ValueArb

Can't wait until Elizabeth Warren is running Tesla and SpaceX by fiat, that's when we'll see real progress in EVs and space!

Since North Korea has nukes, and feels it's the rightful ruler of South Korea, we should accept its opinion and let Kim Jong Il have it? Since Russia has nukes, and feels Ukraine should be part of it's sovereign territory, we should let Putin have it? If we don't think the price of freedom is worth paying a bit more for titanium, oil and gas, what is it worth? Trade with Russia means a whole lot more to Russia than it does to the rest of the world. It has to export to survive, so its a strawman to say if we don't give them Ukraine (and then Georgia, and Belorussia, etc, etc) they'll stop exporting, that would be Putin's suicide.

Seriously, Russias GDP is smaller than Italys. Far smaller at this point, probably not even top 20 anymore. Is basically a larger version of North Korea. How much should we care about what Kim Jong Il thinks? And know your history, Russian governments have always been horrifically backwards and oppressive. They treat their own people as disposable serfs. So again why should we accept any of their wrong headed opinions? Putin is going to claim whatever he needs to get whatever he wants, our job is to say no to him, force him to behave himself and ensure he doesn't invade other countries. We’ve been doing it for almost 80 years and now is not the time to stop.

I've peaced out as soon as he claimed russia has a legitimate security concern over NATO, and that they need a new alliance in Europe for collective defense just like NATO. I've also read enough detailed summaries of the Istanbul peace talks from participants I need to watch a 58 minute video for his dubious opinions? Clearly Putin isn't an honest negotiator, he's shown this over and over again that any agreement he signs is pure toilet paper. Anyone who thinks just giving him part of Ukraine to "end" the war won't end with him taking all of Ukraine is making an extraordinary claim that requires extraordinary evidence. Opening a bottle of champagne over that? Delusional. And I've never called Putin a madman. He was just following Dictator plan A, appease the population with an "easily winnable" war that will increase the territory and resources under his control. Just turned out not to be winnable. Very clearly he's trying to restore the Russian Empire just like the Tsars and just like Stalin and Lenin did with the USSR. It would maximize his power and his legacy. And it has nothing to do with NATO. Again there is a history of Putin saying he didn't care if Ukraine joined NATO, that he'd even consider Russian joining before 2008. Then he decided he wanted Ukraine and it suddenly changed. And NATO is a defensive alliance, its charter clearly doesn't allow it to be invoked to invade anyone, so the only risk to Russia from NATO has been from its own expansionist tendencies. Its a laughable "red line" akin to saying if you try to put sprinklers in that building we are going to burn it down. And again why should we give a shit about what the elite in this toilet bowl of a third world country think?

This piqued my interest, but Hertz just looks terrible to me. It is generating a ton of negative cash flow and buying a ton of cars. And while growing still not back to 2019 revenues. Maybe all the cars its buying is for growth and recovery after bankruptcy but I can't figure out which is growth cap ex and which is replacement cap ex. And revenues only up 8% YOY. Other softer negatives. It back a ton of shares at over $11 last year while it trades for $8.43 now. Negative tangible net worth and ton of debt. Lastly I like that they bit the bullet on Tesla if it wasn't working out for them instead of getting anchored on a big public idea, but the fact they bought a huge number of EVs without fully testing their cost and usage impacts seems like a clown show type of decision.

Like all PR flacks sounds like he's full of it. The war began because of Russian expansionism, NATO only really became an issue after the invasion to attempt to give Putin a justification. I won't argue whether Donbas is lost, its definitely a very tough nut to crack, a lot tougher than Crimea. But for a place that is not truly Ukrainian its pretty amazing how hard Kharkiv fought against the Russians, and its right next door to Donbas with a huge percentage of Russian speakers. And if he thinks the Istanbul deal on the table was advantageous for Ukraine I don't know what to say. It would have basically turned over 100% of Ukraine to Russia over time.

Matt Levine hit it out of the park today. I've already posted separately his thoughts on Grayscales post ETF decline, the game theory behind Elon's demand for more Tesla shares. This is more inside baseball but I found his discussion of how block trades work on wall street fascinating, and why the head of block trading at Morgan Stanley got a light slap on the wrist from the SEC for inside trading (sortof?) clients while Morgan Stanley got hit for a quarter billion in fines/restitution. It seems that Passi called several investors to place a bunch of the stock (and thus largely de-risk Morgan Stanley’s bid), but it’s not clear how methodical he was; it’s possible that he just called a few of his favorites. For instance this guy, from the criminal statement of facts: Because, yes, if you do this right, it is nearly risk-free profit for the hedge fund (who shorts the stock during the day and then gets it back at the close at a discount to the trading price) and for Morgan Stanley (who locks in buyers a higher price than it agrees to pay the seller). You don’t need to be a big or good hedge fund to get the call for this trade; you just need to be a loyal friend of Passi’s. Anyway, two related points. One is that this is illegal, but it’s on a continuum. As a general matter, when you want to sell a large block of stock, you have to balance your desires to (1) tell everyone, to drum up buyers and (2) tell no one, to avoid anyone front-running you. In different circumstances, you might strike that balance in different ways. Sometimes, it is good customer service for Morgan Stanley to “socialize” a block trade before bidding, to pre-market it before actually doing the trade. Ordinarily to do that you’d wall-cross the investors first: You’d call them up to ask “hey would you buy this block,” but only if they first promise not to short the stock ahead of the trade. In fact Morgan Stanley marketed that service; from the statement of facts: It’s just that, when sellers instead chose to do block trades without pre-marketing, Passi pre-marketed the shares anyway — not to benefit the client but to benefit Morgan Stanley. (Also Passi “did not wall cross any investors before sharing confidential information about the Relevant Blocks with them.”) Even without wall-crossing, though, there are some gray areas about what sort of information-gathering a syndicate desk can do before putting in a bid. Like: Calling up some hedge funds at 2 p.m. and saying “hey we got a block of Amalgamated Widgets coming after the close today, are you in? If so you should short the stock now”: pretty illegal. Calling up some hedge funds at 2 p.m. and saying “just hypothetically, how are you feeling about the widget sector these days,” to get a sense of investor demand: maybe okay? You can get some deniability on these calls. Though some sellers know to look out for this; the SEC notes that one selling shareholder’s agent sent Morgan Stanley a bid-wanted-in-competition request that said: The other point is that this is illegal, but apparently not that illegal. Morgan Stanley paid a total of $249 million of penalties to the SEC and $153 million to the Justice Department, though there is overlap in those numbers. (And some of the payment is for restitution to the block sellers who got ripped off.) Meanwhile Passi will pay $250,000 to the SEC and agreed to a deferred prosecution agreement in the criminal case: He has to “demonstrate good behavior and fulfill the terms of the DPA, in which case PASSI will not be further prosecuted criminally.” So it’s not quite real insider trading: If you do this stuff they don’t send you to jail; you get a warning first.

Matt Levine's thoughts on the game theory behind Elon's latest request for more Tesla shares. I laid out the theoretical corporate finance considerations above and, sure, Tesla’s car factories are capital-intensive while some of Musk’s software projects are maybe less so. But that’s not really what’s going on here. What's going on here is: Musk started Tesla,[6] raised outside money, and still owned about 20% of it. He then sold a big chunk of that stake to raise cash, for himself, to buy another company (Twitter) in his personal account (not for Tesla). Now he’s going back to Tesla to be like “well, I own a lot of companies, and I can’t really give Tesla my full attention while only owning 13% of it, so you’d better double my stake, for free, if you want me to keep doing good ideas at Tesla instead of at all my other companies.” Honestly it’s a good threat! If you’re Tesla’s board, and you know that Elon Musk’s top priority now is building AI, wouldn’t you rather have him do it at Tesla than elsewhere? Presumably you want him paying attention to Tesla — that’s why you’ve paid him billions of dollars to be Tesla’s CEO! — so you’d be sad if he turned all of his attention elsewhere. And yet there is something pretty obnoxious about it. He can keep doing this! What if you give him 25% of Tesla, he sells that stake for billions of dollars, he uses the billions of dollars to fund some new distracting hobby, and he comes back to you in a year saying “yeah, I don’t know, my heart isn’t really in Tesla anymore, maybe if you gave me another 25% it would motivate me.” The $55 billion pay package in 2018 — the one that the board is currently getting sued for — was supposed to motivate him to focus on Tesla, and it very clearly had the opposite effect! It gave him too much money, which he spent on distractions. And now he needs more money to turn back to Tesla from those distractions. In general, with normal workers, the tension is that you want to pay them enough to motivate them, but not so much that they “call in rich” and stop working. With Elon Musk, who is on some days the richest man in the world, you might think this would not be a huge problem. You might think “well, whatever motivated him to work night and day to increase his wealth from tens of billions to hundreds of billions of dollars, it probably wasn't his paycheck, so we can rely on his intrinsic motivation to solve big problems and get glory for himself.” But that is wrong: Musk has plenty of intrinsic motivation, sure, but no particular reason to solve big problems for Tesla, as opposed to the many other companies that he has started or could start. It turns out that the problem of motivation is much worse for him. He’s got too much going on, and too much money; his companies need to compete for his attention, and that competition is expensive.

Matt Levine on Grayscale “Shifting to lower-fee alternatives” should be neutral for Bitcoin — “Selling one Bitcoin product to buy another should not impact Bitcoin’s price, said Zach Pandl, Grayscale’s managing director or research” — but just getting out entirely would lower the price, and GBTC holders haven’t been able to do that for years.

Tibet has been part of China or has ruled China for roughly as much as its been an independent nation over the last 1,500 years. So I was counting it as part of insular China. But even if you disagree, it is not a major exception to my thesis that China basically has had little interest in expansionism for the last few hundred years. Compare China to Russia over the last 150-200 years. Russia has been constantly trying to expand its borders (wars with Japan, Germany, Finland, Poland, Ukraine, Turkey, etc) while China has rarely done so.

There are quite a few waiters making 6 figures, and the world is awash with food truck owners making multiples of 100k. I'm not saying thats the median pay, but I'm also saying its not that rare.

For an investment manager, I'm gonna bet that the costs of living in Manhattan pay for themselves in terms of networking value.

Biden has done more to defend Ukraine and Taiwan than any other US President, esp. the last one. I'm as critical as anyone of Biden, especially over running massive deficits while the economy is strong. I think we should be sending far more aid to Ukraine, esp. since we have thousands of first generation Bradleys, Abrams and F-16s just sitting in storage that are obsolete for our troops and will likely be scrapped, but still far better than anything the Russians have. But lets also think about the alternatives. Who is going to do better from the Republican side? Give me someone to vote for so I don't have to just vote against Trump.

Why would Tether be more "anonymous" than any other crypto? I'm thinking its popularity is simply because its a stable-coin, meaning the criminals can keep their loot online without worrying about losing any to price volatility. And that might be very important when the Boss wants all of his money back;) https://www.forbes.com/sites/roberthart/2024/01/15/tether-cryptocurrency-becoming-preferred-choice-among-money-launderers-and-scammers-un-warns/?sh=21644af46385

SpaceX

I was in Marathon a couple years ago, I started by shorting it convinced it was likely a scam, then went long when I calculated their earnings would likely explode from their planned expansion. Neither worked out well because I used LEAPS for both. But it was pretty hilarious to have simultaneous bets MARA would either drop below $7 or blast past $40. One thing that became clear is their capital allocation strategy was terrible. They never sold any bitcoin, which was incredibly dumb on its own. They even borrowed to buy more which is far dumber. Obvious if BTC went up they’d make more money by holding and borrowing to buy more. But they’d already make a lot of money in that scenario. But if BTC has a serious downswing where they struggled to profitably mine it holding BTC compounded the loss of cash flow by potentially forcing them to liquidate BTC at its lows to keep the doors open. And leverage made that scenario even more likely. And it seems clear a big reason they did it is because of social pressure from the BTC community frowning on miners liquidating BTC, and sellers were risking potentially losing priority on new rigs they were buying. There is a disgusting self centered religion in crypto where large participants are guilted into holding as part of a corrupt conspiracy to keep the price higher. It’s little different than Wall Street bets convincing poor retail investors to supply buying volume to their shitcos so the pumpers can exit at a profit. This and the rampant wash trades are reasons why all forms of crypto, including Bitcoin, are still far from having fair trustworthy markets.

If Buffett hadn’t given up his comp plan from the partnerships and given half to charity he’d have left them all in the dust. Probably $500B.

On the MSTR thread I've posted that I think its still close to a 50% premium to the value of its BTC holdings if you calculate taxes owed. In all fairness, my math was done on my fingers and in my head so not verified. And i think there is a good chance it trades at a significant discount to the value of its reserves. First because there is no longer any need to own MSTR if you want BTC exposure. So its likely going to lose a lot of those holders who can sell MSTR for more than it's BTC holdings value right now, and buy an ETF to get more BTC for the same dollar. Secondly, I think the software business value has diminished significantly. Operating earnings have crashed the last few years, and it might have very little value now. I've seen Berkshire Hathaway trade under book, it wouldn't be unusual for MSTR to decline past book value as BTC owners rotate out creating a lot of negative momentum.

1. They are building artifical islands so they can better control the south china sea, which is the gateway for 90% of their foreign trade and linchpin of their economy. 2. They've been blustering about Taiwan for 70 years and have never done anything. 3. China basically hasn't conducted offensive military campaigns for hundreds of years, they are huge but insular and have always valued holding their country together over expansionism. 4. One exception to 3) was the invasion of Vietnam in the 70s. It wasn't expansionism per se, more an attempt to bring Vietnam to heel and China got their ass kicked. 5. Its extremely unlikely China can brute force an invasion of Taiwan. Russia could conduct a surprise invasion of Ukraine by just by driving tanks and trucks up anywhere on a thousand mile border, China has to sail troops for 10 hours over ocean while being easily monitored and subject to missile barrages for hours before they can even see shore and start taking direct fire from artillery, machine guns and Javelins. 6. Anyone who doesn't understand how many times harder amphibious operations are should just ask Hitler why he never authorized Operation Sea Lion to cross the relatively tiny English Channel and invade Britain. Or to look up the casualty counts we took in Okinawa despite total air and sea superiority and the months it took to clear out the resistance in an island a tenth the size of Taiwan. 7. As you described, even if China wins Xi is not going to gain economically. China will be subject to robust sanctions for years, maybe decades, and all the TSMC engineers will flee to the west so that even if the plants aren't demoed into rubble China won't have the skills to keep them operating. 8. Xi knows all of these things. More importantly for him are #1 and #3, because even if he could easily overwhelm Taiwan the South China Sea won't be re-opening for trade for a very long time, plunging China into a depression with mass unemployment and young people marching in the streets and Tiananmen Square, and risking his control of the country.

I will now add drug legalization to my list of risks for Bitcoin;)

There are 500 men in the US who are paid $200K a year to just practice with the 1,200 men who dress for game days in the NFL. Then there are 3,000 people who work as trainers, coaches, medical, front office and support staff for those teams, at very high median salaries. Then there is the NFL itself, with thousands of other high paying jobs organizing and managing games, broadcasts, operations, drafts, etc including 120 full time refs making $200k/year. And that's just a single sport. Anyone who tries to simplify the US economy down to Finance, Tech and the rest bullshit service jobs is doing it to avoid dealing with the real complexity and strength of our economy. If I stood by the bathroom line at our local NBA games, and asked the men in line what they did for a living, I guarantee I'd find out about a number of jobs that I'd never heard of before, and some making insane amounts of money. Of the friends I know who have become wealthy, they all did it in incredibly different ways. 1) Placing and caring for plants at offices and restaurants, employs 40-50 people from account managers to accounting. 2) An SaaS that insurance agents use to reduce the work of bidding out small business medical coverage by many hours, created a half dozen jobs. 3) A mobile apps company that securely stores passwords and other private information on your phone/computer, created about a dozen jobs. 4) Another mobile apps company that securely stores passwords and other private information on your phone/computer. Parlayed that into a mobile software development company where he hired 30 people. 5) Studied to be a chiropractor, pivoted to mortgage broker, built an office where he employed a half dozen brokers working for him (until the market collapsed), along the way poured all the profits into buying single family homes to rent and now owns 30 of them. 6) Specialized into product marketing, led key marketing initiatives at various tech firms until he retired as head of mobile at Ebay. 7) Bought a ranch in Colorado with money he made as a male stripper in Vegas and started mining aggregates from it making him many millions of dollars and bought a five million dollar home in Scottsdale he flys back and forth to on his private plane. 8 ) Moved to Phoenix as a bricklayer to get away from cold Detroit, he and his wife saved every penny until they could buy his own property, used the income to buy more properties, died at 86 owning a good amount of downtown Sedona, Arizona. 9) CFO for tech companies, was the key man in getting a very important one sold for $20M before it went bankrupt (thank you forever Doug), took over as CFO for a Healthcare VC where he added value to every single investment they made by helping them manage costs and investments intelligently, retired to live in a massive home on top of a mountain overlooking downtown Bend Oregon while he fly fishes every day. 10) Led marketing teams at tech startups, when his last one was sold he started his own to sell organisational tools to Mac and iPhone users, creating about a dozen jobs. 11) Took bets as an illegal bookie for decades making millions. Stiffed other friends of mine for hundreds of thousands when he realized they were sharps. 12) Parlayed a few thousand dollars into roughly one million by playing poker, and arbitraging other opportunities in NFTs, sports cards, etc. 13) Parleyed a few thousand dollars into at least a half million by playing poker, ended up playing at the highest levels in Bobby's Room, then rolled it all into creating a startup to sell healthy breakfast drinks where he just raised $20M. Employs over 100 people now in production, marketing, testing and foods research. 14) Made hundreds of thousands of dollars playing poker, when boom faded he took a web development bootcamp, now makes six figures in web development. Obviously these people are all well above the median in terms of income. But some of them have also created a lot of six figure jobs.

I just quit an app developer job where base pay was $170k in the US, + stock options, + up to 20% annual cash bonuses based on employee/company performance, with great benefits (all jobs remote, paid healthclub memberships, free biometric sleep trackers, lunches every fridays, counseling, dental, medical, vision, quarterly onsite parties, etc). The point is there are a huge number of great paying jobs we aren't even aware of that have been created by, or increased in numbers, because of outsourcing. And the increasing wages for the average worker are very clear in our ever rising median real income levels. https://fred.stlouisfed.org/series/MEHOINUSA672N

And yet in real dollars median income in the US has grown by 50% in the last 40 years. Sure it's not growing as fast as it did before then, but it isn't shrinking yet (unless 2019-2023 is the new long term trend). And a big reason our incomes have increased is outsourcing. Instead of assembling iPhones here in grueling manual labor jobs we outsourced them to China where they pay substantially more, are easier and far safer than the rural farming jobs many of the workers were drawn from. And the savings mean Apple can sell more iPhones and hire more engineers, designers and managers here, and the market is bigger for software developers taking advantage of it. That's what is driving our higher wages. Of course a lot of our work hours are wasted, that's been true since the dawn of time. But still our capital reinvestment steadily produces more and better tools to enable us to produce far more output for the same amount of work. 150 years ago David Graeber would be ranting that McCormicks invention of the mechanical reaper was making it too easy for farmers to harvest their fields, eliminating labor jobs and it was turning the younger generation into a nation of shop-keepers and craftsman who could no longer feed themselves. This nation started by being 90% farmers! Oh, how can it survive without nearly everyone working in the dirt 12 hours a day 6 days a week just to feed their family and make a small surplus to sell at market to the Europeans! What in blithers is an "App Developer" and how can they feed anyone? Their $4,000 laptop can't plow any field, so why are they making $200,000 a year?

Just call them. It's amazing how much more often microcap CEOs and CFOs call you back than larger company management. You can have a conversation that may help judge them better.

From Crenshaws dissent on authorizing the ETF.