Welcome back to the original call, team. I'm Phil Rosen. In light of last week's hype about cryptocurrencies, today we will leave economics behind and turn to history.
You've seen the movie The Big Short, right? It may be The financial crisis of 2008 is the clearest and most interesting analysis of how, so, so bad to bet on subprime mortgages.
The biggest domino to fall 14 years ago was Lehman Brothers, a classic that failed and went bankrupt.
It's a roundabout way of saying that the crash of Sam Bankman-Fried's FTX cryptocurrency exchange is hard and dramatic enough to warrant his own movie a few years later.
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1. For the past few days , we have been discussing the demise of FTX with Wall Street and blockchain executives ever since Lehman Brothers in 2015.
My main question is: Is FTX owned by Lehman Brothers?
Communication sounds like a noisy "vision".
Remind me for a moment : In the years leading up to 2008, Lehman Bros. filled its balance sheet with massive amounts of subprime mortgage debt.
But literally overnight, the value of those properties vanished when the housing market crashed. Lehman went bankrupt and the world plunged into the worst financial crisis since the Great Depression.
Meanwhile, the FTX empire also collapsed last week, as its balance sheet was hit by an asset, FTT's native token, which crashed to nearly zero overnight. This raised serious concerns about their companies' creditworthiness and triggered a domino effect that led to bankruptcy filings on Friday.
But Ian Szilagyi, CEO of financial firm Toggle AI, told me that the Lehman rate has far more disruptive implications than anything a crypto firm could come up with.
"An organization like Lehman would be at the center of a relatively complex financial system , fixed and expanding in mortgages, consumer loans, commercial loans and so on," Silji said.
He added that because people aren't borrowing in cryptocurrencies to pay off mortgages or credit cards, the risk of contaminating traditional markets is reduced.
However, that doesn't mean that the infection can't bring the cryptocurrency industry down.
“Just as the traditional financial system was corrupted by profits and constraints in 2008, the cryptocurrency ecosystem is corrupted by profits and constraints,” said Hilary Allen, a financial regulator at American University.
“The primary use of cryptocurrencies is speculative , so the crash is unlikely to have as broad an impact as the traditional financial system has had a significant impact on cryptocurrencies,” he said.
Lehman or not, risks remain for players large and small in the digital asset space.
Today, the crypto firm doesn't have a lender of last resort , unlike Wall Street in 2008, but David Seamer, CEO of Wave Financial, told me a new regulatory reform could bring FTX out of the ashes. according to:
“The industry needs to mature before it can recover, both through government policy on how to engage with cryptocurrencies and through more sophisticated asset managers handling large volumes of asset activity.”
What do you think is the most likely outcome of an FTX crash?
A) Significant and stringent regulation of cryptography in the United States and around the world
b) The market recovers and eventually returns to normal.
Let me know on Twitter ( @philrosen ) or email ( prosen@insider.com ).
In other news:
2. US stock futures were released on Monday morning as voting member Christopher Waller said the Fed "isn't picking up" inflation and that the point of the final rate hike could be "far off." Here are the latest market moves.
3. Benefit Covered: SMC Corp., Tyson Foods Inc. And others, all reports.
4. America's Largest Fund Manager Explains Why He's Telling Clients Going Into Stocks Is The Right Move Now. Renowned expert Peter Malluk explains how he advises investing in stocks and bonds in an uncertain environment and why investing in real estate may not be practical.
5. Stocks may rise in 2023, but that doesn't mean inflation won't stay the same. Bank of America analysts expect rates to be higher next year and the Fed to hike rates if the recession doesn't start.
6. Former PIMCO chief economist said the Fed squeezed the housing market and destroyed widespread speculation. He pointed to doubling of lending rates and problems with cryptocurrencies as signs that the Fed has tightened monetary policy enough. “I think we are here.
7. The latest CPI report has changed the stock market game and there could be a 25% rally in the next 50 days. This is a report from Tom Lee of Fundstrat. He believes the good inflation data will be repeated next month, which suggests the Fed has a better chance of a soft landing.
8. Goldman Sachs shares an alternative trading strategy with 18 years of experience maximizing investors' portfolio returns. As consumer price forecasts and recession fears mount, the firm notes which rates could challenge the volatile macroeconomic environment. See how analysts explained the strategy here.
9. A Fidelity International fund manager explains why he invests without traditional valuation metrics. This portfolio manager manages a small-cap international that is crushing the market and explains why it continues to grow despite the looming recession. This year, a group of companies shared the details of how it helped them beat 91% of their competitors.
10. El Salvador did not have Bitcoin on FTX. At least the Binance CEO tweeted: “Received a message with President Naib a few minutes ago. He said: “We have no bitcoin on FTX and have never been connected. Thanks God!"
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Produced by Phil Rosen in New York. Comment or advice? Tweet @philrosen or email prosen@insider.com
Curated by Max Adams ( @maxradams ) in New York and Hallam Bullock ( @hallam_bullock ) in London .
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