SharperDingaan

Some add on's: A great many investment properties sit unoccupied/partially vacant. A first great wave of new housing will be their return to market, as/when landlords finally have to dump &/or re-purpose vacant office space; & everyone is screaming as to how 'awful' Canadian real estate investment is. Multiple towers worth of condominium units all rushing the exit at once, & new condo's getting cancelled (freeing up construction workers). A second wave of new housing (largely housing new Canadians/first time buyers) being the result of policy action. Probably a version of the 1970's MURB for qualified first time buyers, with a low DP and a non-transferable 25 year term fixed rate mortgage at 3-5%, backstopped by the BoC; sell the place, & the low rate mortgage is immediately repaid. Zoning amended to accommodate brown-field tear-downs & replacement with similarly zoned but larger buildings. Whichever political party implementing it, probably remaining in power for a consecutive 3-4 terms. Lot of disruption, but with it - opportunity. SD

Couple of points: Canadian interest rates are simply returning to long-term historic norms; we're just working through the hangover of extreme low interest rates from the Covid era. The price bubble arising out of low interest rates/very tight supply is slowly being deflated as fixed rate (blended payment, up to 5 yr terms) mortgages reset upon renewal, and supply rises as investors are forced to sell. Very little systemic risk (CMHC insured mortgage, bank capital buffers at highs/going higher, principal pay downs, term extension, etc.), but quite a bit of household risk (the more so the less financially literate you are, & most people). Investors built/bought office/warehouse/condos/houses, & have mostly sat on them; minimising accumulating unrealised loss by keeping them off the market, and prices high. Per the media reporting, it would seem that many are about to fold; speculators/investors fleeing, the new supply flooding the market/forcing down price, & ordinary people finally getting a chance to buy at more historic valuations. The inflation reducing, practical, & shorter term solution to the housing market. However, a lot of rich/entitled people are going to get burned, & the knock-on effects from related bankruptcies (over-borrowed against high RE valuations) are difficult to proactively quantify. Drowning people scream, and the media will be full of negative 'human interest' RE investment stories, feeding into the selling loop. The 'good news' affordability stories largely ignored, as the sources don't contribute to political campaigns. Not a bad thing, and long overdue. Moral hazard exists, it doesn't care how 'special' you are, & it's a bitch. Get used to it. SD

"The other use case I see with BTC is the censorship resistance. CBDCs may work for most, but they'll probably have the same issues that sex workers have, or that marijuana distributors have, and etc" Think of it more as 'active privacy'; and usage primarily as per the Cyberpunk Manifesto. Everything you do on a rail, payment platform, CBDC, etc. is public, and subject to ever changing public censorship (good/bad). Whereas BTC offers a widely available, direct and fully functional censorship resistant alternative, that you pay to use - as/when you need. Big brother suddenly turns on you ... the jaws snap on empty space, not your life savings. https://archive.org/details/anarchy_Cypherpunk_Manifesto SD

Have to think that most everyday payments are going to be done by CBDC; which we increasingly see happening every day (eCNY, eKrona, etc.). We will still have the rails (Visa, Mastercard, FedPay, etc.), & cash; but with less activity in each stream. While the Lightning network is a good 2nd level payment solution, it sucks as a business solution. For those small everyday purchases (coffee, lunch, etc.) it really doesn't matter if I can be tracked; and it's a lot easier/more cost effective to simply break the trace by using cash. BTC's true value is in its anonymous portability, and its long term inflation protection (store of value). We can argue to what degree; but the reality is that values are no longer constrained to hard assets for inflation protection, or trapped behind national capital controls. SD

Quick word, then let the thread resume .... A major issue is the lack of a relevant benchmark/comparable. If you're from another country, & had a life totally different from most all others around you, you're the one-off outlier .... there just aren't any other benchmarks. You take away the best you've seen in various people you've met along the way, & try to adapt it. I learnt brewing/bootlegging in Africa at the feet of an enormous black women, & thoroughly enjoyed the experience. Turned out she was the 'black sheep' of one of the Zulu households; and via her, I got to spend time with one of Africa's more far-sighted Induna's - all while under apartheid, in an extended civil war, with people routinely getting killed everywhere, everyday. As in wars everywhere, time accelerates, & the lessons learnt at the feet of both masters were incredible. Zulu culture celebrates 'bastards', as long as they are 'good at their job' & the cycle of life prevails (limited time engagement); hence the soft spot for the Robber Barons of their time, the friends in low places, etc. Along the way you will invariably meet some of them, the exchange of views raises your game, & you'll learn various 'management' techniques. Again; learning at the feet of masters, all of whom are paying it forward. The take away from all this is that 'wealth' isn't money; it's your relationships with people, & your confidence/ability to make/accept/trust in your own decisions. You need 'wealth' to eat/live; but after that - it's what you choose to do with it. Making money is pretty straight forward; the use of it .... not so much! Now back to the thread ... and the making of that money! SD

Couple of takeaways from the 'risk shop' .... The business ownership approach isn't just the longer term view on the market; business owners see capital and income as interchangeable, Joe Investor typically does not. The owners objective is a healthy/growing business capable of spinning off more profit every year; if the business profit is 500K this year, whatever money taken out as salary/dividends > what is needed to live, is a capital allocation decision. If you decide to live well; your business profit needs to be either a lot higher than 500K, or you are slowly running the business down (sometimes not a bad thing). Volatility is not an issue if you are 'prepared' for it (as you repeatedly hear); 'preparation' takes many forms, but it is fundamentally about access to cash. There's the 'cash' pile, and the 'debt free' assets pile; the first preparatory $ coming from higher debt (tax deductible interest), the last $ coming from the 'cash' pile. There's also the 2nd job/go back to work pile; everyone doing what works best for their risk tolerance/family situation. Hence high quality marginable assets, assumption of a 50% loan-capacity haircut, and a cash pile as 'insurance'. Occasionally you will encounter the opportunity to step up to the plate. It comes down to doing your numbers, being comfortable with/able to survive the adverse consequences assuming it blows up, and having the strength to 'walk away'. It might suck at the time, but there's often a consolation prize that is nearly as good. Continually do this well & eventually you will run up against the corrosive effects of wealth; if you are against the general concept of 'trust fund babies', you need to give some of it away. It is not charity, it is simply an exchange of monetary for social wealth; the better you can do it, the better your 'exchange rate' will be. So what? Everybody eventually croaks, & you can't take your wealth with you. Hence your 'mission', should you choose to accept it; is to lead a happy/healthy life well past 100, & demonstrate to those behind you, a life well lived. No sweat! SD

Long term investing thing. Almost everyone will be told they should get on the property ladder; as soon as possible! For the tradesman/handyman that's typically the 'fixer-upper', flipped for a gain, and repeated. For us less gifted, it's typically buy the small house in an appreciating neighborhood, rent/share the place, progressively flip, and repeat. The ultimate goal being ownership of a house that is debt free, some years before retirement. Carry a mortgage, pay it off via forced monthly saving, use gains to accelerate the mortgage burning date. But ...... propose to pay down that same mortgage via stock-market gains, & you're a heretic! Even though if you simply compounded at an average 12%/yr, your house would be paid off at the end of year 12. [at 12% it's a 2-bag in 6 years, and a 4-bag in 12. A Day1 20% DP, plus a 20% investment that grows to 80% in year 12, pays off the mortgage]. And the better you are at this ... or the luckier, the sooner you can burn the mortgage. Learnt this trick from Greek friends who used their sovereign debt crises to advantage. 250K in 25year zero-coupons, 1.25M purchase of a villa that would normally sell at 4M, and a brutal carry on a 1M mortgage. Yields went their way, the mortgage was repaid 2 years later, & there was enough left over to also buy a celebratory boat. Sadly I'm still mocked for passing on it! The reality is that the ability to 'apply' vs parrot [the CFA way] is not that common, and those that are good at it whisper. Stray out of the accepted swim lanes, and you will feel pressure; not a bad thing. SD

Nah - 100% long as always! We just try not to drink much of the latest cool aid. We're always in a mix of equity/bonds/cash; we just view the components differently. Cash = T-Bills, & mostly BTC/UBS. Bonds = Canada's held to maturity, distressed/zero-coupons, and mortgage repayment. Equities = o/g, utilities, etc. We do nothing; cash/bonds pretty much double by themselves, the gain pays off mortgage, & we're left with our money back plus fully paid off housing that we can easily rent to cover operating costs. Should UBS oblige with a spin-off of the former CS bank branches, our London(UK) redevelopment will be fully paid off, we'll still have all 3 units versus just 2 as originally planned, & there will just be a small tax-bill. However it is only feasible 'cause we have the risk tolerance, and the risk management expertise to do it; and view the whole thing as on par with running a business. As with all business people, we hope to be good at it, and we're not in it for charity. SD

Couple of observations. Price inflation. We aren't going to have significant inflation when folks are getting 5-10% wage increases every year. We're just creating future unemployment as the goods produced become too expensive to buy, we make less of them, & more of what we do make is done with machines vs people. Asset inflation. It is quite obvious that in a Canada/US, at required immigration levels, the state is going to have to become the mass builder of affordable apartments; and in quantities similar to that at the end of WWII to house returning soldiers. With the flood of new supply, today's high house values can only fall. Asset & credit deflation. Interest rates. Grandma eats a lot better when her 100K of capital pays a 5% coupon vs a 1% coupon. The money gets spent on necessities & travel; & with less program spend on seniors, there is less money goosing the economy. Deflation. Stocks/Bonds, 60/40 split. The real measure is the Sharpe Ratio; there are routinely times when bonds are a lot better than equities. The distressed bond that returns to par, the high duration zero-coupon in a falling yield environment, etc. Bonds are bought to provide cash, stocks are bought to provide growth; apples to oranges comparison. Oil/gas isn't the inflation builder it was; simply because the more the world's capital stock moves to EV, the less of an impact oil/gas has. It's still good to be the producer, but you're in run-off mode and net capital recovery (cash cow). So what? Sure, the indexes could go 10% higher than they are today; but, they could also go down - & by more. Given the rapidly growing list of global problems, repeated climate change events, & easy availability of high coupon treasuries (avoiding the risk altogether), which do you think the more likely? SD

Your best 'forecast machine' is your gut; & listening to what it is telling you. Shine the turd all you want ... but Chinese demand is slowing, and not coming back to historic year-on-year growth for quite some time. Simply because their economy is a lot bigger than it was, and their systemic problems are getting a lot worse ... not better. OPEC+ doesn't voluntary extend supply cuts because it wants to .... it cuts back because it has to. The Feds want a slower economy, to lower inflation. Markets only rise if the Fed screws up (have to intervene with a rate cut); if they don't, markets continue to pull back .... as the Feds intend. A bear market bias, plus an out-of-market call in case you're wrong. The closer the US 2024 election gets, the more uncertain/dysfunctional the market becomes, and the more the market sells off. Bear market bias, plus calls relying on Trump saying something provocative to get elected. Add it all up; if you aren't hedged, you're betting on failure (Fed) & disruption (Trump) to make your numbers. Great trading position, but not so much for most everyone else. SD

Troublesome businesses are routinely seized, & founders 're-educated' in the new reality. Whether anyone ever sees the founder again, depends upon how rational he/she chooses to be. Your brains or your signature on the contract; either works for us. SD

Like it or not, China is about as investable as a Russia; you are not getting your money out unless you take it in goods, and even then - at cents on the dollar. Everybody needs an enemy to support their military-industrial complex, and the outcome is an apartheid like detente. When one enemy collapses (Russia), a new one gets created (China). Entirely rational, & just the way of the world. As in the colonial era, the world is in another land grab; separating into American, Chinese, BRIC, & other. The powers do their thing, we eventually get balance again, then it's business again as normal. The reality is that it is a lot less risky, & a lot more reliable, to simply invest domestically vs in china. The only people bitching are those trying to exit china, & discovering there is no market to sell into. Pick your tribe & just get on with it. SD

There is a reason why BTC is so heavily controlled in China, and why Binance is under such tight control (& mistrusted). Talk to your Lebanese/Iranian/African friends. SD

Closed out our old rolls at good gains, before going on vacation. Proved (2P) reserves are independently valued every year at a conservative price deck and a 10% discount rate (year-end reserve report). Multiply by 50% to get the loan value that the 2P will support, and the impact on the drilling budget. Most times it's smarter to just buy the more isolated 2P at 50-70c on the dollar and run the wells down, versus drill. The US SPR refill just puts a floor under the price of heavy sour (VZ, CAN, MEX, etc.). Most would expect the fill to come with significant opportunism and political leveraging. Essentially, the do what we want, and we'll take some of your sanctioned production thing. Cold fusion/nuclear has merit, but it's so far out that its essentially worthless when compounded at a standard risk-adjusted 25%. The much lesser wind/battery improvements delivering sooner, are a lot more valuable. SD

Look at province of newfoundland bonds, laddering as opportunities permit, and holding to maturity. 50% of the minimum draw funded from interest, the rest funded from prefs SD

You might want to keep in mind that China is still very much a planned affair, with two economies; the Renminbi internal economy behind capital controls, the Yuan external economy, and the PBoC/Party/Military in between. What a westerner sees is the price/volume of China exports, the price/volume of imported commodity inputs, and the foreign policy of the party (access to china, belt/road, balance of payments, etc). Quite a bit different to the experience of most people in China. The reality is that even if China can consume materially more of its own production, it will not turn on a dime, and it will not be enough; simply 'cause different tastes will demand different quantities and qualities of goods. To the extent that surplus production cannot be exported (increasingly likely); it's more stress, for longer, on the internal economy. So what? Luxury goods/commodities remain the place to be, but little else. Nothing wrong in that, but if you insist on holding the Asian Fangs/Shippers/Exporters versus the commodity producers, expect more volatility. SD

Assumed the bill was now law, and that Coinbase would now come under regulatory control. SD

Rather think that one of these quotes is wrong: Armstrong stated that the SEC reportedly expressed its belief that "every asset other than Bitcoin is a security." He recalled the regulator's stance, saying, "we’re not going to explain it to you; you need to delist every asset other than Bitcoin." This only makes sense if BTC is viewed as a security, and the clones are not. (1) BTC has a CME options and futures market, the clones do not (2) Only the original (BTC) is the security, child clones using Bitcoin Protocol are not (3) If the coin (ETH, Lightning Network) is used for utility purposes, it is not a security. Wipes out most of the Stable Coin, NFT's, Sh1te Coin of the world, as for the most part - they are all used for some kind of utility purpose. Elegant. It also wipes out most of the crypto-exchange activity, concentrates trading within just a few crypto names, and makes wash trading (money laundering) a lot more visible. Very bad news for many of the off-shore crypto exchanges. Elegance squared. SD

https://cointelegraph.com/news/first-major-success-in-us-congress-for-two-crypto-bills-law-decoded-24-31-july In a 35–15 vote, the House Financial Services Committee (FSC) approved the Financial Innovation and Technology for the 21st Century Act. The bill is intended to establish rules for crypto firms on when to register with either the Commodity Futures Trading Commission (CFTC) or the Securities and Exchange Commission (SEC). The bipartisan Blockchain Regulatory Certainty Act, also passed a vote in the FSC. It aims to set guidelines removing hurdles and requirements for “blockchain developers and service providers” such as miners, multisignature service providers and decentralized finance platforms. https://cointelegraph.com/news/grayscale-sec-approve-all-bitcoin-etfs-together Crypto fund manager Grayscale is urging the Securities and Exchange Commission to approve all proposed spot Bitcoin exchange-traded funds (ETFs) at the same time to avoid one having an advantage. July 27 Grayscale’s legal team submitted a letter regarding eight spot Bitcoin ETF filings — including its own — arguing the SEC shouldn’t pick “winners and losers” and instead make a fair and orderly decision. In late June, the SEC pushed back on the ETFs due to there being no surveillance sharing agreements (SSAs), saying they were needed due to what it claimed was the potential for crypto markets to be manipulated. Grayscale claimed that the SSA’s “would neither satisfy nor be necessary” under the SEC’s standards, as Coinbase isn’t registered with the SEC as a securities exchange or broker-dealer nor with the Commodity Futures Trading Commission as a futures exchange. An issue that is now resolved..... It would seem that the BTC spot ETF just got a whole lot closer .... SD

I had forgotten about this thread! Most would expect existing term debt (car lease, hire-purchase, mortgage, etc.) to remain as is; revolving debt (LOC, Credit Card, etc.) called in at the end of the revolving period (month), and a reduction in total credit. Revolving debt that can't be repaid, termed out as the debt becomes due, and remaining available credit reduced to some nominal amount ($500-$1000). Liquidity crunch. The hard arses will cite that it's a great, and quick, way by to reduce the current inflation rate; all quite true. Forgiveness advocates will demand that if students are to carry the inflation can for a time, outstanding student debt has to be guaranteed forgiveness after X years; reasonable. There will be a lot of bitching, but hard not to see it as a win-win for everyone. SD

We have been doing very similar, for a very long time; only thing to add, is cap valuation at some maximum number. Thereafter, systematically take every nickel above the cap, off the table as circumstance permits. BTC at 100K is great; but useless if it then falls to 30K, and you hadn't sold! SD

You have to be truly gifted to be this arrogant, and this incompetent ... https://www.theglobeandmail.com/business/article-crypto-wonderfi-coinsmart-coinsquare-merger-competition-bureau/ " WonderFi Technologies Inc., CoinSmart Financial Inc. and Coinsquare Ltd. said in news releases, media interviews and statements to investors on July 10 that a deal to combine their cryptocurrency operations had received official approval from the bureau, which regulates mergers and acquisitions. The companies even referenced the assent as they rang the opening bell on the Toronto Stock Exchange that day to mark the closing of their transaction, which had been months in the making. Now, the companies say they never actually sought approval for their merger agreement to begin with.“The confusion in our messaging was that there was no official objection from the Competition Bureau to prevent this deal from closing, so we communicated this as an approval,” The transaction was “too small to require notification to the bureau.” Mr. Power said the bureau must generally be given advance notice of a proposed transaction when an acquisition target’s assets in Canada, or its revenues from sales in or from Canada generated by those assets, exceed $93-million. If the combined Canadian assets or revenues of the parties and their respective affiliates in or from Canada exceed $400-million, the bureau must also be notified. When the deal was announced earlier this month, the crypto companies said the merger would put together nearly $600-million in combined assets under custody, from a customer base of around 1.65 million users, with 1.6 million of them in Canada. Client assets under management do not count as company assets under the bureau’s test for advance notification. " SD

Great CHT video. Notable is that at the practical level, TechFin is just one more face of AI. Competing across regulated business silo's, via the use of technology which is not regulated. The airbnb using 3rd party AI to match buyer/seller directly via an unregulated digital marketplace; arguing that it is not in the regulated short-term rental accommodation business, but in an entirely different industry. We compete upstream of the stream of buyers seeking regulated short-term rental accommodation; and all quite true. The obvious solution is a version of nuclear arms deterrence via mutually assured destruction; global regulation/restriction on how AI can be used, subject to an external control. No matter how good/smart you are, there is no value to manipulation; if your body ends up swinging below Blackfriars Bridge as a message to others; as Roberto Calvi discovered. https://www.forbes.com/sites/sofialottopersio/2019/08/23/when-the-apparent-suicide-of-gods-banker-roberto-calvi-was-ruled-a-murder/?sh=4d37be431cd4 SD

Interesting in that it is the same as In the mining world. Toxins (cyanide used in gold leaching) never go away, they are just managed via 'dilution'; sample a lake near the discharge point and you die (too little dilution), sample the same lake far away from the discharge point and the toxin is barely detectable. The toxin is not evenly distributed, and you can kill a population via a slow accumulation of toxicity, the same as yeast in a sugar solution. Corrupted data remains where it is, and you can slowly keep adding to it without setting things off, against the day you would like to use it. Interesting in that there is a human algorithm over-ride. The AI learning simply supports preconceived notion; if it aligns, it stays ... if not, it is overridden. Best case, the human 'editor' edits lightly, and allows the AI learning to 'speak its own voice'. Worst case, the human editor is bribed to override the AI learning .. to whatever you want it to be, whilst the AI takes the blame. Lots of possibilities ..... Interesting in what happens if the human algorithm over-ride is removed. Example: Good data, and AI learning, say that humans are similar to a virus, and that this virus causes destruction of the environment. The learned solution is that viruses can be managed via a 'vaccine'. AI learns how to produce a vaccine .... that neutralises humans. Oops. A material takeaway from development of the nuclear bomb, is that you cannot just delegate away the responsibility for it (Vishnu's 'Now, I am become death'). The, 'I just make bombs, I am not responsible for the decades long radiation damage after they have been set off', thing doesn't work. It would appear to be a very similar thing with AI, hence the debate. We live in interesting times. SD

Question for those with deep knowledge in this area. Does the technology have the ability to detect and scrub corrupt data/connection from its learning? If I intentionally introduce a small cloud of disguised garbage data, to generate erroneous connection, is the technology able to detect and erase? And if I repeat over an extended time frame, is there a practical limit to my stealth corruption? Example: Assume that I am pretty sure a competitors 'bots are continuously sniffing cyberspace for live time change in a range of securities with deep markets. I buy a number of puts on said securities, flood cyberspace with a large cloud of garbage negative data, and trigger a flash crash that I close out against. However we've all paid our lobbyists, the exchange rescinds the trades, and it is as though nothing ever happened. But did the technology remove the erroneous learning from that corrupt data? If not, I have an opportunity! SD