📈📉 A Tale of Two Turnarounds

What’s on the Menu 🍴

Bitcoin innovations, stock turnarounds, and risky leveraged bets…

That’s what this week is all about!

Let’s go:

• MicroStrategy Unveils Bitcoin-Based ID Platform 🏧

• A Tale of Two Turnarounds 📈📉

• Buying Crypto On Credit: A Risky Bet ₿

• Video Of The Day: Stagflation Scare Spooks Investors 📺

Today’s newsletter is a 5 minute read.

 MicroStrategy Unveils Bitcoin-Based
ID Platform 🏧

MicroStrategy just took Bitcoin to business-critical with their latest launch, MicroStrategy Orange, at their flagship event.

It’s not just another blockchain spiel; it's a whole new way to tackle digital identities.

The Big Picture:

So, MicroStrategy is pushing a decentralized identity platform that’s less about trading and more about securing who’s who in the digital world.

Need-to-Knows:

• MicroStrategy Orange is here to blend enterprise needs with blockchain perks. Think of it as your digital ID fortress, built on the Bitcoin blockchain.

• Central to the platform is a service cloud that dishes out digital IDs, ensuring your company’s security isn’t just a hope but a given.

• Get ready for 'orange apps,' the ready-to-deploy solutions aimed at squashing digital identity dilemmas.

Cezary Raczko, EVP at MicroStrategy: "We’re setting up shop right where security meets simplicity. Every Bitcoin wallet could, and should, jump on this."

At its core, the platform leverages Bitcoin's blockchain, ensuring that every ID issued is as immutable and secure as the ledger it lives on.

Bottom Line:

MicroStrategy’s move might just be the blueprint of how businesses will safeguard their digital identities.

Using Bitcoin's blockchain not just as a ledger but as a shield?

That’s a game we’re watching closely. Got an opinion on digital IDs going blockchain? Drop us a comment!

A Tale of Two Turnarounds 📈📉

People LOVE a good comeback story.

When it comes to business turnarounds though, there are a lot more failures than success stories.

Public companies have it extra hard since their crashing stock prices can cause low morale, executive turnover, and public ridicule.

But when a turnaround works, it can be an investor’s dream come true.

Carvana (ticker: CVNA) is a perfect example of a company that was in distress but pulled off a miraculous turnaround in both the business and the stock price.

The stock is up more than 20X (2000%+) since its lows in December 2022:

The stock gapped up over 30% this week after a better than expected earnings report in which CVNA posted its first profit since 2021.

CVNA must still repair its debt heavy balance sheet in the years ahead, but the market is more confident about that after several quarters of cost cuts and improving revenue.

Unfortunately, many other companies that attempt turnarounds fail.

WeWork, Bed Bath & Beyond, Bird Scooters, AppHarvest, and Virgin Orbit are some recent examples of public companies that wiped shareholders out in bankruptcy.

Another well known company is having a rough ride in its turnaround attempt so far: Peloton (ticker: PTON).

PTON stock is down more than 90% since 2022:

Unlike CVNA, investors haven’t seen enough progress yet to get optimistic.

PTON’s CEO, Barry McCarthy, stepped down this week after two years on the job.

To McCarthy’s credit, PTON did make great strides in reducing expenses and getting to profitability in its most recent quarter.

The missing ingredient for PTON seems to be user and revenue growth.

The current subscriber base for PTON’s connected fitness products (bikes, treadmills, & rowers) has flatlined around the 3 million level for several quarters.

Most successful turnarounds need profitability AND growth to turn positive in order to see a resurgence in share price.

Peloton has $1.7 Billion of debt coming due in 2026 versus $800 Million of cash on the balance sheet today.

In the next two years PTON will need to pay down debt and/or refinance it, so growing the cash flows of the business is hugely important in completing the task.

If the business doesn’t grow or even shrinks from here, then bankruptcy restructuring is not out of the question.

CVNA faced these same questions, and had arguably a worse balance sheet than PTON.

It cut costs aggressively but also started growing again:

Can PTON find ways to accelerate growth in the quarters ahead?

The reward for doing so is likely a multibagger return for the stock.

Otherwise, the company could end up on the list of once popular brands that no longer exist!

Buying Crypto On Credit: A Risky Bet ₿

The internet is full of wild ideas for making money in the markets… but, this may be the wildest one yet.

A Twitter user has been publicly sharing his journey of maxing out 8 credit cards to buy Bitcoin.

A move that would probably send even a high-risk taker dropping their jaw:

Surprisingly… the comments to this post were full of individuals supporting this journey.

They’re “sticking it to fiat”.

So… are these people out of their minds? Or smart for doing this?

This is working for some people who have pretty low cost basis in the asset.

However, truly, in the world of high risk money moves, buying a volatile asset such as Bitcoin on credit cards, just about tops the cake.

Why you ask?

A lot has to go pretty perfectly for this to work.

1. You have to “time the market” and buy during bear markets/corrections. The gentleman maxing out 8 credit cards actually has pretty decent cost basis on his coins. While he didn’t buy in the depths of the bear market, he bought as the market was recovering. That’s why this is working…for now. His decent market timing may have come from good technical analysis skills or luck, I am not sure. However, doing this well will likely require a bit of both.

2. Timing your holding period with your ability to continue to roll the balance to 0% intro credit card offers. Not only do you have to hope you can continue to find 0% intro offers for the length of time you have to hold the Bitcoin, but, there are fees every time you transfer. Granted, the idea is that the fees to do the balance transfers over-and-over pale in comparison to the returns. This result would of course depend on your cost basis and the unknown future returns (hence the risk)! In a perfect world, Bitcoin just keeps going up forever, and you keep finding 0% intro balance transfer offers. However, we all know the world and the markets aren’t perfect.

3. Avoiding interest on the balances: If you can keep doing balance transfers to 0% interest intro offer cards, this wouldn’t be a problem, but, there’s a chance you run into offers that won’t let you transfer 100% of your balance. Some only let you transfer up to a certain dollar amount, or maybe only 75% of your balance. Every bank does it differently. So, you have to hope you can continue to find offers that let you transfer your entire balance (or else you just may be selling some of your crypto at inopportune times and taking a hit).

4. You need to be able to afford the payments: This seems like an obvious one, but, some people may only have big returns on the brain. Of course, if you’re lucky enough to be sitting on big profits, if you can’t afford the payments, you can simply sell your Bitcoin and pay off the cards. However, what if you end up in a cash flow crunch due to unforeseen circumstances and can’t afford the payments on the cards? Now, what if Bitcoin is in a significant drawdown and selling wouldn’t cover the balances? Now you’re really in some hot water.

Again… a lot has to go perfectly.

Speaking of “timing the market” well… here’s a risk I am seeing now with anyone who is trying to implement this strategy:

We’re closer to a top in Bitcoin than a bottom. Said another way, if anyone bought Bitcoin on credit RECENTLY near the top, there’s A LOT of downside risk to deal with.

In the case of our Twitter friend Sunny Po, his purchases are shown in green.

He lucked out here.. but, of course isn’t out of the woods.

Bitcoin has seen 70-90% corrections with ease. It could happen again. What if it did?

They’re now in a potentially stressful situation to have to find appropriate balance transfers for however long it may take for the trend to recover. They’re essentially in a “hold and hope” situation which could cause some major stress.

Even larger of a problem is if cash flow becomes an issue (recessions and layoffs can’t be ruled out of the realm of possibility in anyone’s life).

Bitcoin would be down, your cash flow compromised, and you simply have an inability to “wait it out”. It doesn’t matter if you think Bitcoin “only goes up and it’ll recover”… your cash flow will stop you in your tracks and cut off your airflow.

With everything in personal finance & investing, you have to weigh pros and cons, and risks and rewards.

But, you might be better off just saving your money up over time to buy it vs. trying to manage a situation as risky as this.

Video Of The Day:
Stagflation Scare Spooks Investors 📺

With sticky inflation and falling productivity, investors are starting to worry about the “S” word… Stagflation.

So in this week’s We Talk Money episode we’re taking a look at what this could mean for the markets.

We’re also looking at bitcoin’s pullback, earnings season, and more!

Food For Thought 🧠

“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”
- Satoshi Nakamoto

DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.