Monthly Newsletter: May 2022

👋 Hey there, welcome to the WalletBurst monthly newsletter for the month of May 2022.

Around the web

💣 Terra (LUNA) crypto implosion. May was a painful month not just across the stock market, but even moreso in crypto markets. In mid-May, the algorithmic stablecoin Terra USD (UST) began to lose its 1:1 peg to the US dollar and in less than a week it completely disintegrated along with its backing token Terra (LUNA). This was an unprecedented blowup in the crypto space as UST and LUNA were both at one point in the top 10 coins by market cap, so their blowup spread across the broader crypto market. But why did Terra and UST implode given that the project had the endorsement of so many credible players in crypto? At the core of Terra’s implosion was that the entire project simply wasn’t solvent, and likely wasn’t for a long time before the crash. Kevin Zhou, former head of trading at Kraken, does a great job of explaining what went wrong in his Terra post-mortem podcast with The Defiant.

Kevin also shares some advice from Stanley Drukenmiller on where to invest in times of high inflation but raising interest rates: buy boring assets (businesses) with good cash flows and a lot of pricing power. This is because these businesses still have relatively low P/E ratios with low expectations of growth and are able to pass on price inflation to consumers.

🧐 How to spot a Ponzi scheme. I found this tweet about how to qualify something as NOT a Ponzi scheme to be especially relevant amidst the recent Terra blowup:

📉 Declining personal savings rate. After soaring to massive all time highs during the pandemic, the personal savings rate as measured by the Federal Reserve has fallen to the lowest level since 2008. Michael Burry, a storied investor who is famous for predicting the subprime mortgage crisis and subequently profitting from it, shared his concern about how this could point to a looming recession on Twitter:

[Tweet deleted]

🏠 Housing market. I’ve been sharing interesting data about the US housing market in the newsletter, and this bit came across my feed recently. The University of Michigan maintains a consumer survey about the buying conditions in the housing market and in April 2022, consumer sentiment reached the lowest point since 1982. Check out the chart below:

💵 You can make money doing almost anything. Over on Twitter, Jakob Greenfeld has a great running thread of fascinating ways people are making money both online and in the real world. Some of my favorite examples include a guy running a LEGO alternative asset investing community and a group of photographers in Bali who take high-quality, unsolicited photos of surfers and then catch the surfers on the beach and sell them their photos.

New on WalletBurst.com

Nothing new this month...

End Note

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Have a great day,

Andrew ✌️