How To Invest in Cryptocurrency

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TSP 173 | Invest in CryptocurrencyEpisode Summary:

If you have been following the world of cryptocurrency, you may have noticed that Teeka Tiwari and Palm Beach Confidential are trending. That is because we are at the doorstep of the next cryptocurrency boom. Teeka is an editor at Palm Beach Research Group LLC and he is responsible for the firm’s flagship service, The Palm Beach Letter and small-cap and cryptocurrency advisory, Palm Beach Confidential. One of the best case uses of the blockchain is helping homeowners, and Teeka provides professional advice to everyday people on how to invest in cryptocurrency. People need to get in the game because putting your money in stocks, bonds, and real estate and calling it a day is no longer enough. Learn from Teeka as he provides insight information on how to invest in cryptocurrency without having to depend on a broker.

Teeka Tiwari has quite an impressive background as an investment banker and now as an expert in cryptocurrency. He shares with us his incredible story of being in foster care in the UK to making it big in America. He said, “When you visualize the future you want, it becomes a reality. When you focus and outwork everyone else, success is inevitable.” He shares a clear understanding of what the blockchain is and why it’s going to change how we all do business.

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How To Invest in Cryptocurrency

I’m thrilled and honored to have someone I met at a Brenton Woods Economic Summit. His name is Teeka Tiwari and he is the Editor of the Palm Beach Letter and small-cap and cryptocurrency advisory Palm Beach Confidential. He’s a former hedge fund manager and Wall Street executive and he’s widely considered one of the world’s premier cryptocurrency analysts. He epitomizes the American dream. He grew up in the foster care system in the UK and he came to America at sixteen with just $150 in his pocket and the clothes on his back. By eighteen, he’d become the youngest employee at Lehman Brothers. Two years after that, he shattered conventions by becoming the youngest VP in the history of Shearson Lehman. He’s a regular contributor to the Fox Business Network and has appeared on all kinds of shows like CNBC and ABC’s Nightline and a lot of international television networks. Teeka, welcome to the show.

Thank you, John. I appreciate it. It’s great to be here.

I have had the privilege of watching you in action on your amazing webinar. I would love to have you start talking about what it was like growing up in the foster care system in the UK. People are familiar with what it’s like here in the US. It’s usually not a pleasant experience, and I’m hoping it’s a little bit better and not so Charles Dickens-ish as we might imagine.

The first time I entered into a system, I was eight years old. I was in a group home where the average child was at least four or five years older than me and some were considerably older. I would love to tell you that it’s a wonderful place and we sang songs, but it wasn’t. It was a place full of violence and danger. It’s a frightening and very dangerous place for an eight-year-old boy to be in. I’d get beaten up and my things would get stolen. I would have to maneuver a chair at my door to stop people from coming into my room at night. It was a terrible time. From there, I went into a foster home with a family, not a bad family, but not the greatest. I lived in a room over an uninsulated garage. At night in the winter, when you would breathe, you would see your breath. It was like being outside. The room was probably 38 to 42 degrees. It was freezing. My final foster family were very nice people and gave me a wonderful home. I can’t say enough good things about them. It’s definitely a hit or miss when you grow up in the system, and I’m fortunate that I did well regardless of what I went through as a kid.

TSP 173 | Invest in Cryptocurrency

Invest in Cryptocurrency: It’s very hit or miss when you grow up in the system.

What’s interesting to me is the whole nurture versus nature element that causes people to still thrive despite possibly not having the best childhood. What made you come to America at sixteen? That’s a brave thing to do with very little money as well.

From the age of twelve years old, I had this desire to move to New York and work on Wall Street. I remember I watched some show and they were talking about this new type of person cold a Yuppie, a young urban professional. This is the early ‘80s and I thought, “That’s cool.” I started and I saw all these yuppies who all worked on Wall Street or in the city of London, in finance. I started doing some research on this and I discovered the stock market. The whole idea of being able to buy a piece of paper and be able to sell it later at a higher price blew my mind.

Growing up, I had always seen people trading time for money. I had never seen anybody use their mind to make enormous amounts of money. That idea intrigued me, and it was like inception. It was something in my brain that would not go away. I grew up in horrible poverty and I remembered thinking, “There’s got to be a better life than the one I’m in now.” My focus was get to America and go work on Wall Street. While other kids had posters of soccer stars on their walls, I had pictures of New York. I had travel brochures all over my floor. I would sit there and I would dream about walking the streets of New York City, working on Wall Street and driving a beautiful car. It was very real for me.

The power of visualization is important at any age. I am so grateful that you shared that early visualization and how that came to be. I’m imagining there’s a story of how a young lad from the UK convinced Lehman to hire him. Did you have special skills that they said, “We’ve got to get this guy in?” You probably didn’t know anybody.

I moved to New York at sixteen. I was now eighteen and I was selling typewriter supplies over the telephone, IBM Selectric. This was 1989. I’m making $300 a week and I’m thinking, “This is the American dream. This is amazing.” I met a guy there called Kevin Wong. I would always tell people from the time I came to America, “I’m going to go work on Wall Street.” If I had met you even for two minutes, I was going to tell you about my Wall Street dream. I was telling everybody about my Wall Street dream. I met Kevin, I told him, and he said, “If you’re serious, I know a guy at Lehman Brothers.” I was like, “You do?” He said, “Yes. They’ll treat you like hell, they’ll pay you like hell but they’ll give you a shot.” He gave me a name of a guy called Frank. I called him and he’s like, “Come in for an interview.”

I didn’t have the right clothes to wear to go to Lehman Brothers, so I went shopping. I bought a pair of gray slacks and I didn’t realize that when you buy pants, you have to get them finished. They’re unfinished. My pants are dragging on the ground. I’m wearing fake leather shoes with white gym socks, a pink polyester shirt, a pink polyester tie, and no jacket because I can’t afford one. I walk into Lehman Brothers, which at that point in 1989, 55 Water Street was the highest producing retail brokerage office in the world. It was doing $150 million a year in commission, which was a lot of money for retail.

[bctt tweet=”Visualize the future you want.” username=”John_Livesay”]

I go to the interview with Frank. This guy looks at me and shakes his head and says “You’re a nice kid.” He’s trying to let me down easy. “This is not for you. Thanks for coming in.” I look at Frank and I said, “Frank, I just want a shot. I’ll work for free. I don’t care. Just give me a shot.” There was something about that he liked and he gave me a shot. Back at Lehman, if you work 60 hours a week, they only pay you for 29 hours and they paid us $4 an hour. I was in the door, I would work nights and weekends to make ends meet.

Talk about the determination and passion you had that he was able to see past your clothes to say, “I’m going to give this willing to work for free.” That’s the way you were. That guy must be so happy he gave you that shot. How did you get to be so successful so fast?

I haven’t always been like a natural study at things, but one thing that I have and I consider it the greatest equalizer, is I have an ability to work, focus and outwork anyone. I tried to make myself as useful as possible to as many people as possible to learn as much as I could. Then I read everything on investing, how to give presentations, and understanding and selling to an affluent market. This is not anything people told me to do, I just did it. I would practice presentations because at eighteen, I was driven but I was shy.

Social interactions were very difficult for me, so I knew I had to overcome that. I read a lot and one of the things that I learned was that people cannot tell the difference between somebody who was confident and somebody who just acts confident. That was groundbreaking for me because I wasn’t confident but I could act confident. I could say, “These are the markers of a confident person.” It was a pantomime I’d go through and people would respond to me as if I was confident.

TSP 173 | Invest in Cryptocurrency

Invest in Cryptocurrency: Make yourself as useful as possible to as many people as possible to learn as much as you could.

Stand up, straight eye contact, all that good stuff that you pantomime. What I’m getting from this is that success is inevitable when you focus in that work with other people and combine that with acting as if you’re already confident and you will be.

I firmly believe that success is an act of will. All creation is an act of will. Some of us were born with these skills and others of us, like myself, had to learn them. These are learnable skills and they have nothing to do with how smart you are at math or how good you are remembering facts. Anybody with average intelligence can become successful in their chosen field. I possess average intelligence and I would say my differentiator is the ability to focus on things that move the needle in my life. I’m a big believer in the 80/20 rule, which says, “20% of your actions create 80% of the results in your life.” I focus most of my time on that 20%. I’ll sit down and I’ll say, “What’s the 20% of actions that move the needle in my business life, personal life, and health?” I build my life around that.

I love that because people get overwhelmed and they don’t know what to do first. If you focus on what’s going to get you the biggest bang for your buck and do that first, you’ll be successful in all areas. You have a success story that I heard on your webinar that I’d love to have you share. What did you do that had you become the youngest VP at Shearson Lehman?

I was good at raising assets, creating great relationships with my clients, and generating a lot of revenue for the firm. I was the number one rookie producing broker in my first year. The second year, I was one of the top five producing brokers in the office. I was very good at what I did. They were afraid that I was going to get poached. I could imagine the discussion was, “We’ve got to make Tiwari our VP,” and it meant a lot to me as a kid.

Everyone’s ego gets stroked by that title but back then, that’s fantastic. I know that your expertise is in the cryptocurrency advisory role. All the lessons you’ve learned from your expertise on Wall Street are now being taken to the blockchain. I hear a lot of people saying the blockchain is as revolutionary as the internet was, and we certainly heard a lot about that at the event that we were at. The analogy I loved was the internet didn’t take off until email and blockchain’s killer app is Bitcoin. Can you share with us what you see as far as impact and opportunity around blockchain and cryptocurrencies that are using it?

A blockchain is a form of a database. It’s not that sophisticated. A traditional database has a central repository of information and then you have a lot of people hitting that database for information. The problem with a centralized database is that it’s very easy to manipulate. We’ve seen companies like Wells Fargo go back and change records on their database because it’s a centralized database. There’s no oversight there to prevent that. The blockchain solves this problem and it does it because it keeps an identical copy of the data on thousands of machines. An example of that would be Bitcoin. How do we prevent people double spending their bitcoin?

[bctt tweet=”When you focus and outwork others, success is inevitable.” username=”John_Livesay”]

The way that’s done is that say there’s 50,000 machines on the Bitcoin network and they all have an identical copy of the ledger. Before somebody can make a change to that ledger, let’s say I want to spend some Bitcoin or you want to send me some Bitcoin, the note that you’re trying to do that through will compare their version of the ledger with everybody else’s version of the ledger. If everybody else’s version of the ledger says, “John has that money that he can send to Teeka,” it allows the transaction to happen. Those transactions happen in ten-minute blocks of time. All those transactions in that ten minutes are correlated and then tacked on to the block of information that came before and that continues.

What’s the advantage of that? You can’t double spend and you cannot go back and change data in the blockchain because you would have to take control with 51% of all the computers on the network and you’d have to do it simultaneously in order to tamper with the blockchain. Because the Bitcoin blockchain is now so large, there isn’t enough computing power available to try to coopt the Bitcoin blockchain. It gives you the ability to have a universal source of truth that you can rely on. When you can do that, it opens up all these new avenues and applications that never existed before.

One prime example is with stocks. When you go and you buy a stock, the person that you’re buying the stock from might not have the stock that you’re buying. They might be lying about it. There’s this three-day period where the firms have to make sure that this person has a stock, make sure you have the money, then they have to transfer it over. That whole process, which is called trade settlement, costs about $20 billion dollars a year. If you put all of that on a blockchain, it says, “John owns us thousand shares of IBM,” and the blockchain says, “Teeka has this $146,000 to buy the thousand shares.” Then you can do the transaction immediately and eliminate any of the of the back-office functions that chew up so much capital and time.

I’ve never heard anybody explain it in terms of ten-minute blocks of time that create a blockchain. Everything the readers and I do is all about what makes a good pitch. What problem are you solving? Who do you help? What problem do you solve? You did a great job of explaining the transparency factor combined with the time savings, which then gives huge cost savings. People will start to get a little bit more in-depth understanding of how the blockchain technology is revolutionizing not just cryptocurrencies, but the authenticity of, “Is that food organic? Is that jewelry or art authentic?”

If we double click on how that’s impacting cryptocurrencies and your expertise in particular, what you offer is insider observations through your ability to focus on in the Palm Beach Letter and the Palm Beach Confidential that is so valuable to people who are overwhelmed and they need someone like you to curate for them. If I want to dip my toe in, where should I start? Is what you’re offering that accurate?

[bctt tweet=”Success is an act of will.” username=”John_Livesay”]

I travel all over the world and meet with development teams, venture capitalists, and the people that are putting together different blockchain types of solutions. My job is to uncover the ideas that are worthy of investment and very few ideas are. There’s a reason why I don’t recommend ICOs or Initial Coin Offerings. It’s because about 85% of them are just fraudulence. Another 10% to 13% of them are bad ideas and maybe 1% to 2% of them are good. You have to go through a lot of different ideas in order to find ideas that will work out over the long-term.

One tip out I’ll leave the audience with is that as you’re examining a coin or use case, you should always think about, “How is this coin going to aggregate users? How are they going to incentivize usage of the coin, adoption of the coin?” Having a great idea is not enough. Great ideas are a dime a dozen. It’s getting people to migrate over and use your solution. The very best projects have great incentives built into them that make it easy to adapt and make it a no brainer for people to adapt their solution. That’s what I try to focus on.

TSP 173 | Invest in Cryptocurrency

Invest in Cryptocurrency: 85% of ICOs, initial coin offerings, are fraudulent, 10%-13% of them are bad ideas, and only 1%-2% of them are actually good.

There’s been a big shift from tokens being just utility versus now being perceived as security. I’m involved with one that is an asset backed with residential real estate of fractional ownership. That’s our solution. It’s how can we create something that people are understanding and feeling comfortable with because a lot of people understand real estate. I like to say that when Bitcoin gets a cold, the rest of the alternative coins gets pneumonia.

If we’re creating a token that’s backed by actual net asset value of owning small percentages of thousands of homes, we’re not going to be as affected as the other ones that are not backed by assets. I was curious to hear your thoughts on tokens that are backed by assets, whether it’s real estate, gold and art as a potential way that they might have an incentive for people to use it because they understand it.

This is an area of token economics that I’m excited about. What I’m excited about is that we can take previously illiquid assets or assets for the average person could not own a fractional piece because they don’t have enough money and we can tokenize them. For instance, homes, shopping malls, massive buildings, stadiums, these are things that would have required enormous amounts of funding by massive banks that individuals haven’t even been allowed to buy a piece of. Through tokenization, you can create these types of investments that can give you equity ownership directly into a performing asset, can give you income that is directly paid to you via the blockchain, and gives you ownership on something at a fractional level that would never be practical before. You take $100 million building, you can’t make money selling thousand-dollar pieces of it but with the blockchain, you could do that.

That’s why I was so excited to join quantmRE because I saw that there was fractional ownership happening where someone has a million-dollar home and they only have a mortgage payment of $500,000 and they want $100,000 out. Their only option is to refinance it or second mortgage HELOC, which means going into more debt. The ability to give people $100,000 in exchange for owning 10% of their house is fantastic, but it still requires all those investors to wait for that person to sell their house before they get their money back. By tokenizing this, we’re making this illiquid asset of all that equity that’s sitting in people’s homes liquid because now people can buy and sell an asset back token without people having to sell their homes.

To your point, everyday investors who maybe want to get into real estate but don’t have the money to own an apartment building or a rental house can now get in because they’re owning a fraction of a fraction of someone’s home without having to be a landlord. That’s one of the best case uses of the blockchain, helping everyday people who are homeowners and helping everyday people who want to invest. It becomes a great digital on ramp for institutions where your background is. From what I understand, Smith Barney is hiring several hundred people to start analyzing cryptocurrencies for their clients to figure out where they should be going. If people are smart enough to subscribe to your Palm Beach Confidential, they’ll get their own insight information without having to depend on a broker.

I wouldn’t trust brokers yet with crypto research.

They know they need to get in the game because it’s no longer enough for people that say, “Put my money in stocks, bonds and real estate,” and call it a day.

Everybody should have at least a small allocation to crypto. The point that I want to hammer home is that be rational. I recommend if you’re a smaller investor, $200 to $400 per idea, if you’re a bigger investor, $500 to $1,000 per idea. I suggest never put more than 5% to 10% of your liquid net worth into crypto because they’re incredibly volatile. The truth is we are very early in the cycle and some of these ideas won’t make it. Some of them will go to zero. I suggest having a broad-based portfolio and using an equal dollar amount in each one, this way you don’t over own a loser or under own a winner.

It’s a great strategy. If you look at all the dotcoms back in the ‘80s, some made it, some didn’t. Looking at tokens or coins that are backed by actual assets give you some level of comfort that the homes are never going to go down to zero in value. When the housing market went down in 2008, they didn’t go down to zero and now by 2018, they’re all backed up to where they were a little higher. If you’re willing to take a long view, real estate can be a great place to have some of your money in it. With tokenization of it, it becomes a whole new wave because before nobody could get into those assets.

We’re going to see a lot of assets that were once highly illiquid become liquid through tokenization. Another area you’re going to see liquidity come to is in private equity. If you invest in a private equity fund, your money is tied up for seven to ten years and you have zero liquidity. You’ll start seeing private equity funds start to tokenize and a whole secondary market will spring up around private equity as well.

TSP 173 | Invest in Cryptocurrency

Invest in Cryptocurrency: You’ll start seeing private equity funds start to tokenize and a whole secondary market will spring up around private equity as well.

What is also exciting is that not only do you let people get into something that they haven’t been able to get into and liquid. For those people who want to invest in stocks, you can buy mutual funds. There’s always a certain percentage of people, I call them the “Laptop and Latte Crowd.” Those people at Starbucks with their laptops and they like to invest on their own and think they can outsmart the S&P 500. The blockchain is allowing quantmRE to let people say, “I want to buy homes that are within a certain area code or zip code of where I live because I know this market well. I don’t want to buy all the homes that you own.” When you have that kind of flexibility, you’re allowing people to use their knowledge and creativity to invest in something in a small zoom in way, like monopoly meetings Zillow.

I’m not familiar with quantmRE. This is the first time I’ve ever heard about this project, John.

It’s this concept of using the blockchain to take something that’s illiquid and making it liquid with some social impact thrown in. That goes back to what you said. A good analysis of what’s the incentive for people to adopt using a token that’s backed by an asset. It makes it much more compelling because it’s not so attached to Bitcoin’s volatility.

A lot of people ask, “What’s the point of Bitcoin?” For me, Bitcoin is a store of value. It is the equivalent of digital gold. It’s the world’s most secure way to hold and transfer value. There will only be 21 million of them, and about five or six million of them have been lost forever. When people say, “You can’t go into a store and use Bitcoin to buy a latte,” that’s like saying, “I can’t use my Ferrari to tow a bunch of firewood. It’s not designed for that.”

[bctt tweet=”Focus on things that move the needle in your life and build your life around that.” username=”John_Livesay”]

When you start looking at things on a global level, that’s what interests me. You zoom out and it’s the world looking for some digital currencies where they don’t have to pay fees to convert from dollars to pesos, pounds, and euros. You start to get a picture of how big this can be. I can’t thank you enough for sharing your expertise. Your personal story is riveting. How can people follow you on social media? Let us know what’s the best way to keep track of how you’re continuing to give advice.

We have a free eLetter, which you can sign up for at PalmBeachGroup.com. I don’t use a social media channel.

Go there for the free newsletter and that will get you in the world of your expertise. I personally have studied who you are, what you’re doing, and your expertise. It’s a world that once you start to enter, you feel like you’ve gotten some water after crossing the Sahara because it’s so refreshing and so easily understood in a way that’s not with all the hype but with all the insights. That’s what everybody needs.

Thank you so much, John.

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John Livesay, The Pitch Whisperer

 

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Tags: blockchain, cryptocurrency, cryptocurrency boom, how to invest in cryptocurrency, Palm Beach Confidential, Teeka Tiwari