Meet a 26-year-old FTX user

Good morning to the smartest corner of the internet. Phil Rosen here. I'm in sunny Los Angeles now, but don't fret — I'll still be ready to meet you in your inbox bright and early from the west coast.

In light of the hubbub surrounding FTX and Sam Bankman-Fried, this morning I'm thinking about a quote by novelist G. Michael Hopf: 

"Hard times create strong men, strong men create good times, good times create weak men, and weak men create hard times."

This idea shows up often (Dune comes to mind), but I'm weighing this as it relates to the ongoing crypto drama. 

The billions of dollars that seemingly evaporated overnight with the collapse of FTX has left many feeling duped — but it's also made everyone a little wiser.

More stringent regulatory scrutiny has arrived, influencers and commentators are voicing concern, and retail traders are pivoting into safer positions. 

The next time an earnest, wunderkind-founder in shorts tries to pitch a multibillion-dollar venture, interested parties will be more cautious.

In other words: Tough times make more cautious investors.

And that's the sense I got from speaking to one 26-year-old investor who lost a sizable chunk of his portfolio in FTX. 

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1. I just caught up with FTX user Daniil Pemberton, who lost access to roughly $14,000 in funds when the crypto exchange imploded last month. 

When headlines first emerged about the faltering firm, Pemberton — a graduate student based in the Netherlands — had tried to withdraw his holdings . 

The FTX app showed the transactions were pending, but ultimately his attempts were not successful. All told, he lost access to about 60% of his total portfolio , including assets held in other platforms.

"The tech itself, the crypto, seems fine, but the problem is the institutions around it," he told me on the phone Monday. "They are the ones who undermine the trust , because at any point a platform could make a bad decision which leads them to becoming bankrupt, and everyone loses."

The SEC last week alleged that Bankman-Fried orchestrated a multiyear scheme to defraud investors. FTX's new CEO, John Ray III, warned that, thanks to the company's horrendous bookkeeping, it could take years to return funds to creditors. 

Now, FTX users like Pemberton have been left with a hole in their pockets and faltering faith in the digital asset sector. 

"I'm skeptical on who to entrust with my funds," he said. 

Pemberton said one of the main reasons he initially deposited funds in FTX was because everywhere he turned, he saw people and media applauding the company , including many finance YouTubers he followed. 

"The New York Times had wrote about Sam Bankman-Fried, and so did other prestigious publications and individuals," he said. "I thought surely they did their research and wouldn't praise him without due diligence ."

Not only that, but Pemberton liked FTX's promise of high yields on crypto. 

Looking back now, though, ramping up investments because of that feature was a dumb decision, he added.

Read the full story on this FTX investor — and how he plans to pivot to traditional investments.

Do you have a story to share about losing access to funds in FTX, or on how you're changing your investment strategy? Let us know in the comments.

In other news:

2. Here's where to put your money in 2023 with a recession closing in. Goldman Sachs, JPMorgan, and nine other Wall Street giants shared their year-ahead investment outlooks as risks to stocks and the economy continue to mount. Get the details here.

3. Morningstar strategists shared the best stocks to own in 2023. These names are set to produce returns for the next 20 years as consumer favorites, the firm said. See the list of 19 companies.

4. This couple in their 20s turned their side hustle into a business that brings in $19,000 a month. Steph Gordon and Den Mathu have learned how to negotiate raises and carefully select what to focus on. Here are their top three strategies to increase income. 

5. Lumber dropped to a new low for 2022 as homebuilder sentiment slips for the 12th month in a row. The critical building commodity is now down 68% year-to-date, and is off 79% from its record high reached in May 2021. "NAHB is expecting weaker housing conditions to persist in 2023 and we forecast a recovery coming in 2024," economist Robert Dietz said.

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