Putting our heads together is what Stray Reflections does best. Here’s a summary of the most helpful insights gained from the community in our members-only Slack group last month. 

1. Long Rubbish (#crypto) 

2. Long Falling Knife (#china) 

3. Short Kombucha (#tech) 

4. Short Loneliness (#stocks)

Long Rubbish

TE: A few thoughts about the BTC ETF. Comparing it to the Gold ETF can only get you so far, but that comparison reminded me of something important that I completely missed when the Gold ETF was introduced in late 2004.

Back then, the sentiment was very similar to the sentiment around the BTC ETF today. And the sentiment was not wrong—gold rallied from $450 to more than thrice that within six years of the ETF launch. 

That was as much about QE and China as it was about the ETF. But the ETF was not nothing. You could obviously see this from the inflows at the time, but the argument as to why these were not so important was that they were simply flows that would have happened anyway, only the format shifted. 

This argument was largely rubbish. I should have known this, as I knew exactly who any metals desk’s customers were—they were hedgers, central banks and speculators. That’s it. 

People would make the argument that the flows into (and out of) the ETF were simply the speculator’s flows that used to be done on COMEX or on the desk, and there was some truth to this, but it missed something important.

Think back to how big real money portfolio managers thought about gold prior to the ETF. They might think about it as a theoretical part of a portfolio, or maybe as some sort of benchmark, but they didn’t actually do anything with it. Customers were hedgers, speculators and central banks. They were, for the most part, NOT pension funds or endowments or 401ks.

Sure, all those latter groups would talk about gold, but it’s not like they could do anything about it – it was just too much of a pain to bother with from an execution, custody, and settlement point of view.

Fast forward to post-ETF, and all those discussions about what part gold could play in a portfolio were no longer just theoretical, but practical. It did not happen overnight, as these type of guys (and gals) do not move quickly, but it happened. And I know that metals desks today now have four types of customers – hedgers, central banks, speculators and real money. 

I do not think it’s too much of a stretch to expect something similar to happen in BTC post-ETF. BTC will move from a theoretical part of a theoretical portfolio to a real part of a real portfolio. This is not necessarily long term bullish. These pools of assets can sell as well as buy, but in the medium term, I suspect it will give a bid to the market. 

Maybe not quite as quickly as some of the more enthusiastic members of the crypto community would like, but it’ll be there.

Long Falling Knife

AF: Every single analyst on the street is still calling for higher prices in China and Hong Kong by year end. Incredible. For those paying attention to local policies, the leadership is still clueless on how to revitalize fortunes, and we are getting more confirmation that margin calls are happening on real estate. Not going to be a fun few quarters for banks and lenders. 

AA: What of the view that China is prioritizing currency stability, and will try its best to not stimulate until the US and Europe begin?

AF: US and Europe went from NIRP to a full peak cycle, and now back to a cutting cycle. We didn’t even move from ground zero. How much of the inaction is due to a lack of acceptable options (we’ve hit the wall) versus some fantastical plan to explain our fears away? The alternative is too scary to accept for most investors, but it is obvious to local business owners.

CT: I think about this question often in a broad sense. What problems do we have in the world that cannot be solved via fiscal or monetary policy? Covid came close. China seems like it’s flirting with this with real estate and other credit related issues. Once confidence is broken, the real macro game begins. 

AF: Absolutely spot on. My perspective would be the clash of a deep rooted ideology over pragmatism in today’s interconnected world, with someone who has managed the unthinkable of consolidating power to within one man in the world’s second largest economy.  

What he’s doing is arguably wonderful for the populace in the long term, but a disaster for (foreign) capitalists in the foreseeable future. We always complain about politicians being short sighted and the wealth polarity being off base. Now we finally have a leader who does seem to value ‘century-long’ sovereign building benefits at the expense of capitalistic desires. 

Does the world have the gumption to see it through?  Based on all the mainstream rhetoric and this incessant desire to “knife-catch” the China trade, it would seem that we are not ready for it.

AA: What would it take for household consumption to turn around?

AF: Time, and a lot of it. But we’ll figure it out.

NG: Wondering if there are any implications of the Evergrande liquidation. 

AF: The amount of life savings that are proxy-tied to them and other Chinese developers is immense. Even if there’s no systemic crisis within the controlled central system, there’s still the reality of citizens losing generations of wealth in this (especially the older ones who trusted the government). 

It’s similar to how those in their mid-thirties lost their careers and went into negative equity on the double whammy of losing their tech jobs just as they were expanding their household into bigger houses using the underlying stock as collateral.

All the western bankruptcies have been diversified, funded into different geographies, types of investors and institutions who ultimately can afford to lose. We are talking about people’s lifelong savings here. This is why there’s no confidence left domestically. It’s one rug-pull after another for throwing your faith behind the leadership. 

I have distant families that bought properties as a second retirement home. Blue collar families. These places will likely never finish. It’s been late for years. And while these families can afford to lose these without going to the poor house, it is a significant portion of their planned retirement life and they are struggling to come to terms with this. This is just a microcosm of the bigger picture given the amount of weight real estate has in the Chinese economy. 

KB: The issue I have no visibility on is the extent of the wealth management products used to finance the mortgages. It is indeed a double whammy as your underlying collateral is gone and the vehicle you were using to get mortgage and the additional kicker income is also gone. 

AF: That’s why I think Wall Street is still consistently bullish, and relies on simple correlation models on consumer behavior, investor sentiment and focused on ‘capitulation’ as a sign that things will rebound. I am of the view that ‘capitulation’ in this case is indeed ‘capitulation.’ That is people are out of cards and it’s going to take time before things can rebound.

As Jawad pointed out with the other excellent article, we have tonnes of things going extremely well for us (EVs, renewables, etc.), but it’s going to take a lot longer than what Wall Street wants to see.  

KB: I spoke today with some brokers from mainland and what they hear is that Evergrande’s unfinished projects will be delegated to smaller developers. Maybe through a mix of government-driven bank loans and government support.

As AF rightly mentioned, these are lifetime savings so there will be some attention on not seeing them evaporate as confidence in the government has to be maintained somehow. 

AF: Spoke to some family office heirs who will be taking over the family’s reins over the next 3 to 10 years. Long story short, no hope for any major recovery in investments / real estate anytime soon, as least not to any magnitude that would cover their very real losses that they have accumulated over the past five years.

Whether we can get another industrial and manufacturing renaissance with a central planned economy versus a free market (US with Y-Combinator and the free spirited tech savants) is something that history will judge. It’s a LONG road ahead. 

JM: Between 1995 and 2001, Beijing took a bold step to reorient the economy, laying off 46 million state-sector workers. That was equal to sacking about 30 percent of today’s US labor force over six years, and while painful, set the course for a private-sector dominated economy.

Remember this when thinking about the Chinese leadership’s ability to tolerate pain and steer the economy to new heights. 

Short Kombucha

DZ: Having looked at the last 3 Y-Combinator (YC) batches as an angel rather than an institutional VC, I’m officially short YC this decade. 

YC has been the gold standard for startup investing over the past decade with 45% of YC companies getting to Series A with median ARR of +$1 million. The average YC startup has been a vertical SaaS or DevTools startup, with some outliers being huge hits (AirBnb, OpenSea, etc). In the last decade, index’ing into YC (investing in every company of the batch) generated a 176 percent annual return.


YC is starting to become cyclical and consensus. In 2022 third of the batch was crypto. In YC S23 and W24, there is virtually no crypto. Instead, 99 percent of the batch is AI or AI enabled. When everyone is running towards something without a unique insight, I’m more skeptical than before. 

There are fewer and fewer idiosyncratic thinkers and founders today. It’s become too sexy to be a founder. I agree with Thiel broadly on this but looking through hundreds of companies there are few that are even remotely interesting.

AI is going to be more deflationary than any other technology (internet, computers, etc). For startups, the issue is that there is a ton of value generated without any guarantee of capture. Solo indie hackers are now able to replicate YC startups in a weekend. Any reasonable idea gets copied to death. I’ve seen over 30 “AI for Customer Support” startups. 

The key idea here is that it’s very unlikely running the same SaaS playbook for AI enabled vertical SaaS will yield the same results as the last decade where software was king.

YC has been the #1 advocate of the “factory model” with a standard playbook for building, operating, selling, and fundraising. This model is now breaking down. Founders no longer want to raise tons of capital to meet unsustainable growth targets. VCs can no longer guarantee the pipeline of A -> B -> C -> D funding cycles with their ever-changing requirements. 

YC has gone from an exclusive club to becoming much more open. The number of companies went from 16 during the W09 class (Stripe and Airbnb included!!!!) to a peak of 403 during W22. 

It’s become “cool” and a career badge to have gone through YC. This causes the worst thing ever in startups—adverse selection in founders. Anything that’s cool attracts all the worst people to build massive startup outcomes, like MBAs, career FAANG-ers.  

What’s the trade?

Invest in less YC companies. Indexing is a horrible trade with 300+ companies. Invest or incubate bootstrapped founders at much lower valuations.

Hilariously, it’s a wonderful time to be a founder yet a terrible time to be a VC. Builders have more options than ever even if fundraising markets have tightened. VCs don’t have anything to deploy their large and bulky check sizes into. 

Short Loneliness

CT: I’ve been using the Vision Pro for the last day and it feels very much like ChatGPT. I recognize the step functions in tech and experience but find myself searching for reasons to use it. It’s also uncomfortable. Personally I’m not sure I would recommend it to anyone and will be returning mine. 

That said, the immersive video demos they offer blew my mind. I think the real hockey stick will come when AI can generate that type of content digitally versus requiring physical cameras to capture all the angles. I could not believe how real the Alicia Keys recording studio felt.

It’s also isolating which I don’t like. I guess there is a fine line between immersive and isolation. Not sure I want to have an IMAX experience every morning while I check my email, but I can also see how it can be great for focus. 

I am sure future versions will solve a lot of this and use cases will become clear, the same way ChatGPT is step 1 of 10 for AI. For now, I’ll stick to a laptop and watching movies on my couch.

JM: I know you’re a Casey Neistat fan. He said: “Vision Pro isn't just great, it's the single greatest piece of tech ive ever used.”

CT: It is certainly the biggest step function I have seen since the iPhone. I had some people over last night to try it and they all agreed it was incredible. 

This morning I find myself looking at it and asking “why should I be using this again?” and searching for reasons to put it on. Not in a bad way just in a use case way. 

If you packaged this tech into sunglasses or contact lenses, made the tech a bit more seamless, it would permanently alter society and the future of everything. Only a matter of time in my opinion.

JM: I found it surprising and unsettling that Casey ended the video saying “buy Apple stock.” Don’t know why but that didn’t sit well with me.