Milu

Jensen and Brad are speaking my language

A good tell of how close we are to a bottom in a bitcoin downturn is the number of gloating posts show up in close succession so perhaps we're on the way up from here. And time to trim is when the 'have fun staying poor' posts show up on the other end. My conviction in the asset remains unshaken.

Sometimes people don’t want to invest 100% of their available capital 100% of the time. Looks at Berkshire for example, buffet has about $300b in tbills which have traditionally been the default store of value for him when he doesn’t find any investments that meet his strict return requirement. If and when the market has a big drawdown and some opportunities present themselves I would expect him to sell down some of his tbills and invest in stocks. Buffett’s tbills aren’t going to increase in value but his goal is to maintain purchasing power via the interest paid, so that when he is ready he can invest. Most people have some reserve asset that they use to store wealth in when they are not ready or not finding suitable investments.

I find most of these debates are just people at different stages in life with different investment philosophies and risk tolerances just talking past each other. One approach is to put 100% of your investable assets into stable stocks that you believe have legitimate IV, another approach is to put a high percentage of your inevitable assets into these stocks but also hold a portion in other assets like land, gold, real estate, bitcoin. Maybe you put another small portion into more speculative plays like venture capital, derivatives, palantir, Tesla. There is no right or wrong answer and what might seem safe to one person such as having 25% of portfolio in Berkshire and 25% in fairfax might look like crazy concentration risk to another person. Or somebody who has 2% or their portfolio in bitcoin and 3% in palantir might look stupid to the other person. There is never any real way to say what’s right and wrong, all you can do is look at some long term overall portfolio returns and even those can be based on a lot of luck.

Yea it’s an interesting trait alright. If somebody calls something ridiculously overvalued, bubble, worthless at $5k, $10k whatever, and that asset currently sits at $65k (after a 50% drawdown) you haven’t really been proved right.

I’m not sure how many places you spend money would accept a gold coin or bar either. The word crypto ’currency’ has always been confused the matter, should have been crypto asset. Store your wealth in gold, bitcoin, stocks, spend your wealth in dollars, euro, yen.

I’ll probably start buying some over coming weeks and months if prices stay at this level or drop further. I have a decent amount of cash to deploy, so unless any attractive stock opportunities present themselves then using this year to accumulate more bitcoin might be a good thing to do.

Might be worth buying some more bitcoin so if prices keep coming down. Maybe we will get to 25 or 30k if previous 80% drawdowns show their face again.

I always found the 4 year cycle a load of nonsense but I suppose if enough people believe in it then perhaps it becomes self fulfilling, I suppose many of the bitcoin bears would say the same about bitcoin Wasn’t 2025 a down year though which seems to break the 4 year cycle pattern, not sure what mental gymnastics people are going though to explain around that?

Yes I'm the same, I don't average up in multiple I'm willing to pay but have no issue buying a stock that I already own that has doubled, if the underlying earning power of the business has doubled. I don't really see that as averaging up in my head, but perhaps others do. To me averaging up would be if I bought a stock I liked at 15 times earnings, and then it went to 20 and 25 times earnings, I wouldn't be confident averaging up if I felt the earning power of the business stayed the same and all that changed was the multiple people wanted to pay for that went up.

I guess I just never thought we’d be getting to discussions around a government bailing out random assets that go down. Perhaps constellation software should get a bailout from the Canadian government, that’s down a lot right? And SAAS stocks have been hit hard to, perhaps the fed can buy a basket of CRM, Adobe, and Atlassian!

I have a bit of a mental block with averaging up, improving gradually though, but don't have any issue riding my winners to ever and ever higher levels of concentration, so I get to the same end point as you. Top 4 positions are around 60-70% of portfolio.

But what would be the purpose/need of a fed liquidity injection? If gold, which is an asset with about 10-20 times the size of bitcoin, dropped by 40% in a year, is the fed going to 'bail out' gold holders. I'm a bit confused by this.

Yes looks to be google playing to its strength in that it has a business expected to earn 150-200 billion in operating cash flow and they are planning to spend it all, open AI has to rely on capital raises which is. It as straightforward. We are getting into uncharted territory here with the level of investment so hopefully they are seeing the returns or pathway to returns.

I don’t fully understand why the media are reporting on the concept of a bitcoin bailout. What are they expecting would be ‘bailed out’ exactly. Bessent was asked this question and also made it clear that it doesn’t make sense. Then see stories in the media ‘bitcoin falls after bessent rules out bailout’. So much nonsense.

Will take a look, thanks.

Day to day for things like iron or other commodities, yesterday's price tends to be the best indicator of today's price. It doesn't follow some random process where each daily price is completely independent of the previous day. But over time it will go up and down gradually based on supply and demand. Yes there are probably some models that attempt to value gold or other commodities, but I've not spent much time looking into them. If they do exist I'd be curious what they say about gold at $5000, is it fairly valued, overvalued, undervalued based on this model, and how accurate has the model been in the past for estimating gold price. We are on the same page regarding bitcoin and its potential, but I'm just a bit more skeptical when I see people come up with a model to value it.

There isn't any way to quantitively value an asset without cashflows, this is the same for Gold, Silver, Rembrant paintings, vintage wine, collectables etc. It's more subjective and relative, but unfortunately can't boil it down to a scientific number, and anybody who says they can is lying. I still hold it though and have previously held gold which also isn't possible to value. Both of these are assets with some degree of scarcity that should trend updwards (in fiat currency) terms as long as governments continue to print load of a non-scarce assets (dollars, euros, yen etc)

Yea agree with most of this. I do wonder about some of the research many of these supposed though leaders put into the things they right. I see a lot of talk about how Mstr is doomed if bitcoin falls below its average cost as if this is something that has never happened before. Or that MSTR is going to be in some doom loop. While the bitcoin treasury company concept isn’t necessarily my personal choice, and I just prefer bitcoin, there does seem to be a lot of nonsense out there right now regarding some hypothetical forced selling event that is supposedly coming soon.

Thanks, yes UA may work out and agreed that as long as the big investments are showing good returns I don't mind a few small ones doing badly. My other question for you seeing as you have obvioulsy done a lot of research on the company. Is there any good metric to use to assess the valuation of FFH relative it it's peers and it's history. And how do things look now based on that. I know price to book is often used for these types of firms, Berkshire typically being known to be good value at 1.2 or lower, although Buffett gradually put less emphasis on this. Is Price to Book a similarly useful though not perfect way to assess Fairfax?

Yes that's a good point. With Buffett I could understand the logic of the companies he was buying, lots of big consumer brands with large moats, and demonstrated track record of success. Fairfax (to my surface level knowledge) have tended to focus more on deep value or turnaround plays, perhaps they have changed this now. Again I don't know enough about the company yet to have a fully educated opinion, just an interested observer and trying to learn more about it.

I hear this but then I see them taking a big position in Under Armour, which makes no sense to me. Maybe there is some logic but this is a beat up distressed apparel company. I also remember when they went big into Blackberry/RIM after it was clear that apple and the smartphone had destroyed the business, it seemed like a very confusing investment decision to me at the time (not hindsight bias) and it played out in expected fashion. And then deciding to be perpetually hedged or short during one of the biggest bull runs in history. Perhaps the sign of how good this business is is how it has still managed to generate such good stock and book value returns despite plenty of large capital allocation errors, not necessarily because of great decisions. I have started to read some of @Viking posts though and he does make a very good case for the company if they have indeed rectified these prior capital allocation approaches although seeing this Under Armour talk has made me question things.

Ya lots of people taking victory laps based on short term fluctuations. 6 months is nothing in terms of bitcoins acceptance or not as a store of value or some perfect hedge on inflation or debasement. Long term (5 year minimum) it has and I expect it will continue to be more than a satisfactory offset to any debasement. Gold was basically ignored from an about 2011 to 2023, now everybody loves it. The market has a very short memory.

Yes Tesla definately based on a lot of trust too, but I've followed and consumed about every interview or article written about Musk for the last 15 years so I have the faith (rightly or wrongly). Same with Buffett and Munger which made the Berkshire investment easy. Prem Watsa and the team I don't have this but would possibly like to start building it up. Probably need to read every letter, watch a load of interviews, find some books and get a sense of the person, the ethics, the culture, and then if that all passes the test for me, and the price isn't crazy, just take the plunge and buy some.

Thanks, it's definitely something I will look into. There seems to be a broad consensus on the forum that Fairfax is a great company, still fairly valued even after a significant run up, and has good growth potential ahead. To my detriment I have avoided paying too much attention to it as I typically avoid the conglomate/insurance company firms due to the complexity of these businesses. Although I did own Berkshire in the past and did well out of it, but that was mainly just based on my admiration and trust for Buffett rather than a deep understanding of the business and it's valuation.