SharperDingaan

As a small-cap investor for decades, we find this whole conversation both instructive, and highly amusing. Einhorn is quite right in that small-caps don't feel the love when they do well; but why would you expect them to? They can't be bought/sold in quantity without moving the price, hence are useless to the trading market; the better trading solution is actually a small-cap ETF where the liquidity is deeper. And with that small-cap ETF, all that one need do is set up a 'bot up to buy/sell against an algorithm; and get out of way. You, as the human ... are just a liability. To do well in the small-cap space, you have to accept the inherent higher risk and view the companies as businesses - not investments. Know what they do, how they make money, where their commodity cycles are, etc. It's about continuously growing cash flow via dividends, and the reinvestment of swing trade gains, through time. Playing the same game multiple times, versus the gamblers once and done. Not conductive to typical trading. However, play well, and the dividend yield on your original $X of investment; moves to infinity over time, and becomes infinity when gains to date exceed the original investment. Hence swing trades aren't just trades, they are also a strategy not conductive to typical trading. Be mindful of the conversational framing. SD

The uncomfortable truth is that EIA reporting just isn't accurate, or reliable. It has some useful data points, but the 'roll-up' to aggregate quantities is very suspect. Sadly, the EIA is now also far from what it was, and has become a political tool - to artificially create lower prices at the pump. It has been well known, and for some time, that US shale was high-grading. Much of the recent consolidation has been driven from high-grade (high flow, fast deplete, few wells) no longer being available, and consolidation for 'manufacturing' (moderate flow, moderate deplete, many wells) purposes now being the next best alternative. Within reason, drilling long horizontals close to each other, fracking them, and controlling pressure via water injection, will get you comparable production - but at the price of a material bump in initial capex investment; hence consolidation. The downside is the huge quantity of water required, a growing issue in the US. It has also been well known, and for some time, that the EIA has issues around liquids and gas reporting. Report gas at the traditional 6:1 gas to oil conversion; as the shale gas cut progressively increases, a rising portion of the reported 'oil' production isn't actually real. Then remind yourself that shale is a gas field producing oil as by-product ..... Most would expect Canada's TMP expansion to rapidly reach its new 590K bbl/day of egress, and that most of it will go to the western US (shortest sea route). Post refining; every 1 barrel of crude imported will turn into 1+ barrels of refined/blended product, and that '+' will be reported by the EIA as US 'production'. Manipulation that is just par for the course. SD

An investor could simply take their money, and buy either a BTC-ETF, or CORZ. It's real hard to see why CORZ would be the better choice, and harder still to forecast if they will still be here a year out. SD

Nothing wrong with a fat pitch! The Satoshi Nakamoto paper came out in late 2008/early 2009; if you had a lot of BTC in 2012 it was because you were mining (& therefore knew a lot about BTC). Quite a few others (who read the paper) also saw value in BTC, and bought in their BTC at ridiculous prices (vs today). A lot of folks on this thread. BTC isn't a buy/hold, it's a trading sardine. Same as most everyone else we swing-traded and did very well, often making more on the down leg than on the up leg; but unlike most others (we're survivors from o/g), we also kept taking $ off the table, and repatriating. Simply 'cause once you have your first millions, the rest aren't particularly useful - so why incur the risk to get them. Very anti-capitalist!. By market value, we hold a lot more BTC than we would prefer; and if the price rise keeps up - will have to sell it down again to further repatriate capital this year. Ideally, the same as a market maker; we get to slowly accumulate by selling 4 of every 5 BTC we buy, and are funded entirely with house money. Point here is that there are many roads to Rome; the fun is in the journey getting there, not the destination. SD

Not to knock it, but this whole MSTR vs BTC thing is very funny ... No doubt MSTR has done very well, & continues to do so; power to them ... but it's only a 25.84B market cap. Whereas BTC is currently at 1.37T; and if it makes the much touted 'next level' 100K/BTC by year end; it will finish the year at around 1.93T - amongst the top 5 market caps in the entire world. MSTR is the mouse pissing on the elephants leg! BTC is barely out the gate. At this point, pretty much every wealth management & sovereign fund in the entire world now needs to have at least 2-5% of AUM in BTC. Every pension fund, large corporate, and state treasury around the world now also needs to have at least a 5-25% weighting to BTC within its cash equivalents allocation. And it isn't going to take years for adoption; it will only be as long as it takes for the various Investment Policy Statements to come up for renewal. And all this ..... is just the institutional side BTC is capped at 21M, but the number of BTC-ETF units is unlimited; hence as BTC rises, units simply get progressively split to keep the price around $20/unit, and the BTC-ETF becomes the ubiquitous equivalent of a $20 bill; backed by BTC and not a central bank. With central banks quite happy, as BTC-ETF's can easily be restricted within national borders; whereas BTC itself is borderless. Longer term, BTC is like owning Standard Oil and US Steel when Rockefeller/Carnegie/Morgan were still running the show. The players change, but the game essentially remains the same; may we all do very well SD

The actual FUD is 'everyday change'; framing it as Bitcoin is just gaming. 'Everyday change is a highly volatile commodity with an extremely uncertain future. A prudent person should assume everyday change will fail, if for no other reason than that most new things fail'. Folks just don't 'get' Bitcoin, don't trust it, etc., etc. .... Excellent!, that's the norm with change, and why we can all still buy it cheap. But the reality is that when the years of accumulating evidence demonstrate that Bitcoin acceptance is increasingly becoming the norm, and Bitcoin continues to rise in value; it's simply prudent to go with the evidence. It doesn't mean you're a believer; but the less folks are able to change, the more violent the eventual change will be. It's also not new. Different context; change Bitcoin to Hitler, and folks to German citizens in Germany, in the early 1940's .... German citizens just don't 'get' Hitler, don't trust Hitler, etc., etc. .... Excellent!, that's the norm with change, and why we can all still buy Hitler cheap. But the reality is that when the years of accumulating evidence demonstrate that Hitler acceptance is increasingly becoming the norm, and Hitler continues to rise in value; it's simply prudent to go with the evidence. It doesn't mean you're a believer [in Hitler]; but the less [that]German Citizens are able to change, the more violent the eventual change [to Hitler] will be. Nobody wants a repeat of the Hitler experience, but the contrast is very instructive. Overlay the increasing radicalisation of much of Europe, and the yin of Bitcoin to the yang of fiat currency; and the intrinsic value of Bitcoin becomes a lot more obvious. SD

Re crypto investment: To most people crypto investment is simply entertainment; mouthing off for kicks/glory, and gaming for a quick fortune over a few hours/days. It floats both the development and social media communities, and creates a market for the sale of sh1te coin. Not a lot different to venereal disease, it's just part of the environment. To many on the cocktail circuit, it's just an entertainment talking point. It's a scam!, that SBF crook!, that Reddit IPO - what a dog! Lot of gaming, trading of tips, and a lot of what's 'said' is often not what's actually done. But .... even if they had been tipped to buy Apple at $10/share, most would simply freeze in the headlight. Noise. Both the trading and the development community are all about the latest sardine; if you aren't trading it, or developing/marketing it, you aren't playing the game. Get rich by actually investing, and you're despised - as you've done squat, and are nothing but a HODLer. Of course .... they have to trade &/or develop, whereas you don't. Jealousy. The reality is that crypto has no comparable, and its use in investment is rapidly evolving. Like it or not it is functionally BOTH an asset class; AND its main asset (BTC), is a cash equivalent; get over it. Recognise that every IPS that does not include BTC/CBDC in its cash/cash equivalents weighting is obsolete, and you immediately add a sizeable global demand to BTC. It takes both courage and maturity to be able to think for yourself, and more still to act on your own conclusions. You get paid to recognise opportunity, take on the risk, and you do what you can to mitigate it. Do it well, and over time, you can expect to become very successful. And all those 'haters' ..... actually work for you ... at zero pay! SD

"But for me, hoping for 100-200% gains from this investment over the next 5-10 years, I would not sell because of a 10% move up or down. It is a lot easier for an investor to hang on if she knew a bit more about Fairfax, and was thus not scared off by the Muddy Waters allegations or fears about their impact." To each his own, and may it work out for you. We only point out that there is the buy/hold return on FFH itself, AND the swing trade returns from volatility. Global warming is generating bigger Super-Cat losses, and the FFH insurance business has a seasonality to it, that is just part of doing business; nothing wrong in that, but it will generate opportunities from time to time. If you able to make a success of them, you will get to your 200% a lot quicker SD

You might want to rethink this; as we recently exited our swing trade at > CAD 1500, and typically swing trade around the dividend record date. We trade FFH because it's well run; but our trades themselves are just about being opportunistic, and acting on value when we see it. We act like insurance; additional buy side demand when the sh1te hits the fan, that quietly exits later when everybody is positive. SD

25-35% of cash equivalents at cost, highest when we enter the position. As we periodically repatriate capital we trim it down, as we swing trade we fine tune the weighting; cash gains/losses into Canada's. If we've done our job well; we will only have realised swing trade gains, and HODL on unrealised losses. BTC drops 25% next month; we sell down the Canada's, re-enter at the lower price, raise our cost base, and adjust our weighting. As total cash equivalents rise, so does the amount we can safely put into BTC Do this long enough and eventually there will be a year-end with a lot of BTC at a high cost base, in a much lower priced market. Sell everything, buy it back >45+ days later, reset the cost base, and harvest the tax loss. Not for everyone, but it does the job very well. SD

If you are are a young person, looking to build your retirement nest egg 35 years from now (age 70); it is extremely stupid NOT to have a significant weighting to an BTC-ETF. The only real question is how much of a weighting you should have, and whether it should be maintained at cost or market value; the lower your risk tolerance, and the shorter your investment horizon, the lower the weighting. At the institutional level; providing company sponsored pension plans, at a 2% weighting for now ... that will rise over time. BTC is just a payment app that was created to demonstrate blockchain technology; if you think that blockchain technology is likely to materially change the world over the next 3-4 decades, it's hard to find a better vehicle than a regulated BTC-ETF. No need to predict who the winners/losers are; just a need to be in the game, and in a vehicle unlikely to sink. 35 years ago this might have been a Berkshire Hathaway share, and at a share price not much different to recent BTC prices. Most people (Joe Sixpack) just want to 'buy and forget'. A BTC-ETF is a fraction of the price of a BTC, and designed for those with zero experience/expertise in crypto; as far as 'Joe' is concerned, the PM is actually a value add and relatively cheap. Over time, the more 'Joe's' that add 2-5% weightings in their portfolios, the higher the demand for BTC goes, and the higher the price. Momentum, halving, etc. just taking price higher still. The adoption curve. And as price goes higher ... the more that FOMO kicks in; less than year ago BTC was at USD 32,000; today it's pushing USD 69,000. Not that long ago, we were being questioned for treating BTC as a portfolio 'cash equivalent' - as how could the value of a cash equivalent possibly rise by 50%+! Zero recognition that if you don't want a cash drag on your portfolio, some of that cash needs to be in BTC Back in the day cars not only replaced the horse and buggy, they replaced all the related infrastructure as well; at the time there was little idea as to how long this would take, similar disbelief prevailed, and then as now - few took up the opportunity. Same thing occurred when steam replaced sail, and wireless replaced landline. Inability to adapt to change. All good, and more for me! SD

This keeps up, we're going to have to have a 2nd capital repatriation this year .... SD

It's one thing to find methane leaks ... but expect anything that comes back from these satellites to 'disappear', near permanently. The overwhelming majority of methane emissions are natural; not from o/g, and agriculture. As permafrost melts it releases methane, and there have been multiple explosive methane releases all across the Arctic and Siberia, for quite some time. As long as the rotting biomass remained frozen, and the ice caps remained both thick/frozen (capping fossil methane egress) there wasn't a problem, but with the warmth of ice-melt, large quantities of methane have been bubbling through arctic lakes, and exploding through thinner ice-caps. Some of the releases have been continuous enough to catch fire, remain lit 24/7, and are visible at night. All of which has been going on for some time now. The Kyoto Accords were driven from climate models with predictability that have proven to be utter sh1te. While they were state-of-the-art models at the time, the implementation of corrective policy was badly botched; a common outcome when research is commercialised. The extent of record arctic methane releases, growing undersea fire-ice methane releases (warming China Sea), smoke from record global fire seasons, and geologic change/eruption was not adequately modelled; resulting in both significant and material understatement. https://theweek.com/environment/fire-ice-methane A good chunk of the 'new' economy is based on green energy, and polluter pay toll charging; plus redirection of new investment away from conventional o/g and into these 'new' areas. Materially undermine the Kyoto accords on which this is all based ..... and it all ends badly; so if you find things that burn the 'trust the data' playbook (i.e: the Kyoto models were junk), expect your findings to be suppressed (not talked about) The reality is that polluter pay is purely a rich mans problem, and that most of the world isn't rich. Coal burning power stations may be very dirty, but coal is widely available, and it enables the production of electricity that lets modernisation happen; even if for a few days/year there is a need to shut them down so that people can see/breathe again. Nations get around the problem by going directly to wind/solar; hence, there is a reason why China is so prominent in these industries. Most would expect o/g to remain the villain, and to asset strip to fund buybacks/dividends for many years to come. Polluter pay is not a bad thing, but ultimately the market will decide it over time. Today's younger generations have few issues with the principle, and in 10-15 years they will be running the place, whereas today's objecting older generations will all be in nursing homes. SD

Costs more, and takes longer to build the modern nuke; but it's all base load, running 24/7, in quantity, and at a cost/MW that is pretty hard to beat. Only things that slow it down are national/local legislation, the hybrid/EV mix, and local charging from neighbourhood solar charged Tesla Walls. If JOE built out a new community where every rooftop was solar, with cheap green power fed into each unit first, then community Tesla Walls that powered resident EV's and golf carts at nominal cost/KW ... would you buy into it? 'Cause if you would ... this whole thing is a lot closer than you think ...... and it doesn't slow down nuclear, unless it takes off. Different take. SD

The reality is that US shale are GAS fields, producing oil as byproduct; gas prices are local, with a floor price a little above the cost of distributing it. Higher prices the further away from tidewater you are, and most of it going to standby gas fired turbines when weather is cold. Gas is cheap but nukes are cheaper. Nukes will also increasingly supply both the growing hydro-electric shortfall (no rain), and base-load power requirement of growing numbers of EV. Gas will top up supply when its cold (for heating), when the wind ain't blowing, and when it's hot (PV less efficient). Not a lot of reason to love gas. SD

Just to throw it out there ..... FFH might want to include an EV/Common Share valuation every quarter, starting with the AGM. First time out include the methodology, and drive it from the Statement of Cashflow (PAT approach). Provide the estimated maintenance capex, the WACC, and the growth rate. Refresh the estimates every 2nd quarter. Multiple of BV is just the dominant industry comparable; change the framing, and you change the valuation. Run the company as a business, versus an investment, and EV is a lot more relevant; as management makes the key decisions that influence cash flow activities, WACC, growth, maintenance capex, etc. Evaluate management on what they do. Nobody else does it .... yet. Put the EV/share out there and you'll get a lot of attention!, particularly when it is a lot higher than the multiple of BV valuation. Successfully defend it, and others will follow; the combined effort achieves critical mass, and the framing changes. It's risky .... not. If the EV/share is 20% higher than the BV multiple, to discredit the approach a naysayer has to consistently and persistently argue a discount to EV/share of > 20%. Hard to do, and if only 50% successful, EV/share is now 10% higher than the BV multiple; and it gets near impossible to do ... if EV/share becomes the industry metric. Fear is the mind killer here, not the approach itself. The bulk of the industry is a handful of players, that all know each other. Should one trial it for a year, lets the market decide, and it works out; the 'impossible' could well occur a lot quicker than everyone thought! To quote the renowned Trooper song . " If you don't like what you got, why don't you change it? If your world is all screwed up, then rearrange it?" https://www.azlyrics.com/lyrics/trooper/raisealittlehell.html SD

It's way more lethal when 'institutions' are mocking you. MW has erred badly, and it has entangled them in a growing tar baby. They have a weak hand, their network is reassessing them, time is ticking, and they need a way out (Reddit). There is a much higher risk adjusted payoff to simply staying put. The smart thing would be for MW to cut bait, and fold. Question is, does their network let them? Bought the popcorn, expecting a show. SD

Keep in mind that no buying doesn't mean no money waiting on the side-lines to come in. If MW round 2 doesn't happen soon it's not going to, so give them some time ; it's a small community, and the laughter is echoing. Their last success was a long time ago, and if this is the best that they can do now ...... well, the walls are closing. Somebody lend them a few shares, to buy back cheaper! SD!

It's not just in the Permian. SD

This is why we have the plastic bag; ain't in the playbook, and nobody grabs a slashing wolverine without getting at least a few wounds. Targets are supposed to roll over, not slash your throat! Fellow 'peers' pull back to watch the show, and place their bets! .... against MW. SD

Thing is, there is little risk to it as the media assumes the bluff will not be called; and most of the time it will be right. Not going to change unless the media is systematically sued, every time it occurs. SD

Most management in o/g knows their sensitivities extremely well; they will generally hedge some production at X to guarantee the funds to pay for planned capex, lock in the occasional opportunistic gain, but everything thereafter is left at market. Simply because o/g investors WANT the market exposure, as it creates share price volatility to trade against. The reality of course being that investors recognise that the intangibles are significant value creators; hedge them away and you also remove most of the investment opportunity. SD

Under IFRS accounting (Canadian standard since 2010), only inventory available for sale is M2M, and it is re-marked to market every quarter. The quarterly change charged to other comprehensive income, and closed to equity. Only inventory not available for sale, or specific inventory assigned as a hedge against a specific liability is not M2M. If the hedging assets drop by 50% tomorrow it's no bother as there is no intent/need to sell until the liability actually comes due. Similarly, inventory not available for sale; covers all those long term investments bought at cents on the dollar, awaiting their future day in the sun. Of course, if it's actually not available for sale ... M2M valuation is meaningless. MW essentially argues that all inventory is available for sale at the the right price, and therefore should be at M2M. Here are all these 'omissions', they should be charged against equity! lowering book value! Maybe if the intent was to liquidate FFH tomorrow, but for normal course business IFRS accounting says otherwise. MWs financial strength rests on ongoing ability to demonstrate that they know their business. Mock and vilify their 'incompetent' attack amongst their peers, and you jam a plastic bag over their head. They have to come after you hard, and as quickly as possible, before the air runs out; squeezing the orange SD

Sadly it would seem that exchange traded options on FFH are no longer available; at one time, you could buy/sell them on the Montreal Exchange. The reality of course is that you can still do the same thing; but now its via ISDA agreement/private market, and without the premium and open interest information being visible to the open market. https://m-x.ca/en/markets/mx-indices/derivatives-indices Should MW go multiple rounds, one has to think it's only a matter of time until it reappears. The higher leverage of options vs the 50% margin maximum, and the greater transparency, reasonably assuring the prospective market maker of sufficient volume to make it worthwhile. SD

Sadly, I'm nowhere near as eloquent as James Joyce! Just to throw some random numbers out ... Start at 1400 pre-announcement. Short 1,000 shares, long 10 out-of-the-money puts at 1300, publish report, media tour Drive the price < 1300 by expiry date. Have the 1,000 shares assigned, off exchange. Long 20 calls between 1300 and 1400. AR is announced, squeeze the shorty! Price moves to 1500, sell the 20 calls at 1500, return the 1,000 shares to the lender. Buy today at 1260. Sell at 1500 post AR (240 profit), buy back at 1260 on MW round-2 (240 profit). MW eventually walks away, shares sold for 1500 (240 profit). Total gain of 720 on a 1260 investment is 57%. If you only capture 2/3 of this ... about a 38% return. Just one of many possibilities ..... SD