The endless offer

Changing the world, one predatory loan at a time

Off late, everything is fintech. My barber has renamed his establishment as “Fintech Hairdressers” because he accepts Paytm. Most of what passes for fintech today is lending and payments. And on a long enough timescale, every goddamn startup becomes a fintech and every fintech becomes a lender. 99% of fintech is having a fancy UI and a whole bunch of other nonsense.   

This is is the promise of fintech – we’re going to destroy the old stodgy and staid incumbents 🙄

“The banks are extremely vulnerable” because they have not kept up with what customers expect, saidMark Goldberg, an investor at the venture capital firm Index Ventures. He predicted $1 trillion of market value could transfer from old guard financial institutions to tech companies over the next two decades.

The New York Times

But what makes you a bona fide fintech is a ridiculously high predatory interest rate.

Here’s an excerpt from this piece on how gold lending seems hot by Arti:

Rupeek, for instance, charges 8.5% and the average blended interest rate is 17-18%. indiagold, on the other hand, offers rates starting at 9%, with what it calls a “jumper plan”. Abbot of indiagold goes into some detail: you start with 9%, but if you fail to pay one EMI the interest rate will jump to 12%; if you fail to pay two EMIs this 12% will jump to 14-14.5%.

Consequently, customers are usually relaxed, and they tend to delay and miss EMIs; nearly 70% of gold loan borrowers miss EMIs, according to Abbot.

The Morning Context

And who can forget the recent action against shady Chinese lending apps that had very reasonable interest rates:

The flipsides, however, were the high interest rates ranging from 800% to 1,000% on an annual basis and the pack of collection agents that hounded him if the repayments were even a day late. Abhishek Makwana died of suicide in December 2020, but ironically, he had repaid most of his loans.

The Ken

Here’s some more fintech:

But in the last year, the easiest way for retailers and online stores to get high-end devices into working-class people’s pockets has been through a new method of lending: collateralizing smartphones. Vendors are selling smartphones to first-time borrowers on high-interest payment plans financed by loan companies, but only after users install an undeletable app at the point of sale. The apps can then monitor repayment behavior throughout the duration of the loan. One late payment leads to instant blocking of the phone, rendering it useless.

Rest Of World

I think today a lot of what passes as fintech is just utter nonsense. If you truly look at everything that’s being passed off as fintech, you’ll see that just a handful of companies are actually solving real world problems. Everything else is just fancy UIs, non-existent business models, and a boatload of NGO donations from VCs.

Empty threats

This Franklin Templeton saga is like a long soap opera, it never seems to end. First, there were reports that several people from the top management of Franklin had redeemed their investment in the troubled debt funds before Franklin decided to shut them down. And then there were reports that Franklin allegedly gave preferential treatment to several promoters and companies in whose bonds it had invested.

The Morning Context has done some amazing reporting on all the alleged misdeeds and irregularities at Franklin. Here’s an excerpt from this Morning Conext piece on the top brass at Franklin redeeming before the funds were closed to be wound down:

But these withdrawals are not as innocent as the explanation from the company makes them appear. Going by the audit report, these withdrawals happened when these individuals were aware of the stress in the schemes, making it a case of alleged insider trading or acting while in possession of unpublished price-sensitive information. 

From the piece on Franklin’s preferential treatment to promoters and companies:

An important point to note here is Kamath’s admission to defending ADAG not just internally but externally as well. To be sure, this email excerpt is part of an exchange where Kamath initially raised concerns about the falling cover, followed by Jhunjhunwala taking offence to these concerns. 

On Tuesday, Economic Times reported that Franklin’s global head had threatened to exit India if there was any regulatory action:

“If we are hit with unfairly large penalties — whether by fine or disgorgement — that not only would discriminate against a major US-based global investment manager, it also would cause us to cut jobs and otherwise pull back our Indian operations,” Franklin Templeton’s global chief executive and president Jennifer M Johnson said in a note to the Indian ambassador in Washington that ET has seen.

Here’s a piece from Sucheta Dalal with some historical context about the various shenanigans of foreign-owned financial entities in India.

When are facing an existential threat, deliberately shooting yourself in the foot is a bad idea. But FT probably didn’t get the memo.

F.I.R.E. in the hole

The Financial Independence, Retire Early movement has become all the rage. There are multiple versions of FIRE. On the extreme end, you have people who try to save like 70-80% of their income by making their own clothes, soaps, avoiding going out, cutting TV, and so on. On the moderate end, you have people who try to save as much as they reasonably can to retire early.   

But FIRE’ing doesn’t always end up the way people assume from reading all these plastic success stories and seeing those photoshopped Instagram photos. Things can go horribly wrong.

I was reminded of this after recently reading this post about a retired FIRE blogger (“LivingAFI”) who was forced out of early retirement after five years due to unforeseen circumstances. The long story short is that LivingAFI and his wife enjoyed their first few years of early retirement, but then things went downhill.  As both of them watched their friends get richer and go on fancier vacations, the wife started to feel like she was missing out.  One thing led to another and she ended up having an affair which led to their divorce.

Archego, going, gone capital

In the last issue, I just briefly summarized the Archegos saga and details were scant then. But since then a lot of skeletons have come out of the closet.

Aaron Brown writing for Bloomberg Opinion

Not every credit loss is a mistake or a disaster. They are a natural part of the financial system. Other than the amounts involved, the Archegos collapse is nothing unusual. Hwang has a reason to be depressed, and some at the Wall Street banks may be looking at pink slips, but the rest of us can go about our business unconcerned.

Gillian Tett of the Financial Times:

But the key point is this: the Archegos rubble shows that years of excessively loose monetary policy have not just left asset prices elevated but created half-concealed pockets of leverage, too. When the two collide, disaster can erupt. And the big headache today is that while price froth is visible, it is frustratingly hard to tell where the pockets of excessive leverage lie, or how exposures are interconnected, since the shadow banking sector is so untransparent.

Nomura which took one of the biggest hits was probably just getting into its plan to make money from prime broking until…

As Nomura begins an internal investigation of the debacle, a graph prepared by an analyst at Nomura’s prime brokerage desk in Tokyo, and seen by the Financial Times, appears to show that the bank ramped up its financing of US securities by more than 500 per cent in the months leading up to the Archegos fire sale.

Financial Times

Here’s a Ben Hunt take on this whole sordid mess.

Endless bids and offers

This is a really fascinating article with a unique angle on the side effects of easy money. It’s about how quickly the markets have adapted to the gush of easy money searching for yield. A few amazing excerpts:

Seed rounds raised a median of $2.5M at a $10.5M post-money valuation in ’20, this compares to $1.8M / $8.25M in 2017 & $1.3M / $7M in 2015. We’ve seen the time between funding rounds cut dramatically with some companies such as Fast reaching $1.0B valuation inside two years.

Prior to 2020 there were only 10 trading cards that ever sold for $1.0M+ in history, earlier this month Goldin Auction had 5 cards sell for $1.0M in a single night.

Prior to 2020 there were only 10 trading cards that ever sold for $1.0M+ in history, earlier this month Goldin Auction had 5 cards sell for $1.0M in a single night.

A gaggle of other links


Everybody Loves a Good Interest Rate Cut…Except the Savers

Five Investing Powers

The Power of Compounding

How Recessions Change the Winners in the Stock Market

Value Investing Is Dead? No, Long Live Value!

Fund management

Cathie Wood and Content Strategy


Why Investors Can’t Quit U.S. Debt

Are Demographics Disinflationary?

Mario Draghi and Italy’s years of crisis.

Startups & Venture capital

Cash App is Culture (Part 2)

“Buy and Hold” No More: The Resurgence of Active Trading


People’s Expensive NFTs Keep Vanishing. This Is Why

An Oversupply of NFTs Is Going to Kill the Golden Goose


The journalism crisis across the world

Everybody want to Clubhouse


The Long, Sweaty History of Working Out


Reports predicting lower future expected returns are noting new. But nonetheless they scare the crap out of you. Here’s one from The Economist:

All of this adds up to annualised returns for Gen Z of a mere 2% on a 70:30 portfolio of stocks and bonds—not even a third of the historical return of the baby boomers (see chart). These guesses could prove too pessimistic, but perhaps not dramatically so. The authors concede that a serious bout of deflation could drive up bond returns. But currently inflation, not deflation, is the worry.



Hope you enjoyed this Tipsheet.

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