The Pomp Letter

To investors,

Chamath Palihapitiya is executing better than anyone we have seen in the public markets in a long time. He has successfully taken an old financing mechanism, the SPAC, and popularized it in a way that unleashed billions of dollars of liquidity into the market. His first deal was to bring Virgin Galactic public, which was followed by the $4.8 billion deal for OpenDoor.

This morning Chamath unveiled the deal for his third SPAC — Clover Health. The Medicare insurance company will be valued at $3.7 billion and nearly $1.2 billion in cash proceeds. There will be $400 million PIPE transaction done by Chamath and additional investors as part of the deal as well.

Here is the one page summary of the deal that Chamath tweeted out this morning:

The legacy media will do a good job covering what is happening here, so I want to talk about the why, along with a few trends that are starting to emerge. First, let’s start with healthcare investing in general. The quick summary is that we have seen very little innovation and large outcomes in US-based healthcare companies, which explains why American healthcare is worse than many other places around the world.

Josh Wolfe highlighted the lack of innovation and large outcomes yesterday in his tweet storm announcing Lux Capital’s new Health + Tech initiative:

“Today' medtech industry hasn't kept pace with the rate of innovation + value creation of TECH companies. VC-backed medtech has produced only a HANDFUL of innovative companies with large cap valuations since the turn of this century...There are incredible success stories — Insulet, Livongo, 10x Genomics, NovoCure, Guardant, Penumbra, and iRhythm, to name a few — but only ONE of the companies sits above $15 billion in market value....

To find larger success stories we have to look back to Intuitive Surgical (now $81 billion in market cap), which was founded in... 1995! Another huge success founded by Lux's late partner Larry Bock––last century––Illumina–– in 1998 is now over $45 billion in value. BUT...

Beyond that––slim pickings. In CONTRAST over the same time TECH created trillions of dollars in shareholder wealth from a blank canvas, propelling once humble start-ups to the upper echelon of the S&P 500: AMZN, FB, GOOG, Salesforce, Paypal, Netflix, Broadcom, ServiceNow…The list of multi-billion public TECH founded since 1995 is in the hundreds So too biotech––from 1976 creation of Genentech (+ Amgen in 1980) scores of public co's valued in billions — Gilead, Vertex, Biogen, Regeneron, Alexion, Incyte, BioMarin, Moderna... Medtech? BUBKIS.

Current crop of public US medtech — Abbott , Baxter , Becton Dickinson, Boston Scientific, J&J, Medtronic, Stryker, Zimmer — have an average founding date of... 1924. Their age creates one significant disadvantage––REALLY dated business models.

WHY? medtech VC for too long saw success in tuck-in M&A fetching relatively low price tags in the low-to-mid hundreds of millions. The result? Low ambitions + consolidation in the industry around a few REALLY old centenarian incumbents.”

This lack of innovation and ambition for large outcomes will have to change to drive significant improvements in American healthcare. It appears that investors like Lux Capital and Social Capital are both ready to help spearhead that change. They’re quite literally putting their money where their mouths are.

Another trend is that the SPAC mechanism is definitely here to stay. As of this morning, there have been 127 SPACs this year and over $48 billion in gross proceeds.

This process allows companies to get into the public markets faster and more efficiently. One fun statistic for you — Chamath has reserved ticker symbols IPOA through IPOZ, but he is only on IPOC right now. That means we could see another 23 SPACs from him before he runs out of ticker symbols :)

So what is driving the underlying investor interest in SPACs and the recent flip in founders’ minds about getting into the public markets?

The macro economy is going to be a gigantic tailwind for public equity asset prices. The Federal Reserve has publicly committed to keeping interest rates at 0% for the foreseeable future and it has become politically correct to pressure the government into unloading more and more quantitative easing on the market. With so much cheap capital sloshing around, it will be nearly impossible for stocks to avoid benefitting.

Given this macro environment, we are likely to see a significant shift in capital allocation strategy from investors. Everyone has been pouring money into the private markets over the last few years. Companies were staying private longer because of the enormous availability of cheap capital from private investors. But the shift is underway. There is going to be an explosion of startups looking to get into the public markets as quickly as possible, since that is where the returns are going to start flowing.

It has been taboo over the last decade for tech companies to attempt to go public if they were valued at less than $1 billion. People just didn’t talk about it, nor did founders desire it. Everyone had this mental block on $1 billion or more in value. That is quickly changing. We are about to return to the old days — the days where companies would go public with hundreds of millions of dollars in market cap.

It wouldn’t surprise me to see companies starting to get into the markets with $250M to $500M valuations. The hope would be to get liquid stock and become beneficiaries of the insane artificial inflation of asset prices. You still need to build a solid business, but the tailwind of the public markets will help entrepreneurs get there faster.

So expect more healthcare investing, expect more SPACs, and expect founders to start going public earlier and more frequently. Entrepreneurship is a game. When the game changes, the best investors and founders will capitalize on the opportunity.

I can’t wait to see who can change their strategy on the fly.

-Pomp

THE RUNDOWN:

John McAfee Arrested in Spain on US Criminal Charges: Today the Justice Department announced that a 2016 US presidential candidate has been indicted for tax evasion. After John McAfee was arrested in Spain, the Tax Division unsealed an indictment from June 15th claiming that he failed to file tax returns from 2014 to 2018 despite earning “millions in income from promoting cryptocurrencies, consulting work, speaking engagements, and selling the rights to his life story for a documentary.” Read more.

Fidelity, Vanguard, Schwab Funds Have Been Loading Up on Crypto Mining Stocks: Three of the largest asset managers are diversifying their funds to hold blockchain stocks, throwing more establishment financial might behind bitcoin’s technology. Charles Schwab has begun purchasing shares of Riot Blockchain, joining Fidelity and Vanguard – already investors in Riot, HIVE Blockchain Technologies, Hut 8 and BC Group – in allocating mutual fund holdings to a cryptocurrency company, according to financial filings with the U.S. Securities and Exchange Commission. Read more.

Estonia’s Central Bank to Research if Blockchain Can Support a Digital Euro: Eesti Pank, the central bank of Estonia, is undertaking a “multi-year” research project that will investigate the suitability of a blockchain-based digital currency to work alongside cash. Read more.

Pro-Crypto PAC Giving $50 in Bitcoin to the Campaign of Each Member of Congress: If your elected representative to the U.S. Congress has never heard of cryptocurrencies, how do you start telling him or her about it? Hoping to raise awareness, the blockchain advocacy group Chamber of Digital Commerce’s Political Action Committee wants to start by contributing $50 worth of bitcoin to the campaign of those running for re-election. Read more.

Record $616M of Wrapped Bitcoin Minted in September: Wrapped Bitcoin minted a record $616 million worth of tokenized bitcoins in September, according to transaction data analyzed by CoinDesk, a more than 160% increase over the $232 million minted in August. Record minting comes as strong over-the-counter demand for wrapped bitcoin continues, according to Chicago-based firm Grapefruit Trading, one of the first OTC desks to mint WBTC through BitGo. Read more.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Will Cole is the Chief Product Officer at Unchained Capital and Parker Lewis is the Head of Business Development at Unchained Capital. These two are true Bitcoiners and it was a lot of fun hearing their perspective on recent events.

In this conversation, Parker, Will, and I discuss:

* The recent trend of corporations holding Bitcoin as a reserve asset on their balance sheet

* The macro and micro trends driving this transition

* Why corporations are the next group after individuals to do this

* How businesses can hold their private keys

* What Unchained is building currently

I really enjoyed this conversation with Parker and Will. Hopefully you enjoy it too.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

* Athletic Brewing is re-imagining beer for the modern adult. They love beer. But they also love being healthy, active and at their best. The non-alcoholic beers are fully flavored, clean ingredient, and a fraction of the calories of full strength beer - they fit in any occasion. Check out www.athleticbrewing.com for more details and free shipping nationwide.

* Choice is a new self-directed IRA product that allows you to buy Bitcoin with tax-advantaged dollars, while still holding your private keys. You can go to retirewithchoice.com/pomp to sign up today.

* Unstoppable Domains is working to make the internet operate how it was originally intended, which means anyone can publish anything from anywhere. You can go to unstoppabledomains.com and claim your censorship resistant domain today.

* BlockFi provides financial products for crypto investors. Products include high-yield interest accounts, USD loans, and no fee trading. To start earning today visit: http://www.blockfi.com/Pomp

* Crypto.com allows you to buy, sell, store, earn, loan, and invest various cryptocurrencies in an user friendly mobile app. Join over one million users today. You can download and earn $50 USD with my code “pomp2020” when you sign up for one of their metal cards today.

* Coinlist — Smart investors know being early is critical to success in crypto. CoinList is where early adopters invest in, earn, and trade the best new crypto assets before they list on other exchanges. Sign up via coinlist.co/pomp and earn $10 in BTC after you trade $100.

If you enjoy reading “The Pomp Letter,” click here to tweet to tell others about it.

Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 75,000 other investors today.

To investors,

Everyone is well aware of my bullish outlook on Bitcoin as the next global reserve currency. The digital application of sound money principles appears to be the solution to many of the world’s most difficult economic issues at the moment. Contrary to popular belief though, I’m not a Bitcoin maximalist.

I believe that there will be many different digital technology innovations that occur over the coming 10-20 years. One of those innovations is in the digital art space, where I foresee a seismic shift from analog art to digital. Just as Bitcoin is superior to gold as a store of value, I believe digital art is superior to analog art. Which blockchain this occurs on will be debated by the market, so I won’t waste time discussing that here.

Another innovation that I have been bullish on for years is tokenization. You have probably heard me say that “every stock, bond, currency, and commodity will be tokenized.” This mantra encompasses many different ideas, but the core belief is that the assets and market participants will remain the same, while the technology form factor will improve.

I’ve explained this idea before using the following framework:

The Analog Age of Securities required physical assets (stock certificates, mortgages, etc). The Electronic Age of Securities required electronic CUSIPs to serve as the representation of the physical assets which remained in centralized custody (ex: DTCC). These electronic CUSIPs move from one centralized database to another and require lengthy/inefficient settlement procedures.

The Digital Age of Securities is where we are now. It is still really, really early. The writing is on the wall though — the idea of market participants trading tokenized stocks, bonds, currencies, and commodities seems like a foregone conclusion. The technology is better. It provides cheaper, faster, and more efficient trading for investors. Digital assets open the financial system to a broader set of global participants.

And now it appears that government regulators are starting to see the same future that I have been talking about. According to Yogita Khatri of The Block:

“In a webinar hosted by the Chamber of Digital Commerce on Friday, Clayton said all stock trading is today electronic, compared to 20 years ago. In the past, there were stock certificates, and today there are digital entries representing stocks. "It may be very well the case that those all become tokenized," said Clayton.

The webinar, titled "Two Sides of the American Coin: Innovation & Regulation of Digital Assets," focused on what is needed to grow the blockchain and crypto space. Brian Brooks, the acting comptroller of the currency at the Office of the Comptroller of the Currency (OCC), also participated.

Both Clayton and Brooks said that they welcome innovation in the crypto space, but of course, within regulatory frameworks.”

This is important to hear Jay Clayton and Brian Brooks focusing on this talk track. It shows that they are not anti-Bitcoin or anti-crypto. They see the potential for innovation and positive impact. It appears they just want to see working products that follow the existing legal framework.

Here is my favorite prediction about how this is all going to unfold — I believe the SEC is eventually going to mandate every company and traditional exchange to tokenize the securities that are traded in the market. This would allow regulators to become proactive in their security law enforcement and would save them enormous amounts of time, money, and energy.

It is inefficient and costly for two investors to do something that breaks the rules, then have the SEC build a case and enforce the law. In this Digital Age of Securities, the law will be written into code and specific actions will be prevented from occurring. The easy example I always use is the following:

* Every investor’s digital wallet will have specific information associated with it. (Are you accredited? What geography do you reside? What are you allowed to own or not allowed to own?)

* Every asset or security will have specific information coded into the token (who issued the asset? is it only available for accredited investors? non-accredited investors? certain geographies it can not trade in? are there limits on how much someone can own?)

* As one investor wants to buy/sell an asset, the code will instantaneously check and confirm that the transaction meets all of the regulatory requirements. This will prevent illegal or ill-advised transactions, while ushering in a more efficient system for the market.

The key to this vision is that regulators will actually be creating a safer, more efficient marketplace by mandating the transition to digital assets. Most people question whether the regulators have the power to mandate something like this, but we have seen them do similar things in the past. They mandated the use of the Edgar database and they mandated the inclusion of XML technology as well. There is little difference in mandating the future implementation of digital assets — every asset will still be the same stock, bond, currency, or commodity, and every market participant will be the same, but the assets will simply be in this new technology form factor.

So what are the hurdles to having this world built?

The easy one is time and the hard one is technology. Creating innovative technologies like we are discussing today take an inordinate amount of time. You need smart people, who are well funded, working for years to build a system that can work at global scale. If you’re going to be handling trillions of dollars of transactions, then you better make sure you have everything set up and operating properly.

The technology hurdle is much more controversial. Everyone is financially incentivized to believe that their blockchain of choice is going to be the winner. If you ask me, I’ll explain why I believe the most secure chain (Bitcoin) will ultimately be the home for transacting any asset. If you ask an Ethereum believer, they will explain all sorts of things about DeFi, etc. If you ask someone who is working on a different chain, they will scream about some technical component or advantage they believe they have.

Ultimately, no individual’s opinion matters. The market will decide the winner. This disagreement on the future winner is exactly how markets get made. Some people will be right and some will be wrong. Some will create enormous fortunes. Others will destroy wealth. It is a cycle that has happened over and over again whenever there is technological innovation.

While the debate about “where will it happen?” rages on, one thing is very clear — every stock, bond, currency, and commodity will eventually be tokenized. Don’t believe me? You probably didn’t know that the largest HELOC-backed bond in a decade was recently settled over a blockchain by portfolio company Figure Technologies:

“Mike Cagney’s blockchain lending startup Figure Technologies has provided collateral for the biggest bond backed by home equity lines of credit since the American housing collapse over a decade ago.

The $308 million unrated securitization was sponsored by alternative real estate finance firm Saluda Grade and priced earlier this week. The offering is the second securitization of Figure-originated loans and one of the first asset-backed securitizations to be completed entirely on blockchain….The Heloc loans backing the deal were originated, serviced, financed and sold on Figure’s affiliated blockchain, Provenance. Figure, a non-bank lender, has originated more than $1 billion of Helocs since its founding in 2018 and expects more demand for the product as the large traditional banks retrench.”

Just a matter of time before this becomes commonplace. Even the regulators are starting to talk about it publicly :)

-Pomp

This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 75,000 other investors today.

THE RUNDOWN:

SEC Is Willing to ‘Try’ a Tokenized ETF, Chairman Says: Securities and Exchange Commission (SEC) Chairman Jay Clayton said the regulatory body’s open to the idea of a tokenized exchange-traded fund, according to a report by Decrypt. "We're willing to try that: our door is wide open," the report quoted Clayton as saying in a webinar yesterday with the Chamber of Digital Commerce. Read more.

Coinbase Employees Have Begun to Take Severance Packages: Companies can’t become “apolitical” overnight. According to multiple Coinbase workers, the plan to offer a clean exit for mission-dissenting staffers has been in the works for six months. So far, at least three people in the 1,200-person firm have taken the severance package, one of these sources told CoinDesk on Friday. Read more.

Digital Euro Will ‘Protect’ Eurozone From Foreign Issuers, Says ECB Exec: An executive at the European Central Bank has said a future digital euro initiative could save the eurozone from relying on digital currencies issued by foreign entities. In a post on Friday, ECB executive member Fabio Panetta, formerly head of the Italian central bank, said the envisioned aim of a central bank digital currency would be to "preserve the public good that the euro provides to citizens."Read more.

Facebook, Google and Twitter CEOs to Testify Before Congress on Oct. 28: The CEOs of Facebook, Google and Twitter have agreed to testify before the Senate Commerce Committee on Oct. 28. Facebook CEO Mark Zuckerberg, Google and Alphabet CEO Sundar Pichai and Twitter CEO Jack Dorsey will testify on Section 230 of the Communications Decency Act. That rule protects tech companies from liability over the content posted by users on their online services, while allowing them to moderate it. The hearing will also cover the topics of privacy and “media domination.” Read more.

Belarus News Media Are Testing Decentralized Tech to Resist Censorship: Belarus is cracking down on reporters. The nation’s government, led by President Alexander Lukashenko, whose election was mired in controversy and has not been recognized by the European Union, announced Friday it was canceling the press accreditations for all foreign journalists immediately. The move comes as Belarus continues blocking its citizens from accessing local media websites, including the Belarusian branch of Radio Free Europe/Radio Liberty, in the wake of a massive, three-day internet outage and weeks of protests over the Aug. 8 election. Now, some media outlets are fighting back. To make their mobile apps more resilient, some Belarusian news organizations are using NewNode, a decentralized file-sharing service by the California-based startup Clostra, which basically runs on the same principle as torrents. Read more.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

David Kinitsky is the CEO of Kraken Financial, the first approved SPDI bank under Wyoming's new crypto-friendly legislation. He previously worked at Circle, Fidelity, and Grayscale Investments as well. This episode is packed with information and a look into the future.

In this conversation, David and I discuss:

* The SPDI banking license

* What it allows

* Why Kraken applied

* How incumbents are likely to react

* What users can expect from the business moving forward

I really enjoyed this conversation with David. Hopefully you enjoy it too.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

* Athletic Brewing is re-imagining beer for the modern adult. They love beer. But they also love being healthy, active and at their best. The non-alcoholic beers are fully flavored, clean ingredient, and a fraction of the calories of full strength beer - they fit in any occasion. Check out www.athleticbrewing.com for more details and free shipping nationwide.

* Choice is a new self-directed IRA product that allows you to buy Bitcoin with tax-advantaged dollars, while still holding your private keys. You can go to retirewithchoice.com/pomp to sign up today.

* Unstoppable Domains is working to make the internet operate how it was originally intended, which means anyone can publish anything from anywhere. You can go to unstoppabledomains.com and claim your censorship resistant domain today.

* BlockFi provides financial products for crypto investors. Products include high-yield interest accounts, USD loans, and no fee trading. To start earning today visit: http://www.blockfi.com/Pomp

* Crypto.com allows you to buy, sell, store, earn, loan, and invest various cryptocurrencies in an user friendly mobile app. Join over one million users today. You can download and earn $50 USD with my code “pomp2020” when you sign up for one of their metal cards today.

* Coinlist — Smart investors know being early is critical to success in crypto. CoinList is where early adopters invest in, earn, and trade the best new crypto assets before they list on other exchanges. Sign up via coinlist.co/pomp and earn $10 in BTC after you trade $100.

If you enjoy reading “The Pomp Letter,” click here to tweet to tell others about it.

Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 75,000 other investors today.

To investors,

The biggest recent knock against Bitcoin from the peanut gallery has been something along the lines of “yeah, but Bitcoin is still down almost 50% from the all-time high.” This is not only a lazy argument intellectually, but it also is highly misleading when presented without context.

First, why are people yelling about this on Twitter and television? The simple answer is because Bitcoin has violated the mainstream narrative. It didn’t die in 2018, although most of the talking heads were calling for the digital currency’s death. If that wasn’t bad enough, Bitcoin and crypto has served as the best performing asset class this year. The pandemic, economic shock, and subsequent intervention by the Federal Reserve has created a situation that resulted in a 50%+ increase in Bitcoin’s price year-to-date.

But remember, you wouldn’t know it by reading Wall Street / finance talking head Twitter or watching television. They’re still screaming “yeah, but Bitcoin is still down almost 50% from the all-time high.”

What these people are referring to is the spot market price for Bitcoin. In 2017, we saw Bitcoin rise from around $1,000 to a high of $20,000 in the calendar year. The asset went from $10,000 to $20,000 in a mere 18 days. It was sitting around $19,000 for about 72 hours, before falling almost 85% over the next 12 months to nearly $3,000. Finally, Bitcoin was above $10,000 for less than 60 consecutive days in December 2017-January 2018.

This context is really important because it shows that the end of 2017, and into the beginning of 2018, was a classic blow-off top in a market that had reached an unsustainable level of frothiness. Any sophisticated investor would heavily discount this data when looking at historical price analysis, because it doesn’t serve as a good representation of where Bitcoin was being priced.

Here are two other data points to evaluate that I believe will serve as better indicators of Bitcoin’s price over the long-run:

* Bitcoin’s 200-week moving average

* Bitcoin’s number of consecutive days over $10,000

Let’s look at the 200-week moving average first.

As you can see in this visual representation, Bitcoin’s price has never fallen below the 200-week moving average. It rises significantly above the average in the bull markets and has historically bounced off the 200-week moving average in bear markets. Additionally, according to the 200-week moving average of Bitcoin, the asset is currently sitting at an all-time high in price.

Next, let’s look at the number of consecutive days that Bitcoin’s price is above $10,000.

The previous all-time high was 62 consecutive days back in 2017-2018, but as of last night, Bitcoin has established a new all-time high in consecutive days above $10,000. Shout out to Zack Voell of Coindesk for pointing this out.

So wait a minute? The 200-week moving average and the consecutive days above $10,000 are both at all-time highs, but the talking heads are still screaming about $20,000?

Their argument makes for great headlines. It doesn’t tell the full story though. The spot price is worth being aware of, but the 200-week moving average and consecutive days above $10,000 are much better metrics to watch in my opinion. They give you an idea of how strong the Bitcoin price is over a period of time. It helps to smooth over the outlier data and show the general and relative trend in price.

Remember, look at that 200-week moving average. It continues to go up-and-to-the-right in a fairly compelling manner. This is exactly what long-term holders (and investors) want to see. I don’t care about the short-term price movements. I care A LOT about the long-term price movements. And so far, so good.

As I continue to talk about, there is an incredible amount of misinformation being thrown around in the Bitcoin world. The narratives that get laid out can be quite misleading. Stay focused on long-term trends and keep a low time preference. This advantage of having a long time horizon will ensure that you can benefit from one of the greatest wealth transfers in human history.

Have a great start to your week and don’t forget, Bitcoin is sitting at an all-time high in the metrics that actually matter :)

-Pomp

This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 75,000 other investors today.

THE RUNDOWN:

Vulture Investor Feasts on Crypto Whales Seeking Quick Exits: When big investors commonly referred to as whales need to quickly or quietly get out of the cryptocurrency world, they often turn to Brian Estes. Estes, 52, runs Off The Chain Capital LLC, a nearly $40 million fund that specializes in buying digital assets from people strapped for cash due to divorce, loss of income or other unforeseen circumstances. The Orlando, Florida-based firm typically picks up assets at more than a 50% discount, Estes said. Read more.

EU Plans to Regulate Cryptocurrencies in Digital Finance Push: The European Union is taking a major step to regulate crypto assets in the bloc, seeking to protect its financial markets without depriving citizens and companies of the new technologies. Under the initiative unveiled on Thursday the EU’s executive arm seeks to establish clear ground rules for cryptocurrencies, which often aren’t captured by traditional rules and can leave investors without protection. Read more.

Jack Dorsey Details Twitter's Blockchain Strategy at Oslo Freedom Forum: When Twitter and Square CEO Jack Dorsey spoke at the virtual Oslo Freedom Forum 2020 on Friday, he said blockchain technology is the future of Twitter. “Blockchain and bitcoin point to a future, point to a world, where content exists forever,” Dorsey said. “We’re not in the content hosting business anymore, we’re in the discovery business.” Read more.

Hong Kong Reportedly Picks ConsenSys for Digital Currency Pilot Project: Ethereum workshop ConsenSys said it has been chosen by the Hong Kong Monetary Authority (HKMA) to assist in Hong Kong and Thailand’s cross-border central bank digital currency (CBDC) pilot. ConsenSys said in a Friday announcement it will "work on the second implementation stage" of those countries' Project Inthanon-LionRock CBDC alongside consultancy PricewaterhouseCoopers and Forms, a Hong Kong fintech.Read more.

Ant Launches Business Trade Blockchain in Run-Up to $35B IPO: Ant Group has launched a cross-border trading blockchain platform as it prepares for what could be the largest stock market flotation of all time. Ant said Friday that its new trade platform, called "Trusple," will make it easier for small and medium-sized enterprises (SMEs) to sell their wares to clients overseas. Built on AntChain, Trusple automates key aspects of the payments process, such as order placement and tax liabilities. Read more.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Amanda Agati is the Chief Investment Strategist for PNC Financial Services Group. In this role, Amanda leads the team which establishes overall strategic and tactical asset allocation guidance of client portfolios, oversees the evolution of investment processes, provides thought leadership on key investment issues, and authors numerous publications.

In this conversation, Amanda and I discuss:

* COVID-19

* The Federal Reserve

* Inflation

* The Presidential election

* Trade policy

* Whether 60/40 portfolios are dead

* Betting odds

* Bitcoin

I really enjoyed this conversation with Amanda. Hopefully you enjoy it too.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

* Athletic Brewing is re-imagining beer for the modern adult. They love beer. But they also love being healthy, active and at their best. The non-alcoholic beers are fully flavored, clean ingredient, and a fraction of the calories of full strength beer - they fit in any occasion. Check out www.athleticbrewing.com for more details and free shipping nationwide.

* Choice is a new self-directed IRA product that allows you to buy Bitcoin with tax-advantaged dollars, while still holding your private keys. You can go to retirewithchoice.com/pomp to sign up today.

* Unstoppable Domains is working to make the internet operate how it was originally intended, which means anyone can publish anything from anywhere. You can go to unstoppabledomains.com and claim your censorship resistant domain today.

* BlockFi provides financial products for crypto investors. Products include high-yield interest accounts, USD loans, and no fee trading. To start earning today visit: http://www.blockfi.com/Pomp

* Crypto.com allows you to buy, sell, store, earn, loan, and invest various cryptocurrencies in an user friendly mobile app. Join over one million users today. You can download and earn $50 USD with my code “pomp2020” when you sign up for one of their metal cards today.

* Coinlist — Smart investors know being early is critical to success in crypto. CoinList is where early adopters invest in, earn, and trade the best new crypto assets before they list on other exchanges. Sign up via coinlist.co/pomp and earn $10 in BTC after you trade $100.

If you enjoy reading “The Pomp Letter,” click here to tweet to tell others about it.

Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 75,000 other investors today.

To investors,

One of the recurring themes in this letter over the last few weeks has been a “K-shaped" recovery. The idea is that coming out of the economic shock earlier this year, the wealthiest Americans were recovering quickly, while those without significant assets or income were continuing to struggle.

Putting the debate over a specific letter in the alphabet aside, this idea of two Americas and their polar opposite responses to the economic shock made sense. We just didn’t have material data to unpack around the thesis.

Thankfully, Harvard economist Raj Chetty has been working diligently to solve that problem. He and his team released a new tool in the last few months that highlights the economic situation on a county, city, and neighborhood level across the United States. Bloomberg wrote a great article about Chetty and the work he has been doing, which you can read here.

I played around with the tool for awhile this morning and was impressed with the insights that it provided. First, it is obvious that high-wage worker employment has basically recovered to pre-COVID levels, but low-wage workers are still suffering significantly.

As of September 2020, total consumer spending in the United States is only down 3.8% compared to January of this year.

But when you break consumer spending down by socioeconomic class, you realize that low income citizens are spending more today than they were in January and high income citizens are spending almost 10% less.

So what industries are winning and losing during this volatility of consumer spending? Across all socioeconomic classes, grocery spending is up 10% year-to-date, and restaurant/hotels (-24%) and transportation (-46%) are down significantly.

Chetty’s team also tracks small business revenue. As you would imagine, the national small business revenue across industries is down more than 20% since January.

Leisure and hospitality are down almost 50% nationally, while other industries are hovering around 10% decreases year-to-date.

Some of the drop in revenue may be attributed to the percentage of small businesses that are open. Unsurprisingly, more than 20% of small businesses remain closed compared to January of this year.

And Leisure and Hospitality businesses are more than twice as likely to be closed at the moment compared to other industries.

If so many businesses are still closed, you would expect open job roles to be down as well. While this is true, the 6% decrease in job postings compared to January 2020 was a much lower drawdown than I would have anticipated.

What is interesting is that the job postings that require the highest amount of education are down more than job postings that require minimal education.

Lastly, the student progress in math is actually up nationally since January 2020.

But when broken out by socioeconomic class, we see a very different story.

Raj Chetty and his team are finally presenting data that supports the idea of a “K-shaped” recovery. If you’re wealthy or have high income, the recession is essentially over for you. If you are less fortunate, you are still struggling to navigate the economic carnage.

Hope each of you has a great day.

-Pomp

This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 75,000 other investors today.

THE RUNDOWN:

Coinbase Hires Executives From Venmo, Adobe and Google: Cryptocurrency exchange and wallet platform Coinbase announced it has hired Shilpa Dhar, Ravi Byakod and Frank Yoo for VP roles on its product, engineering, and design & research teams. In an announcement published on its website, Coinbase said it was also creating a new “Platforms” team across its product and engineering organisations and that Dhar and Byakod would head the new team. Read more.

Startup Behind Siacoin Storage Platform Raises $3M, Rebrands as Skynet Labs: The startup formerly known as Nebulous has raised a $3 million funding round led by Paradigm with participation from Bain Capital Ventures, Bessemer Venture Partners, A.Capital, Collaborative Fund, Dragonfly Capital Partners, Hack VC, INBlockchain, First Star Ventures and others. Read more.

Economist Stephen Roach Issues New Dollar Crash Warning: Economist Stephen Roach warns next year will be brutal for the dollar. Not only does he see growing odds of a double-dip recession, the Yale University senior fellow believes his “seemingly crazed idea” that the dollar would crash shouldn’t be so crazy anymore. “We’ve got data that’s confirmed both the saving and current account dynamic in a much more dramatic fashion than even I was looking for,” Roach said. Read more.

JPMorgan to Pay Almost $1 Billion Fine to Resolve US Investigation Into Trading Practices: JPMorgan Chase is close to paying almost $1 billion to resolve government investigations into the alleged manipulation of metal and Treasurys markets, according to a person with knowledge of the matter. A settlement between New York-based JPMorgan and several U.S. agencies could come as soon as this week, according to Bloomberg, which first reported news of the fine. The deal would resolve probes from the Justice Department, the Commodity Futures Trading Commission and the Securities and Exchange Commission. Read more.

Peterson Ventures Just Closed a $65 Million Fund: Peterson Ventures, a 12-year-old, Salt Lake City, Utah-based seed-stage fund, has long operated fairly quietly, but many of its bets have become known brands in the respective worlds of consumer and enterprise software investing. Among these is the shoe company Allbirds; the men’s clothing company Bonobos (acquired a few years ago by Walmart); and Lucid Software, which closed its newest, $52 million round back in April. Read more.

Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

* Athletic Brewing is re-imagining beer for the modern adult. They love beer. But they also love being healthy, active and at their best. The non-alcoholic beers are fully flavored, clean ingredient, and a fraction of the calories of full strength beer - they fit in any occasion. Check out www.athleticbrewing.com for more details and free shipping nationwide.

* Choice is a new self-directed IRA product that allows you to buy Bitcoin with tax-advantaged dollars, while still holding your private keys. You can go to retirewithchoice.com/pomp to sign up today.

* Unstoppable Domains is working to make the internet operate how it was originally intended, which means anyone can publish anything from anywhere. You can go to unstoppabledomains.com and claim your censorship resistant domain today.

* BlockFi provides financial products for crypto investors. Products include high-yield interest accounts, USD loans, and no fee trading. To start earning today visit: http://www.blockfi.com/Pomp

* Crypto.com allows you to buy, sell, store, earn, loan, and invest various cryptocurrencies in an user friendly mobile app. Join over one million users today.

* Coinlist — Smart investors know being early is critical to success in crypto. CoinList is where early adopters invest in, earn, and trade the best new crypto assets before they list on other exchanges. Sign up via coinlist.co/pomp and earn $10 in BTC after you trade $100.

If you enjoy reading “The Pomp Letter,” click here to tweet to tell others about it.

Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 50,000 other investors today.

To investors,

Jason Williams and I are making a big bet on digital art.

World-class investors know that the best way to make generational returns is to pursue investment strategies that are unpopular, while ensuring that the new investment strategy is also correct. If you merely do something different than everyone else, but you’re wrong, then that only makes you the idiot in the room. If you do something different than others, and you’re right, then you capture significant profits.

In my opinion, one of the easiest ways to pursue a non-consensus investment strategy is to look for markets that have either (a) been abandoned by the crowd or (b) are so new that most investors don’t realize they exist. Selecting the right market is the most important decision. This second category — the industries that are incredibly early in their lifecycle — is my favorite place to go hunting for opportunity.

Jason Williams and I have been searching for a new market that is too early for most people to have spent the time building an investment thesis. We finally think we have found the perfect opportunity — digital art. 

Before we spend time talking about the digital art market, let’s take a quick look at the traditional art market:

* The art market is estimated to have a market cap of approximately $65 billion for the last few years.

* The United States, United Kingdom, and China make up about 85% of the entire market.

* US sales of traditional art was nearly $30 billion in 2018, which made up more than 40% of the market.

* Art dealers are responsible for about $36 billion in global sales.

* Art auctions are responsible for about $29 billion in global sales.

* Online art sales are only responsible for about $6 billion in global sales.

* More than 50% of US art collectors are over the age of 50.

* Asia, particularly Singapore (46%) and Hong Kong (39%), have high percentages of millennials as art collectors.

The traditional art market has done incredibly well over the last 20 years. From 2000 to 2018, the art market outperformed the S&P 500 by over 180% (see today’s sponsor Masterworks for more details and a cool traditional art opportunity). The world’s wealthiest people have been acquiring art for decades, whether it was for store of value, capital appreciation, or pure creative and intellectual stimulation. Regardless of your personal experience with traditional art, the numbers are absolutely staggering. 

There is a shift about to happen though. The world is going to change and it is going to change much quicker than most people realize. 

Similar to how Bitcoin is superior to gold in almost every way, digital art is superior to traditional art in almost every way also. A traditional piece of art is static and sits on a wall. There is no motion. The art does not change unless someone takes the art off the wall and hangs a different piece. Physical art is hard to move around the world, it can be easily damaged, and there is difficulty in proving what is authentic and what is not.

Digital art is the next evolution of art. Each piece can incorporate complex movement and motion into the art. A single screen on a wall can periodically cycle through different pieces of art at the predetermined direction of the homeowner or art collector. The digital art can be sent to anyone in the world with a few clicks of a button, it is immune from damage, and authenticity and provenance is transparently available for anyone to verify. Quite literally, digital art has significant advantages over traditional art in the same way that digital news has advantages over physical newspapers.

This transition to a digital art world is not a question of if it will happen, but rather when. In fact, I personally believe that the digital art market cap will grow to become larger than the physical art market cap. This may sound ridiculous today, especially since the digital art market cap is less than $10 million and the traditional art market is more than $60 billion, but this is exactly what disruption looks like. Estimating the exact timing of the digital art market eclipsing traditional art is hard, so I’ll refrain from making a fool of myself on that front. My confidence level that we see a future 6,000x increase in the digital art market cap is fairly high though. 

Jason Williams and I have spent the last few months thinking through the best way to capitalize on the potential growth of the digital art market. We ultimately settled on the idea to partner with the best digital artists in the world in an attempt to bring attention and awareness to the great work they have been doing. Recently, we have commissioned a number of pieces and collections with the artists we believe to be absolute world-class. The first artist we are revealing is FEWOCIOUS. 

In my opinion, FEWOCIOUS is the best digital artist in the world. We have commissioned a 6-piece collection that takes radical new ideas and merges it with the FEWOCIOUS style of pop art that has become globally recognized. The first piece in the collection that we are sharing publicly is titled “The Innovator’s Dinner.” 

This piece features famous innovators over the last few centuries. From left to right, it includes Benjamin Franklin, Henry Ford, Amelia Earhart, Walt Disney, Steve Jobs, Elon Musk, Beyonce, Jay-Z, Dr. Dre, and Malala Yousafzai. Each is presented at the same table in a tip-of-the-cap to Leonardo da Vinci’s The Last Supper. It is our hope that this iconic digital art will serve as the quintessential example of what is possible in this new world.

"I’m super excited to work with Jason and Pomp on this collection! Digital art is the future. Our goal is to create dope art that shows what’s possible for that future. I can’t wait for everyone to see what we’ve been working on together!" - FEWOCIOUS

In addition to the FEWOCIOUS collection and other private commissions, we have been busy participating in various digital art auctions. We are not ready to showcase everything we have done yet, but here are a few highlights:

* The 1 of 1 Hackatao piece that sold for more than $12,000 (link)

* The #9 of 25 Trevor Jones Bronze Bitcoin Bull (link)

* We lost the bidding war for Trevor Jones’ 1 of 1 Bitcoin Bull, which was ultimately purchased for $55,555. We immediately purchased the original painting that the NFT is based on for $55,000 directly from the artist.

Jason and I both have deep conviction in the future of digital art, so we plan to invest heavily in the space over the coming months and years. We are constantly looking for the best digital artists. We’ll continue publicly sharing the various artists we work with and the pieces we add to our collection. This should be a lot of fun — check out the digital art at Nifty Gateway, SuperRare, and OpenSea.

We would love to have you join us.

-Pomp

SPONSOR: What’s the most lucrative investment in the world? With paintings selling for $450,000,000+, our money is on art. That’s not a typo: blue-chip art has outperformed the S&P by 180% from 2000–2018, according to Artprice. So what do you call it when one startup makes investing in great works by Banksy and Kaws affordable for everybody? We call it a great opportunity—and so do 80,000 other investors. Why wait?

*See important disclosures here

THE RUNDOWN:

Philippine Central Bank Warms Up to Digital Money to Aid Fintech: Philippine central bank Governor Benjamin Diokno said the technology behind digital tokens could improve delivery of financial services, as the regulator proceeds to study the feasibility of its own digital currency. Digital tokens expand reach and lessen costs of financial services, Diokno said in an emailed reply to Bloomberg late Thursday. It could also help the central bank eventually reduce the use of fiat money, he said.Read more.

Crypto Exchange Bitfinex Wins More Time to Present Documents: The crypto exchange Bitfinex won additional time to provide documents in a case filed last year by New York Attorney General Letitia James that claims that it hid the loss of comingled client and corporate funds. In a virtual ruling Thursday, New York state Judge Joel M. Cohen extended an injunction by 90 days and directed a special referee to set a schedule to provide documents requested. Cohen said he’d defer to the referee in determining which documents related to the cryptocurrency Tether, which is affiliated with Bitfinex and related companies, are pertinent to the case. He also hinted that he may not extend the injunction again. Read more.

Investment Firm Blockchain Capital Joins Libra Association: One of the oldest investment firms in crypto has joined the governance organization behind the Facebook-backed Libra project. The Libra Association announced Friday that Blockchain Capital would advise on the creation of its global payment system. Read more.

US Space Force Taps Blockchain Firm Xage Security for Data Protection: The recently created United States Space Force, or USSF, and the U.S. Air Force Research Lab has chosen blockchain firm Xage Security to develop data security systems. In a statement, Xage Security said it was awarded a contract to provide end-to-end data protection for the USSF. The company will employ its blockchain-based Xage Security Fabric solution for the project. Read more.

World’s Largest Sovereign Wealth Fund Indirectly Holds Almost 600 Bitcoin: The Norwegian Government Pension Fund, also known as the Oil Fund, has over $1 trillion in assets, including 1.4% of all global stocks and shares. It is considered the world's largest sovereign wealth fund. According to Arcane Research’s report on Sept. 19, the fund also owns almost 600 Bitcoin through its investment holdings. Arcane Research analysis data shows that the Norwegian oil fund has 577.6 BTC through its investment in business intelligence firm MicroStrategy. This puts the company’s portfolio in BTC at around $6.3 million. The Norwegian Government Pension Fund has a 1.51% stake in MicroStrategy. Read more.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Robert Rosenberg served as the CEO of Dunkin Donuts for 35 years. He took a company with 100 shops and $10 million in sales when he first became CEO, to 6500 outlets including Baskin Robbins Ice Cream Shops and nearly $2.5 billion in sales the year he retired.

In this conversation, Robert and I discuss:

* How to hire

* How to fire

* Finding culture fits

* Defining competence in specific areas

* The four primary functions of a leader

* When to go public vs stay private

* The value of a brand

I really enjoyed this conversation with Robert. Hopefully you enjoy it too.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

* Athletic Brewing is re-imagining beer for the modern adult. They love beer. But they also love being healthy, active and at their best. The non-alcoholic beers are fully flavored, clean ingredient, and a fraction of the calories of full strength beer - they fit in any occasion. Check out www.athleticbrewing.com for more details and free shipping nationwide.

* Choice is a new self-directed IRA product that allows you to buy Bitcoin with tax-advantaged dollars, while still holding your private keys. You can go to retirewithchoice.com/pomp to sign up today.

* Unstoppable Domains is working to make the internet operate how it was originally intended, which means anyone can publish anything from anywhere. You can go to unstoppabledomains.com and claim your censorship resistant domain today.

* BlockFi allows you to keep your crypto, put it up as collateral, and receive a USD loan funded directly to your bank account. They do loans ranging from $2,000 to $10,000,000, and they're perfect for helping you reach your financial goals of all sizes. Visit BlockFi.com/Pomp to learn more about putting your crypto to work without having to sell it by getting a loan or earning interest in their interest bearing accounts.

* Crypto.com allows you to buy, sell, store, earn, loan, and invest various cryptocurrencies in an user friendly mobile app. Join over one million users today. You can download and earn $50 USD with my code “pomp2020” when you sign up for one of their metal cards today.

* Blockset by BRD is your hosted blockchain infrastructure. Blockset enables enterprises and developers around the globe to deliver high-quality blockchain-based applications in a fraction of the time, at a fraction of the cost.

* Bybit currently has over 300,000 users, with numbers growing in double-digit percentages monthly. The exchange features no overloads during volatility, low latency trading and 24/7 live customer support. Newly registered users can receive up to $90 in rewards!  

If you enjoy reading “The Pomp Letter,” click here to tweet to tell others about it.

Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

Many people have been asking me to discuss the bull case for DeFi. The following write-up is from the research team at dYdX, which spells out their perspective. I don’t agree with everything written, but I think they did a good job laying out the argument.

If you aren’t subscribed to the daily installment of The Pomp Letter, you should join 50,000+ other investors and subscribe today.

With the introduction of Bitcoin’s genesis block, the world had its first truly decentralized financial application. Bitcoin enabled anyone in the world to store wealth without the need for a centralized party. That wealth could be taken and sent anywhere in the world, the only requirement was an internet connection. As the Bitcoin network grew in terms of number of holders and value transferred, developers began looking for ways to create more complex financial transactions. This was at odds with how the Bitcoin community viewed the tradeoffs between security and expressive financial applications, which created an unmet opportunity for a blockchain that could facilitate more complex financial contracts.

When Ethereum launched, it aspired to be a world computer capable of powering an arbitrary number of applications through smart contracts. The ICO mania of 2017 reflected this vision, but Ethereum as a platform ultimately left much to be desired for most applications. Amidst all the noise, it became increasingly obvious that Ethereum was fertile ground for financial application experimentation. Ethereum drastically dropped the costs associated with a variety of financial transactions including capital formation, asset issuance (hence the ICO bubble), asset exchange, loan administration, collateral management, and much more. After the rubble of 2017 cleared, the Ethereum community was left with a burgeoning movement dubbed, “DeFi” (short for decentralized finance).

DeFi had immense promise given both how inefficient traditional finance was and how well its aims aligned with the core ethos of the crypto community. Ethereum’s smart contracts enabled money to be managed programmatically, without the need of a central party, which in turn created many efficiency gains. Similarly, DeFi applications were open and permissionless. Just like Bitcoin, anyone could access them, all they needed was an internet connection. 

Compare this to the traditional financial system and it’s easy to see how much more desirable DeFi is. In the traditional world, financial applications are difficult to access, rigid, hard to use, and most importantly, expensive. 

Early Signs of Product Market Fit

Shortly after the Ethereum community rallied around DeFi and allocated engineering resources towards building out infrastructure, early signs of traction emerged. In these early days, the most promising developments were DeFi primitives: building blocks that could be built on top of each other to create more expressive applications. The composability of these primitives help create strong network effects, where the value of products and services grow as the number of DeFi users increases.

The first use case to see large growth was stablecoins. Stablecoins are simple, they are assets designed to keep a peg to another asset, which in the case of the most popular stablecoins, is the dollar. With stablecoins, anyone can transact in dollars, globally, and with no delays. Stablecoins seem rudimentary on the surface, but being able to send dollars freely within the crypto ecosystem has always been difficult — the fiat world and the crypto world aren’t very interoperable. 

Stablecoins really started to see growth when new primitives came to market. The ability to exchange stablecoins for crypto through decentralized exchanges such as  dYdX, 0x, and Kyber or the ability to borrow and lend stablecoins through platforms like dYdX and Compound, made stablecoins that much more powerful. Users could remain on-chain for a lot of their banking needs. 

We can see clearly that stablecoin issuance really took off in late 2018, right as many of DeFi’s first primitives came to market. The amount of USDT tokenized on Ethereum has grown to over $6 billion USD from virtually 0. USDC has also seen astronomic growth, growing to over $1 billion market cap in less than two years. 

Decentralized exchange was another primitive that took off in 2019. With decentralized exchanges, smart contracts handle all parts of the exchange process — they verify that each holder owns the assets, that they approved the transfer, and once those are satisfied, the contracts atomically swap assets between the two counterparties. Again, it seems simple, but the traditional exchange process can be costly and exposes users to a lot of counterparty risk. As we have seen time and time again, exchanges can go down with all of their customers’ crypto.

Automated market makers took the decentralized exchange concept one step further by removing the need for a centralized market maker to quote both sides of the book. There are many reasons AMMs have been a breakthrough model for decentralized exchanges. First, it’s extremely costly for token projects to engage market makers – the deals are very one-sided and concentrate too much influence in the market maker’s hands. Second, it’s expensive for market makers to provide liquidity on decentralized exchanges given the latency and cost of on-chain transactions. Through AMMs, projects can have liquidity from day one, making it much easier to bootstrap communities and networks. 

The last DeFi primitive worth mentioning is borrow and lend markets, more specifically, borrowing and lending directly from a smart contract. These systems allow anyone with idle assets to deposit them into a shared lending pool and anyone who wants to borrow assets to draw down from this pool in exchange for interest. Developers have been able to build powerful products by building a top these lending markets. For example, dYdX’s lending markets power a global margin trading system — the ability for traders to earn interest helps bring more liquidity to the platform.

Where is DeFi Going?

DeFi has just started to scratch the surface in terms of decentralizing the most important pillars of traditional finance. 2020 has been a watershed year for DeFi — the primitives noted above are being leveraged to create both products that rival traditional solutions as well as net new products that aren’t available in today’s system.

The recent liquidity mining boom is actually an interesting play on yield generation. While most of the yields are a function of inflation rather than actual interest or cash flow, it’s being offered at a time where most traditional banks are offering savings rates close to 0%. Because of this, we’re seeing a massive influx of capital into the ecosystem. Even if it’s short term, this new capital helps fuel experimentation until something of value is found. Similarly, these protocols have intrinsic value via their cash flows. So even if the yields will collapse over time, they still have a floor that’s much larger than anything offered in the traditional banking system. 

Decentralized exchange is also a vertical that will continue to grow in the short to medium term, and we expect them to surpass most centralized exchanges in the next few years. Already today, there have been numerous days in which trading on Uniswap has surpassed the trading on Gemini, Kraken, and even Coinbase. Developments like liquidity mining will boost the liquidity offered on decentralized exchanges to the point where traders will be able to exchange at a cheaper rate than they do on centralized exchanges, and without KYC. Additionally, decentralized exchanges are still in their v1.0 modes. At dYdX, we’ve worked hard to build margin trading and the very first synthetic BTC perpetual swap, all on-chain so users never have to give up custody of their funds. In the next few months, we will also be launching our Layer 2 solution with Starkware, which will greatly reduce costs, increase throughput, and enable more trading pairs as well as the ability to cross-margin on our perpetual markets. 

Another area in which decentralized finance is subverting its centralized counterparts is lending. On-chain lending was always criticized for not being able to administer undercollateralized loans given the lack of legal recourse and identity, but this might change soon thanks to lending protocol Aave’s new credit delegation design. Through their system, token holders will be able to stake their assets behind the credit reputation of another address (tying to a user), enabling that address to borrow funds without overcollateralizing the loan. If that user doesn’t repay the loan, it is their staker that is punished, meaning token holders are incentivized to act in a way that doesn’t hurt them, in effect helping ensure only creditworthy borrowers are able to take out uncollateralized loans.

Lastly, the DeFi ecosystem has birthed its own insurance offerings, allowing users to buy protection against smart contract risk. One of the biggest barriers to adoption in the early days of DeFi was the lack of insurance. No traditional insurer would enter the space so ecosystem participants built their own solutions. Through protocols like Nexus Mutual and Opyn, DeFi users can secure their deposits without the need of a traditional bank or institution. 

All of the innovation happening in the DeFi ecosystem is affirming the fact that decentralized finance can create financial applications that are more desirable than those that exist in the traditional world. We’re already seeing some DeFi projects overtake parts of the centralized crypto economy and it won’t be long until this activity starts to overtake the traditional world.  There’s never been more of a need for a financial system that’s more fair, open, and efficient. At dYdX, we couldn’t think of a more exciting mission to build towards.

About dYdX: dYdX is building open, secure, and powerful financial products accessible globally. Trade Spot, Margin, and Perpetual Markets, with up to 10× leverage. dYdX runs on audited smart contracts on Ethereum, and enables trading with no intermediaries. It allows traders to move quickly, while maintaining full control of their assets.

This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 50,000 other investors today.

THE RUNDOWN:

Coinbase Building Platform to Help Crypto Startups Launch Tokens, Raise Cash: Coinbase is developing a token crowdfunding platform for crypto startups looking to break into the space. CEO Brian Armstrong said on an Aug. 11 podcast with asset manager and host Patrick O'Shaughnessy that his exchange is indeed "working on" the platform first hinted last September – to be called "Coinbase Launch or something like that." Read more.

The Tapscotts Take Their Blockchain Research Institute Into Europe: Blockchain Research Institute, the education and innovation hub founded by father-and-son tech evangelists Don and Alex Tapscott, has opened a European arm. Announced Wednesday, Blockchain Research Institute Europe launches in partnership with Blockwall, an independent venture capital firm based in Frankfurt, Germany. The new BRIE think tank will bring together a gaggle of European industry leaders, academics, policymakers, entrepreneurs and researchers. Read more. 

Minting Dozens of Coins a Day, Speculators Tap Into Crypto Craze: Fueled by a spike in speculative appetite, cryptocurrency entrepreneurs are offering new digital coins at a torrid pace reminiscent of the Bitcoin boom three years ago. Among the freshly listed: Porkchop, Davecoin, Spaghetti, Newtonium and Whale. Many have no obvious utility, but investors have poured billions into them up in hopes of riding one to an easy profit.The world of crypto has always attracted peddlers of get-rich-quick products when fans of rewiring the global financial system start buying into a new idea. In 2017, it was Bitcoin and the end of fiat currency. Read more.

China’s Digital Currency May Come With Hardware Wallets as Well: Mobile apps may not be the only medium for storing and transacting China’s digital yuan, according to the Terms and Services agreement from a major Chinese bank. The roll-out of China’s central bank digital currency may include hardware wallets as well. Over the weekend, China Construction Bank (CCB), one of the country’s big-four state-owned commercial banks, opened up a wallet service to public users within its mobile app for testing China’s central bank digital currency (CBDC), also known as DC/EP. Read more.

Deutsche Bank CEO Gives Grim Outlook for the Global Economy: The global economy will not return to pre-coronavirus levels for a “long time,” the chief executive officer of Deutsche Bank warned Wednesday. Business activity in the euro zone dropped sharply in the wake of the strict lockdown measures imposed in March, but have somewhat rebounded in recent months following the easing of certain restrictions. The United States has experienced a similar picture. Read more.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Ben Cohen is a sports reporter for The Wall Street Journal in New York covering the NBA, college basketball and college football. He is also the author of the new book titled: The Hot Hand: The Mystery and Science of Streaks.

In this conversation, Ben and I discuss:

* The NBA

* The playoff bubble

* Lebron James

* Damian Lillard

* Kawhi Leonard

* The financials of the Golden State Warriors

* Bitcoin

* His new book on the science of streaks

I really enjoyed this conversation with Ben. Hopefully you enjoy it too.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

* Athletic Brewing is re-imagining beer for the modern adult. They love beer. But they also love being healthy, active and at their best. The non-alcoholic beers are fully flavored, clean ingredient, and a fraction of the calories of full strength beer - they fit in any occasion. Check out www.athleticbrewing.com for more details and free shipping nationwide.

* Choice is a new self-directed IRA product that allows you to buy Bitcoin with tax-advantaged dollars, while still holding your private keys. You can go to retirewithchoice.com/pomp to sign up today.

* Unstoppable Domains is working to make the internet operate how it was originally intended, which means anyone can publish anything from anywhere. You can go to unstoppabledomains.com and claim your censorship resistant domain today.

* BlockFi allows you to keep your crypto, put it up as collateral, and receive a USD loan funded directly to your bank account. They do loans ranging from $2,000 to $10,000,000, and they're perfect for helping you reach your financial goals of all sizes. Visit BlockFi.com/Pomp to learn more about putting your crypto to work without having to sell it by getting a loan or earning interest in their interest bearing accounts.

* Crypto.com allows you to buy, sell, store, earn, loan, and invest various cryptocurrencies in an user friendly mobile app. Join over one million users today. You can download and earn $50 USD with my code “pomp2020” when you sign up for one of their metal cards today.

* Blockset by BRD is your hosted blockchain infrastructure. Blockset enables enterprises and developers around the globe to deliver high-quality blockchain-based applications in a fraction of the time, at a fraction of the cost.

* Bybit currently has over 300,000 users, with numbers growing in double-digit percentages monthly. The exchange features no overloads during volatility, low latency trading and 24/7 live customer support. Newly registered users can receive up to $90 in rewards!  

If you enjoy reading “The Pomp Letter,” click here to tweet to tell others about it.

Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 50,000 other investors today.

To investors,

This week is shaping up to be one of the most historic in modern monetary history. Federal Reserve Chairman Jerome Powell is set to deliver a speech on Thursday that will outline a significant change in the way that the organization thinks about inflation and their annual targets.

This speech will be part of the Fed’s virtual conference that is replacing their traditional get-together in Jackson Hole, Wyoming. Rumors are Powell’s speech is titled “Monetary Policy Framework Review” and will specifically focus on increasing inflation as a means of creating a better economic environment. There is only one problem though — history tells us that decreasing inflation is not only better for the bottom 50% of Americans, but it is also creates a stronger outcome over the long run.

In order to understand why the upcoming decision is so important, we must first take a trip back in history to October 1979. Paul Volcker had been Federal Reserve Chairman for a mere two months, but he was quick to realize the errors of his predecessors. They had allowed, and even encouraged, high levels of inflation. Here is the St. Louis Fed’s summary of how bad the situation was at the time:

“The inflation rate, a mere 1 percent in 1965, hit 14 percent by 1980. Unemployment trended up from a low of 3.5 percent (annual average) in 1969 to 9.7 percent in 1982. The stock market was in the dumps. Oil prices jumped off the charts. Presidents Richard Nixon and Jimmy Carter became desperate enough to tinker with price controls, the results being disastrous.”

Paul Volcker immediately made a number of tough decisions upon assuming the Chairmanship. The first decision was to ignore the short-term impact of any monetary policy decisions and optimize for long-term economic strength. The second decision was to stop obsessing over a low interest rate environment, which shifted the focus to the money supply.

The impact of these decisions are hard to comprehend in today’s world of instant gratification. Volcker essentially took the hard road in the short-term, so the US economy could be healthier over time. The short-term difficulties included a transition from the easy/cheap credit environment to an expensive credit environment, prime lending rates were over 20%, unemployment reached double digits numerous times, and the dollar was severely weakened in foreign exchange markets. Ultimately, Paul Volcker oversaw two economic recessions before his policies had the intended impact of creating a prosperous market and economy.

Think about how difficult that would be in the current world. A Federal Reserve Chairman choosing to pursue the correct, yet unpopular, decisions. Leadership that optimized for long-term strength, rather than short-term pain mitigation. It is nearly impossible to fathom the idea that any politician or Federal Reserve member would be willing to oversee two separate economic recessions in order to put the United States back on track.

So what exactly happened once the United States got through the short-term pain? We had an incredible economic boom cycle starting in the 1980s and carrying through the 1990s. The economy had found solid footing. There was a direct relationship between Volcker’s decisions and the economic boom, stabilized prices, and general prosperity of the United States.

As I have learned more about Paul Volcker and the drastic measures he took, one paragraph from the St. Louis Federal Reserve stood out to me. Here is what they said about the lessons learned:

“For starters, ideas matter. Bad economic advice, much of it from economists, contributed greatly to policy mistakes in the pre-Volcker days. Keynesian economics had been in vogue by then for decades. This school argued that the government could tax and spend its way to full employment. Inflation was acceptable if it put more people to work. Thankfully, such thinking has been discredited today, although our economic models still need improvement.”

Read through that paragraph again. Keynesian economics had been in vogue. Government could tax and spend its way to full employment. Inflation was fine as long as more people went back to work. Sounds familiar, right?

My greatest fear is that the United States is about to make the same mistakes that we made decades ago. Rather than allowing the current economic reality of low inflation and high unemployment to naturally correct itself in the market, the Federal Reserve feels compelled to intervene. This interventionism is a natural human emotion — we feel like we lack control if we do nothing in uncertain times.

Remember though, just because we have the urge to act doesn’t mean that we should. That won’t matter when Jerome Powell takes the stage on Thursday. According to Jeff Cox at CNBC, here is what the current Fed Chairman is going to do in plain English:

“Simply, it means that the Fed, which has pegged 2% as a healthy level, will let inflation run higher than that for a while if it has spent a considerable time beneath that level. The Fed’s preferred inflation gauge has stayed below that level for all but two years since the Great Recession ended in mid-2009.

It’s a mirror-image reversal of Volcker’s inflation-busting and sets the stage for a pivotal policy move.”

This obvious return to Keynesian economics is likely to be a disaster. You can’t use government, through taxation and spending, to drive economic growth. We know this because many people in the past have tried it, which has led to major problems. So why exactly are we going to try this failed experiment again?

One reason may be because the monetary policy decisions are being made by someone who isn’t an economist. Wait, wait? Yes, many people forget but Jerome Powell is not nearly as well versed in economic policy as his predecessors have been. In fact, he is the first Fed Chairman in 40 years that is not an economist. Now it is no secret that I am no fan of most academic economists, but I would argue that Powell’s private equity experience lends itself to a world view that continues the status quo of making the rich richer and the poor poorer.

Let me explain.

As we have discussed ad nauseam in this letter over the last few months, inflation is not experienced equally. The lower socioeconomic classes in an economy will experience higher levels of inflation than their fellow citizens that are better off financially. This happens because the wealthier you are, the more likely you are to have your net worth tied up in real assets rather than cash, you are almost guaranteed to have an inflation-adjusted wage contract, and you tend to be more financially educated on how money and inflation works.

So when the Federal Reserve and US politicians decide to create a high inflation environment, they are essentially pumping asset prices at the same time that they are hitting the lowest socioeconomic classes with a hidden tax. The rule of thumb is that interventionism economics, regardless of the policy, always requires an increased tax on some portion of the population. Some times it rears its head as an explicit increase in tax on earnings and other times it shows itself in the invisible theft of purchasing power.

To be honest, I am concerned about the road we are heading down for a number of reasons. First, the constant manipulation of the US economy through monetary policy is only weakening the efficacy of central bankers’ tools in the long run. This virus-related, government-induced economic slowdown is painful, but our inability to endure short-term pain for long-term gain is going to serve as a serious problem down the road.

Second, the wealth inequality gap is about to get significantly larger. The Federal Reserve is going to decimate an entire generation and set entire socioeconomic classes back a decade or more in terms of progress. The continued abuse of our inflationary currency creates a financial incentive for the organizations in charge to accelerate the transfer of wealth from those at the bottom to those at the top.

Lastly, the United States is merely speeding up the inevitable demise of the US dollar as the global reserve currency and the economic power that comes with it. History shows us that the continued devaluation of a currency ends up ultimately being a death march, so the pursuit of higher inflation will only turn that march into an all-out sprint. The strengthening or weakening of the US dollar is always relative to other currencies, but the monetary policy path we are going down may be the most aggressive globally.

The US economy is a complex beast. There are many intricacies and nuances. It is nearly impossible for one person, one group, or one organization to have enough control of the tools to increase or decrease growth leveraging only interest rates and quantitative easing. We can do our best to change directions, but there is a low likelihood that we will be able to stop inflation at 2.5% and not let it run to 3% or more.

While I spoke highly of Paul Volcker earlier in this piece, it is important to remember that he was the same person who advised President Nixon to abandon the gold standard. This is a great example of how difficult it is for any central banker to make good decision after good decision. The system is just too complex. Rather than continue a culture of interventionism, we should be moving back to a world of free markets and true capitalism.

Unfortunately, we have seen the exact opposite over the last few months. Most of the “capitalists” on Wall Street revealed themselves to be socialists and the Fed’s policies were the main driving force behind billionaires in the US increasing their wealth by more than $500 billion, while over 50 million Americans lost their jobs.

Our economy, and the central bankers overseeing it, need to become a little more pain tolerant. Just as Paul Volcker was willing to sustain the short-term pain of two economic recessions in pursuit of a strong economic foundation, we should be willing to withstand the current environment without succumbing to the urge of intervention.

Let the free market work. Get out of the way. Stop pumping trillions of dollars into the economy. While it feels good to say “look what we’re doing,” the reality is that the United States will be paying for these sins for decades to come.

BONUS: I think it is really important for more people to learn how money and the economy works. Financial education is one of the easiest ways for us to create a more equitable world.

To incentivize more people to share this information with others, I have created a referral program that rewards you for sharing The Pomp Letter. Rewards include everything from virtual coffee with me to being flown to NYC and hanging out for a day. Sign up here for the referral program and start earning rewards!

-Pomp

This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 50,000 other investors today.

THE RUNDOWN:

Asana Files for Direct Listing: Asana, a San Francisco company that provides software for tracking group projects, filed paperwork for a direct listing on Monday, six months after announcing it had confidentially filed draft paperwork with the U.S. Securities and Exchange Commission. Asana plans to join the New York Stock Exchange. The company has not yet finalized its ticker symbol. Read more.

Boston Fed Is Looking at ’30 to 40′ Blockchain Networks for Digital Dollar Experiments: The Federal Reserve Bank of Boston, one of 12 regional Federal Reserve banks operating under the U.S. central bank, is evaluating more than 30 different blockchain networks to determine if they would support a digital dollar. Read more.

Crypto Derivatives Exchange BitMEX to Block Ontario Traders: BitMEX, one of the oldest cryptocurrency derivatives exchanges, is to block users in one Canadian province. According to a blog post on Monday, customers based in Ontario, Canada, will no longer be able to use the trading platform as of Sept. 1, 2020. Read more.

Binance.US Expands Into Florida, Eyeing Millions of Potential New Traders: Binance’s U.S. affiliate has taken Florida off its cryptocurrency trading “no-fly list” and on Monday opened for business in the sunshine state. The expansion into America's third-most populous state follows Binance.US’s July procurement of a Floridian money transmitter license under the name “BAM TRADING SERVICES INC.” Florida was one of the 13 states not included in Binance.US’s original game plan. Read more.

Canadian Software Startup Puts 40% of Cash Reserves Into Bitcoin: An Ottawa-based graphics software firm, Snappa, announced Monday its decision to move a significant amount of its cash reserves into bitcoin, citing concerns of inflation and global economic uncertainty. Read more.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Leah McGrath Goodman is an American best-selling author and award-winning investigative journalist who writes from New York City and London. She will be best known to this audience for her Newsweek cover story on the search for Satoshi Nakamoto.

In this conversation, Leah and I discuss:

* Her Newsweek cover story

* Satoshi Nakamoto

* The global oil market

* The importance of reading

* Corruption

* Wealth inequality

* The child abuse scandal on the island of Jersey

I really enjoyed this conversation with Leah. Hopefully you enjoy it too.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

* Athletic Brewing is re-imagining beer for the modern adult. They love beer. But they also love being healthy, active and at their best. The non-alcoholic beers are fully flavored, clean ingredient, and a fraction of the calories of full strength beer - they fit in any occasion. Check out www.athleticbrewing.com for more details and free shipping nationwide.

* Choice is a new self-directed IRA product that allows you to buy Bitcoin with tax-advantaged dollars, while still holding your private keys. You can go to retirewithchoice.com/pomp to sign up today.

* Unstoppable Domains is working to make the internet operate how it was originally intended, which means anyone can publish anything from anywhere. You can go to unstoppabledomains.com and claim your censorship resistant domain today.

* BlockFi allows you to keep your crypto, put it up as collateral, and receive a USD loan funded directly to your bank account. They do loans ranging from $2,000 to $10,000,000, and they're perfect for helping you reach your financial goals of all sizes. Visit BlockFi.com/Pomp to learn more about putting your crypto to work without having to sell it by getting a loan or earning interest in their interest bearing accounts.

* Crypto.com allows you to buy, sell, store, earn, loan, and invest various cryptocurrencies in an user friendly mobile app. Join over one million users today. You can download and earn $50 USD with my code “pomp2020” when you sign up for one of their metal cards today.

* Blockset by BRD is your hosted blockchain infrastructure. Blockset enables enterprises and developers around the globe to deliver high-quality blockchain-based applications in a fraction of the time, at a fraction of the cost.

* Bybit currently has over 300,000 users, with numbers growing in double-digit percentages monthly. The exchange features no overloads during volatility, low latency trading and 24/7 live customer support. Newly registered users can receive up to $90 in rewards!  

If you enjoy reading “The Pomp Letter,” click here to tweet to tell others about it.

Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 50,000 other investors today.

To investors,

This morning BlockFi announced that they have raised a $50M Series C round of funding. The investment round was led by my partners and I at Morgan Creek Digital, alongside an amazing list of co-investors like Valar Ventures, CMT Digital, Castle Island Ventures, Winklevoss Capital, SCB 10X, Avon Ventures, Purple Arch Ventures, Kenetic Capital, HashKey, Michael Antonov, NBA player Matthew Dellavedova and two prestigious university endowments.

I will be joining BlockFi’s board of directors as part of this investment. 

It is hard to describe how excited I am to continue supporting Flori Marquez, Zac Prince, and the rest of the BlockFi team as they build out the industry-leading wealth management platform for crypto investors. We made our first investment in the business a little more than 18 months ago and this team has impressively executed their vision since. 

For those that are unaware, let me break down what BlockFi does today, why I think this business can be one of the next multi-billion dollar fintech giants, and where they are going next. Today they have the following products:

* A lending product that allows an individual or organization to deposit crypto assets and take US dollar loans out against the collateral. This is popular for people who want USD liquidity, but would rather not sell their Bitcoin or other assets.

* An interest-bearing account where users can deposit Bitcoin, Ether, or stablecoins and earn up to 8.6% APY interest.

* A cryptocurrency exchange that has no transaction fees.

The business was doing just under $1 million a month in revenue and had about $200 million in AUM when we made our third investment in the company at their Series B during Q4 2019. They have grown aggressively since the start of this year, which means they are now doing nearly $10M a month in revenue and have over $1.5B in assets under management. This type of hyper-growth is historically reserved for businesses that have found product-market fit in large addressable markets. 

Ultimately, that is exactly what BlockFi has done in my opinion. Before I get to that though, I want to call out a very specific structural component of BlockFi — their focus on deposits, rather than transactions. I’ll use Robinhood and Square as two companies in the legacy finance world to highlight the difference.

Robinhood was started as a brokerage business that could help retail traders buy and sell public equities cheaper or in a fractional share model. Square was started as a financial services company that could help merchants and users more easily transact, while also providing a place for them to store their deposits. These two starting points feel very different, but they are ultimately going after the same business of financial services.

Years later we can now see how these two starting points have significantly determined the direction that each company can take, including what products they offer and how large the addressable market is. Robinhood remains a brokerage-focused business. They have tried to scale by adding new products (crypto trading, cash accounts, etc), but that appears to be a much more difficult road than originally anticipated. Square on the other hand has been able to build a serious ecosystem of products that includes payment infrastructure, point-of-sale technology, CashApp, Bitcoin brokerage, and fractional share brokerage for public equities.

Simply, starting with a focus on deposits has served as a much more scalable model than beginning with brokerage. This has not been true in the crypto space to date, but not because I believe the framework has been invalidated, but rather because there had been very few companies starting with a focus on deposits. BlockFi is the first business to not only do this, but to do it really, really well.

I have learned over the years to press your winners as hard as possible and that is exactly what we and many other existing investors are doing. We understand the scalability of the business model and we see how big the addressable market is. The hope here is to build a generation-defining business that serves as the leader in Bitcoin and crypto. BlockFi has already built a great business, but they still have a lot of work ahead. 

They are hiring for many different positions and will need the absolute best people to help them build this future world. There will be plenty of obstacles and challenges to overcome, but this team has intelligence, experience, and a level of determination that is rare in companies who experience a lot of success early. You should expect to see them continuing to roll out new products (including the Bitcoin rewards credit card!) and going deeper in various markets.

The future of finance is digital. Every stock, bond, currency, and commodity will eventually be digitized. Investors will need a state-of-the-art wealth management platform to serve as their headquarters in this new world. This is exactly what BlockFi is building and now they have $50M in fresh capital to go faster and further.

You can sign up for a BlockFi account here: www.blockfi.com/pomp

-Pomp

This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 50,000 other investors today.

THE RUNDOWN:

UK Regulator Grants License to Digital Security Exchange Archax: The Financial Conduct Authority has granted several licenses to digital securities exchange and custodian Archax – making it one of the world’s first authorized trading spaces for the asset-class. Archax said Wednesday it was now licensed as a multilateral trading facility exchange, a broker and a cash and asset custodian. Read more.

Chainlink to Provide Data for Farming Insurance Startup Arbol: Data provider Chainlink will provide decentralized weather data for insurance startup Arbol, according to a blog shared with CoinDesk. Arbol provides crop insurance for small to medium-sized farmers or enterprises. Smart contracts pay claims to subscribers when a preset value – such as the average monthly temperature or rainfall – turns out different than the contract specifies, the firm said. Read more.

A Former Beauty Queen Raised $12M to ‘Revolutionize’ Cannabis. The Courts Can’t Find Her: Investors in the 2017 Paragon Coin token sale want their money back, but they can’t find the celebrity couple behind the operation. “The attorneys representing the defendants have withdrawn as counsel,” said attorney Donald Enright, who represents plaintiffs in this crypto-fueled legal dispute. Enright added the defendants “defaulted” by failing to appear in court and respond to the claims. Read more.

Apple Hits $2 Trillion Market Cap: Apple hit a market cap of $2 trillion Wednesday, doubling in valuation in just over two years to become the first publicly traded U.S. company to reach the milestone. Five market experts weigh in on the move. Krish Sankar, managing director and senior research analyst at Cowen, said the move toward services has allowed for multiple expansion. Read more.

Airbnb Has Filed Confidential IPO Paperwork: Airbnb on Wednesday announced that it has submitted a draft registration to the Securities and Exchange Commission for an initial public offering. The company did not disclose its financial information nor did it specify how many shares would be offered. The filing comes after a rough year for Airbnb and the U.S. travel industry. Read more.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Zac Prince, the co-founder & CEO of BlockFi, the industry-leading wealth management platform for crypto asset investors. Today they are announcing a $50 million Series C fundraising round. This episode gives you an overview of the business, their products, and what they are going to do with the money.

In this conversation, Zac and I discuss:

* BlockFi's $50M Series C fundraising round

* An update on revenue and assets under management

* What BlockFi is working on for future product launches

I really enjoyed this conversation with Zac. Hopefully you enjoy it too.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

We have started a new show exclusive to YouTube called Lunch Money. The goal is to cover current events in business, finance, and technology from the perspective of the every day citizen, rather than the talking heads on television. It is just as funny and entertaining as it is educational. Hope you enjoy it and make sure you go subscribe to the YouTube channel!

Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

* Athletic Brewing is re-imagining beer for the modern adult. They love beer. But they also love being healthy, active and at their best. The non-alcoholic beers are fully flavored, clean ingredient, and a fraction of the calories of full strength beer - they fit in any occasion. Check out www.athleticbrewing.com for more details and free shipping nationwide.

* Choice is a new self-directed IRA product that allows you to buy Bitcoin with tax-advantaged dollars, while still holding your private keys. You can go to retirewithchoice.com/pomp to sign up today.

* Unstoppable Domains is working to make the internet operate how it was originally intended, which means anyone can publish anything from anywhere. You can go to unstoppabledomains.com and claim your censorship resistant domain today.

* BlockFi allows you to keep your crypto, put it up as collateral, and receive a USD loan funded directly to your bank account. They do loans ranging from $2,000 to $10,000,000, and they're perfect for helping you reach your financial goals of all sizes. Visit BlockFi.com/Pomp to learn more about putting your crypto to work without having to sell it by getting a loan or earning interest in their interest bearing accounts.

* Crypto.com allows you to buy, sell, store, earn, loan, and invest various cryptocurrencies in an user friendly mobile app. Join over one million users today. You can download and earn $50 USD with my code “pomp2020” when you sign up for one of their metal cards today.

* Blockset by BRD is your hosted blockchain infrastructure. Blockset enables enterprises and developers around the globe to deliver high-quality blockchain-based applications in a fraction of the time, at a fraction of the cost.

* Bybit currently has over 300,000 users, with numbers growing in double-digit percentages monthly. The exchange features no overloads during volatility, low latency trading and 24/7 live customer support. Newly registered users can receive up to $90 in rewards!  

If you enjoy reading “The Pomp Letter,” click here to tweet to tell others about it.

Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 50,000 other investors today.

To investors,

News broke late Friday that Warren Buffett’s Berkshire Hathaway made some big investment decisions during the second quarter of 2020. This shouldn’t be that shocking given the market volatility and a significant shift in the macro environment due to the COVID-19 crisis. However, what was surprising was the specific investments that Berkshire and Buffett decided to enter and exit.

Here is a quick summary of the most notable decisions:

* Berkshire bought 20.9 million shares in Barrick Gold, a Toronto-based gold miner, which was a $563.6 million investment at the time it was reported

* Berkshire sold 85.6 million shares of Wells Fargo, which is approximately 26% of the previous ownership position

* Berkshire sold 35.5 million shares of JPMorgan, which was approximately 60% of the previous ownership position

* Berkshire completely divested of their financial stake in Goldman Sachs

* Berkshire continued to invest in Bank of America and now owns almost 12% of the financial services company, which is worth about $28.2 billion

Warren Buffett and his team have essentially decided to dump bank stocks and start gaining exposure to gold. This is a complete U-turn from the perspective Buffett has publicly stated for many years, which downplayed the value of gold and boasted of the banks’ future prospects. So what exactly is driving this change of opinion?

Many people are speculating that changes in the macro environment are to blame. That thought process would include the following:

* COVID-19 created a public health crisis

* Governments had to respond, so they forced everyone to sit in their homes

* The velocity of money drastically slowed while everyone was sheltering in place

* Governments realized that they could mitigate the short term pain if they intervened

* That intervention was produced in the form of trillions of dollars in quantitative easing

* If governments are printing trillions of dollars, there will be high levels of inflation in the future

* Gold will be a great inflation hedge asset to put in your portfolio, so that is what Buffett did

This thought process has many valid arguments, but there is only one major problem — Warren Buffett and Berkshire Hathaway did not buy gold. They bought equity in Barrick Gold, which is a gold miner. This is an investment in a cash producing business, rather than an investment in the precious metal. Now before everyone freaks out, yes, the future prospects of Barrick Gold are partially dependent on the future performance of gold. But it is important to call out that the investment Buffett made was in a business, not a commodity.

So if he is not actually buying the commodity itself, why would Buffett be buying into a gold miner?

An easy first place to look is the poor performance of Berkshire Hathaway’s top 10 stock holdings. As of August 10th, here they are ranked by portfolio percentage (largest to smallest) and their financial performance year-to-date:

* Apple +54.4% 

* Bank of America -23.6% 

* Coca-Cola -12.3% 

* American Express -17.3% 

* Kraft Heinz +10.8% 

* Wells Fargo -52.0% 

* Moody’s +14.7% 

* JPMorgan -25.9% 

* U.S. Bancorp -35.4% 

* Bank of New York Mellon -22.8%

According to Yahoo! Finance, “the seven financial stocks have an average year-to-date total return of -23.2%, 40 basis points less than Bank of America’s total return so far in 2020. The three non-financial stocks have an average total return of 17.6%, primarily on the back of a fantastic performance by the maker of iPhones.” The quick takeaway is that Buffett has been invested in a number of old-school businesses that have not been able to convince the public markets of their technology prowess.

In fact, the most technologically innovative business that Berkshire is invested in has been their best performer — shocker! When your portfolio is being crushed this bad, it forces people to reevaluate their strongest held beliefs. I have no doubt that the investment team at Berkshire Hathaway has been discussing what they can do to mitigate the potential risk from high inflation in the coming years. If that conversation has been occurring, the natural conclusion in the conservative world of Wall Street is to gain exposure to gold.

Buffett has preached for decades about his disdain for non-cash producing commodities, so it makes sense that they would get indirect exposure to gold through a gold miner. But ultimately this is still a less superior decision than the one that Paul Tudor Jones made just a few weeks ago. Warren Buffett and Berkshire Hathaway have chosen to gain exposure to gold in the fcae of potential inflation and Paul Tudor Jones chose to get exposure to Bitcoin because it is likely to be the “fastest horse.” So what exactly is the difference between gold investors and Bitcoin holders?

The good news is that both groups have a general agreement on the myriad of issues related to quantitative easing, central banks, and future inflation. They each also agree that sound money principles are the best solution to not only protecting one’s wealth, but also benefitting from the devaluation of the US dollar. But that is where most of the agreeing stops.

Gold bugs and Bitcoiners are both incredibly staunch in their belief that each respective asset provides the best application of sound money principles moving forward. Yes, you read that right. Even though each group agrees on sound money, they are actually disagreeing on the application of those sound money principles as the vehicle for people to use. It is important that I call out my bias here — I’m a relatively young guy who is excited about innovation and technology. 

It is no secret that I’m strongly in the Bitcoin camp on this debate, but I’m going to do my best to provide an honest assessment of the two assets. First, gold has been around for thousands of years and Bitcoin is only approximately 11 years old. The Lindy Effect is much more in gold’s favor, but Bitcoiners would argue that every great innovation was young at some point too. This difference of time in existence has much more of an effect on confidence levels, rather that actual properties of the assets themselves.

Here is a quick rundown of each aspect to consider:

* Scarcity – It is becoming abundantly clear that Bitcoin has provable scarcity and gold does not. There are 21 million Bitcoin in the total supply (hard cap on that number) and there are just over 18.4 million Bitcoin in the circulating supply. These numbers are provable in the Bitcoin code base and by simply syncing a Bitcoin node to the network and querying for the data. Gold has an estimated total supply and circulating supply, but no one knows the exact numbers of each. They also can not prove either gold number either. 

* Portability — Gold is heavy and difficult to move in any serious size. Bitcoin is a fully digital asset, so it can be moved anywhere globally almost effortlessly.

* Divisibility — Gold is difficult to divide into smaller amounts than you are currently holding. You could shave some off or have your gold bar professionally broken down, but it would be nearly impossible to do risk-free yourself. A single Bitcoin, on the other hand, is divisible by 100,000,000 fractional units called satoshis. This makes it infinitely easier for someone to use Bitcoin for transactional purposes compared to gold. 

* Physical applications — Gold is well known for it’s resistance to corrosion and rust, while also serving as a great conductor of heat and electricity as well. Bitcoin has none of these elements, nor does the Bitcoin community believe these properties are important for determining superior money.

So in a short sentence, Bitcoin is superior to gold in almost every facet except how long people have accepted the asset as money and any physical applications around corrosion and conduction. But as I previously stated, Bitcoin wins against gold when presented side-by-side for any comparison that involves true importance for money. 

This game doesn’t have to be zero sum though. In fact, I believe that Bitcoin and gold are both going to do well in the coming years as we see high levels of inflation and investors look for inflation-hedge assets. With that said, I’m with Paul Tudor Jones. I believe Bitcoin will be the fastest horse and investors will be upset if they have zero exposure to the asset. It is not lost on me that many investors are now going to look at gold because Warren Buffett’s exposure has essentially de-risked the asset for other investors. No one will get fired for copying one of the greatest investors of our lifetime.

Here is my word of caution though — Warren Buffett is probably not the person you want to be copying based on his performance over the last decade. He has struggled mightily to beat the S&P 500 annual returns. He also recently sold his airline stocks near the market bottom in a panic, while choosing to buy gold near it’s all-time high. Maybe the airline stocks go lower and gold goes higher, but these two investment decisions go against everything Buffett has ever taught us about value investing. The game is to buy low and sell high, not sell low and buy high.

I am a big fan of what Warren Buffett has done over the past few decades. He not only displayed one of the greatest investment track records in history, but he educated an entire generation in his well-known pragmatic fashion. My belief is that Warren Buffett and Berkshire Hathaway should have taken 5-10% of their entire cash position and purchased Bitcoin. It would likely serve as their best investment coming out of this economic crisis.

That scenario is nearly impossible to imagine though — Buffett has made his thoughts on Bitcoin clear. We shouldn’t be surprised when we see 89-year-olds resisting technological innovation. On the bright side, this just leaves more Bitcoin for the rest of us :)

-Pomp

This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 50,000 other investors today.

THE RUNDOWN:

Brainard Says Fed Is Conducting E-Money Tests for Research:  The Federal Reserve is conducting experiments with a hypothetical digital dollar for research purposes, though it hasn’t yet committed to issuance that would require a formal policy process involving the government and other stakeholders, Governor Lael Brainard said Thursday. In addition to the Fed’s own internal work, research teams from the Boston Fed and Massachusetts Institute of Technology are engaged in a “multi-year effort to build and test a hypothetical digital currency oriented to central bank uses,” she said. Read more.

Pentagon Forms New Task Force to Investigate UFOs: The Pentagon is forming a new task force to investigate UFO sightings that have been observed on several occasions by U.S. military aircraft. The creation of the Unidentified Aerial Phenomena Task Force, or UAPTF, continues an effort begun in recent years to investigate unexplained aerial incidents encountered by the U.S. military. Read more.

Bitcoin To ‘Ignite’ After Labor Day, Warns Former Prudential CEO In Surprise Crypto Flip: George Ball, the chief executive of investment firm Sanders Morris Harris and former chief executive of Prudential Securities, has changed his tune on bitcoin, switching from being a bitcoin "opponent" to an advocate—and warning people will begin turning to bitcoin after Labor Day on September 7. "I’ve never said this before, but I’ve always been a blockchain, cryptocurrency, bitcoin opponent; but if you look right now, the government can’t stimulate the markets forever," Ball said, speaking to the newswire Reuters in a video interview this week. Read more.

The Pandemic is Prompting Asian Countries to Adopt Blockchain: The COVID-19 pandemic prompted many Asian countries to adopt blockchain technology to secure their data via the Internet against hackers and cyber thieves, according to a report from the Nikkei Asian Review. This increase in adoption comes as  The Business Research Company said the global blockchain market is expected to hit $15.88 billion in 2023. Read more.

Music Is Big on Twitch. Now Record Labels Want It to Pay Up: Is it illegal to stream music on Twitch? Content creators can argue that based on how little music is being used and the context of the stream, some music streaming should be considered fair use and therefore not illegal. But the RIAA said it looks to see if a clip could be fair use before sending out its notices. Read more.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Pattie Sellers, an award-winning writer, producer, and multimedia journalist. She currently serves as the Co-CEO of SellersEaston Media and the Chair of the annual Fortune Most Powerful Women Summit, where she previously worked for 32 years. Pattie has spent more time with the world’s most successful and powerful people than anyone else I know. It was great to hear so many interesting stories.

In this conversation, Pattie and I discuss:

* The world's most successful and powerful people

* Warren Buffett

* Ted Turner

* Melinda Gates

* John Mack

* Martha Stewart

* Rupert Murdoch

* Oprah

* Alex Rodriguez

* What makes these people tick

* The changing media landscape of today

I really enjoyed this conversation with Pattie. Hopefully you enjoy it too.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

We have started a new show exclusive to YouTube called Lunch Money. The goal is to cover current events in business, finance, and technology from the perspective of the every day citizen, rather than the talking heads on television. It is just as funny and entertaining as it is educational. Hope you enjoy it and make sure you go subscribe to the YouTube channel!

Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

* Athletic Brewing is re-imagining beer for the modern adult. They love beer. But they also love being healthy, active and at their best. The non-alcoholic beers are fully flavored, clean ingredient, and a fraction of the calories of full strength beer - they fit in any occasion. Check out www.athleticbrewing.com for more details and free shipping nationwide.

* Choice is a new self-directed IRA product that allows you to buy Bitcoin with tax-advantaged dollars, while still holding your private keys. You can go to retirewithchoice.com/pomp to sign up today.

* Helium Hotspots allow you to earn cryptocurrency by building a new wireless network for the Internet of Things and creating a more connected future in your city. Get $50 off your Helium Hotspot by going to helium.com and using my special code POMP at checkout.

* Unstoppable Domains is working to make the internet operate how it was originally intended, which means anyone can publish anything from anywhere. You can go to unstoppabledomains.com and claim your censorship resistant domain today.

* BlockFi allows you to keep your crypto, put it up as collateral, and receive a USD loan funded directly to your bank account. They do loans ranging from $2,000 to $10,000,000, and they're perfect for helping you reach your financial goals of all sizes. Visit BlockFi.com/Pomp to learn more about putting your crypto to work without having to sell it by getting a loan or earning interest in their interest bearing accounts.

* Crypto.com allows you to buy, sell, store, earn, loan, and invest various cryptocurrencies in an user friendly mobile app. Join over one million users today. You can download and earn $50 USD with my code “pomp2020” when you sign up for one of their metal cards today.

* Blockset by BRD is your hosted blockchain infrastructure. Blockset enables enterprises and developers around the globe to deliver high-quality blockchain-based applications in a fraction of the time, at a fraction of the cost.

* WSOT is the biggest trading competition in the crypto space, with a massive 200 BTC prize pool and bonuses of 9,400 USDT up for grabs!

If you enjoy reading “The Pomp Letter,” click here to tweet to tell others about it.

Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe

This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 50,000 other investors today.

To investors,

It has been almost exactly 5 months since the original lockdown orders went into place in the United States. There has been incredible economic carnage that transpired since, so today I want to spend time zooming out and recapping those developments.

During times of uncertainty and chaos, it is always important to level set on what has happened, where we are now, and what are the possible situations yet to play out. Fortunes are going to be won and lost throughout this financial crisis. Certain narratives will disappear and many trends will be accelerated. The best investors are merely trying to be right more times than they’re wrong.

Let’s start with an analysis of the job market. We started the year with a historic low in unemployment around 3.5%. Once the pandemic hit the US in March, it quickly became clear that businesses would be unable to keep employees on payroll if they had near zero revenue. In my March 18th letter to each of you, I wrote the following:

“As I have talked to people about this issue [unemployment] over the last 24 hours, most are relatively calm about it because the general belief is that it would take quite awhile for high levels of unemployment to take hold. The data says otherwise though. These large increases in unemployment filings tells a much different, and very scary, story.

While I don’t want to cause panic or fear monger, it appears that most investors are drastically underestimating the economic crisis we have on our hands. This is not going to be a few weeks of pain. This is likely to be months and months, if not a few years, of material slowdown in economic activity.”

My belief at the time was that we would see unemployment reach approximately 9% by the end of Q3, but we ended up in a much worse position than I could have imagined. There have been more than 56 million first time unemployment claims filed since the week of March 20th, which is approximately 1 in every 3 people in the US workforce. The continuing jobless claims currently sit at just over 15 million and the civilian unemployment rate is being reported at 10.2% for July 2020.

We all know that these official unemployment numbers can be wildly misleading — they don’t account for certain types of workers, they rely on self-reporting, etc — but they are the best data points we have to understand the general magnitude of the situation and any directional trends. In the last 5 months, more people lost their job than most investors had expected and it appears that there will be inflated unemployment levels for many years to come.

Why are the unemployment numbers going to be high?

The businesses that employ many of these people are getting decimated throughout this economic crisis. It doesn’t matter how big or small the business is. Governments forced people to shelter in place, which drastically slowed the velocity of money. They even mandated the shut down of many types of businesses, which only further accelerated the damage.

Take restaurants, one of the most heavily affected business sectors. A recent Yelp report from the end of June showed that “23,981 restaurants that are listed on their platform shut down completely at some point during the pandemic, and 53% of those have already decided to close their doors for good.” It also shows that approximately 41% of the businesses on Yelp that chose to close their doors at some point since March 1 have since decided to permanently shut down the business.

We won’t know the true damage on small businesses until the government releases a more complete data set later this year or in early 2021. With that said, my belief is that we are likely to see 20-25% of small businesses in the United States be shut down for good before this economic crisis is over. If that were to be the case, we could see 10% of all jobs in America destroyed (small businesses make up 50% of jobs in the US).

Big businesses aren’t doing much better. As you would expect, the damage is sector specific. Ride hailing companies like Lyft saw revenue decline more than 60% and airlines like Southwest experienced an 80%+ decline. This is in direct contrast to the big tech sector, where we saw revenue gains of 10% or more in year-over-year Q2 numbers in some cases.

The damage was not exclusive to the revenue, and subsequently the equity, of businesses though. McKinsey created an interesting report that highlights the probability of default among various industries:

The nuances of the damage are important, but the macro picture is quite clear — the public health crisis led to a government mandated shut down. That shut down created a scenario where tens of millions of Americans lost their jobs and millions of businesses lost majority of their revenue or were forced to shut down permanently.

Thankfully, the US government wasn’t completely asleep at the wheel. They recognized rather quickly that the economic damage would be severe and immediately reached into their tool box to implement the 2008 financial crisis playbook. This action saw two emergency interest rate cuts that got us to 0%, which was then followed by multiple monetary stimulus packages totaling approximately $3 trillion.

This whiplash from high-flying economic activity at the beginning of the year, to catastrophic damage within weeks, and then back again to an economy supported by the injection of trillions of dollars has led to complete chaos in markets. Early on during the initial liquidity crisis public equities saw an approximate 30% drop across the board. Gold was down almost 15%. Bitcoin went down 50% in a single day. It literally felt like there was no floor for any asset.

But once the stimulus started to hit the market, we about faced and went up even faster than we had fallen. Stocks are essentially flat to the beginning of the year. Gold is up almost 30%. Bitcoin is now up more than 60% year-to-date.

Every asset didn’t go down though as you would have expected. Let’s use real estate as an example. The median home price in the United States actually rose during the pandemic. This was mainly due to an incredibly advantageous rate environment enticing people to use the cheap capital to purchase a new home, while being combined with an overall shortage in US housing. It isn’t rocket science. Any time you have low, relatively-fixed supply intersecting with increasing demand, you are likely to get prices rising.

When you unpack this even more, most asset prices plunged before skyrocketing again. Real estate stayed strong throughout the crisis. And somehow we have entered into an even more dangerous credit cycle — landlords are seeing double-digit percentages of their tenants unable to pay rent, banks are feeling the pressure from landlords (both commercial and retail) that are suddenly with significantly less revenue, and credit card balance payments essentially became zombie land.

I share all of this to highlight one critical factor — the US government and Federal Reserve have done a fairly decent job at masking the economic damage that has occurred, but we are watching in real-time as the struggle between “whatever it takes” style Democrats negotiates with “we don’t have unlimited money” Republicans. They all agree that more monetary stimulus is needed if you want to mitigate the short term damage for American citizens and businesses. What they can’t agree on is how much money, and for what purposes, that monetary stimulus includes.

The Democrats are currently looking to spend approximately $3 trillion and the Republicans only want to spend $1 trillion. Frankly, using the word “spend” is comical but I will use it for ease of understanding today. This deadlock between two political parties has left Americans in the cross-hairs during an election year. The simple answer is that we are likely to see some compromise in the middle, but it may take much longer than any reasonable person would expect.

It is unclear how long the monetary stimulus can be used to artificially inflate the economy. The economic damage on the ground is worse than most anticipated and it is concerning that it is not improving in any dramatic way. This leaves us with a solid understanding of what has happened and where we are today. But where are we going?

Honestly, this is the scariest part to me. We seem to be heading toward a world where the leaders of our country become more emboldened to make decisions optimized for short-term gain, rather than long term sustainability. This is best illustrated in the recent talking points coming out of various Federal Reserve organizations. We have heard from multiple people that they believe we should set the inflation target higher than 2%, while also committing to no action to slow it down until the official numbers reach as high as 2.5%.

Another way of saying this is that the Federal Reserve is suggesting that we violate their own guidance in an effort to solve the problem this “one time.” We all know how this temporary measures in government go — they almost always become permanent. As I have discussed ad nauseam in these letters, a 2.5 - 4% official inflation number could lead to the lowest socioeconomic classes experiencing 10-20% inflation at the same time.

The pandemic has been incredibly painful for many people. Some have lost loved ones. Others have found themselves jobless. And many have been hurt financially. The idea that the Fed and their government counterparts are going to solve the problem is wishful thinking in my opinion. Not because they are incompetent, but rather they don’t have the tools to solve the problem for the average citizen. They can pull the large levers at a macro level, but those efforts tend to be quite ineffective in helping the little guy.

So what can you do moving forward?

First, this has been an incredible learning opportunity for many people. You must do the hard, disciplined things during the good times, so that you can drastically reduce the likelihood of economic ruin in bad times. Spend less than you make. Invest your capital intelligently. Let compound interest work for you. Hold assets that protect you against inflation. These timeless personal finance rules are as true today as they have ever been.

Second, you can prepare yourself for what is likely to transpire over the coming months and years. There have been trillions of dollars printed, with more probably on the way, so it is a common belief that inflation will naturally rise. As this happens, those caught holding cash will get their purchasing power destroyed, while those holding real assets will see their wealth artificially inflated. Building wealth is a game and that game has rules. You have to understand these rules in order to successfully play the game.

While I don’t give financial advice, my best way of guiding you on potential paths forward is to simply explain what I am doing. I have set aside a pre-determined amount of cash that provides me about 6 months of expenses. This gives me peace of mind that I won’t find myself completely screwed if every investment went to zero tomorrow. With the rest of my wealth, I have aggressively invested over the last few months in inflation-hedge assets. These include Bitcoin and real estate. The only public stock I hold is GBTC, which is in my retirement account. Other than that, I have a long-time horizon and have worked to position myself to benefit, rather than suffer, from the inflation that I believe we are about to experience.

Lastly, the coming months and years will most likely require incredible patience. Once you have done the work to understand the structural changes that are occurring, you can position yourself to capitalize. But once you are in position, it becomes a waiting game. It will be important for people to remain calm. Don’t overreact to short term price movements. Hell, don’t even look at the day-to-day news. Generational wealth isn’t built overnight. It is actually built historically by making directional bets and then doing nothing for very long periods of time.

You don’t have to be a genius to get wealthy during times of economic crisis. You have to be diligent in doing your work. Be courageous and convicted in how you position yourself. And disciplined and humble enough to patiently wait for markets to play out. This is all incredibly easy to talk about and just as difficult to execute.

Best of luck to each of you. Hope you’re staying safe. Continue to be kind to each other. You never know what your neighbor is going through. We will always be stronger when we collaborate, learn together, and seek cohesiveness rather than divisiveness.

Talk to you tomorrow.

-Pomp

This installment of The Pomp Letter is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 50,000 other investors today.

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THE RUNDOWN:

Chia Network Raises $5M to Rival New Crop of DeFi-Friendly Base Layers: Chia Network, led by BitTorrent creator Bram Cohen with the aim of creating a programmable money platform, just raised another $5 million in an equity round led by Slow Ventures. Despite the resurgence of token sales this summer, Cohen said the plan since 2018 has been to go the IPO route and rely on venture capital until the token launch. Read more.

Grayscale Tells SEC Its Bitcoin Trust Rose $1.6B Over Six Months: The total value of Grayscale’s flagship Bitcoin Trust increased over $1.6 billion in the first six months of 2020. The New York-based crypto investment firm said the dollar value of total assets in GBTC went from $1.87 billion at the end of 2019 to $3.5 billion by the end of Q2 2020 – an increase of 90%. Read more.

UK Crashes Into Deepest Recession of Any Major Economy: UK economic output shrank by 20.4% in the second quarter of 2020, the worst quarterly slump on record, pushing the country into the deepest recession of any major global economy. This crash in GDP in the April-June period, compared with the first quarter, is the worst since quarterly records began in 1955. Industries most exposed to government lockdown measures to contain the coronavirus pandemic — services, production and construction — saw record drops. Read more.

Lyft May Suspend Service in California: Lyft may suspend services in California if the state does not overturn a recent ruling requiring it to classify its drivers as full-time employees, Lyft co-founder and President John Zimmer said on the company’s second-quarter earnings call. Read more.

Sheryl Sandberg: Facebook Will Work With Whoever Wins the Election to Address Big Tech Concerns: Facebook COO Sheryl Sandberg on Wednesday said the social media company needs to work with whoever wins the 2020 U.S. election to address their concerns about Big Tech. “We know that there’s real concern about the size and the power of the American tech companies, both here in our country and around the world,” said Sandberg, speaking at the CNBC Small Business Playbook virtual summit. “It’s our job to work with anyone who’s in office, whether they’re in the Senate or anywhere around the world, to address those concerns.” Read more.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

Bill Barhydt is the founder of Abra, a simple to use cryptocurrency investment platform. After working for the CIA, NASA, and Goldman Sachs, Bill decided to join Netscape working on telecom and Internet banking deals, mostly in Europe. After the AOL acquisition of Netscape, Bill founded WebSentric. The technology for WebSentric exists today in SAP's online portal service.

In this conversation, Bill and I discuss:

* Macroeconomics

* The Federal Reserve

* Monetary policy

* Bitcoin as a reserve asset in corporate treasuries

* Decentralization

* A number of new products and features that Abra has launched recently

I really enjoyed this conversation with Bill. Hopefully you enjoy it too.

LISTEN TO THIS EPISODE OF THE POMP PODCAST HERE

We have started a new show exclusive to YouTube called Lunch Money. The goal is to cover current events in business, finance, and technology from the perspective of the every day citizen, rather than the talking heads on television. It is just as funny and entertaining as it is educational. Hope you enjoy it and make sure you go subscribe to the YouTube channel!

Podcast Sponsors

These companies make the podcast possible, so go check them out and thank them for their support!

* Choice is a new self-directed IRA product that allows you to buy Bitcoin with tax-advantaged dollars, while still holding your private keys. You can go to retirewithchoice.com/pomp to sign up today.

* Helium Hotspots allow you to earn cryptocurrency by building a new wireless network for the Internet of Things and creating a more connected future in your city. Get $50 off your Helium Hotspot by going to helium.com and using my special code POMP at checkout.

* Unstoppable Domains is working to make the internet operate how it was originally intended, which means anyone can publish anything from anywhere. You can go to unstoppabledomains.com and claim your censorship resistant domain today.

* BlockFi allows you to keep your crypto, put it up as collateral, and receive a USD loan funded directly to your bank account. They do loans ranging from $2,000 to $10,000,000, and they're perfect for helping you reach your financial goals of all sizes. Visit BlockFi.com/Pomp to learn more about putting your crypto to work without having to sell it by getting a loan or earning interest in their interest bearing accounts.

* Crypto.com allows you to buy, sell, store, earn, loan, and invest various cryptocurrencies in an user friendly mobile app. Join over one million users today. You can download and earn $50 USD with my code “pomp2020” when you sign up for one of their metal cards today.

* Blockset by BRD is your hosted blockchain infrastructure. Blockset enables enterprises and developers around the globe to deliver high-quality blockchain-based applications in a fraction of the time, at a fraction of the cost.

* WSOT is the biggest trading competition in the crypto space, with a massive 200 BTC prize pool and bonuses of 9,400 USDT up for grabs!  

If you enjoy reading “The Pomp Letter,” click here to tweet to tell others about it.

Nothing in this email is intended to serve as financial advice. Do your own research.

*See important disclaimer

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe