October 19, 2022
Read time: ± 4 minutes
New here? The WC is a selection of five useful, interesting & notable insights, handpicked by our CIO Wyatt Cavalier and pumped into your inbox every Wednesday.
Table of Contents
How much worse will it get?
If you’re starting to feel the pinch of 2022’s market, housing, and societal collapse, it’s normal to wonder how much longer the pain will continue.
I addressed this a bit in Monday’s Alts Cafe, but here’s some historic context:
Depending on when you’re reading this, the market is down around 28% from its recent high. The crash of 1973, the Dotcom bubble, and the Great Recession all saw drawdowns of more than 50%.
If this drawdown is anything like those events, we’ve got a lot more pain in store, before it’s time to start catching falling knives.
Where to invest when the market is 💩
Keeping dry powder during an economic downturn is important (our ALTS 1 fund is 40% cash), but it’s boring, and when inflation is a million percent, it’s also depreciative.
Over the last couple of weeks, I’ve put together pieces on profit-making opportunities in two areas: NFTs and Real Estate.
- Real Estate Tl;dr: find geographies that didn’t see a big increase over the last two or years that also have good school districts and a solid jobs market OR focus on yield-making properties where valuation isn’t the only growth lever. Ideally, both.
There are always opportunities to profit, even in a down market, if you know where to look.
Three new things I like
Last week, I tried something new — highlighting a few resources, tools, or products that have caught my eye.
I didn’t know how it would go down, but we’ve had fantastic feedback, so I’ll make it a regular thing.
Blinkist
Most non-fiction books are 20x longer than they need to be.
They usually have three or four main points that can be described and proven over five to ten pages, but the author drags it out another 40k words to make a book of it.
Blinkist delivers a condensed and simplified version of books like A Brief History of Time, Sapiens, and Plato’s Republic.
The app isn’t actually new (or even new to me). I tried it out five or six years ago and hated it.
The problem with reading, particularly non-fiction, is that most 300 page books could be ten pages. @blinkist tries to solve this, but last time I was a member (3 yrs ago) most of their summaries were unreadable.
— Wyatt Cavalier (@itiswyatt) August 5, 2021
The awful writing was so distracting it destroyed any value I got.
I tried Blinkist again last week, though, and they’ve fixed everything I didn’t like.
The writing is good now, the selection of texts has exploded, and they’ve done some solid curating.
It’s actually a super useful tool now for both learning and keeping up a bit with the zeitgeist.
Good Good Good
If you’re sick of hearing how sh*tty everything is all the time, or if you believe ignorance is bliss, the Good Newspaper might be for you.
It’s full of uplifting stories about successful organ transplants, record turtle nesting seasons, and a Canadian couple helping 200 Ukrainian refugees fly to safety.
ArtCentral by Nefertiti
Last week, I had lunch with Koby Karp, the founder of ArtCentral.
His team has built a tool I’ve been wishing existed for at least a year — it uses ML for real-time NFT analytics and appraisal to help you identify market opportunities and optimize your portfolio.
Their customer base is funds that need audits every quarter to report the NAV to investors.
But there’s a cooler use for it — you can use ArtCentral to identify NFTs currently for sale that are listed below fair market value.
Is someone cheating at sports cards?
If you’re not into sports cards, you probably don’t know what box breaks are.
It goes something like this:
- A “breaker” buys a box of sports cards for $500. Each box has several packs and dozens or hundreds of cards.
- Twenty customers each pay $40 for a slot in the break. Slots can be defined a number of ways — maybe you get all the cards of a certain player or team, for example.
- The breaker opens the box live on camera and reveals all the cards inside.
- The customer gets to keep any card matching their criteria.
It’s a total lottery. You could pull a $300 card from your $40 “investment.” Or more likely, you get something worth a lot less (or nothing). If a breaker got known for pulling super valuable cards more than other breakers, that would be very good for them. And Backyard Breaks has:
They are hitting the most valuable of the valuable cards. Out of the most expensive NBA card sets from this year, Backyard Breaks has hit the TOP 4 most valuable cards.
Sounds too good to be true?
Last week, someone mathematically proved that Backyard Breaks is cheating:
In conclusion, 1 of 3 things MUST be true.
— The Collectibles Guru 🧠 (@ericwhiteback) October 14, 2022
1. Backyard opened $40M+ of these products AND got 1:200 lucky.
2. Backyard opened less than $40M of these products, but got absurdly lucky (≈ 1:117,605).
3. Someone is giving Backyard loaded boxes.
You tell me which is most likely.
First it was chess, then it was fishing, and now it’s sports cards. Where will it end?
Is it time to end the war on drugs?
Since 1971, The United States has spent over $1T on the war on drugs, and it’s not really worked.
A couple of eye-opening stats:
- The number of illicit drug users rose to 13% of Americans in 2019, nearly reaching its peak from 40 years ago.
- The number of Americans arrested for possession has tripled since 1980.
- One-fifth of the incarcerated population (or 456,000 individuals) is serving time for a drug charge.
- Incarceration has a negligible effect on public safety. Crime rates have trended downward since 1990, and researchers attribute 75 to 100% of these reductions to factors other than incarceration.
- Did I mention the US has spent over $1T on this?
So, what’s to be done about it?
On October 6th, the US government pardoned 6,000 or so Americans convicted of possessing a small amount of marijuana. While still illegal federally, the drug is now legal in 19 states.
A couple of days later, The Economist argued that’s not going far enough — if you’re going to legalize weed, why not cocaine?
Their argument is sound and follows much of the same logic politicians have used to legalize marijuana and alcohol:
More people would take it. But the benefits of lifting drug prohibition are well worth the individual and societal harms that legal coke would unleash. Legal cocaine would be less dangerous, since legitimate producers would not adulterate it with other white powders and dosage would be clearly labelled, as it is on whisky bottles. Cocaine-related deaths have risen fivefold in America since 2010, mostly because gangs are cutting it with fentanyl, a cheaper and more lethal drug.
According to the CATO Institute, the US would net over $100B per year in reduced enforcement costs and increased tax revenues. $100B. Per Year.
Worth thinking about.
What caught your eye this week?
Cheers,
Wyatt
