Part 7
Shorting sub-prime mortgages
Peter Schiff reflects on his insight that there was a serious problem with the mortgage lending industry and saw that the market was going to crash. He warned his investors, they dumped their positions on the market, and he spent the next months/years opening short positions on those loans, and was right in timing 2007-2009.
Peter Schiff's accusation to Richard Heart creating Hex, is that he gave it away for free, and then new people came along who believe in it, and are investing in it, and eventually it will go to zero when those people try to sell for a profit.
So, my question is this:
Is Peter the crook who would dump a bad stock on someone else's head? Based on those details I'd say yes.
What this means, is that there is an ethic in trading, that if you see something is a scam, you are partaking in it if you try and sell to get the heck outta dodge. If you think you're getting scammed, you accept the loss, bow your head in defeat. Even more, you are an advisor, and if you tell people to sell to get out of a bad investment, you are the one advising people to sell bad product to someone else who is uninformed enough to still be putting in bids to buy.
You cannot have it both ways. If you think Hex is a scam, and warn that the people who get hurt are the ones that are trying to buy in now, providing the liquidity used for the scammers to sell, then you are utilizing your fiduciary responsibility to warn people not to buy, and if you bought, don't harm newcomers by dumping it on them. When there is a scam, the idea is that everyone is a loser. If you warn people to dump and get out, you are no longer permitted, in my book, to use the words "Ponzi" or "pyramid" in any sentence involving investments. PERIOD!
So, his advance was to get out (dump on other people's heads) and then short (helping turn the market against the remaining value).
There is a mighty difference in the 24/7 volume on Bitcoin and a constant flow of people begging to buy and sell at every price. The reason it doesn't go screaming to $0.5 and $1,000,000 20 times/day, is because enough people see the tangible, real value in it, that they are in a constant line around the block working their turn to buy some.
Volume is truth. Liquidity is truth. Reality is based on who is interested and who is informed.
The entire value of Peter's supposed fiscally responsible perspective on the market being about value-shopping is turned on its head in two important ways:
1) the willingness to shake loose a bad investment at the detriment of others and
2) making money by betting against the thing you hate. I understand shorting against positions you know well enough to catch the dip during down turns and hedging against the value of long up positions, but shorting because you believe something will go down because it is bad, damaged product, makes as much sense as telling everyone to avoid Bitcoin because you don't understand it, while continuing to admit you regret not grabbing it and making a killing.
It's impossible to find it admirable for someone to give good stock advice when they simultaneously agree with Richard Heart that the government has turned into a worthless secondary reflection of what it used to be. There's a lot of high and mighty posturing from Schiff that, if you really pay attention, shows the shady nature of someone who's ego is more inflated than his portfolio.
What makes this worse, and again I wish Richard caught on to the opportunities to point this out, is that Peter defended his decisions in gold by talking about timing the market to base the value it goes up and down. If the entire argument is supposed to be that it is a store of value in place of fiat, he shouldn't be talking about time horizon according to the value at all.
Richard makes a lot of strong points about the value of investing in your own patience, with delayed gratification by leaving your Hex locked up, and Peter's attack was that Richard was counting on people adding to their long term holdings so he could cash out and leave them stuck in Hex. The problem is, the argument doesn't make any sense after exposing his willingness to dump bad mortgage bundles on unsuspecting shareholders.
What a mess!
Peter exposes his lack of understanding about scarcity, and it becomes scary.
I would imagine that an important word in debate is "bait", meaning it would be easy to get baited by the opposition, so I'd be careful not to make an argument for something that didn't reflect well on me in the other direction.
Peter actually did it: Schiff argued that Bitcoin can't be scarce because there are thousands of other cryptocurrencies.
What on earth is this guy gonna do when they issue the CBDC?
That means that gold isn't scarce because of iron and copper!
Peter actually believes that all cryptocurrencies are the same, and they are all competing for the same, single market.
Sorry, but is he really saying that a bored ape is the same as Tether?
I mean, seriously I'm disturbed that these people are making more money than I am... for now.
Please, please people entering the 2020s and beyond; get a wider angle on your financial advice and don't single out your choices based on Peter Schiff. His defense that stocks are companies with different values and therefore more stock offerings don't reduce the value in a single stock, is identical to what we see in crypto. Crypto has real organizations doing actual... things, and using coins as utility.
I DO agree, that the reason we have not seen the full value of Bitcoin and the handful of meaningful scarcity models, is because people are chasing shiny, insignificant short term coins that will tank. That is what the majority of the market is. I would argue that most people that play around with the stock market on their own are chasing low cap junk as well, and eventually they will realize that trusting your assets is worth much more than getting lucky on a pump. Other than that one guy in 10,000 who gets in right at the pump and kills it and is set for life, everybody else should be looking for real value. That's what kills me that Schiff is so... wrong. It's not just about whether he shares my thoughts or values, he's just plain 100% wrong about what he is talking about.
So, after all of this fun tearing through my favorite parts of this little gem of a show, I'm left with little concern over what Richard said. I've heard it all before and he will say it all again, but I'm much, much more concerned about the way that the OG investment world is looking at the future. It's like they've learned so little from the history available to them about culture, money, science, tech, bio.
We're all humans, and we all have our blind-spots, but I should be constantly taking notes at the knowledge I amassed that I didn't know about stocks and gold after an hour with Schiff. I've listened to him before and disagreed with him less when he talked about things he actually knows about.
It makes me wonder about people and their general knowledge about the world. Does Peter like to cook? Hate it? It makes you wonder if he's, like, a total complete idiot about car models or pasta, or if he really knows his football handicaps? lol Who knows. Is he the kind of person that is a sushi-roll denier because he hates the taste of sea-weed? Or, absolutely loves a good rib-eye, so he tells everyone that rib-eyes are the future, find a meat-packing company to get behind. I'm having a little fun, but you get what I'm aiming at. Liking, disliking, is everyone's right, but he's an advisor.
Crypto exists.
They are companies, projects, entire new industries. Closing one's eyes, much like certain maxis, does not make them go away, and much like mentioned internet bubbles, there was a dot com crash, and then there was 20 years of the internet being the biggest thing in every industry.
Peter Schiff is proud to have steered people away from dot com bubble crashes, and equates all of crypto to the same thing. It's not unlike having fallen off a bike at 8 years old, only to believe you've saved the world by warning them to stay away from streets at age 50. Eventually, every human is going to recognize the benefits of the wheel, and figure it's involved in the best ways to get down the road.
Most ICOs and IEOs probably will end up being crap: Not scams, but surely crap. Some of them will rock, and like us silly humans, we'll simply choose the inferior options because we prefer the shiny one. You know... like gold! lol
Peter could have framed a smart argument to say most crypto is going to zero, and people need better advisors. Sure, that's kinda the point I've been making.
You want a better world with more wealthy cryptonians? Get more due diligence and education inside the crypto world. That is how we avoid the crippling regulation coming. There's nothing more distasteful and feeling like a wild stallion fenced in, than outsiders with terrible world views on everything, coming into your home-base to tell you how the world works. They know the text book version of crypto, because they hired their lobbyists to write them.
So, as you can see, a debate can be about much more than a debate. It was an opportunity to hear how two brains frame their argument, and how a 3rd person, this time being myself, can point them more into the direction of greater truths. I have the luxury of doing so at leisure. You are the beneficiary.
Thank you to those who traveled the journey along to the end. Hope you enjoyed!
Gordon shall now continue his normal path of pouring his crypto brain into normally flowing thoughts.
And that means, Crypto Gordon Freeman, the free man, for now... out.
