Episode 12

LESSONS YOU CAN LEARN FROM THE FTX COLLAPSE

Episode Description

In episode #12 of The Big Bo $how, Big Bo (a.k.a. Jason Blumstein, CFA®) dives into the recent collapse of FTX, the cryptocurrency exchange, and provides lessons you can learn from yet another financial tragedy.  Additional topics discussed:

- Why envy can be the root of all evil

- The parallels of American fútbol to financial literacy

- Big Bo's Mount Rushmore of his favorite holiday foods

Hope you enjoy the $how!

Episode 12 Key Takeaways:

• 00:00 The numbers behind the crypto craze — and how digging into the data can help investors avoid FOMO-induced mistakes. 

• 05:23 What is the central investing philosophy at Julius Wealth Advisors? 

• 08:03 The importance of taking a critical look at celebrity-endorsed investment trends.

• 11:50 The concerning parallels between soccer and investment literacy for American children. 

• 20:12 Big Bo’s Mount Rushmore of holiday foods.

Episode Transcript

Welcome to episode 12 of The Big Bo $how, the final episode of 2022. We have a great episode coming up for you folks, what we're going to have a trifecta of fun, we're gonna go into a segment about finance, about football, and about food. And make sure you stick around to the end to find out what the latkes have to do with Abraham Lincoln. Sit back, relax, and enjoy episode 12 of The Big Bo $how.

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  All right, so let's get into the first segment of The Big Bo $how wrapping up 2022. And I want to talk about a topic that is current in the marketplace. In the world of finance, or seemingly the world of finance, I'm not sure if it's really finance. But this is the current saga with the FTX collapse. Now, if everybody knows that FTX recently had what's called a run on the bank, quote unquote, which ended up taking the valuation of the company through what people thought was worth $32 billion down to bankruptcy in a matter of weeks. So how can this happen? And not only how can this happen? More importantly, what are the lessons that you can learn from this? Now the first lesson that I think we all can learn, and that I try to talk to people about. I was also reading an article recently from Charlie Munger, Warren Buffett's right hand man, and the article points to the fact that people think that greed is the root of all evil. But he pointed out that envy is the root of all evil. And I thought this dovetail probably properly into what happened with the FTX collapse. And in my opinion, the crypto world as a whole. Now, the past few years, people have been going gaga, if you will, about the crypto space. And in my opinion, a lot of this had to do more with which I talked about on episode two, of fear of missing out not necessarily because anyone did any sort of due diligence on the subject, but mainly because they're envious of stories that we hear from people that purchased Bitcoin or different cryptocurrencies at record low levels. And now, cryptocurrency and Bitcoin were exploding to the upside. So this caused a lot of envy. And when you're trying to create sustainable wealth, as monger pointed out, envy can be the root of all evil, and it can lead you to make mistakes, I want to point something out. So according to that, I was reading a Fortune magazine article, and they did some due diligence by looking at the average price that most people paid for Bitcoin. And that average price that most people paid for Bitcoin was $47,500 47,500. Now, from my experience in this industry, everyone typically always tells you about their successes. Oh, yeah, I bought crypto at $2,000, $3,000, $4,000. False. The data speaks for itself. Most people bought it at around 47,500 And it's now currently trading around 17,000. So that tells me the average purchase price of most people in this country where most people around the world are down 64% So 64%. And those are just the numbers, the numbers, not from your friend telling you what they did, or your uncle, your mom or whomever, these are the numbers and my, I always preach to the people that numbers don't lie, people do. So when everyone's envious of something going to the moon, just sit back, relax and do some due diligence. 

  And this also goes into the second lesson that you can learn from this is that you need to stay within your circle of competence, or a philosophy that you understand teaming up with someone the philosophy that you understand, or if you have your own philosophy, and you understand it, stick with it. So getting back my philosophy, my central philosophy and the philosophy that I distilled to people that our clients are Julius Wealth Advisors is that we want to focus on owning the most profitable businesses and let those profitable businesses do the work for us a profitable business. And an asset typically kicks off cash flow, that means they have revenue, they have expenses, but at the end of the day, they make cash flow. And there's tons of people telling me oh, you got to get into crypto Bitcoin, oh, it's the best thing since sliced bread and my due diligence, going back to my philosophy, and I'm not trying to pat myself on the chest, I'm just trying to teach people about how you have to figure out your philosophy and how that works. But my philosophy says, hey, does this kickoff a cash flow, that's the first thing I look at that this business does is as a kickoff of cash flow, because it kicks off a cash flow when there's a way to value it. Because I can essentially buy that asset and collect that cash flow, when at some point, I'll get a return of my investment and then on my investment, step number one for Bitcoin and crypto was that it did not, it does not kick off a cash flow. So there the due diligence ends. There's no point in looking any further, in my opinion, because this philosophy, which is, again, not my philosophy that I created, it's something that I've studied since age 10. And this is the way Warren Beth Buffett and Charlie Munger, also look at investments, does it kick off a cash flow? Does it have a profitable entity? answer no, move on, and then looping it back to NV so other people are making money on it in the short term, and even in the long term? Who cares? Because that's not in my circle of competence. And I'm not going to be envious of them. I'm just going to know what I know. Keep it simple, what I've which I've always talked about also in the past, and harness the philosophy that I am comfortable with, not that everyone is going bananas over. 

  And this also brings me to something about I would say, you know this industry as a whole. And something that I'm very passionate about with this industry where I have my core values, integrity, knowledge and passion and I’ll hone in on that second one, the knowledge piece. So there are stories out there of top ranked venture capitalist firms that gave FTX tons of money, a lot of money. And they thought it was actually comical how the head of that company was playing video games during our due diligence calls. And when I hear these things, it kind of just reminds me of like, the blind leading the blind people following the hurt. So, you know, you have to understand what you're, what you're investing in, you have to understand who you're investing in. And you have to understand that envy can be the root of all evil, to understand your philosophy, a philosophy that you can believe in that you can understand that you can stick with, block out the noise and understand what you're getting yourself into. And then maybe ask yourself other questions like Hey, Tom Brady, Tom Brady's out there, promoting FTX and crypto and Giselle and Steph Curry, with all due respect to Tom Brady, which I'm a huge fan of. If I wanted someone to win me a Super Bowl. I would listen to Tom Brady. If I want someone to give me guidance on an investment. Sorry, Tom. I don't think that you. Same thing with Steph Curry. I'm not a huge basketball player. I've always been more like a Shaquille O'Neal style when I was younger. But if I wanted someone to teach my child how to choose to shoot a jump shot, or my daughter who's getting into basketball how to shoot a jump shot out of Steph Curry. So again, understand people's circles of competence. And I'm not saying Steph Curry and Tom Brady, like, you don't know anything about investing, but it's probably not the first person I would ask about investing in good investments. So, again, don't get envious and enamored by the shiny object of celebrities that are marketing things. At the end of the day, I'll bring it back to you have to focus on your philosophy and what you can believe in as a kickoff of cash flow. Is it a business that has profitability? So let's take a quick break, and then we'll come back with the second segment about football or maybe it's football.

  All right, welcome back. Let's talk about the second topic of football as we wrap up the final show of 2020 to The Big Bo $how brought to you by Julius Wealth Advisors. Reach out if you have any questions or comments info@juliuswealth.com or visit our website, www.julius wealth advisors.com. So let's talk about football. I'm actually going to switch it up and talk about futbol. As we are in a World Cup season. The World Cup is here yesterday, Argentina advanced to the finals, we'll see what happens next. And I want to talk about this because I think kind of related parallels to the world of finance is the US which made it out of the first round or the group round. We've never had a powerhouse team in soccer. Men's Soccer has never been a powerhouse sport in our country. And it got me thinking about why. Why is this? I've had these conversations with a few people like, why I mean, listen, I've been alive for 40 years. And the US men's soccer team have never ever thought they had a chance of winning anything, whether it be the World Cup, the Olympics, he's just like, Okay, great. We're there. We're winning. It's kind of how I feel about my Miami Dolphins were there, who cares? Big deal, go at it, we're not going to win. So I kind of wanted to understand this better. And I talked to some people about this. What I've summarized is that I feel that it is because of the fact that we don't get our children interested in the sport and not saying this is a good thing or bad thing. I'm personally not interested in soccer. But I also reconcile that back to my main point of that, when I was younger, we had a lot of other sports to play, whether it be football, baseball, or even basketball. I wasn't a big basketball player. Like I said earlier, I just mainly use my size and it may be a baby hook or a fadeaway jumper in the post. But besides that, not very good. So to me, this is one of the main reasons why we're not very good in the US in soccer relative to the rest of the world because in the US, we have so many other sports to choose from basketball, pretty easy to learn, get hoop in front of your house, go to the local park, there's you typically basketball hoops, play some basketball practice, baseball, same thing used to be America's pastime, that's kind of changing football, tough sport. Not everyone can play it. But people are definitely interested in it. They played in the playgrounds today. And know that's the biggest sport my son plays at school. So you already have three sports for people to choose from for kids to choose from. 

  So when you're talking about soccer, it's like number four on the list. Will this ever change in our country? I don't know if I would probably say no. And the reason why I would probably say no is because of this. I never really got into soccer, because it's boring, frankly. And this is also validated. As I was watching the World Cup with my son, my son got into the World Cup. All the kids in the school were talking about the World Cup. And we're sitting there or watching one of the games, and he's all into what he's all into, and wants me to watch it within 10 minutes of the game, because 80% of soccer games are played in the middle of the field. From what I've witnessed, I don't I don't have any hard data on it, it's just my observations, he turns to me after 10 minutes and says that this is boring, you can change the channel. So that, to me, is the number one reason why I don't think soccer will ever be powerful in this country. It's the fourth choice for our children to play, and frankly, is boring. And a lot of people might be upset with that comment. But that's just how I feel it's fairly boring. 

  Now, let's dovetail this into the world of finance and personal finance, as everyone knows, or if there's a first time you're listening to The Big Bo $how. I'm very passionate about teaching financial literacy to kids. This got me thinking about how we live in the wealthiest country in the world. But the people aren't wealthy. I have talked about statistics. In the past, most people in this country lived paycheck to paycheck, only 9% of the adults in this country have a net worth over a million dollars. And that number really has an increase, that percentage really hasn't increased in real terms post inflation, for 20 plus years. So thinking about soccer, finance and financial literacy. To me, the same issue is that we don't get our children interested in it at a young age. If we get our children interested in it at a young age, then it just becomes commonplace in our society. And kids get interested in it, they want to learn about it. And then once they become adults, they already have this knowledge foundation for them to thrive. This is exactly what happened to me. I started learning about it when I was six, seven years old, my grandfather got me into it and got my first investment when I was 10. And I was able to build this knowledge from a young age, when most adults, when I meet them and read about it, most adults first start learning about personal finances after they start getting their first job as an adult in their 20s. And then they make some mistakes in their 20s. They learn by mistake, and wake up in their 30s. Maybe they want to take it seriously then sometimes they wake up in their 40s. But if we start to learn about this at a young age, get kids excited about it. Personal Finance does not have to be like soccer in this country. Because the ramifications of our children not being into soccer, not that big of a deal for our country and our children, the ramifications of our children not understanding personal finances. In my opinion. That's huge. We cannot go one day without understanding money and finances. Whether you go to the store and you buy milk or you buy eggs, or there's substitute products do you need to buy eggs that day? Do you need to buy milk? Can you buy a different type of milk? Again, these are simple concepts that substitute products. Oh, the cost of meat is high. Do you need to buy meat or can you buy chicken or can you buy fish? Again, you can't go one day in our country. I would argue any country without dealing with money. Let's make personal finance, not like soccer. Maybe I'll create a shirt like that and say personal finance is not like soccer. Let's teach our kids the right way. So again, let me take a quick break. Come back and let's wrap up the third and final segment about food on episode 12 of The Big Bo $how final episode of 2022. 

  All right, welcome back to the final segment of a final episode of 2022. For The Big Bo $how. Obviously, we're sitting here in the holiday season, and I thought I would do something fun to wrap up the first season and the holiday season with The Big Bo $how. I thought we'd go into my personal Mount Rushmore of holiday foods, all the holidays that go on throughout the year, my Mount Rushmore of holiday foods. 

  So without further ado, here we go on Mount Rushmore, don't forget, folks, we got George Washington, Thomas Jefferson, Theodore Roosevelt, and Abraham Lincoln. So we'll pair each of my favorite holiday foods, with each one of these corresponding former presidents that are currently on Mount Rushmore. So the first one is George Washington, and my George Washington of holiday foods, and my favorite holiday foods is Thanksgiving turkey. Now why is that? Well, for me, whenever I hear about George Washington, I think of tradition, I think of America as tradition. First President of the United States of America, you ask anybody, any child, even ask me I'm not into presidents, as we talked about before they are more into math and science. But even he asked a fool like me who the first President of the United States was, George Washington. Turkey is similar to that, in the sense that you ask anybody what you eat on Thanksgiving. They're gonna say Turkey. Now this brings up a whole other conversation is Turkey, the right food to be eaten, but it's very traditional. It's very Americana. So that's why I'm going with Turkey, as my George Washington of holiday foods. Now let's move on to Thomas Jefferson, one of the founding fathers of our country, as well. And Thomas Jefferson, a very hearty individual. When we're founding this country, a lot of tears, a lot of strength were needed in battles. And to create this country when I think about that, earthiness, hearty strain, yet tears, I think about partially dipping partially in saltwater. During the holiday of Passover. I'm going to go with parsley, an earthy, hearty food. I'm not a big fan of eating partially, but you need that earthiness that strength. And you need to dip it into the saltwater to remind us of the tears and the strength that was needed during a time of Passover getting out of Egypt for the Jewish people. And Thomas Jefferson the strength that was needed to found our country. So that's the Thomas Jefferson of the mountain Rushmore of foods for the holidays. 

  Next we'll go to Theodore Roosevelt. Now when I think of a Roosevelt and probably most people think of a Roosevelt you don't think of Theodore or Teddy, if you will you think of FDR. So thinking about Theodore Roosevelt, with no disrespect to him, I kind of think to myself, like, why did he make it to Mount Rushmore, you have people who know who Thomas Jefferson is, George Washington, Abraham Lincoln. But Theodore Roosevelt, not the first Roosevelt I think about so I parallel this with one of my favorite holiday foods that probably no one else would think about would be a great holiday food. And that's lasagna. So where does lasagna come into the holiday food? You might be asking exactly what I was thinking about when I thought about Theodore Roosevelt on Mount Rushmore, but lasagna for me has two great memories. Number one, my wife always makes lasagna every single year on New Year's New Year's holiday celebrating the new year. We eat meat lasagna every single new year as a tradition in my family. And also, when I was younger, I used to go over my friend's house for Thanksgiving meals when I was in high school, and his mother used to make the best lasagna you'll probably ever tasted like outside of my wife's of course, but again, who would ever think you'd have lasagna on Thanksgiving? So that's why, again, Theodore Roosevelt. Why is he on Mount Rushmore lasagna? Why is that on your holiday table? So lasagna is my Mount Rushmore, Theodore Roosevelt, of holiday foods. And then the final piece of Route mountain Rushmore. The last person that we haven't named yet is Abraham Lincoln. So when I think of Abraham Lincoln, I think of swagger, someone that was brave enough to fight and win the Civil War, Abraham Lincoln also signed the Emancipation Proclamation, which many people thought was a miracle at the time that he can get this done. So when I think of my holiday food that is similar to Abraham Lincoln, I think of latkes, Hanukkah, potato latkes because it was a miracle. Well, why do we eat latkes? Because it was a miracle. The oil lasted eight nights, the oil lasted eight nights that allowed us to have Eight Crazy Nights of Hanukkah. So that was a miracle. And then you also think about how latkes have swagger, they're salty, eaten with sour cream, you can eat them with applesauce. I don't know anyone that doesn't like it a lot. So to summarize it, we have George Washington as a Thanksgiving turkey, partially as Thomas Jefferson lasagna, as Theodore Roosevelt. And potato lock is like Abraham Lincoln to wrap up my mountain Rushmore of holiday foods.

  So with all this said, I wish everybody a happy holiday season. Happy New Year. Looking forward to bigger and better things in 2023. With Julius Wealth Advisors, and The Big Bo $how many questions comments, feel free to always reach out info@juliuswealth.com juliuswealthadvisors.com is the website as well. Jason Blumstein, CEO and founder of Julius Wealth Advisors, and The Big Bo $how. Happy holidays in 2023. Don't forget to always continue to live a life of integrity, a life of knowledge, and always live a life that you're passionate about. Until 2023. All the best thank you for tuning into The Big Bo $how. 

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