Burn These Two Disasters Into Your Memory

Another week, another two interviews with Sam Bankman-Fried... One of the dumbest 'my dog ate my homework' excuses of all time... The clueless CEO should listen to this guy... Another 'Bull Club' member keeps talking, too... Trying to walk a mile in Cathie Wood's moccasins... Burn these two disasters into your memory... [Stansberry Research Logo] Delivering World-Class Financial Research Since 1999 [Stansberry Digest] Another week, another two interviews with Sam Bankman-Fried... One of the dumbest 'my dog ate my homework' excuses of all time... The clueless CEO should listen to this guy... Another 'Bull Club' member keeps talking, too... Trying to walk a mile in Cathie Wood's moccasins... Burn these two disasters into your memory... --------------------------------------------------------------- Against all reason, logic, and [legal advice](... Sam Bankman-Fried is still talking. The founder of bankrupt crypto exchange FTX is like an insecure guy at a party who wants to talk to the prettiest girl in the room. Everything he says lands flat. So he keeps babbling on, nervously trying to explain himself. But as an old saying in politics goes, "If you're explaining, you're losing." Bankman-Fried is doing some serious losing these days. Since I (Dan Ferris) last wrote to you a week ago, he has given at least two new interviews – in the Financial Times and the Wall Street Journal. Bankman-Fried's comments just don't land with the authenticity and sincerity that he thinks they do... For example, the Journal asked about $5 billion in deposits that FTX customers wired to Alameda Research. That's the affiliated crypto-trading firm of which Bankman-Fried owns 90%. Customers were instructed to wire money there because FTX didn't have a bank account. Now, at least to me, "didn't have a bank account" suggests FTX probably shouldn't have opened its doors to customers in the first place. But OK, sure, we'll go with it for now. The next part is what's really breathtaking. And while I'm certainly not a criminal investigator, I believe what he said could possibly get him arrested. As Bankman-Fried admitted to the Journal... [Those deposits] were wired to Alameda, and... I can only speculate about what happened after that. Dollars are fungible with each other. And so it's not like there's this $1 bill over here that you can trace through from start to finish. What you get is more just omnibus, you know, pots of assets of various forms. Did Bankman-Fried really just say he "can only speculate about what happened" to billions of dollars in customer deposits because all dollar bills look alike? Someone get Bankman-Fried's lawyers on the phone! Where the heck are they?!? Bankman-Fried might think he's saying something more sophisticated. But I don't think so. It's one of the dumbest 'my dog ate my homework' excuses of all time... Selfishly, I love that Bankman-Fried hasn't listened to his lawyers. And since he is essentially admitting gross negligence and probably a half-dozen other crimes, I can keep writing about him. But he really should listen to his lawyers and stop talking. Bankman-Fried thinks he's being candid about FTX's downfall. But to law-enforcement agencies, it probably just seems like he's daring them to get off their duffs, have him deported to the U.S., and arrest him. (I'm no lawyer, either. But I assume that can happen.) As I said, Bankman-Fried also gave another interview last weekend... In that one, he told the Financial Times... As a company, we kind of lost track of positional risk in a pretty big and pretty destructive way. So as we've learned, he "can only speculate" on the whereabouts of those billions of dollars that FTX customers wired him. And he also "kind of lost track" of basically all the dangers. The pretty girl at the party is now rolling her eyes, noticing her drink glass is empty, and excusing herself. Bankman-Fried should just stop rambling and go home for the night. And you can call me naive if you want. But shouldn't Bankman-Fried know more about the company he founded and ran? It's not like he had retired after years of service. He just founded FTX in 2019. It was still a private company. And he still served as the company's CEO until November. Knowing every aspect of that business should've been his minute-by-minute obsession. Instead, he thinks he can get off the hook by representing FTX as a casual afterthought. Doing an interview with the Financial Times at 3 a.m. from his bed in the Bahamas (where the FBI can't arrest him) isn't a great look, either. Talk about a lack of self-awareness. Maybe Bankman-Fried's lawyers just aren't trained for this kind of client... Maybe they've never dealt with someone who was caught in this kind of pickle before. The more I think about it, the more I believe Bankman-Fried needs a new lawyer. Perhaps he should hire Ira Sorkin. If you've been playing Fraudster Bingo since the financial crisis, you likely recognize that name. He defended the late Bernie Madoff, who ran the biggest Ponzi scheme in history. Madoff could've kept the scheme going, too, if the financial crisis didn't scare his clients into wanting to withdraw their money. Now that I think about it, that sounds familiar. It's a lot like the $5 billion "bank run" on FTX before it shut down withdrawals and admitted to an $8 billion hole in its balance sheet. Sorkin has a ton of experience in these situations. And as he told the Financial Times... You're not going to sway the public. The only people that are going to listen to what you have to say are regulators and prosecutors.#_ftn1 Don't get me wrong... I doubt Bankman-Fried will actually stop talking. He's too busy trying to sway the public. But if I could give him only one piece of advice, it would be this... The guy who defended the biggest fraudster in history is essentially saying, "Shut up and save it for the cops and the courts." You should start listening immediately. As entertaining as the Bankman-Fried saga is for me, I realize it doesn't resonate with everyone... After all, I bet a lot of Digest readers have never owned cryptos – and never will. You're far more likely to have owned a crappy tech stock or two in your investing lifetime. I know I have. So now, let's look at an example that might hit closer to home... Like Bankman-Fried, [another "Bull Club" member]( wants to keep talking. And also like him, she should probably just keep quiet. I'm talking about [ARK Investment Management founder Cathie Wood](. The troubles of Wood and her company are well-documented in these pages... ARK Investment Management's flagship ARK Innovation Fund (ARKK) is down roughly 78% since its February 12, 2021 peak. As bad as the Nasdaq Composite Index has performed over the past 22 months, it hasn't been that bad. It's only down around 22% in that span. In other words, Wood isn't doing her job very well. So now, she's doing what any responsible Bull Club member would do... Wood is now lobbying for the Federal Reserve to save her bacon. On Wednesday, she took to Twitter in an effort to coolly assess the situation... The bond market seems to be signaling that the Fed is making a serious mistake. At -80 basis points (as measured by the 10 year vs 2 year Treasury yields), the yield curve is more inverted now than at any time since the early '80s when double-digit inflation was entrenched.#_ftn2 There is a problem with Wood's attempt to divert the public's attention... We already pointed it out in [our October 14 Digest](. That was when Wood wrote an open letter to the Fed, criticizing it for hiking interest rates. As I said at the time... To me, Wood's letter isn't really about the Fed at all. Rather, it's a thinly veiled attempt to blame her company's miserable performance over the past 20 months on someone else. My colleague Dr. David "Doc" Eifrig piled on and got a big laugh at our Stansberry Conference later that month. He noted that writing an open letter to the Fed is like writing a letter to Santa Claus. Now, Wood wants us to nod along with another cursory analysis of interest-rate spreads... And she says this setup indicates "that the Fed is making a serious mistake." Wood and the investors in her company's exchange-traded funds ("ETFs") would be better served if she learned to recognize her own mistakes and move on. At some point, she needs to stop holding on to a portfolio full of melting ice cubes in the biggest heat wave in decades. That was my point in October. And it's still valid for Wood's latest dig at the Fed. You might think the guy who created this Bull Club list of folks like Bankman-Fried and Wood (me) would eventually lose his ability to be astounded by anything they say. After all, this is the same person who said in an interview published February 3, 2021, "Are we in a bubble? I do not believe so," even though ARKK had just risen nearly 300% in roughly 11 months. Look at ARKK's chart since its inception. Try to spot the bubble Wood says wasn't there... I mean... if an ETF full of money-losing garbage tech stocks flying nearly 300% higher in about 11 months isn't a massive sign of a bubble, then there's no such thing as a bubble. And of course, as we've discussed ad nauseam... ARKK peaked nine days later. Once the mega-bubble pops, I guess I shouldn't be surprised if Wood campaigns for the Fed to bail her out instead of admitting she was wrong. That's a classic Bull Club strategy. But Wood's lack of self-awareness and apparent finger pointing at the Fed still surprises me. So let me go the other way... Instead of merely criticizing Wood, I'll try to walk a mile in her moccasins... I want to see if I can understand her a little better. (And no, I'm not anywhere near there with Bankman-Fried yet. He's still just a target for rotten tomatoes at this point.) Wood launched ARK Investment Management in January 2014. Nearly nine years later, she's still an unapologetic tech-stock booster and proud of it. Her mind travels at one speed and in one direction. It never slows down or veers off course. ARK Investment Management's ETFs buy "disruptive innovation" stocks. And they do absolutely nothing else. Wood will probably stick to her guns until the day she dies. Here's the biggest concession I'll make to Wood... When the assets you've devoted your life to owning and promoting soar to massive bubble-like valuations, it's probably impossible to see it as a bubble. It's just too much to ask of any human mind. Almost nobody would admit, "I'm not smart. I'm just lucky, so I'd better sell it all now." That just doesn't happen. It would be like asking Warren Buffett to tell you the best time to short Berkshire Hathaway (BRK-B)... No matter how the company's share price performs, the idea of shorting his own life's creation simply doesn't exist in the 92-year-old investing legend's mind. It's the same thing with Wood. She was born a raging tech bull. And she'll die a raging tech bull. It's too much to ask someone to take the risk of building a new asset-management company from scratch... devote themselves entirely to one asset class... and also be vigilant when that asset class becomes the biggest losing proposition since a certain serpent offered Eve a piece of fruit and she told Adam to take a bite. The fact that Wood went from a little-known, up-and-coming money manager to the most famous one in the world in a year or so likely made it harder for her to make good decisions. None of what I've said changes the business that Wood chose, though... Wood manages the ETFs' portfolios for her company's investors. So ultimately, she's responsible for their performance. And of course, all of ARK Investment Management's ETFs have been obliterated. Since February 8, 2021 (around when they all peaked), they're all down between 51% and 78%... It was all a toxic soup from the beginning... A true believer touts tech stocks and stumbles into a massive bubble... which briefly makes her look like a genius... then loses all the big gains as their prices fall back to Earth. It sounds like the perfect outline for a Netflix movie. It was always doomed. I've never heard Wood say that investing in disruptive technologies is one of the riskiest things you can do with real money. And I've never heard her say that the strategy isn't appropriate for most individual, self-directed investors who are saving for retirement. I doubt she ever will. Unfortunately, far too many folks will take the wrong lesson away from the mega-bubble's blowup... They'll see what happened with ARKK, bitcoin, and other assets over the past year or two. And they'll say something like, "But, but, but... if you can figure out how to get into a bubble early and get out near the top, you can make a quick fortune." There are two things wrong with that view... First, people who try to make a quick fortune in stocks usually lose a ton of money. The market is better than casinos at attracting suckers and getting their hard-earned capital. At least we all know that the odds of casino games favor the casino owners. We have no excuse for not going in through the bright lights and glass doors with our eyes wide open. But in the stock market, nobody tells you how often people who take up "day trading" get totally wiped out... Successful short-term traders aren't that way because they make a lot of money quickly. They're successful because they use a strategy that probably took them years to create. And then they do it with an ironclad discipline over a period of (usually) decades. If you don't want to do that, don't trade. Just put good stocks in your 401(k) and get a life. The other thing that's wrong with the idea of getting into a trend early and getting out near the top is that you won't recognize the top until it's long gone. Folks look at historical price charts, see where the big gains and losses occurred, and believe that they'll be able to recognize the trends developing in real time. But it's a trick of the mind. They won't really recognize the top as it comes and goes. And they'll give back most of what they made – if not all of it – by the time they see it clearly. OK, Dan, so what's the real lesson then? Why do I keep going over these sagas of wealth destruction, incompetence, and possible fraud? Two reasons... First, I'm curious to see if your jaw hits the floor with the same loud thud that mine does when you read this stuff. (Yes, I did hear it happen earlier.) If someone had written all this as a fictional book or screenplay, I would've said it was too unrealistic. I would say nobody in Bankman-Fried's position would make such dumb mistakes, talk to the media this much, or sound so stupid if he did. And yet, here we are! Second, I keep talking about this stuff for a practical reason... I hope my Friday Digests lodge the FTX saga firmly into your memory. I want you to remember what everything looked like, how it felt, and how much money got vaporized. This hope is based on a familiar idea for regular Friday Digest readers... I'm talking about "via negativa," which is Latin for the "negative way." It's the belief that the learning of life is about what to avoid. And I promise you... It's not sexy at all, but avoiding bad investments is more important than finding good ones. Finding a bunch of good investments isn't worth much if you fail to avoid the really bad ones. Over the long term, you'll feel a lot better if you preserve your capital well and earn even a mediocre return than if you watch too many bad bets erode any of your big gains. That's true even if you wind up with more money in the end by enduring those big losses. Looking at returns and historical market movements can make you forget you're human. It can make you forget how you'll feel if you make a lot of money quickly on a highly speculative bet... and then lose it all in short order. If I don't do anything else in my entire career except help people learn every kind of investment situation to avoid... smell possible frauds and disasters from a mile away... and learn from history to see the biggest mega-bubble of all time right in front of them... I'll consider myself more successful than I ever could have dreamed. But my mission isn't even half accomplished yet... I still need to help investors interpret the big events as the mega-bubble keeps bursting. I need to guide you and help you learn the right lessons so you can avoid future disasters. So with that in mind... I'll talk to you all again real soon. --------------------------------------------------------------- Recommended Links: [Here's What Wall Street's Watching Today]( Half of the top 300 financial institutions, the Department of Defense, and the brightest minds at Harvard University, London Business School, and the University of Chicago await one man's prediction for 2023. Don't be left out. [Click here for a major 2023 warning](. --------------------------------------------------------------- [Why 2023 Could Kick Off a 'Cash Frenzy' in Stocks]( Many mainstream analysts are predicting that stocks will recover soon. But one 20-year market veteran says we'll instead witness a "cash frenzy" unlike anything we've experienced in 21 years before stocks recover. And he's urging Americans NOT to buy a single stock until they see it. [Details here](. --------------------------------------------------------------- New 52-week highs (as of 12/8/22): Alamos Gold (AGI), Atkore (ATKR), Gilead Sciences (GILD), General Mills (GIS), Hershey (HSY), and Novo Nordisk (NVO). In today's mailbag, feedback for our Ten Stock Trader editor Greg Diamond, who we mentioned in [yesterday's Digest](... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com. "Dear Greg, I want to take time to thank you for your trading service. You are absolutely the best... I was very skeptical when I started trading with you in March 2022. I only allocated $1,000 to start with. Trading one contract at a time I have now $7,000 dollars available. I now trade two contracts. Please do the annual realized gain for me. I THINK YOU CAN SEE WHERE THIS IS GOING FOR ME. Your trading style fits me perfect. You do have a lot of knowledge and put in a great deal of work to figure out the market... You know what you doing and I thank you for that." – Paid-up subscriber Joe O. Good investing, Dan Ferris Eagle Point, Oregon December 9, 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 10/09/08 917.3% Extreme Value Ferris MSFT Microsoft 11/11/10 887.7% Retirement Millionaire Doc MSFT Microsoft 02/10/12 762.0% Stansberry's Investment Advisory Porter HSY Hershey 12/07/07 578.5% Stansberry's Investment Advisory Porter ETH/USD Ethereum 02/21/20 470.4% Stansberry Innovations Report Wade AFG American Financial 10/12/12 442.8% Stansberry's Investment Advisory Porter BRK.B Berkshire Hathaway 04/01/09 442.5% Retirement Millionaire Doc WRB W.R. Berkley 03/16/12 421.1% Stansberry's Investment Advisory Porter ALS-T Altius Minerals 02/16/09 320.2% Extreme Value Ferris FSMEX Fidelity Sel Med 09/03/08 303.5% 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 ETH/USD Ethereum 12/07/18 1,128.5% Crypto Capital Wade ONE-USD Harmony 12/16/19 1,099.9% Crypto Capital Wade POLY/USD Polymath 05/19/20 1,068.4% Crypto Capital Wade MATIC/USD Polygon 02/25/21 871.7% Crypto Capital Wade TONE/USD TE-FOOD 12/17/19 396.3% 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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