SnarkyPuppy

And many also own gold. I prefer owning RE to Gold. But we are talking speculation on the rise of a new store of value - not an investment in a current one. If we accept that Gold is a speculative flight to safety store of value (90-95% of its value is not based on utility) + make the assumption (just for a second...) that bitcoin beats gold at its own game (durable, scarce, immutable, easily transferable, etc), then its a simple probabilistic bet on growing network effects currently priced at ~4% odds of working out (assuming bitcoin bull thesis = gold = $7tn).

Just like nobody is taking away our jr pref equity rights? ;D That's just in jest... I hope! I'm not saying it's likely in our lifetimes - but on a long enough timescale the immutable property rights offered by bitcoin/decentralized assets are what makes them so inherently valuable. Real estate and bitcoin can coexist just as real estate and gold currently coexist. One consideration that made me think about the crypto space from a different perspective was trying to step into the shoes of someone who lives in China, Venezuela, Russia, Morocco, Mongolia, etc as opposed to viewing things from a comfortable American's perspective. It's definitely possible I'm holding a bag of worthless tulips- but the more I focus less on the popularity/recent price surges and more on the idea itself, I come away believing that there may be something to this thing. It's imperfect now in the way that DOS was imperfect in the 80's/early 90's - and the beauty of "forking" seems to allow for seamless upgrades to the existing architecture

Agree, there is no comparison - bitcoin wins/will win each of these and more if you are skating to where the puck is going for me, the skating in this analogy is an ability to understand blockchain tech sufficiently to know what i dont know about this space. i dont see myself getting on this ice much less skating towards this puck put another way, while i can understand bitcoin as a store of value, there is an alternative to gold and cash/treasuries that is more understandable for me, namely real estate. has utility, cant replicate land and hard to replicate buildings, can transfer for value (albeit with transaction costs). when i read pfeffer's interesting analysis, i wonder why he analyzes bitcoin as an alternative to gold only (silver in passing) when he should really also include RE...isnt RE much bigger than gold as a store of value? RE is not easily transferable and your ownership is subject to the whims of government authority (ie you can be evicted from your house, nobody can take your private bitcoin unless they torture you). Keep in mind that these are theoretic extremes - but the concept of gold as a hedging asset taken to its logical extension is also a theoretic extreme. The most valuable aspect of bitcoin is that it is private property which cannot be taken from it's owner.

Agree, there is no comparison - bitcoin wins/will win each of these and more if you are skating to where the puck is going

How much has your life changed after a 12000% year? I stopped counting my crypto gains as Buffett says it is better not to watch the ticker and to avoid the noise. I missed XRP so probably less. I continue to add on big dips like just after Christmas and just before Thanksgiving. My life changed little as I became even more of a value investor. I still drive around my $2000 car. I stopped drinking booze and coffee this year when I realized they were both interfering with my thinking and so I could buy more crypto. That has created a far better change in my life than some additional wealth and one unexpected side effect of stopping all drinking and coffee is that my mild but worsening heart disease went away soon afterwards. Does anybody know why? (My impression was that the few drinks a week of wine or beer that I drank had the biggest effect). People spending money on coffee and booze should reconsider as the real cost of a $5 coffee is something like $5000 $5X10X10x10 by 2020 and probably many health effects as well so many who are poor, struggling or sickly in 2020 will often have only themselves to blame. The fear of loss being the #1 excuse not to buy is accordingly irrational. (And the #2 excuse don't know how ended when the public listings became available). This fall I have started to run into customers who are willing to pay in crypto which I always request for international customers. Many businessmen now realize the benefit of using crypto to pay cross border payments. It is nice to be paid in crypto and have it double and redouble soon thereafter as I am more motivated to do the work. I hold BTC, LTC, BCH, FUEL and ETH. I calculate the average daily compounding rate and generally buy that (which generally tells you which token enjoys the fastest rate of adoption). I also try to keep diversified between cryptos by buying tokens that are expected to go up when the competing token goes down like BTC and BCH and I stop buying when I get above my planned weighting due to massive gains. Of my coins currently FUEL and LTC having the fastest daily average compounding followed by BCH, ETH and BTC. I look for gains of at least 1% per day. I have been loading up on LTC on this big dip partly because I expect it to enjoy the soonest and greatest increase in the rate of adoption and partly because I doubled my planned weighting. XRP easily exceeded this average daily compounding but my bias against a banker's coin makes me irrational. What the hell is daily compounding rate? I'm bullish on crypto (and I told myself I'd be nicer in the New Year), but you quite literally sound like an insane person. This is not value investing - this is venture capital investing. Low probability but +expected value asymmetric bets (long term) mixed with frontrunning a very inefficient and illiquid market ahead of the likely inflow of larger volume (short term). The value of any of these tokens is a total guess - I'd be curious to hear your thoughts on actual valuation of any of these aside from bitcoin. (Bitcoin is the only coin I have a thesis for: flight-to-safety store-of-value which cannot be tampered with by any government - it will replace gold which itself is valued based on the same properties that bitcoin has, but does not have the immutable decentralized and non-tamperable aspects of bitcoin; first mover advantage will be solidified when wall street begins trading bitcoin first). I like ETH, but how do you value the token ether? I'm in it to frontrun the transition to proof of stake (lowering velocity -> increasing value) and wall-street liquidity inflow - and its simply event driven investing. But long term what is the value of an Ether? What is the value of a FUEL? What is the value of a LTC? Why LTC instead of Zcash instead of Monero instead of IOTA?

ESSX rental corp - nanocap based on asset liquidation value. Bought at ~75 cents a share; company was eventually sold for ~20-25 cents per share (depending on amount of escrow to be paid). Primary Lesson: Incentives are critical. Management incentives were not aligned with shareholders - simple as that. Secondary Lesson: Over-reliance on 3rd party appraisals of asset values outside of circle of competence. Posting this as a reminder to myself mostly - financially I lucked out and bought a bunch when it dipped down to .10-.13 cents for a few days, but the investment itself was lazy and a reminder of how important incentives are.

How much has your life changed after a 12000% year? Congrats, that’s awesome. +1 on congrats. How did you convince yourself to continue to hold when it started reaching significant amounts? And how did you convince yourself to go all in on crypto to begin with? I've been convinced that crypto was going to be huge and life changing since 2014 yet I never put in significant amounts do to the risk and due to the fact that I didn't think it was going to go exponential until sometime in the 2020s. I thought I had time and I didn't want it sitting as dead money until then. I'm not complaining my crypto gains have been incredible, but they could have been massive because I invested far too little even when I knew better. One thing that is good though is that I invested so little that I'm still holding and am not under pressure to sell. Congratulations for not only having the insight, but for having to courage to put your money where your thinking was. I started listening to Naval Ravikant and I felt he had a strong grip on a lot of philosophies that were more within my circle of competence. The one area I didn't understand that he was (and still is) extremely bullish on was crypto and that made me look a lot closer. Curious to hear your thoughts on how things play out from here? BTC replacing gold (~$350k per BTC) is such an obvious thesis to me - but ETH is harder to value. I do like FUN (Funfair coin) - large industry ripe for disruption; solid dev team; +value for both casinos (reduces cost) and customers (increases trust). Interestingly, FNMA prefs continue to be my largest position and this should resolve itself in the next 12months.

I know right- it almost reminds me of those who look at the recent price moves and immediately conclude bubble.

Appreciate the condescending reply - the tone immediately made me realize how everything I wrote is silly and outright stupid. Can you please send me a list of your investments so I can just clone you? Network effect is probably in the top 3 requirements for a store of value asset. Bitcoin is currently winning the network effect game. Once again, I'm not a zealot and my opinions will grow as facts change. I hold some of the smaller coins in crypto as an effective hedge on bitcoin losing its current network effect status. And great idea with the interest earning crypto-asset. Must be nice to be able to just come up with million/billion dollar ideas on the spot and not act on it. I would advise that you create this - but I hate spending time giving advice to people who don't want to follow it. In response to Jurgis, the answer is, I don't know. But I also don't know why gold? vs why silver, vs why palladium, vs why granite? vs why limestone. I don't really need to know or understand to know that they have a value in the market. The internet and tech in general have shown to be a way of the future. Internet real estate, which takes the form of domain names, has shown to be just as valuable as tangible dirt and soil real estate. Why? again I am not an expert and do not know. The only question one should be concerned with, has to do with whether it is sustainable. I have started to believe it might be. Palladium and silver are valuable as well, because they are used as a store of value (silver) and have industrial uses (Palladium is a catalysator metal). Platinum also has industrial uses and is also more expensive than Gold. All of the above are rare in the earth crust and expensive to mine. Gold is pretty to look at (shiny yellow color) is non corrosive and easily malleable,which made it the metal of choice for precious things since many thousand years ago. One can argue about the value to store wealth in it, but the above will always make it worth something. In a time of crisis, it has proven to be an enduring way for means of exchange (also in WW2 for example, cigarettes in Germany worked better). I don’t think that crypto currencies, which can easily be replaced with another crypto currency's, have the same durable aspects to it than the above. It is not even clear to me that in the time of a real crisis, you will have access to internet or a computer. What would a crypto currency be worth in such a case? I think this aspect to important for those that want to have a vehicle to store wealth. Right now, it seems to me that Crypocurrencies is just a bet that more suckers will be drawn into it in the near term future, just like buying internet stocks in Y1999 or even gold in Y1980. This is the consensus view. Money is made by having a variant view on consensus (and being right, of course). Price has gone up tremendously, but <1% of the world uses bitcoin and the liquidity pales in comparison to what it will be if even a 100bps of wall street/pensions start buying it.

Found this interesting (from 2015)- https://www.cato.org/blog/we-decide-keep-fannie-mae-around "1) Open up the charters to competition. If we learned anything from the rampant corruption that characterized early 1800s U.S. state banking, it is that legislators shouldn’t give out exclusive charters. Accordingly, the government should delegate chartering authority to the regulator and allow anyone who can meet the requirements to get a charter." Check. Skipping ahead: "4) Break ‘em up. This might be the most controversial, but simply allowing other institutions to enter the market is unlikely to guarantee sufficient competition. We broke up Ma Bell. Under any antitrust standard, Fannie and Freddie are a duopoly. Unless we are repealing the Sherman Act, the two companies should be broken into at least 6 pieces each and barred from merging. Existing shareholders would get shares in the off-spring companies."

Ditto.

Appreciate the condescending reply - the tone immediately made me realize how everything I wrote is silly and outright stupid. Can you please send me a list of your investments so I can just clone you? Network effect is probably in the top 3 requirements for a store of value asset. Bitcoin is currently winning the network effect game. Once again, I'm not a zealot and my opinions will grow as facts change. I hold some of the smaller coins in crypto as an effective hedge on bitcoin losing its current network effect status. And great idea with the interest earning crypto-asset. Must be nice to be able to just come up with million/billion dollar ideas on the spot and not act on it. I would advise that you create this - but I hate spending time giving advice to people who don't want to follow it.

There continues to be a massive disconnect between two (very general) groups of people: - Those who have spent a significant amount of time understanding the benefits of the underlying innovation (simple combination of incentives/game theory and cryptography) and identifying areas where the fact patterns of that innovation (scarcity, reliability, transferability, immutability, and fungibility) provide incremental value in comparison to existing markets/conditions/assets. - Those who have spent minimal time analyzing these fact patterns while simultaneously taking definitive stances on the overall implications of these assets based on the fact that: a) the types of people who have bought into bubbles in the past have bought into crypto, b) recent substantial increases in absolute price are consistent with patterns recognized in prior bubbles, c) focusing on the current volatility/market size/transaction speed/cost and not extrapolating where things will be in 10-20 years. Among others. My opinion is there is heavy bias involved here - primarily recency bias but many others exist. When I first learned about crypto, I had the same reaction as everyone else - bubble, stupid, pointless, no intrinsic value, people are going to be taught a lesson - but these opinions were not high conviction opinions resulting from thoughtful analysis. A large percentage of bitcoin bears are misunderstanding (or haven't bothered to even try to understand) the most basic elements of its structure (e.g. supply). I think we can all agree that when seemingly everyone is playing a game of opinion telephone, there sometimes exists opportunity. Not the best example- but everyone is familiar with the odds of Trump becoming president back in mid/late 2015- most disclaimed any potential favorable outcome of Trump becoming president as "absolutely ridiculous" while a few people took the time to think through why the fact patterns of Trump's disposition and strong persuasive skills ('Influence' anyone?) may be heavily influential in the current political environment. Things are not always going to play out as they immediately seem, and it's a mistake to dismiss everything based on immediate hunches. With that said, it's fine to not have an opinion, but I think most are starting from a position of bitcoin=worthless and working backwards from that conclusion. I think there's some value here, everyone is playing opinion telephone, and there remains great asymmetry between the current price and the eventual bull thesis price. I have not heard a solid argument as to why bitcoin will not replace gold as a flight-to-safety store-of-value. Gold's physicality is not what makes it valuable. Gold is inherently speculative. Bitcoin is volatile today but this is largely irrelevant - the question is would Bitcoin be volatile as a $7tn asset? People hold gold as a hedge against the current financial system/fiat currency - if you follow this through to it's logical extension, we would have a society where gold is used as a primary payment system through physical barter - this worked hundreds of years ago when societies were localized prior to the innovations of telephones and the internet, but becomes increasingly inefficient (and even a "con") when compared to bitcoin which requires no physical movement. This isn't a 100% home run. It's probably even < 50% chance of happening. But it's absolutely >0%. Betting on asymmetric +EV probabilistic outcomes where there is variant perception against telephone opinions will do well long term. I'm sure many will continue to post the spot price of bitcoin in 2 months if it drops 80%, but this is no different from the grandma buying bitcoin because it has gone up 15x in a year. It's a very long term binary outcome (IMO). No margin of safety though, so it has to be a small position in the designated speculative bucket of a portfolio. In the short term, short of some major event (which is definitely probable), wall street is going to flood the spot bitcoin price with liquidity. I'm not a zealot though - this just continues to be a strong probabilistic bet. Munger criticizing it gives me pause as he preaches not having an opinion on something until you understand it in great detail. Either he hasn't done his homework this time, or he has and he's fearful that consensus changes the supply limit if the deflationary aspects of limited supply result in a spiral, causing consensus to agree its in the best interests to modify the 21mm limit. This only happens at a much higher price than todays. Last disclaimer: I'm wrong sometimes, and SD (who is demonstrably more thoughtful than me in general + much more informed on the granular aspects of blockchain than me) is increasingly a bear at current prices. This also gives me pause.

I sure hope so. I'm buying more under $9K, under $5K would be ideal. Just curious, but how are you determining your price points to add? There is no real way to determine an intrinsic value, so is it just based on regressions or prior trading ranges? I can't give you an exact value, but if Bitcoin becomes what I think it will you will have 7 Billion people who want to own and use those 16M-20M coins (depending on how many you think are lost). I don't know if the price in 10 years is $500K or $25M, but it won't be $5K unless my thesis on bitcoin is entirely wrong. If that is the case then you probably shouldn't buy it at all as $0 would be my best guess. I've been buying on the dips since 2014 and it has served me well building my position. I think the real runup is going to be in the 2020s. As we go from way less than 1% of people using/owning bitcoin to 20-40%. Facebook has over 1 Billion users, what happens when a billion+ people want Bitcoin? I still think that there is plenty of time. This drop will be one of many along the way. It's also just basic expected value. I personally value based on golds current market cap and reverse engineer breakeven EV probability. Think we are around ~3% now but forget offhand exact % at $13k. Is there a >3% chance bitcoin becomes a prominent store of value?

Agree if it goes into his pocket. Not the case here.

maximizing warrants does not seem to be a priority for any congressperson or senator, even if it is for some people on the message boards and moelis / ackman / rnc. I used to believe it made sense to believe in the warrants' appeal but no one in power has spoken up, despite many opportunities to do so. mnuchin very much wants to be trump's shining boy imo. eg didnt lambast trump over charlottesville notwithstanding his jewish heritage (emphasis on ish as i think his true heritage is $GS). i think mnuchin very much wants to take credit for taxes and soon infrastructure by giving trump a $100B check courtesy of the warrants. just wouldnt be mnuchin like (given his $GS heritage) to piss away this opportunity. you can take the man out of $GS but you cant... Possible we are conflating incentives here? I think you're right, but can also very easily see a reality whereby re-election incentives are #1 and maximizing benefit to taxpayers (by monetizing warrants) is not actually important to trump and team. What if Trump and Mnuchin view odds of re-election to be greater by restructuring and turning GSEs over to bank-owned institutions (increase fundraising and support by large banks in 2020), as opposed to reinstating the old model (which by the way, the average genius voter considers synonymous with the cause of the financial crisis)? Maximizing value of warrants implies this heavy assumption that trump and mnuchin have fully aligned incentives with the taxpayer. Big assumption. Removing any contingent liabilities (outstanding litigation) by restructuring back to old model could be seen as a risk acceptance of a low probability outcome (NWS reversal), for which they can blame the Obama administration for when the time comes. I'm the contrarian here in a thread of contrarians, but maybe it's not so crazy that the prefs are still trading at such a wide discount. I'm very long - just like to pose these questions to the group to get a sense from much smarter people than myself.

Mnuchin was recently removed as a defendant in one of the lawsuits (fairholme I think?). Is there any significance of this? Is it consistent w anything that needs to happen for Moelis?

Ding ding ding

am i correct in saying that the bull case for the prefs now is that because of this tax bill the DTAs are worth less and thus they will have to take a write down and thus this will force trump/mnuchin to act to "set them free"? IMO- There will be a small capital buffer put in place w/ strong language towards no recap/release. Will be a non event. Could argue though that one of Mnuchin's legacy bills (tax reform) has its votes leading him to be more candid now. Think we all should have learned to expect the most conservative outcome by now.

I disagree

Maybe a very small % of the bulls actually understand the technology. Most people are just jumping on the hype... recently had a friend (kind of a stoner, never invested in his life, does some football gambling) tell me he's concidering going into bitcoin as it seems like a guaranteed investment. ;D This is a very recent group of people who have joined post $10k+. It's fine if you don't buy it, it's inherently speculation given there is no margin of safety. I just wouldn't be as proud as some who think they're Ben Graham by yelling the word bubble without any actual analysis other than looking at a historical squiggly line.

Not sure I understand the volatility argument. There's naturally going to be volatility in a new asset class as it becomes a store of value. We're valuing the future state which is why the bet is so asymmetric. If it hits $7tn, it won't be volatile. Volatility has actually decreased as the price has risen over time. There's an interesting phenomenon in bitcoin where the bulls generally have an intricate understanding of the value proposition and underlying aspects of the technology (and breakthough) and bears have very limited understanding largely due to kneejerk reactions.

Not sure I understand how it has "no game changing benefits" as compared to gold when you can transact in bitcoin literally without an intermediary.

It doesn't add up. If there's been an agreement across Mnuchin, Corker, Henslaring- why is he fighting so hard for this bill?

The immediate kneejerk reaction of "bubble" continues to keep me interested. No debate that this is inherently speculation/gambling (as opposed to investing with a margin of safety) - but simply because something is speculation does not warrant immediate rejection (in my opinion). If you're offered the opportunity to bet on a 50/50 coinflip with a payout of +$1000 if you win and -$100 if you lose, it would be irrational not to take the bet, despite the fact that this is quite literally gambling without a margin of safety. I think the kneejerk reaction of calling bitcoin a tulip misses the point. The 'gamble' has become less attractive at $16k, but the replacement of gold as a flight to safety store of value is a sound thesis. The lunatics of the world have proven there is a $7tn demand for this type of asset (it's not a currency) - and what better attribute to have in a flight of safety asset than a decentralized coin which cannot be tampered with by the government? It's perfect for gold freaks (long term). Bitcoin today is valued at $277bn market cap. If there's a >= 4% of bitcoin replacing gold, this is a "good bet". Not investing, but a good bet. At $1k per bitcoin, the breakeven was >= ~0.3%. Those who saw this without screaming bubble made money. In the short/medium term, I also would be keeping a close eye on the impact of institutional liquidity flooding in to an asset which today only trades at 1x the daily volume of Apple. In some ways this is a reverse bubble in that retail is first to hold the bag. I've sold some as the expected value has gone down, but I would be absolutely thrilled to buy more at a certain price.