GM. This is the Milk Road. A newsletter so full of sauce, you might as well call us Ragu.
It’s July 1st - which means we are HALFWAY through 2022.
So I present to you…The Milk Road Halftime Show.
Here are the 3 biggest takeaways from 2022 so far:
TAKEAWAY #1 - INFLATION GOING UP (LIKE THE GRANDPA IN THE MOVIE 'UP')
Inflation is the highest it’s been in 40 years.
The U.S government first claimed inflation was “transitory” - which sounds like one of those weasel words someone uses when they cheat on their spouse.
Turns out, it was NOT transitory. Inflation is real.
We hit 8.6% in May (the highest in 40 years).
Sidebar - do you know how they actually keep track of inflation? Like literally, where does the number 8.6% come from?
WHY INFLATION IS SUCH A CONTROVERSIAL NUMBER
The government has people called "recorders" whose job is to collect data on prices each month.
They literally walk into stores in various cities (LA, NYC, Chicago, etc..) and check prices on shelves and write them down. Or they call people and ask them over the phone how much they're paying for stuff.
FWIW - this is the same method I used when I ran for “Class President” in 8th grade (Finished 4th. Close race tho)
They track prices of 95,000 goods across 8 categories:
- Food & Beverage
- Medical Care
- Services (eg. haircuts)
Everything from cheese to apartment rent to haircuts.
They aren’t all equal though.
For example, housing is a bigger factor than haircuts. If housing goes up 5%, that matters way more than haircuts going up 5% (shoutout to my barber Rico - he’s been cutting my hair for $6 since 1998. Rico don’t play no games)
If you hear “inflation is 8.6% this month”, that means the blended average of costs for things is 8.6% higher in May 2022 vs. May 2021.
This creates the “Consumer Price Index” (CPI).
Why is this controversial? Here are the common criticisms:
- It Doesn’t Catch Shrinkflation - companies start giving you “less stuff - i.e they'll fill your bag of chips with air instead of raising prices.
- It Doesn’t Factor In Substitution - people downgrade when prices go up. So they may still pay $5 for chicken. But that $5 used to get them free-range triple organic chicken, and now it's a mystery meat chicken brand.
- Different Lifestyles Have Different Inflation - If your lifestyle is to travel a lot, stay in nice hotels, eat steaks, and buy nice cars, then you may have a different inflation % than someone who lives a different lifestyle.
Is there a better way?
Some people are trying to find a more “programmatic” way to measure inflation. In fact, Balaji (a friend of the Milk Road) has offered $100K to anyone who can build an inflation dashboard that doesn't rely on the government.
Makes sense right? If the government printing money causes inflation..they may have a bias to not properly measure how bad inflation really is.
But the boys over at the Milk Road are only blessed with double-digit IQs… so we prefer something simpler. That’s why we watch....*drumroll please*.....
The Big Mac Index.
No seriously, this is an index created by The Economist decades ago that tracks how much a Big Mac costs in different cities over time.
The Big Mac works because:
a) There are McDonald's everywhere
b) It's a cheap product that needs to be priced for the average person
c) It takes into account food, labor, rent etc.. all in one
d) It’s funny
TAKEAWAY #2 - FLUSHING OUT THE CRAP
In the first 6 months we’ve seen several “big name” projects get crushed:
- Terra ($60B peak market cap)
- Celsius ($1B+ crypto exchange)
- BlockFi ($4B+ crypto exchange)
- 3 Arrows Capital ($3B+ hedge fund)
Those are multi-billion dollar projects that lost almost all of their value overnight.
This is our 2008 financial crisis. Remember how banks like Bear Stearns and Lehman Brothers collapsed suddenly?
Players that mismanage risk, get flushed out of the system.
Players get greedy.
Do Kwon (founder of Terra) got super cocky, calling anyone an idiot who questioned his project before it crashed (my rant about it has 15,000 views now)
Celsius was taking customer deposits and gambling with them in DeFi…and then the music stopped and there was nowhere to sit.
3 Arrows Capital was recklessly borrowing billions to trade - and once their trades went South they defaulted on all their debt.
On top of this, huge projects like Axie Infinity, Harmony, etc.. all suffered $100M+ hacks because they had sh*tty security in place for their wallets or bridges.
It’s painful - but it’s necessary.
Crypto is a high stakes game, fortunes can be built (and lost) overnight. It attracts some of the most brilliant engineers & investors…and the most brilliant scammers & risk takers too.
For crypto to work - we need bad actors to get punished. Reckless players need to get rekt. Even if it causes prices to go down for a while, it’s necessary for long-term survival.
You need the game theory to reward long-term holders/believers/builders and to punish short-term grifters & reckless risk-takers.
As the great rapper Andre 3000 once said:
"Where there is cheese there are rats,
Where there are rats there are cats,
Wherever there are cats there are dogs.
If you got the dogs you got bitches.
Bitches always out to put their paws on your riches."
TAKEAWAY #3 - DON’T FORGET TO HAVE FUN
I don’t know about you - but the way most people talk about crypto feels so heavy.
Whether it’s the tech stuff (blockchains, oracles, zero-knowledge proofs, etc..) or the coin maxi’s (my coin is good, your coin is evil), it’s all so serious.
I get it.
It’s high stakes.
It’s money. It’s power.
But it’s also supposed to be fun. The early days of the internet were cool. You could tell the internet was a game-changer…but it was also just fun. You had chat rooms with strangers. Goofy websites about cats. Silly emails.
The cell phone revolution was fun too. I remember downloading the Beer App (where you could hold the phone to your mouth and it looked like you were drinking a beer on screen). The first version of Twitter was a bunch of people in tech just sending SMS messages to the world about their breakfast.
Crypto has some of that. NFTs can be fun. The memes are fun. But when the prices crash, it feels like all the fun gets sucked out.
And that’s pretty lame. The fun shouldn’t ONLY happen when prices go up.
That’s why I like what we’re doing with the Milk Road.
We started this newsletter in January 2022. We’re 6 months in, the Milk Nation is 150,000 daily readers strong.
And we’ve resisted the urge to “act like adults”.
Here’s how most crypto media goes:
- Shilling random coins (worst case)
- Doing 9000 IQ level analysis that nobody can understand (and is still wrong >50% of the time)
- Trying to be the Wall Street Journal for Crypto (why so serious?)
I don’t know if it’s a great business move - but I’m glad we’ve gone the other way.
We started the Milk Road because we think crypto is the next big wave. Like the internet wave from 1994-2004 or the mobile wave from 2008-2014.
We think crypto is next. But we also want to have some fun surfing that wave. Let’s learn some sh*t, make some money, and laugh at the stumbles as this thing grows up and goes mainstream.
Some of my favorite fun moments during these first 6 months:
- Turning our ~$1M loss on Luna into a funny video (15,000+ views)
- Launching the new branding, featuring the Milkman (we made a mock Apple commercial)
- Creating a “SCREAM ROOM” on telegram where people can go yell when crypto prices crash (therapeutic)
- Seeing you hooligans at events like NFT NYC
Cheers to a crazy start to 2022.
The waves are definitely choppy right now, but as they say - we’re all gonna make it.
TODAY'S MILK ROAD IS BROUGHT TO YOU BY.....
THE MILK ROAD
If you wanna take this spot in the future and reach the Milk Road Nation (almost 2 football stadiums big), hit reply and we'll be in touch.
Stay thirsty my friends. Have a great 4th of July weekend if you're in the US!
See ya on Tuesday.
DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.
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