ValueArb

You of all people should understand that Iran has been coasting on that huge lead Cyrus the Great gave it 2,500 years ago.

How much debt is too much? Where do you think the line is? Where should I get concerned? If inflation persists and our debt rolls over at new rates (ave duration only 5 years) our annual servicing costs would approach 2 trillion. Thats a few years off and requires a total failure of inflation fighting efforts, but it still frightens me.

There is no way the feds can stop the inevitable rise in interest rates. Our debt to GDP rate is the highest in our history, inflation is still roaring and the fed has already committed to 6%+ rates next year. No one is going to go back to loaning the US government money at 1% a year.

A 40 year downtrend in interest rates is a blip in economic history. Rates are always higher than the last decade because governments always inflate and lenders need compensation for it. If you really think that economic weakness, corporate earnings, inverted yield curve, etc matter more than $30T in debt and rapidly rising debt servicing costs I guess we'll just have to disagree.

Because Russia was going to win its war in 5 days. Then it was going to win in a couple of months. Predicting the future is hard. Those who were best positioned last year to capitalize on the bet you described also have had a nasty habit of falling out of windows.

We are both cherry picking timelines. In your case the life of Bitcoin was created at the same time the federal funds rate was cut to the lowest levels in its history, and until the end of this year it only existed in during a long period of record historical low interest rates. Finally ts price peaked at the end of the largest federal stimulus in history. If interest rates stay high, BTC is likely to start having some pretty poor 5 year performance periods. It has a zero track record across a normal economic cycle with median historical interest rates. And so far in its short life it has performed well when there was no inflation and very poorly since inflation re-appeared.

Yea, there lots of adjustments you could make, rates, inflation, taxation. The actual average for last decade of S&P earnings is $145. Jun 30, 2022 193.36 Dec 31, 2021 211.50 Dec 31, 2020 107.70 Dec 31, 2019 161.74 Dec 31, 2018 157.04 Dec 31, 2017 132.83 Dec 31, 2016 116.71 Dec 31, 2015 109.02 Dec 31, 2014 129.85 Dec 31, 2013 128.13 Dec 31, 2012 112.29 Dec 31, 2011 114.82 Dec 31, 2010 105.17 The reason I like to use Shiller as a starting point is because 2020 & 2021 were both historical outliers, and early this year lots of people said (incorrectly) that S&P 500 PE was reasonable because of that outlier year. It was a record earnings year based on stimulus. Inflation is a tough adjustment, but maybe a necessary one that would make Shiller more accurate representation of market PE. Another factor to consider is taxation rate. Trumps tax cuts increased S&P net earnings, but they only started in 2018 so earnings in years before it would be roughly 15% higher. A main driver to market prices is interest rates. As a value investor I try to ignore present day rates and focus on long term rates when estimating intrinsic value. But clearly a lot of the market bubble was created by using DCFs with historically low rates as gospel. But I haven't really thought of how to adjust for rates or whether it should be adjusted for rates since the historical 16 PE was a product of historical rates. The question is whether Shiller try to predict Mr. Market, or should it try to estimate value? Data from https://www.multpl.com/s-p-500-earnings/table/by-year

This. I think the disconnect between crypto adherents and value investors is that crypto adherents want to imagine some type of Intrinsic Value for crypto when there clearly is none. To the point of trying to redefine Intrinsic Value to claim some. I don't think anyone disagrees that some crypto (BTC and ETH specifically) has utility. Not just to criminals but to good people trapped in terrible countries. But Utility isn't Intrinsic Value and because of that you can't determine a value for crypto. It's Utility will wax and wane over time, but there is no evidence it's Utility significantly affects Crypto's price today. All evidence is that the last two years Crypto had massive inflows because of speculation driven by stimulus and low interest rates. The end of stimulus and low interest rates has coincided with the "crypto winter". If that's not proof enough, compare crypto to speculative tech stocks. Chart BTC vs. ARKK, and it's eery how much in lock step they've been the last 5 years. I don't think BTC will ever drop back to $100, or even $1,000. That would be a $20B market cap, which seems very small in a world full of criminals and terrible countries. But I see no reason why it needs to be $10,000 or even $5,000. Given the massive amount of margin debt used in the crypto space, BTC could easily overshoot into the low thousands as everyone (including Saylor) get liquidated. Then someday there will be loose money again. BTC will double, word will spread and before you know it people will pile back in and who knows where it goes. I don't. I'm a value investor so I try to buy things that I have a high confidence that their value is higher than their price, and that that value is growing so that eventually the right forces will bring price and value into alignment. Outside of country arbitrage that I don't have the resources to pull off, I don't see any value in crypto.

OXY is turning out to be a disaster for Buffett. Its roughly doubled since he bought it, and in a very short period of time. Which means its likely trading at near his estimate of Intrinsic Value. So how is he going to unload it? It would take forever and kill the price. So he's going to be stuck with a massive amount of unrealized and untaxed profits for quite some time. I guess they were right the last time they said Buffett had lost it.

Schiller PE says we still have a ways to fall. https://www.multpl.com/shiller-pe

Inflation has gone nuts since April 2021, clearly Fiat is depreciating. Over that same period BTC has dropped 70%. What a fantastic inflation hedge!

I buy way more shitty stocks than Phil Fischer did. Paying ask often is risky since I need a huge margin of safety. If Phil overpaid for his growth stocks, in a couple years it would hardly matter given how much they appreciated.

LOL, I only accumulated $17k in a little less than a week and now it's spiked 20%. There is a chance that it's actually well below 50% IV even at the higher price but I have to think more about the value of it's less certain assets more before paying up. It was so much work buying $700 at a time I'm not sure if it was worth it. Maybe I should have just fed the ask to see how much it would have taken at the lower prices. My habit is never to pay above bid, and just walk away if it isn't hit, but that may have burned me.

I'm trying to build a position in something I found that is trading at roughly 50% of intrinsic value, with a pending liquidity catalyst in probably 6 months. The problem is its only trading about $150k a day, so I can't really talk about it lest someone blow me out of my bids. Of course its unlikely anyone here has any interest in a tiny shitcap, but better safe than sorry.

This is going to be an interesting case. He is going to argue that he didn't do anything illegal, merely exploited rules that a poorly run exchange allowed, and it will be interesting to see how that plays in court. IIRC he ran up the value of a thinly traded shitcoin in a very short period, borrowing as much as allowed from an automated margin bot before the coin crashed. Matt Levine pointed out this very same problem with FTX and other exchanges, where their systems weren't smart enough to not loan out excessive amounts for thinly traded coins that spiked. I suspect that the prosecution will try to argue this is market manipulation that should be just as illegal for crypto as it is for stocks and commodities. And there are similar problems with Ethereum smart contracts where clever developers poor over them to find mistakes they can exploit to loot their pools of coins. Its not going away any time soon.

Thats a great question I have had since you opined about bonds.

A peace treaty can't be signed until after Russia withdraws from Crimea and the Donbas, otherwise it would be a disaster. Russian leaders know that in negotiations everything they get is a win. If Russia stops fighting, the war ends. If Ukraine stops fighting, it ceases to exist.

a) Everyone knows this. The biggest increase in European security came when the USSR collapsed and instead of NATO facing a roughly 2-1 disadvantage in divisions, things have switched to a roughly 2-1 advantage. The problem is that if the Ukraine falls, that advantage diminishes significantly. As Putin moves more former republics under his control, our edge diminishes more. b) Congress will go along. The only people in congress against supporting Ukraine are a small minority of whackos like Hawley, Paul, Boebert, Gosar, and Marjorie Taylor Greene. c) Western Europe isn't part of the US, everyone knows that. Like Puerto Rico they are US protectorates that owe their freedoms to the US and the trillions we've spent since 1942 protecting them while they coasted along barely spending anything on defense. d) China has committed very few acts of military aggression over the last 150 years. The last time it invaded someone, it got its butt kicked by Vietnam in the 1970s. Russia has constantly been invading its neighbors for hundreds of years.

So the IV of Bitcoin is a small amount of text data on a server? You were so close. A gold bar has no IV because it has no claim on future cash flows. Gold does have a lot of utility however, for making electronics and making your significant other happy. And the fact that you do not understand how bonds work goes a long way towards explaining your love of crypto. You should read a bond indenture some day. I'd read a bitcoin indenture, but it doesn't have one.

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I don't see it. Biden isn't going to backtrack and he's in office another 2 years. From the US perspective aid to Ukraine is the cheapest defense of the west in our history, we spent trillions protecting Europe from the USSR. For less than $70B so far, Russia has lost more than 100,000 soldiers, 1,500 tanks, 1,800 infantry Fight Vehicles, 299 Artillery units, 280 Armoured Personnel Carriers, 161 MRLS, 83 SAM systems, 67 warplanes and 74 helicopters. https://www.oryxspioenkop.com/2022/02/attack-on-europe-documenting-equipment.html Russia can't replace these losses easily or quickly. It will take many years, even decades given the damage to their economy the war and sanctions have caused. This will greatly enhance the security of Europe for many years to come, as long as Ukraine does not lose this war. If Russia is able to conquer all of Ukraine, it will be able to rebuild faster, and staff a significantly larger military so that in a decade it will be a greater risk than ever.

We shouldn't confuse GAAP accounting rituals with our definition of Intrinsic Value. What makes value investing worthwhile is typically finding situations where GAAP measurements of cash flows, asset values and liabilities differ from reality. A value investor understands there are three measures of value, Market Price, GAAP, and Intrinsic Value, and market beating returns are often found when Price & GAAP differ significantly from IV. Now different people may measure IV differently, that doesn't mean it doesn't exist. What that means is sometimes its hard to know what the IV of an investment is, but that doesn't mean it doesn't exist. You just lack the information to make your IV estimate trustworthy. Since no crypto has claim to any future cash flows, all crypto has an IV of zero. That doesn't mean some crypto (BTC, ETH) doesn't have utility, esp. for people trapped in countries with terrible governance. But it doesn't give either of them an intrinsic value.

Bonds are claims on cash flows and assets of the issuer. Bitcoin is a claim on nothing.

Maybe prices are coming down. There were two identical floor plans that were remodeled similarly for sale in my neighborhood, 2,000 SF, small lots. The second one put on the market is in better location, maybe a little nicer remodel, and it has a pool. The first went up for sale at $1,050,000 in late summer/early fall. The second went out for sale in early November and IIRC both were in the high $900s. Now it appears the first one has been taken off the market, and the second one is now listed at $929k. I feel really bad for the realtor who is flipping the second one, nice guy did an amazing job on the remodel and I think he ran into numerous problems he didn't anticipate, and now he might taking a loss.