBank invested $30 billion of its own capital. Overall, the two Vision Funds combined to take in about $123 billion – including $58 billion of SoftBank's own money. [] According to SoftBank's published net asset value, the two funds are worth about $53 billion today. Over the past six years, the Vision Funds have invested in... - WeWork, Neumann's office-sharing disaster - Wirecard, the German payment processor that became insolvent amid an international financial scandal - Greensill Capital, the London-based finance firm that became insolvent amid a political scandal involving former British Prime Minister David Cameron - Broadband satellite provider OneWeb, which went bankrupt in 2020 after failing to secure enough financing to build the last 90% of its network - Katerra, a California-based off-site construction company, which went bankrupt in 2021 and blamed Greensill Capital's insolvency - And of course... FTX SoftBank put its Vision Fund minimum investment of $100 million into FTX. And now, it has written the investment down to zero – along with all the others in the above list. The Vision Fund's total gains peaked at $66 billion in March 2021. But on November 12, the company announced that all those gains had been wiped out. Honestly, once you know Son gave money to Neumann... doesn't that tell you everything you need to know? Son's career proves that you can fail as much as you like under one condition... You need to get one bet spectacularly right. I'm talking about the $20 million he invested in Alibaba in early 2000. The company was just a startup back then. Jack Ma and a bunch of friends had gotten together in his Hangzhou apartment just a few months before that. By the time Alibaba went public in 2014, SoftBank's stake was worth $60 billion. And in March 2020, despite all the panic around the pandemic, it was worth $133 billion. That's a pretty good return on investment. So today, I must conclude that this one massive success created so much momentum for Son that a lot of power players were all willing to look past all the other failures and frauds. Saudi Arabia, Apple, the United Arab Emirates, and more all kept chasing that deal. Like Coinbase and Peloton, SoftBank's business model only looks good at the top of enormous bubbles. And unfortunately for Son, those tops don't last nearly long enough. You know where markets have gone over the past year. SoftBank hasn't been spared... The company reported $13 billion in annual losses for the year ending in March. In August, it reported its largest-ever quarterly loss of $23.4 billion. And last week, the company reported a $7.2 billion quarterly loss. SoftBank's stock has fallen as much as 60% from its March 2021 peak. And it currently trades about 43% below that high. Son seems at least a bit shaken by his latest reversal of fortune... After announcing the big losses in August, he said... We've been making big swings but couldn't hit the ball. Importantly, he said SoftBank is now making smaller bets and anticipating more modest returns. He's also dropping the flamboyant presentations. No more golden-egg-laying geese or flying unicorns. I can't imagine being a SoftBank shareholder... It's up. It's down. It makes big bets. It doesn't make big bets. Geese and unicorns are in one day, and they're out the next. How can anyone keep up at the shareholder meetings? Given all the mammoth investments and matching losses, it's no surprise that SoftBank's stock trades at a massive discount to the net asset value posted on its website. The market is clearly skeptical of something... Maybe it thinks SoftBank's net asset value is overstated. That would make sense, given how the company overpays for investments... For example, SoftBank invested $18.5 billion in WeWork, whose valuation peaked at $47 billion in 2019. Today, WeWork's market cap is about $2 billion. And that isn't the only one. Besides turning to smaller bets, Son also isn't going to rely solely on his gut instinct and ability to throw too much money at startup founders. As the New York Times reported in August... [T]he company has systematized its investment decisions and put more power in the hands of experts, rather than relying on his hunches. Wow. No more big bets on hunches. And no more golden eggs, flying unicorns, or anything fun. Jeez, what's the point? Like Bankman-Fried and Neumann, Son might as well quit. That's not a prediction. Regular Digest readers know I don't do that. But mark my words... I suspect Son will do that in the not-too-distant future. Perhaps after another one or two giant quarterly losses, he'll retire from the limelight and enter the Bull Club Hall of Shame. --------------------------------------------------------------- Recommended Links: [GET OUT OF BANKS IMMEDIATELY]( Salting away your cash in a T-bill is one of the worst things you could be doing with your money. A little-known vehicle outside of banks could double, triple, or even quadruple your life savings... if you know where to find it right now. And it has nothing to do with any typical stock, bond, or crypto. [Click here for the full details](. --------------------------------------------------------------- ['THIS WILL DEFINE MY LEGACY']( After four decades of preparation... Dr. David Eifrig stepped forward with the most important announcement of his life. If you've EVER followed his research... or simply don't want to miss what Doc calls the "biggest opportunity I've ever seen... in any market... any asset... anywhere," you need to see what he has revealed immediately. [Full details here](. --------------------------------------------------------------- New 52-week highs (as of 11/17/22): Biogen (BIIB), Gilead Sciences (GILD), and Ryder System (R). In today's mailbag, feedback on [yesterday's Digest]( about the part of the market that keeps signaling trouble ahead. Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "Corey, Thanks. 'Different numbers, same narrative.' I know historically the narrative seems the same, but is it? The numbers in the way of the debt they are piling on to us doesn't feel the same. They are spending our money with checks we can't cover this time and aren't even asking our permission let alone telling us about it or where they are sending it... "I hope I am wrong but thus far the inflation rate hikes they are applying are Band-aids [for a] wound that will never heal. They are breaking the system. The Fed folks talk out of both sides of their mouths to keep the confusion circulating but I sometimes wonder if they even know what they are talking about. "I talked to a kid the other day that is working three jobs. He said he works at a Walmart warehouse. He said, 'We are getting stuff in. It's packed to the gills but they aren't getting the stuff to the stores.' Then he said, 'I got paid today but it's already gone'. It feels like the Fed should be talking to him. "Thanks for every minute you spend educating us." – Paid-up subscriber Jeff B. "The U.S. can't escape the global recession. The inflation in energy and commodities has been made worse from the Ukraine war and China lockdowns combined with the NATO sanctions used as retaliation. The IMF had and has continued warning all year of global recession... "Our Fed has guaranteed this with their narrow view of the root causes of inflation. Rate hikes won't fix inflation this time. The dollar will rise and then the risk of the world turning away from dollar will increase which we need to be cautious about. "We're not seeing progress on supply chain restoration globally. Current oil price declines are signaling recession. The bond market inversion has historically reflected recession. Too many simply don't wish to call this a recession. The Fed has used rate hikes to induce a recession to fight inflation caused by geopolitical factors which isn't working... "The lack of action to fix the Supply chain is and remains the primary inflation problem. Anything else with money supply can be solved over time with less risk to the global economy. Demand destruction through rate hikes is literally causing economic genocide. U.S. Fed interest rate hikes will not fix the global inflation problem." – Paid-up subscriber Rodger G. Good investing, Dan Ferris Eagle Point, Oregon November 18, 2022 --------------------------------------------------------------- Stansberry Research Top 10 Open Recommendations Top 10 highest-returning open positions across all Stansberry Research portfolios Stock Buy Date Return Publication Analyst ADP Automatic Data 10/09/08 891.9% Extreme Value Ferris MSFT Microsoft 11/11/10 866.4% Retirement Millionaire Doc MSFT Microsoft 02/10/12 743.4% Stansberry's Investment Advisory Porter HSY Hershey 12/07/07 529.9% Stansberry's Investment Advisory Porter AFG American Financial 10/12/12 447.8% Stansberry's Investment Advisory Porter ETH/USD Ethereum 02/21/20 446.3% Stansberry Innovations Report Wade BRK.B Berkshire Hathaway 04/01/09 445.1% Retirement Millionaire Doc WRB W.R. Berkley 03/16/12 405.4% Stansberry's Investment Advisory Porter ALS-T Altius Minerals 02/16/09 312.3% Extreme Value Ferris FSMEX Fidelity Sel Med 09/03/08 297.3% Retirement Millionaire Doc Please note: Securities appearing in the Top 10 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the model portfolio of any Stansberry Research publication. The buy date reflects when the editor recommended the investment in the listed publication, and the return shows its performance since that date. To learn if a security is still a recommended buy today, you must be a subscriber to that publication and refer to the most recent portfolio. --------------------------------------------------------------- Top 10 Totals 4 Stansberry's Investment Advisory Porter 3 Retirement Millionaire Doc 2 Extreme Value Ferris 1 Stansberry Innovations Report Wade --------------------------------------------------------------- Top 5 Crypto Capital Open Recommendations Top 5 highest-returning open positions in the Crypto Capital model portfolio Stock Buy Date Return Publication Analyst ONE-USD Harmony 12/16/19 1,092.8% Crypto Capital Wade ETH/USD Ethereum 12/07/18 1,084.3% Crypto Capital Wade POLY/USD Polymath 05/19/20 1,056.5% Crypto Capital Wade MATIC/USD Polygon 02/25/21 857.2% Crypto Capital Wade TONE/USD TE-FOOD 12/17/19 416.4% Crypto Capital Wade Please note: Securities appearing in the Top 5 are not necessarily recommended buys at current prices. The list reflects the best-performing positions currently in the Crypto Capital model portfolio. The buy date reflects when the recommendation was made, and the return shows its performance since that date. To learn if it's still a recommended buy today, you must be a subscriber and refer to the most recent portfolio. --------------------------------------------------------------- Stansberry Research Hall of Fame Top 10 all-time, highest-returning closed positions across all Stansberry portfolios Investment Symbol Duration Gain Publication Analyst Nvidia^* NVDA 5.96 years 1,466% Venture Tech. Lashmet Band Protocol crypto 0.32 years 1,169% Crypto Capital Wade Terra crypto 0.41 years 1,164% Crypto Capital Wade Inovio Pharma.^ INO 1.01 years 1,139% Venture Tech. Lashmet Seabridge Gold^ SA 4.20 years 995% Sjug Conf. Sjuggerud Frontier crypto 0.08 years 978% Crypto Capital Wade Binance Coin crypto 1.78 years 963% Crypto Capital Wade Nvidia^* NVDA 4.12 years 777% Venture Tech. Lashmet Intellia Therapeutics NTLA 1.95 years 775% Amer. Moonshots Root Rite Aid 8.5% bond 4.97 years 773% True Income Williams ^ These gains occurred with a partial position in the respective stocks. * The two partial positions in Nvidia were part of a single recommendation. Editor Dave Lashmet closed the first leg of the position in November 2016 for a gain of about 108%. Then, he closed the second leg in July 2020 for a 777% return. And finally, in May 2022, he booked a 1,466% return on the final leg. Subscribers who followed his advice on Nvidia could've recorded a total weighted average gain of more than 600%. You have received this e-mail as part of your subscription to Stansberry Digest. If you no longer want to receive e-mails from Stansberry Digest [click here](. Published by Stansberry Research. You're receiving this e-mail at {EMAIL}. Stansberry Research welcomes comments or suggestions at feedback@stansberryresearch.com. This address is for feedback only. 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