This is our second week of the newsletter to be interested in everything that is going on in and around us at a broad and bare minimum with some content that will ensure we invoke curiosity and interest.
As we have mentioned in our first letter, we will talk a lot about Commerce, Commodities & Shipping, Finance & Crypto as we are very interested in learning and interpreting what sells, what ships and what finances the world transactions. Once our research becomes extensive, we will break the newsletters into each specific areas of focus.
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Around us:
FTX - A contagion that has spread wild in the crypto industry. There are some summaries of what happened and what will transpire in some great threads that we have linked here in hyperlinks.
Short Summary of the issues:
Centralized Exchange went bust as it was unable to come up with the capital needed for customer withdrawals.
FTX had built its own token FTT that saw a bank run and the collapse of their balance sheet in the last two weeks.
Relationship between related companies murky and no adequate corporate controls.
FTX filed for bankruptcy last week and second order effects of an exchange going down is still to be seen.
How insane and far reaching is this? A teacher in Ontario, Canada has his pension fund impacted as Ontario Teachers Pension Fund was one of the investors. Sequoia Capital, one of the best venture firms in the world backed FTX and wrote down the entire investment to zero. Temasek (A Singapore state run investment company), wrote down $275Mn to zero. The impact is wide and deep.
Our thoughts: Too many people placed wrong bets, Too many companies were intertwined into the FTX umbrella. Alameda Research, a market maker, a hedge fund, a FTX company was behind a lot behind the collapse due to wrong doings of the past (3AC, LUNA etc second order effects). A million customers ( mostly retail) being impacted may be one of the biggest scams since Madoff and Enron.
I just read FTX's Chapter 11 First Day Affidavit. In it, the appointed restructuring CEO John Jay Ray III, who oversaw Enron's bankruptcy proceedings, calls FTX's case the worst of his career. Its contents are shocking. It was shocking to read the newly appointed CEO words:
“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”
[THESE ARE NOT CONCRETE NUMBERS]
Liabilities: -8.8bn
Liquid assets: 900m
Less liquid: 2.037bn
Illiquid: 3.2bn
liquid hole: -7.9bn
illiquid hole: -2.66bn
Republicans take control of the House of Representatives for the mid term.
As of Nov 16th,
Our thoughts: Power is down right split. We expected a red wave which like any common man would have expected to only realize that the country is very much in the middle where there is disapproval of current government and leadership, but there is hesitancy to the red wave shift to the right completely. Senate continues to be controlled by the Democrats. De Santis winning in Dade county may offer a new leader in the republican party. A hardcore blue region flipping completely suggests a new era. Democratic win in the Pennsylvania suggests we are not yet there for the red wave. We probably need new candidates running for 2024 on both sides.
TRUMP: "In order to make America great and glorious again, I am tonight announcing my candidacy for President of the United States." Yes. He is back officially on to the race to 2024.
Food for thought: US Constitution. Amendment 14. Section 3.
4. RIF: Mass layoffs were in this week and last week.
Current List of Mass Layoffs: 1. Amazon: Laying of 10,000+ this week 2. Twitter: 50% of workforce 3. Snapchat: 20% of workforce 4. Meta: 13% of workforce 5. Credit Suisse: 5% of workforce 6. Apple: Hiring freeze 7. Disney: Hiring freeze.
Our thoughts: It is time to build. Get back to keeping your heads down and running hard. It is a time like none other.
Twitter: God knows what is up with everything there. Twitter just alerted employees yesterday that effective immediately, all office buildings are temporarily closed and badge access is suspended. No details given as to why.
Our thoughts: Twitter is a great platform. A PE style acquisition and force fitting a new work culture to drive greater productivity and avoid a failure is what is driving Elon to make such hard changes. Change is always hard while Failure is harder.
Interesting Info:
We get caught up in a lot of things. Very often we don’t zoom out or zoom in. Our significance in the world can only be described in no better than this video of 1977.
Special Day of this week:
ON THIS DAY: On this day November 14th in 1966, Muhammad Ali knocked out Cleveland Williams. One of the best sports photos of all time, by the great Neil Leifer
Why is this even important? On the evening of November 29, 1964, 2 years before the fight, Williams was shot in the stomach by a highway patrolman, for supposedly resisting arrest. The .357 magnum bullet moved across his intestines and lodged in his right hip, doing immense damage to his colon and right kidney. He underwent four operations over the next 7 months which resulted in the eventual removal of his right kidney and a loss of 60 pounds, which he later recovered by doing weight-lifting. Williams later said that "I died three times on that operating table." The bullet left vestigial damage: a partial paralysis of some hip muscles and a severely weakened right hip joint. Despite this incident, Williams returned to the ring in 1966 and won four consecutive fights before facing Ali.
Commerce:
“Peace, commerce, and honest friendship with all nations...entangling alliances with none” ― Thomas Jefferson
Jimmy Donaldson (Mr.beast) - A man who connected commerce and content in an incredible way using youtube.
A new wave of commerce that is centered around creators and their community and ecosystems are being formed and some have touched scale. A great example is Mr. Beast. Here is his youtube channel growth over the years.
2023 - 13,265,311,414
2022 - 8,184,185,544
2021 - 3,324,451,660
2020 - 2,099,879,911
2019 - 464,282,517
2018 - 122,441,813
2017 - 5,482,596
2016 - 202,000
2015 - 125,634
2014 - 41,148
2013 - 7,000
2012 - 15,000
July 28th: Today over a million people celebrated 100,000,000 subscribers with me
Mr Beast has hit 50M followers on Tiktok & 16M on Twitter. At the age of 24, he has around 111M followers.
PewDiePie has been YouTube's most subscribed creator since 2013. The fact that MrBeast has replaced him at the top signals the end of an era.
For MrBeast, this is the fruition of consistently understanding what YouTube's algorithm wants. From his first million subscribers till now, it didn't take him that much time.
MrBeast's success is calculated, and it is a lesson for aspiring creators.
MrBeast channel has over 18.6 billion views
Over the years, Donaldson has uploaded 730 videos on his channel. The channel now has a whopping 18.6 billion views. His videos are liked 4.2 million times on average. He has four other channels, namely MrBeast Gaming, Beast Philanthropy, Beast Reacts, and MrBeast 2. They amount to another 77 million subscribers.According to Social Blade, he makes $3 million/month from YouTube ads alone.
MrBeast was YouTube's highest-earning creator in 2021
MrBeast was YouTube's highest-earning creator in 2021 with approximately $54 million. According to Axios, he has been trying to raise $150 million for his business at a roughly $1.5 billion valuation.
Source: Link on the header attached.
Most recent acts suggest he declined a $1Bn acquisition offer for his Youtube channel. The most important thing about Mr Beast that none of us in commerce understand is that everything is built around content. He makes the best videos. Period. He wants to make the best content and is laser focused on the content, story and the product that is built for months and months on the story and the product before it is shot, edited and goes live. The obsession to content is stunning and that obsession has a pull effect on everything else he is doing on commerce. The modern commerce is here.
At 13 years of age, he said I am going to be a youtuber. I am going to die trying. I am going to figure it out. I am going to make the best video possible. Nobody in and around him in 100 or 200 miles was a creator on youtube. People thought he was crazy. He was 13 and hardly earnt $100 a month at 17 but ten years into it, he still loves making videos.
The main goal is to make the best video possible and not be the best creator on youtube. Our thoughts: Mr Beast could become at the least a $100Bn+ brand and there is every reason to say they could be 10X more.
“The superior man understands what is right; the inferior man understands what will sell.” ― Confucius
“I met with some of the biggest banks in the world who told me they don’t have any liquidity” because of rising interest rates, Ben Miller CEO of Fundrise said in his podcast. “This is going to play out. The question is, how bad will it be?”
Is the world order changing? Has the world changed in the past? Did we move from the Roman Era to Dutch Era to British Era to the land of opportunities?
Changes in world order are visible when governance increases, ease of doing business goes down, innovation goes down, productivity is flat or is not growing and governments or power centers print a lot of money to finance ambitions mostly in defense, military and printing money unabated beyond controls that are equivalent of crossing the rubicon.
Market Data & Flash updates that could impact Supply Chains:
Equity Markets: Dow Jones Industrial Average: 33,745 ; Nasdaq: 11,146 ; S&P: 3,965 Food for thought: Overall the markets have been flat over the last week. Nasdaq continues to drop as compared to S&P and DJIA. Technology bearish continues to be the trend with interest rates going up and cost of capital going up with growth being harder and more expensive to finance.
Our thoughts: Inflation seems to be cooling off atleast in the shipping industry. What costed $3000 per container had gone to $20,000 per container and seems to be back below $3000 per container. Flipside, the consumer sentiment is not something that is showing any slowdown in spending. What is visible in consumer spending across, sectors including
Our thoughts: There seems to be a glut of inventory due to supply that was planned in excess due to supply chain constraints in LA and other ports. All the squeeze seems to have cooled down or is trending to go down per shipping that is an indicator for the future. Where can you get an yield of over 100% unless the industry is going to go through a massive revenue and profits drop off which the overall market sentiment is in the maritime industry.
The Ethereum dashboard is attached in the source. The network continues to run amidst all adversities. Can a network or a protocol as such fail is a question that we need to wait and watch.
More the number of use cases that enter into the protocol, the lesser the chances of failure. A complete flywheel effect can push the network far and beyond unless the community of users and use cases dwindle down.
Ethereum progress through converting from Proof of Work to Proof of Stake has been impressive that it went live without any major hiccups however the cloud over the entire nascent industry is a like the 2000s when the internet was not understood and a lot of companies went bust.
Our thoughts: I was getting to select my engineering in 1998 and the lack of understanding of computers, programming & internet at that suggested me go down the track of Mechanical Engineering considering it to be an evergreen field. Y2K would end the internet industry then and we could not see far and beyond Y2K. Fast forward, today we cannot see ourselves keeping our smartphones down. So where will the blockchain & crypto industry go next?
The Ethereum transaction fees does not seem any absurd now than before. The charts below is an interesting view of the transaction fees.
Shipping: What’s happening in Bulk?
One of the dry bulk analyst/trader: The declining volatility in the #Capesize market is not a great sign: Suggests we are finally sliding into proper oversupply. Time to close the books and return in February?
Most Chinese steel producers have seen their profit margins on sales shrink significantly since mid-Oct, with the profitability rate among steel mills nationwide hitting another new low for the year on Nov 4.
China's October import volumes fell m/m for most major commodities.
Our Thoughts: We really don’t know how to read the bulk markets. Bulk industry has been sluggish but we have seen certain commodities where the prices in shipping bulk have stayed flat and few up north where there were previously contracted time charters. Food for thought: Long term time charters good for bad?
The Vault: We are currently live with “The Vault”. Feel free to download it. We would love to get your feedback to build the Future of Ownership.
The Vault is powered by a multi-party computation (MPC) based web 3.0 (for lack of better term) wallet that will bring ownership of assets and features that can be used cross border for Global Trade.
A Letter of Credit, also in its short form - LC, is an undertaking by a bank, called the Issuing Bank - which is a bank appointed by a buyer to a transaction to issue an LC to the benefit of Beneficiary, which is the seller, to make payment to the benefit of the Beneficiary mentioned in the LC upon fulfillment of all the terms and condition stipulated in the LC.
Such undertaking is irrevocable by default, unless stated otherwise. This means, as long as you are confident that you can fulfill all the terms and conditions stated in the LC, you can be pretty much assured of receiving you payment when it's due.
How Does a Letter of Credit Work?
Let’s say your business receives a big order from an overseas company. There are plenty of factors to consider, such as getting the order shipped and making sure it arrives properly and on time. On top of all of that, you also need to get paid—and you’re likely going to want a guarantee that payment will be made, especially since you won’t have much recourse to get your money if your buyer is on the other side of the ocean.
Here’s where a letter of credit is your best ally. A bank, typically located in the buyer’s country, will issue a letter of credit that spells out the buyer’s obligation to the seller. This letter specifies the amount of payment due to the seller, as well as the point in the transaction when the seller will pay for the goods. The party issuing the letter of credit (the bank) will do all of the legwork to make sure your customer has the funds to pay for what they bought and will facilitate the payment process along the way.
A letter of credit functions similarly to an escrow account, where a third party coordinates and holds onto the money needed to complete a transaction on behalf of the other two parties in a deal. This letter certifies that the buyer has good credit (hence the name) and can afford to pay for what they have purchased.
Advancements of Letters of Credit
How did it evolve?
Letters of credit soon became the go-to instrument in international trade, because they solved the problem of trust between global traders, time zones, distances, and non-uniformity of laws and regulations across jurisdictions.
During the late 19th century and up until the early 20th century, circular letters of credit that allowed withdrawal of money from various banks around the world were the name of the game among global travelers.
Letters of credit played the role that travelers’ checks and credit cards played subsequently, and that digital wallets play today.
Since the first version of the UCP – known as ‘UCP 82’ – was printed in 1933, it has been revised in 1951, 1962, 1974, 1983, and 1993. The latest version is called ‘UCP 600’, and it was amended in 2007.
The objective of these revisions is to provide a clearer common language, and to adapt to changes in different industries, in order to unify the interpretation and the application of documentary credits.
