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Fat Pitch

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Everything posted by Fat Pitch

  1. Too early to tell, but the most legit project at the moment is ESD. Incentives are being modified for a v2 to come out soon. I do think this is the future, but have just glanced briefly at the algo stablecoins. Any recs for leaders so far?
  2. No one will care about Tethers or any stable coin when the market finally decides to back an algorithmic stable coin.
  3. When does regret set in? $40k, $80k, $500k? ;)
  4. Taking a small victory lap. For those that think you have missed the boat you have to realize we are still early. Bitcoin going towards 6 figures is almost a foregone conclusion. Defi on the other hand look more interesting. Protocols like AAVE have successfully ported all the utility of commercial banks into smart contracts and removed 99.99% of the overhead costs of running such an operation. We are still very early as these protocols start to soak up capital across the globe as a banking platform for everyone. I think we are going to witness these projects surpassing the market capitalization of the current large financial institutions. There's a shift happening at rapid speed. A software business analytics company decided to allocate 250mm into Bitcoin instead of holding treasuries that pay nothing. People are slowly waking up that Bitcoin isn't a currency to be used day to day, but rather a substitute for the global bond market. Also there's lots of innovation coming out of Ethereum via the "defi" movement which is basically porting all the functionalities of banks, Wall Street, etc onto the Ethereum stack which will probably spread to other smart contract layer 1s. Having been in the space for the last 4 years+ this environment was what Bitcoin was built for. We are going to blow past ATHs and melt faces 8)
  5. Yes it's a form of arbitrage, but also understand the middleman is literally cut out thus you are witnessing the "true" yields that would be possible in traditional markets if regulations/rent seekers were eliminated. When you look at BlockFi, Nexo and others that are the centralized regulated version of defi on Ethereum their yields are half of that of defi.
  6. After I unloaded all my defi positions during the mini bubble I'm only holding BTC. I think the bullish trend in BTC, regulatory crackdown on exchanges and period of disillusionment occurring in Defi makes this sector untouchable for the foreseeable future. When I got into defi projects the valuations for Aave, SNX and others were 10mm-30mm. Even after the massive drawdowns they are hovering around 300-500mm. I think there's still more pain ahead.
  7. There's demand for stable coins in crypto for leverage/trading and other purposes. As a result yields are hovering around 5%-15% depending on the platform and liquidity is spread out. The yields are juiced up if the platform is offering a separate token on top for governance for providing liquidity. YFI builds out vaults (smart contracts) that allocates users stable coins to the best yield opportunities in the space automatically so users don't have to keep track of dozens of platforms and juggle their assets. YFI takes a cut for providing this service and that's how the cash flows are generated. What I want to highlight is in the crypto space a single person can write a few lines of code and start generating $50k a day in fees really fast if they find product market fit. How many other industries gives you this kind of opportunity? We are barely seeing the tip of the iceberg in terms of what can be done in this space. It seems like they get income from other tokens (both 5% yearly “maintenance”) and 0.5% withdrawal fees. This sounds like a frocking expensive checking account for users to me.
  8. I was in the same boat as you when Andre released the tokens. I bought as much as I could. While I like the model, the earnings aren't exactly stable. Most of the TVL build up was the result of unsustainable yields on over inflated defi valuations. I sold everything on the run up around $30k. The thing that stood out during the defi mini bubble, zero effort anon forks was able to siphon quite a bit of value. Imagine what focused efforts with VC funding can accomplish.
  9. ~10% at this point. Added a hair during COVID drawdown, but not much. Already very large and bumping my own person position limits. Am optimistic about the direction and recent events, but definitely consistently disappointed on timing. +1 here. ~10% and with the understanding this may drag on for another 3-4 years, with lots of volatility around the elections. Just don't see how the institutions can be recapped without taking care of JPS shareholders; CBO report pretty much said the same. Major risks are delayed timing, being dependent on the kindness of strangers, and another attempt at nationalization by Democrats in that order. +1 The IRR on this is still very attractive relative to the market even if you assume years and years of delay. I'd be more worried if I had to manage clients through volatility When you factor in opportunity costs and inflation that has been occurring this investment has been an absolute disaster. stupid remark, fat pitch. what inflation? over what period of time? what alternatives? if you compare SPY to FNMAS for example over various periods of time, FNMAS beat SPY more often than not. Inflation has been averaging 9%-10% the last few years depending which part of the country you are living in: https://chapwoodindex.com/ As for opportunity costs there are plenty. If you are savvy enough to read & and analyze smart contract risk you can become a liquidity provider and earn 100%+/yr via US stable coins on Ethereum. There are even insurance you can purchase to protect yourself against bugs for a couple percentage points of the capital you are providing. There are plenty of other options, but I rather not divulge them.
  10. ~10% at this point. Added a hair during COVID drawdown, but not much. Already very large and bumping my own person position limits. Am optimistic about the direction and recent events, but definitely consistently disappointed on timing. +1 here. ~10% and with the understanding this may drag on for another 3-4 years, with lots of volatility around the elections. Just don't see how the institutions can be recapped without taking care of JPS shareholders; CBO report pretty much said the same. Major risks are delayed timing, being dependent on the kindness of strangers, and another attempt at nationalization by Democrats in that order. +1 The IRR on this is still very attractive relative to the market even if you assume years and years of delay. I'd be more worried if I had to manage clients through volatility When you factor in opportunity costs and inflation that has been occurring this investment has been an absolute disaster.
  11. There's a shift happening at rapid speed. A software business analytics company decided to allocate 250mm into Bitcoin instead of holding treasuries that pay nothing. People are slowly waking up that Bitcoin isn't a currency to be used day to day, but rather a substitute for the global bond market. Also there's lots of innovation coming out of Ethereum via the "defi" movement which is basically porting all the functionalities of banks, Wall Street, etc onto the Ethereum stack which will probably spread to other smart contract layer 1s. Having been in the space for the last 4 years+ this environment was what Bitcoin was built for. We are going to blow past ATHs and melt faces 8)
  12. Seems like the capital requirements are now known otherwise why hire the financial advisers?
  13. Something is going to happen by May. Non bank servicers are all about to fold and it appears Treasury wants this to happen. Should be bullish for GSEs, but market is pricing in r-ship liquidation. Heads are going to roll soon. Yes, if there is a path of less resistance and easy way to solve this, why isn't it happening yet. Why wait when the result could be catastrophic? It seems that we're missing something. I agree. The joke appears on us. Mnuchin could have easily highlighted the FnF $100bn+ net govt payday when being plastered on his $500bn fund but he stayed silent. Add this to the list of the Trump team punting for 3.5 years, Ginsburg 2017, Atlas recent silence, SC refusing to take the case this term, Lamberth and Sweeney 2023+ after appeals, Calabria muzzled over NWS illegality post FHFA installation, etc -- and voila jr pref @ 17pct of par and common price below 2016 election date.
  14. So housing is a large % of the US economy and the Treasury is going to gamble with that market to keep that $30 billion overpayment from the GSEs? Sounds very reckless, but maybe they are looking for that political cover from the MBA lobby and Congress to go ahead. Or on the other hand they may be looking at legal pathways to zero out shareholders once and for all. I think a final PSPA agreement was viewed as a summerish to fall activity before all of this hit the fan. FnF may have issues after 2-3 months per Calabria which gets us to mid summer. Maybe if things are looking bleak by then its the catalyst that gets things done a little early. I have always felt treasury would not act unless forced. This previously seemed only possible legally but this certainly is a new fold. Political cover will more then be there as this was a bipartisan bill that forced this and MBA and the assoc cast of characters are howling. I guess taking a step back even from a non shareholder view I would question why would'nt you just do a final amendment and move on? The upside to doing another amendment is becoming the best option for all parties, even those that were adamant opponents before. The rub for treasury would be losing 30B.
  15. I bought the baby bonds via MFO after the margin call was announced. Figured there was enough meat on the bone to be okay, but now I'm out after the recovery. Most of these non agency mREITs are zeroes. MRA has a lot of non Agency MBS and residential whole loans. There's no way to properly value the residential whole loans and they were pledged to their repo lines. Those lines total 9.5 billion and they couldn't meet the margin call. I think the equity is a zero depending if the repo counter parties show MFA management mercy and bail them out. Many mREITs had their assets seized by repo counter parties and are being liquidated. TWO bit the bullet and sold out of their tiny non Agency MBS and took a 55% hit to book value... that means someone like MFA with a larger % being non Agency MBS is a zero.
  16. Economy is shrinking by -25% next quarter. There's zero chance of a V-shaped recovery when folks are living pay check to pay check. How exactly are mortgages going to get paid? This is much worse than 2008.
  17. So if Mark goes to Congress to ask for help for the GSEs... what makes you think the legacy holders will survive?
  18. Many ways: loss of private keys, low time preference changes in societies, Cantillon Effect, etc.
  19. Exactly. There ain't no such thing as a free lunch. I can see BTC being used to close on houses, buy cars, or send money overseas, but not an iced tea and a candybar at 7-Eleven. Other systems will certainly be built on top of Bitcoin, indeed they are already being built on top of Bitcoin, but if they are fast and easy, they won't be as safe. Once people realize Bitcoin is a sovereign digital bearer asset then all the utility value of the network will click in for them. I reckon by then it'll have 3 Trillion+ AUM. At this point, nation states can settle global trade through BTC and bypass US SWIFT system which then adds more utility value to the system. Then it'll just become a black hole soaking up excess capital and potentially giving holders a ~3% real rate of return on purchasing power without counter party risks... at this point government bonds cannot hope to compete and more capital will flood into BTC. Are you seeing this viscous feed back loop developing? The question is who will bootstrap this puppy to 1 Trillion+ to kick off the generational lollapalooza effect humanity has ever witnessed?
  20. a) If I buy Stelco at the right price and trust management to allocate capital I can compound very nicely, not just pop. Just requires discipline. b) The kind of companies you're looking at can't endlessly redeploy capital at a ridiculous ROIC. The very fact that they have a ridiculous ROIC tells you they can't deploy capital in the business. That's why they end up with tons of cash and doing deals at silly valuations, both of which depress ROIC. c) App development is becoming commoditised and it's viciously competitive. Picking winners is nigh impossible so while 100x is possible, 0x is probable, and I don't have access to nearly enough opportunities to offset that risk (do you, and if so how?). d) Summary: I'd rather invest in what I know and understand than punt in what I don't. I'm happy to have my life changed slowly, but surely. Just my view :) All I just read are excuses not to adapt to the changing environment that tech is bringing to the global economies. Very much reminds me of Plato's allegory of the cave when you mention tech to a "value" investor ;) I must look up Plato's cave, but FWIW I wouldn't describe myself as a value investor. In general I'm a value-aware growth investor with a weakness (I use that term deliberately) for a few deep value stocks. More broadly, as a personal investor I own both tech and startups (but not tech startups so far as I haven't found any good ones yet) and as a professional investor I would say I spend 75% of my time thinking about what impact tech will have on a given industry/company and how to benefit from it. That thinking has driven huge shifts in my portfolios over time. So I am moderately confident that you're wrong, although there's always room for improvement. The point is, none of that stops me from investing in an old-industry business if I think it has certain characteristics - for example a high (say, 20%) sustainable free cash flow yield, a solid balance sheet, and a management team that can allocate capital. (For clarity, I am not saying Stelco has these things. I'm interested but haven't done enough work. I was using it as a hypothetical example.) So, a question: leaving aside the general impression my comments gave you, what did I say above that was actually wrong? We are still in the early innings of tech disrupting the global economies so we haven't seen anything yet. I tend to fish around in the frontier tech (AI, blockchain) so I'm very confident we'll be shifting to a p2p world where commerce can bypass nation borders at the micro level and also give birth to a virtual economy (100% digital, detached from analog world). So with that lens the ROIC of the next ecosystems will surprise many as capital formation and coordination can be bootstrapped from literally nothing. The joint stock company formula that powered capitalism for the last several hundred years is about to get disrupted. What's great about digital is that it's not bound to the same physics of analog based companies (supply chain, distribution channels, etc). It may sound sci-fi, but I'm witnessing the building blocks being laid and there's a nascent digital economy already forming.
  21. a) If I buy Stelco at the right price and trust management to allocate capital I can compound very nicely, not just pop. Just requires discipline. b) The kind of companies you're looking at can't endlessly redeploy capital at a ridiculous ROIC. The very fact that they have a ridiculous ROIC tells you they can't deploy capital in the business. That's why they end up with tons of cash and doing deals at silly valuations, both of which depress ROIC. c) App development is becoming commoditised and it's viciously competitive. Picking winners is nigh impossible so while 100x is possible, 0x is probable, and I don't have access to nearly enough opportunities to offset that risk (do you, and if so how?). d) Summary: I'd rather invest in what I know and understand than punt in what I don't. I'm happy to have my life changed slowly, but surely. Just my view :) All I just read are excuses not to adapt to the changing environment that tech is bringing to the global economies. Very much reminds me of Plato's allegory of the cave when you mention tech to a "value" investor ;)
  22. On the latter point, I spoke for about 2 hours in depth about this at my annual meeting this year in NY. I think you're exactly on point here :) How does software "destroy", for example, Stelco? Or is the thesis just that software companies have higher ROICs and can therefore grow faster, provided demand is there? Because if it's the latter, you're right, but that doesn't mean you can't make an amazing return on a Stelco if you buy at the right price. And it may be easier/lower risk to make money that way vs investing in software, because 1) everyone is looking at software and ignoring the likes of Stelco and 2) it's not always easy to predict the winner software winners before the market does. FD: Microsoft is one of my biggest positions so I have drunk the Kool-Aid - but only to a point. It just comes down to opportunity costs and redeploying capital. Less decisions you have to make the better. Would you rather chase Stelco like opportunities (5% ROIC) and redeploy into another after you get your pop or focus on companies that can endlessly redeploy capital on your behalf at ridiculous ROIC? Tech based companies can scale to the masses in a blink of an eye vs traditional businesses. There's roughly 2.5 billion people (it's growing too) with a smart phone and they are all 1 click away from using your product/service. Your time is better spent angel seeding smart developers with sensible ideas and going for that 100x-1,000x than over analyzing some steel company that maybe might double your money in 3-5 years. The beauty of this is you only have to win once and your life and future generations are forever changed. I feel blessed in living such a world that affords these opportunities to anyone.
  23. I remember selling out of this stock back when Prem added those equity hedges when franchise businesses were selling below book value. I'll give them the benefit of the doubt that they may have been over-levered for a protracted recession, but boy what an error. For those "value" investors clinging on for hopes of getting validation, here's something to consider: "Software is eating the world". It's not "value" investing isn't working it's just that these companies are getting destroyed by fundamental shifts in the global economy brought on by technology. The opportunity costs are enormous when you consider tech companies can grow at 0% marginal costs while "value" companies are lucky to get 5% ROIC going forward.
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