Mostly Software

  • Wednesday

    • Some random research today along with some review of basics.
    • Hidden Road (https://hiddenroad.com/) offers financial services: prime brokerage, trading, loans/financing options, clearing, fx, more. They do fiat but mostly crypto.
    • Remember recourse loans. Say the lender collects ALL the collateral after the borrower defaults, but the collateral is now worth less than the loan value. Recourse means that the lender can go after the individual for the remainder. They’re personally liable to make up the remainder (wages, other accounts, home, whatever).
      • Nonrecourse just means that only the collateral is up for claim.
      • Recourse loans have lower rates. So lenders want recourse for risky individuals, whereas they’re fine with non-recourse for good borrowers bc they get more interest.
    • Marc Rich: https://en.wikipedia.org/wiki/Marc_Rich. Alleged criminal, tax evasion, wire fraud, racketeering. Was a trader, pm, etc.
    • SharesPost was a PE marketplace. They were acquired by Forge.
    • SecondMarket was a PE marketplace as well. They were acquired by NASDAQ, becoming NASDAQ Private Markets (NPM). SharesPost was in the original deal, but ultimately it became just NASDAQ.
    • Bloomberg Wealth with David Rubenstein.
    • Remember the simple differences of debt financing vs equity financing. Say your company needs money to grow. Debt = taking out a loan. Equity = standard investor round, giving stock for money.
    • LIBOR = London Interbank Offered Rate. It is an interest rate which (international) banks use to lend to each other (which is what the FED uses to increase/decrease rates, since it trickles to the rest of the economy). It is the benchmark for interest rates globally.
      • Until being phased out in 2021 for the better SOFR = Secured Overnight Financing Rate.
      • SOFR is at 2.27% today. There have been step jumps corresponding to the fed hikes this year so far to manage inflation.
    • Risk Weighted Assets = RWAs. Total assets, but proportional to risk. For example: a US treasury bond is less risky than a credit card.
    • Basel III is an accord to prevent insolvency; regulations for stuff like reserve capital for banks internationally. Basel IV will come out in 2023.
      • Tier 1 Capital is the primary reserves, used for business activities and clients. Usually it’s cash and equity. It’s the most liquid. CET1 (Common Equity Tier 1) is the primary portion of Tier 1.
      • Tier 2 Capital is basically the misc bucket of last reserves. It could be many different types of instruments, but all less liquid and less reliable.
      • All of Tier 1+2 reserves must be >=10.5% of all RWAs.
    • Remember equity/stock warrants are basically just options. Few differences:
      • They’re issued by the company. Not just traded on a secondary market.
      • Usually used for the company to raise money, not give away existing equity.
      • When a warrant is exercised, new stock is created (which dilutes the existing).
      • They’re longer term.
    • NAV financing. Net Asset Value.
      • It’s when you borrow against your own portfolio, basically.
      • Say I run a decent-sized PE fund. Pledge that as collateral to take out a loan that I put back into the fund?
      • Can be used to distribute liquidity back to LPs right away, invest in new opportunities, etc.
    • Arch Labs (https://archlabs.com/) is an admin/manager for PE. Helping with investments, connecting with the back office teams, assisting taxes, whatever.
    • Remember that the ability to unstake eth will not be ready until a release after the merge. This is the Shanghai upgrade, and could be a year after 2.0. You can still unstake through all the liquid staking services like lido. They give you a synthetic that you can convert back to the main asset (effectively withdrawing).
    • Tokenized stock revisit.
      • Remember you get all the benefits of blockchain/crypto/web3 with the backing of fiat assets: can trade 24/7, FEX, move around at will, without coordinating with other humans, fractionalize to whatever resolution you want, etc.
      • Caveat – different tickers on different exchanges (although could happen with fiat too).
      • You get tons of infrastructure for free: voting via DAOs instead of shareholder/board meetings, dividends via streaming protocols instead of fiat payment rails, more.
      • Existing marketplaces: FTX and Mirror.
      • Sounds like Templum (https://www.templuminc.com/) is looking to provide something like marketplace-as-a-service and they support tokenized stocks as well.
    • Activated business cards for Mahlstedt LLC and submitted (1) membership authorizations to manage the accounts (2) substitute w-9 for business signature card. Since I’m platinum honors tier, there will be no monthly fees. Activated online banking and set up automatic payments.
    • This round of student loan relief will cost govt ~300b.