SharperDingaan

Viking, great job! We also both owe a big thanks to Dazel for highlighting the 2021 FFH opportunity, when nobody wanted to hear it. We were in FFH as a safe place to park repatriation capital - just wasn't expecting to make double digits on it! SD

Consolidated equity > 100%. Capital for repatriation > 65%. It has been a great year and should be the start of a consecutive string of them over the next 4-5 years. Key assumption being an annual material capital carve-out to remove excess capital. Wins across all our o/g stocks, crypto, etc. ; even on our capital carve-outs (FFH). Losses &/or overpayments on the equity positions being built for years 3-5 (as expected). Minimal reduction in share quantities, ensuring maximum dividends going forward. We were lucky, but a lot of it was strategic planning and expertise as well. Continuous carve-outs to keep reducing risk and keep us within our circle of competence. Seasonal roundtrips as opportunity presents. Crypto trading off of ongoing technical developments, via ETF’s. Over time, accumulating capital carve-outs will fund capital repatriation as an annual dividend; the corpus essentially being a private version of Norway’s Sovereign Wealth Fund. When we inevitably bust as commodity investors, our gains over the cycle will live on. As the bumper sticker says … “Please God, give me one more oil boom. I promise not to piss it all away next time.” SD

Happy New Year! .... with a little kickstart from the Great Big Sea. https://www.youtube.com/watch?v=f-oC-kNtPTs Fortune and glory to all! SD

Not factored in here are the severance savings in relocating the office. It used to be that if you acquired a company, resulting in staff having to travel > an additional 40km to get to work, you had constructively dismissed them. You had to give the acquired staff a severance (whether you wanted to or not), and the total amount could get very big, very quickly. If the acquired staff chose to move, you had to hire them as new employees as well as give them credit for their prior service in the acquired company. Today we don't have this issue, if you have a virtual office, or work from home 3 days or more per week. You are little different to the travelling salesperson responsible for a sales territory - as long as the 'new' office is primarily 'on the road' and your are still responsible for the same territory, there has not been enough change to warrant 'constructive dismissal'. Similarly, if you work from home 2 days/week ... as the office moved to you. If you're looking for savings, and have a large footprint .... WFH has a lot of advantages. If you want to sell me office space, I want a multiple of these severance savings off the rent, and I want them sooner vs later. I also want compensation for the spend of my returned employees in your food-court, from which you are charging local vendors a higher rent. On a new lease ... very low near term rents, subject to long-term rent escalators, and a minor termination penalty for early release. Not good for office REITs. SD

Not a investment solicitation, but look at the Purpose funds https://www.purposeinvest.com/funds/purpose-bitcoin-etf There are probably either similar things in Demark, or soon will be. Todays kids are going to grow up with this technology - as well as the climate change solutions. A decade from now you are going to look very far sighted, and your kids will be incorporating this approach as naturally as breathing. Even our nephews, are pressing the family 25% of all o/g gains/losses from Jan 01, 2022 onwards. SD

Just to expand on this ..... What if you were willing to go long on a dividend paying XYZ, at 50% margin? i.e. Two shares of XYZ, one share paid for in full, one share entirely on margin; dividends on the two shares owned > interest on the margin debt incurred. At a leverage ratio of 2:1, a double in 6 yrs only requires a ROE of 6% (72/doubling period/leverage ratio), and this is a great many dividend paying companies. FFH has a ROE > 6%. Closed at CAD 623 and a CAD/USD FX rate of 1.2705 yesterday. USD 10/yr dividend. Assume a margin cost of 4% Annual interest cost would be CAD 623 x 4%; CAD 24.92. Annual dividend would be 2 x USD 10 x 1.2705; CAD 25.41. Net positive carry. If you believe the current ROE (>6%) will continue for at least 6 yrs, and that FFH will trade at roughly 1.0X BV, you will more than double your money. Your margin of safety is also the current ((ROE-6%)/ROE x100%. If you think the historic CAGR holds up, and assumed 10%; the MOS is roughly 67%. And .... this is the baseline expectation. Higher dividends, trading round-trip gains/losses, better pricing metrics ... and the margin debt declines. Improving expectations. Obviously there is risk here, as FFH is not a Sched-A (DSIB) issued Guaranteed Investment Certificate (GIC) However. substitute FFH for any one of those Sched-A Banks, and would get multiple times the GIC return; on the same risk Happy New Year! SD

The best one can do is estimate how long a company will continue to perform at its current level, and whether that will be enough to double your money. If the current ROE is 12%, it will take roughly 6 years to double (72/12). If you think the company can maintain its current competitive advantage for another 6 years, maybe its a good investment. If you expect competitors to appear and screw up the party - maybe it's time to look elsewhere. If the company ends up growing faster .. you just get to a double sooner than expected. If you're not getting the 12% YoY growth? sell and invest the money elsewhere. No rocket science required. SD

Always a good song to play when counting up the money! SD

How much risk are you willing to take? O/G is an obvious choice, but there's quite some difference between 400-600% on the Canadian drillers, vs 10-40% on the tar-sand majors. It's not just owning XYZ, its also ability to keep your hands off and let it run What's the yr 2-3 plan? SNC is an obvious choice, but you would be rolling calls, and focused on the multi-year CAGR - not the 1 yr return. Cash from o/g gains and SNC margin, progressively funding a growing long position for a sale 3 years out Mitigated risk of SNC running on you, while you are executing. Reasonable probability of continuing solid gains in Yrs 1. 2 and 3. Different POV. SD

Merry Christmas! SD

In a previous life, my firm had a competitor using securitization; when it was still extremely new. We would use an ultra-low cost of funds, bid on a book of business, and consistently lose it to this competitor who would subsequently do an equity issue - at a progressively higher price. Along with some very devious folks, we had to figure out how they were doing it, and how to exploit it! Sadly for them we figured it out, deliberately bled them dry, kept buying into the equity raises, and selling covered calls. The other name for securitization is 'cocaine candy', and the competitor had been booking a deals entire multi-year profit, immediately upon signing. Inflated the ROE, inflated the multiple, inflated the share price - as long as consecutive bigger and bigger deals could be signed. Once bled dry, the competitor suffered a public accounting crises, and received an offer they couldn't refuse; self-funded from gains on puts The competitor was merely taking a more aggressive interpretation of the accounting standard of the time, we simply recognized that it had weaknesses! Thoroughly enjoyed my time at this firm, but I couldn't hold a candle to the skill of the devious folks! SD

So many contenders ..... so hard to choose! https://en.wikipedia.org/wiki/Bre-X "Financial crime seems horribly complicated but there are only so many ways you can con someone out of what's theirs. In fact, there are four. A veteran regulatory economist and market analyst, Dan Davies has years of experience picking the bones out of some of the most famous frauds of the modern age. Now he reveals the big picture that emerges from their labyrinths of deceit. Along the way you'll find out how to fake a gold mine with a wedding ring, a file and a shotgun. You'll learn how fraud has shaped the entire development of the modern world economy. And you'll discover whether you have what it takes to be a white-collar criminal mastermind, if that's what you want." SD

There is also the French approach .... as demonstrated with the Rainbow Warrior solution to Greenpeace protests Simply sink the ships in international waters, and rescue the crew - both the Seals and the Coast Guard could use the practice! And the fintech approach ... a stable coin with a cartel backed coin on one side, and a BTC on the other. Speculate on the operating abilities of your local syndicate, tax the trading gains, and enable an options market. Lots of ways by which to skin the cat! SD

If you have interstate commerce, all an enterprising lad need do is grow their weed cheap in South America/Mexico, fill up a cargo ship, and slowly cruise north and south just inside international waters on both the US East and West coasts. That dirt cheap international weed is going to land in any number of coastal states, in volume, move freely through the states, and immediately put local growers out of business. Back in the day it was whisky on the Canadian side, or rum on the French side of the De Miquelon. Sure, smugglers took the illegality risk, but nobody could really compete against the bribes/kickbacks/volume pricing, even the local moonshiners found it more profitable to 'transport' versus brew their own. There was consumer demand and booze was quasi-legal, little different to todays cannabis. SD

The moat is the black market. Decriminalization made the product legitimate and expanded demand, pain control via weed vs opiate addiction is a lot more benign, every state its own oligopoly fiefdom, rising inflation/cost drives users to the lower cost product. Bans on interstate trade virtually guaranteed, to prevent in-bound flights from a far cheaper South America. 'Brand' is the group controlling distribution - not the product packaging. The big beneficiary is the state, not the users, or legal sellers. Divert folks from opiate addiction and the health care 'system' saves enormous amounts of money. Opiate addicts cost a lot to treat, and take a while to croak. Weed addicts cost almost nothing when the weed is supplied via a 2% 'no hassle' fee on black market suppliers - little different from other agricultural supply managed products. SD

Companies bitch because inflation raises costs immediately, but a company can only respond after a time lag, and not in full. 4% inflation today on a constant sales volume, offset by a 3% increase 9-months from now. When inflation spikes, the higher cost typically impacts EPS today; and tomorrow, by reducing future sales volume (higher price = less volume). Hence, inflation sucks! Yet when inflation spikes down? and the headwind is now a tailwind ? nobody screams inflation rocks O/G companies announce planned capex well ahead of time, most investors just don't know how to use it. If no M&A and write downs are planned, the inflation impact is just (capex announced - depreciation - depletion)/(prior year depreciation + depletion). Invest in the O/G space and you have a pretty good idea as to what the number should be - anything above that is planned M&A, When inflation is rapid, you don't drill - you buy, especially when 2PNPV10 reserves are widely available at cents on the dollar, and majors are being forced into ESG related transactions There is a reason why the investment community isn't crazed about commodities businesses, and why operators love them. SD

Everybody wants capitalism .... until it's time to let the markets clear via 'creative destruction'. Then its bail me out, versus let me go under - 'cause if I go, I'll take everyone else with me. In the good 'ol days - it was kick the stool from under you, and charge for tickets to see the fall! Sure, it hurt at first, but it also removed the corruption, the control, and truly opened the space to new competition, based purely on merit (bent, or otherwise!). What we have today isn't capitalism, its just bad cronyism. The woke folks might be misguided, but they are also bang on in many places. Either do sustainable business, or croak - your choice. All yeast in a sugar solution eventually dies from its own toxic waste (alcohol) - large companies are no different. SD

Would you believe the numbers of a promoter? or would you discount them 20% as your 'grain of salt'?? If it doesn't work as advertised, what are the write-offs? Not mentioning them is just one more opinion - wishful thinking did NOT remove the possibility, it raised it! SD

The people who 'know', saw the 'weed rush' as a joke, and still do. They were there, but in purely 'private' vehicles - and primarily as the sellers of equipment, expertise, etc. Who do think the 'know nothing's' hired to help them build the greenhouses, grow the weed, sell their 'opportunity' to gullible investors? And who has the rolodex today of what equipment is where, it's specs, and how much to repair? The 'know nothing's' also haven't been maintaining the state-of-the-art equipment - and much of it is 'distressed'. Easily fixable, but why should I tell you - vs just make you a low ball offer at scrap value, that you cannot refuse?? The serial entrepreneurs need out, and every day increases the opportunity cost. Gimme a stake to start again with, and this sh1te is yours! Cents on the dollar, that gets lower by the day. There are no buyers, because of Covid, and the related supply chain issues. Why buy the greenhouse today, when I can't get the replacement parts, and everyday the seller gets more desperate? SD

Most of todays cannabis growers were never meant to 'operate'. They were supposed to be dealt off to bigger players, that ultimately become subs of a Glaxo, Monsanto, etc. Publicly, all that was required was a glib tongue, a catchy 'story', and access to easy money. Those who knew what they doing were either private, or working for the end buyers. Tide goes out, boats beach, and you get to pick the carcasses. Everybody's crop is the best !!, same thing for the greenhouse. But when every cannabis greenhouse has automated climate control, grow lights, and watering - it comes down to cost paid, and operating cost. The product itself can largely be grown anywhere, and is typically just flown to distribution centers, it isn't trucked. A Michigan greenhouse is only a good buy if 1) it's bought at cents on the dollar, and 2) it can be broken up and trucked to a better location (more sun, cheap access to water, low taxes, low energy cost, etc.) If you insist on growing in both the cold and the dark, just put it in a container, reopen in Alaska, and grow fresh veg. You will get paid a lot more, and you don't even need the glass. Collectively, there is far more legal supply than legal demand. The surplus just gets dumped into the black market, cut into the black market supply, and raises the average quality of competing product. Black market growers are not fools ...... cannabis investors, not so much! By all means, pick the carcasses, but the smell comes with the territory. SD

We have some expertise in the CPG side of the biz. You will not make money in this space, until you are a niche oligarch. Corner a specific medical weed, industry 'Walmart' type distribution, greenhouse space, etc. Medical weed is extremely competitive and requires blockchain proof of provenance from seed to delivery system; own the patent, and you own the channel. Distribution will always be 2nd fiddle to the black market, who frankly just does it better. Greenhouse space has many other markets beside cannabis, and just as valuable. Put solar panels inside and under the roof of a greenhouse, and you raise nets materially. The panels provide partial shade, and generate more power in the cooler climate controlled temperature of the greenhouse. Less energy is required for cooling, it is produced from the solar panels themselves, and the surplus is additional to the revenue stream from growing product. Smart. SD

This thread would be better were it moved to one of the other crypto threads, but to speak to the question. There is NO safe crypto investment, the reality is that you have to deal with risk - measured as expected return/volatility. Generally, the longer the holding period the less risk For most, an investment via an crypto ETF will be better than a direct investment. Look at the Purpose ETF's, those paying a monthly dividend, and a 2-5 year hold. Professionally managed, cash returning capital every month, a double in 2 years producing a double digit CAGR. Most would expect BTC's price to materially rise, once the 21M cap is reached. Simply because buyer/seller will be splitting the mining cost and paying in Satoshi - every 1/100 of a US cent increase in the price of a Satoshi, increases the price of a BTC by USD 10,000. That's the real 'bull' case - everything else is largely noise. A 100K outlay values at maybe 400K in 5 years. If you receive 6%/yr for 5 years (30K), maybe 70K at risk at the end of year 5 Payoff? 400/70, or 5.71x ........ to simply sit on your ass and do nothing SD

Keep in mind that 'housing' is multiple tranches in a housing 'stack'. The same 'stack' in different cities just looks different; re total area (GTA vs Regina), and proportions (higher vs lower price). The article is talking only to higher priced housing across the stacks, and how to maintain/inflate it. We need more immigration !!! ..... but only the rich ones please! If the intent is to truly help people - Canada needs mass, low-priced housing on the city outskirts, well serviced by city transport, and financed via government issued 25-yr fixed-rate low interest mortgages. Sell, and the government mortgage is paid off in full. If the commute is too much for you, live elsewhere. If you need low cost labour, move your warehouse/distribution centre closer. If you want to continually get elected, give large numbers of people an affordable place to live. The last time Canada did something like this, was to house returning service men shortly after WW II - and it touched off the baby boom. Apparently, too complicated? SD

A company with inflated stock has to get the buyer to accept it, and the buyer will immediately discount it to between 70-85% of claimed value. Whether the deal goes through, depends on who controls the sellers stock - and what additional incentives the seller offers them. No bribes, no deal. Bit different when the seller has a very small share count. The deal almost always goes through, as nobody could possibly buy up the number of incremental shares being issued - without seriously bidding up the current share price. Management doing a reverse split ahead of an acquisition (to raise the currency's value), almost always gets fired - rips off the agents take. SD

It is also one of the more entertaining portions of an accounting lecture ..... lot of rogues and manipulation in here! Depreciation. Tax depreciation > book depreciation = deferred tax liability = zero interest loan = lower WACC = higher valuation. Depreciation: Managing expectations High rates over high income periods to lower income & fund the jar, reverse during low income periods. Write down more aggressively than needed (bath tub), write up as you need an income boost. The controller maintains a pre-close spreadsheet for a reason .... There is a reason why everybody looks at the Statement of Cash Flow ... it's not JUST to see where the cash is coming from, and going to SD