no_free_lunch

So again, I am no expert on this. However from what I have read, the chain IS decentralized, sort of, and still run by the individual banks so that allows them to develop trust and audit the transactions. The banks will develop relationships and balances with other financial institutions and ramp up volume as the trust builds. If they want to transfer to a new institution and one of the banks they do buisness with has a relationship then they can "ripple" and bridge across those relationships. I suspect there is much more to it and I don't understand the inner workings of bank transfers other than I am told it is a slow process when going across countries. There is also this. It seems like it is slowly gaining adoption and ultimately real world evidence is what matters. https://www.cnbc.com/2017/11/16/american-express-santander-team-up-with-ripple-on-blockchain-platform.html

You are absolutely right, they are inflationary to the fiat currencies but too small currently to have a big impact.

The advantage is it is much, much faster as you don't need to do mining. They do appear to have a custom set of validators, so you are trusting ripple to be honest about which validators they use. I get that there are some issues here. This thing should not be worth $360B. Yes it does not have the robustness of bitcoin. However, for actually getting things done it does have some advantages. I was just replying to the "other use cases" question, which I think this pertains to.

It is not really centrally controlled. My understanding, and I am no expert, it is more an exclusive club of consensus generating nodes that work to stitch together the transactions and create each new block. However, there isn't the wasteful mining happening, there is instead more trust involved here. It is a different approach and it has some advantages.

Ripple has another use case. It is a private block-chain that is used for quick money transfers. Apparently transfers are just a few seconds to complete vs 10 minutes for bitcoin. Since it is private it has a mammoth advantage with energy efficiency / transaction capacity but you lose out on the robustness of a decentralized currency.

Honest question about efficiency and transaction costs: Given what I've read about the transaction costs for bitcoin and the amount of computing power needed to validate transactions, it seems like these two points are potential problems, not solutions. Seems like infrequent, high-priority transactions might be well served, but small and frequent transactions would get killed by the transaction costs. Is that a bitcoin-specific issue or a more general block-chain challenge? I have been thinking about this too. They just can't write it all to the chain, it takes too long and incurs significant costs. Unless they are using something other than bitcoin. I wonder if they are running their own private chain / database that they periodically tokenize (basically just encode everything to say a single 256 byte string) and then they write that token to the block-chain. So you can then look at their chain and verify that at each step it was linked to the true block-chain which provides your proof of legitimacy and timing. Just a theory.

About +14% in CAD. +21% in USD. 20% cash for most of the year. I benchmark to the S&P 500 and I beat it if you exclude my cash. I am happy with these results. I generally outperform in a down market but in the meanwhile it is tough just to keep up. TSLA and Bollore were my big winners this year. I don't want to discuss my losers :) .

The spread between the different series has been closing this week. FNMAS (high yielder) is basically flat, while FNMAO (low yield) is up about 10%.

Not to doubt you hobbit but even fairfax india isn't pricing in $1.2B for BIAL. In their latest 10q they run a dcf model and estimate their stake in BIAL at $592m. There is some verbage around the additional purchase that they basically overpaid to convince BIAL to sell.

Anything in particular for the puts?

Yes thanks Midas. I am in FNMAJ, seems to have a good balance between discount to par and yield. FNMAO (amongst others) is very tempting as it will probably just be a conversion to common so might as well get the most upside. I hold FNMAJ just in case something crazy happens and they turn the divvies on, seems like a good compromise. Have by no means done extensive research as Midas has, so open to suggestions on this. I am also at a positions size where liquidity is not an issue.

Sure, I will contribute. GUD.to. It is more of a multi-year stock so we will see if anything happens over the next year. There is a thread on it with much better information that I can quickly throw out.

Here is a legal use case. https://cointelegraph.com/news/ethereum-blockchain-used-by-united-nations-for-sending-aid-to-syria

"after years of tireless effort and billions of dollars invested, nobody has actually come up with a use for the blockchain—besides currency speculation and illegal transactions." This article is contradictory. The use case, as they point out is, illegal transactions if nothing else. Done. The fact that the transactions are illegal is irrelevant to it's utility, this isn't about ethics. You can also add to that safeguarding assets for individuals who live in countries where confiscation is a threat.

The 15% upside assumed a 50% conversion rate and then the commons subsequently falling 30%. So 35 cents on the dollar. I am just not sure what they are basing these numbers on. I don't think the preferred holders would agree to those terms when the companies are profitable.

Merry christmas! Thanks for all the ideas. I am literally richer having interacted with you all. This is the best online investment community out there.

There was an article on benzinga where some fund manager was discussing possible conversion scenarios. He was modelling the jr prefs converting at 50%, 75% and 100% of par into shares. I am not even going to bother referencing the article as there wasnt much too it. However is there any justification for conversion at less than par. I was under the impression that the AIG conversion happened at par so thought we would get that here too, assuming things even go that way.

To go back to the core small business / single security debate. One of the advantages to securities is that you can fractionally own them, this is much harder with a small business. By going 100% on a single stock I think you are losing out on this advantage. I can't help thinking that you should be able to find 2 stocks. Maybe go 60/40 if one is better odds. Even with berkshire which is perhaps the safest company on the planet , you just never know. Some legal issue or unforeseen event can always take it down. Live to fight another day, the way I see it. If you can find stocks with 100% upside, then you will be able to make it back. Even if you lose half your money on a bad stock pick it will just set you back a couple years until the other stock pays off. I think again it really comes down to the amount of time it would take to rebuild your portfolio, then adjusted for your age. There is a certain point where going all in on one stock just doesn't make sense, in my opinion. Regardless of the potential return.

For Viking and those others who concentrate, do you mind indicating what your portfolio size is relative to your current annual savings rate? E.g. 15 years of savings. I don't want to disclose too much but I am say greater than 10 x of annual savings.

I have been thinking about this as well. I don't know about going all in on just one stock but I have found it very tough to build a diversified portfolio that can beat the market. I have cut back to only 5 or 6 investments over the past couple years, for me that's quite concentrated. I hold roughly half of my portfolio in index funds and half spread across this small group of investments. My goal is to get those 5 or 6 companies down to 3 or 4. There just aren't that many good opportunities out there so even with 5 or 6 I am compromising.

Another WSJ piece on the GSE's. https://www.wsj.com/articles/how-the-great-fannie-and-freddie-dustup-could-end-1513880901?mod=e2tw

It is around 1.05x book today. When I look at this thing, I wonder though if it is a good investment. The performance fees seem huge and I am a bit concerned how they can perform given that hurdle. For instance they have $2.5B assets or $2B equity against $105M in performance/advisory fees in the first 9 months of the year. That is over 5% of equity in just 9 months. These fees are a bit lumpy and so it is tough to gauge what they will be going forward. However that seems to be a high take relative to the equity stake. I can't help but think of GLRE or TPRE when I look at this. Two companies backed by excellent managers that yet have failed to deliver. Fees are not the whole story in those cases but they definitely cut into the returns.

Why is a $25 preferred share going to convert to 2.5 $2.70 FNMA shares? I get that if there is an exchange and a recap procedure the fnma shares are going to move in price. However where does the $10 FNMA share price that is implied come from?

RROS, ;).

I can't access the full article but there is a WSJ piece on the GSE's being retained. https://www.wsj.com/articles/government-shifts-gears-on-fannie-mae-freddie-mac-1513515600