SharperDingaan

A brief response, then we we drop the discussion; as the intent is not to hijack the thread. Most people associate block chain with crypto-currency because of Bitcoin, & because pretty much all textbooks extensively feature the mechanics of Bitcoin. As it was designed for a zero trust environment (ie: the silkroad), it was necessary to invent both the distributed ledger (DL) and the smart contract (ie: Nakamoto/Szabo). In reality, it is far faster and efficient to run the block chain and smart contract on a database, use the token in a 'registry' function, and eliminate the DL entirely. The more digital wallet holders the Oracle (Bitcoin, Etherium, DASH, etc.) has - the more effective the crypto-currency becomes for everyone, as wallet holders can transact with each at a fraction of a cent, & without borders. Distribution is critical, and the best platform would be an ApplePay/GooglePay - with every Apple or Google account holder in the world having a Apple or Google digital wallet. Whatever crypto-currency they choose would become the global standard, and they would have strong incentive to choose the same currency versus issuing their own. One tulip only, and maybe a couple of varieties for very specific industry applications; today there are getting on 1100+, & more coming to market almost every week. Of course this is heresy to the crypto-currency industry as it kills the ICO, and focuses development on block chain/smart contract application (hard sell) - versus currency trading (easy sell). To date the main beneficiary has been Etherium, and its cloud based applications that you can test your vision on. Both focuses have their place, and arguably ICO investing is really no different to momentum trading. However the place for any further discussion are the block chain threads, & not here. SD

Couple of things to add.... If you can issue your own currency, & get others to use it; you get the benefit of seigniorage - the difference between the value of the money and what it costs to produce and distribute it. Pull off this trick & you don't need to issue equity or debt to fund your start-up. Hence everyone rushing to do ICO's, & dissing anything that might strangle the current ability of a start-up to get 'something for nothing'. Prices for coin will very likely rise as the technology becomes more mainstream; ie: rising demand for Bitcoin on the fixed supply (that doesn't change with price) essentially guarantees it. But are you really confident today - that your $50,000 Bitcoin is actually going to be cashable in the future? The real value of the block chain/smart contract technology is when it is used to disrupt long standing existing business processes, not in issuing token for cash. SETL coin and the R3 consortium being a classic example - reducing securities settlement time to T, eliminating days of JIT financing, reducing the number of confirmation staff, and office space in which to house them. Find the firms doing this kind of change, & you will almost certainly become very rich ;) We're at the start of the next industrial revolution, so consider investing accordingly. Hoping to sell to someone dumber than you, is a pretty shallow way to go. SD

Re: Crypto currency and ICO's. You might want to remind yourself that a token (Bitcoin Ether, etc.) is not an investable asset. You are exchanging real cash for a digital asset through a single FX facility backed by a limited liability corporation (LLC) - and are hoping that 1) the value of the token will rise during the time that you are holding it, and 2) the corporate FX facility will actually be able to return real cash for your token when you cash out. The corporation did the ICO to raise the cash to fund its development; the go-forward expectation is that on any given day - the funds from new buyers of token, will fund the cash out of token sellers. In the early days the LLC has the cash to make good on net cash outs ... but as it burns through its cash to fund that development - your odds on a successful exit rapidly decline. No different to a ponzi scheme. To escape collapse the token either has to be widely used as currency, or the FX facility has to be backed by a central bank, &/or a large consortium. If you are one of the top-5 distributed ledger currencies this may well be feasible, but if you aren't .... it doesn't end well. SD

"Given that there are roughly 100 million non-college-educated workers in the U.S. economy (about 70 percent of the labor force), the scale of wage losses suffered by this group translates to roughly $180 billion." Sadly; there are a great many similarities between this and the low skilled Afrikaners of South Africa who created apartheid based on skin colour - to protect their privileged economic status. We're just seeing apartheid being implemented by other means. It is of course a choice, implemented by regime. South African history evidences that majority agreement is not a requirement. SD

Bilateral versus unilateral, depends almost entirely on the dominance of your trading position. If you're unevenly matched, & the #1 economy in the world, you want bilateral trade with all your trading partners. You call the shots no matter what, might is right, and your trade partner says 'thank you' every time you deign to trade with them. Nice place to be. If you're evenly matched, & one of the top economies in the world, you also want bilateral trade with all your top economy partners. Its dirty trade, and you need the muscle, flexibility, & speed to deal with it. But most of the world isn't in the top economies; & like fish, there is safety in schooling together - unilateral trade. If you can get a dominant economy to buy more from you, than you buy from them - good for you. When they complain it is to them to either buy less, or invest in your economy such that you can buy more from them. If your production cost is lower than theirs, you will get the investment; & their labour force will suffer the unemployment. To buy less simply make more of it at home, & keep the jobs at home - but pay a higher price for the goods. No more 'throw-away' $10 T-Shirts assembled by slave labour in Bangladesh. All trade is based on costs and benefits, and only occurs if mutually beneficial. Obviously, when the folks on the bottom of the food chain aren't benefiting - you clearly need to do it differently. Lots of ways of doing that, many of which are being discussed at NAFTA. Our own view is that ultimately labour standards rise in the low cost countries - reducing disparities, labour mobility between countries improves, & more product gets built at home versus outsourced. Higher consumer costs for everything we buy, & no improvement in the lot of the under-educated unskilled worker (responsibility remains at the individual/state level). SD

No worries, the US is just another trading partner - same as everybody else! Point is that if you're going to trade you cant be isolationist, and you cant dictate - the US isn't #1 anymore. A lot of what the US offers, Asia does as well - and often at better value. Currency manipulation, subsidies, protectionism, etc. is part of the value equation - and expected. Like it or not, the imbalances exist because the US is addicted to buying more than it sells; simply either buy less, make the product yourself, or sell more. But recognize that you cant make someone buy from you when your value proposition sucks. Many would argue that a very good solution would be making more product at home, and making US consumers pay more. Even Henry Ford recognized that the whole reason for paying a workforce more is so that they can afford to buy the products that you make; paying a foreign workforce little, then trying to sell them goods they cant afford - just ensures a growing trade deficit. Deficits have to be financed, it is primarily Asia doing the financing, and they don't have to fully roll over maturing debt. It is hard to see how the US would not be forced into a slow devaluation. Ultimately it means adverse changes in the US standard of living, and the ability to accept them. Not something the US does well. SD

The US needs partners to trade with. No partners because of insistence on bi-lateral negotiations = no trade. The US is also the #2 economy, not the #1; and the rate of decline is accelerating. Was #1, is not #1. Trade deficits widened because the US bought more than they exported - & it was because the partner either couldn't afford to buy the US product - or was able to buy the acceptable quality alternative, elsewhere. The US value proposition failed. SD

Bi-lateral agreements make zero sense when you're dealing with a dominant trade partner; for the same reason that you don't sell to Walmart when you're a small player. They will own you, squeeze every nickel out of the relationship, & ultimately turn you into a slave. The strategic thing is to walk away - leaving you with a smaller, better diversified, agile & healthier business; that is a lot easier to manage. The reality is that US production line industry is fundamentally obsolete in today's world, & the US hasn't been able to move on. It is no longer possible to use economy of scale to offset labor costs, simply because we don't buy millions of identical units anymore; factories compete on smaller, frequent, & flexible production runs - & robotics. There is recognition that US citizens are going to pay more for their goods (protectionism), but it hasn't been thought out. Make the cheap stuff more expensive, & the demand for it will fall off a cliff; automatically resulting in lower US imports and a better balance of trade. SD

More like folks wake up one morning, notice a lot of tanks and troops on the streets, and silence from the regime. Died in their sleep. New regime & no invasion from SK, per a negotiated deal. SD

The well worn elegant solution is that Kim and company depart this mortal coil. The quid-pro-quo for an unrestricted US response/defense against a missile launch, being an unrestricted Chinese response/defense to their NK problem. The 2 Korea's stay as they are, tensions dissipate, and business returns to a more predictable 'normal'. Assuming success, the template then gets applied to 1-2 others as well. SD

Back by popular demand! The University Of Toronto Summer Innovation Series of courses; Course 3389 – Blockchain: How Do I Implement It. http://learn.utoronto.ca/courses-programs/business-professionals/summer-innovation-series The updated version of the 2 day course costs $499, runs on a Thursday and Friday, and is offered August 17-18, September 21-22, and November 9-10. To facilitate those traveling to Toronto; as much as possible, the dates have been selected so as to be adjacent to significant events occurring in the city - such as the Invictus Games 2017. The course walks students through a systematic 4 phase due diligence ‘go’/’no go’ assessment process, applied to both a clear and a coloured token block chain application. We will also touch on SETLcoin, a new crypto currency patented by Goldman Sachs July 2017; for exchanging assets, like securities, cash, and cash equivalents, through a peer-to-peer network. If you're thinking of addressing a particular problem, via a block chain solution - this may well be the cheapest $499 of due diligence that you'll ever do Day 1 of the 2 day course speaks to how the distributed ledger works, what has been occurring in the distributed ledger space, what a block chain application is, the Input-Process-Output impact, the database/distributed ledger decision, clear versus colored token, SETLcoin, Bitcoin Cash, and the Corporate Social Responsibility considerations of a block chain application. Day 2 of the course walks the audience through the use of a Balanced Score Card by which to assess whether a proposed block chain application should be undertaken or not. We assess whether a clear token charity fund raising block chain application, and a colored token bond fund raising application should be undertaken. We conclude the day with a compare and contrast of clear versus colored token applications. I will look forward to meeting you! SD

"SD - why are the spinoffs, as you call them, related to Prem's age and succession planning? It looks to me like Prem has built a deep bench, with Paul Rivett and Andy Barnard at the forefront - that's to do with succession planning. But I don't understand what FIH and FAH have to do with it." FIH and FAH are akin to our time-worn mercantile adage of 'sending ships to the new world'. Send 2-3 ships at a time, split the cost of the venture across multiple parties, and put the ships in the hands of the next generations of all those parties. If it works out; the ships return, everyone gets rich, and those next generations command the new trading route. If it fails; it's not enough to put any of them under, and they get practice working with each other - for next time out. Win-win. But while those ships are away, & the fledglings are learning to fly - their home base is protected, & strengthened over time. Papa's job until he eventually retires. SD

Not sure if this was meant tongue-in-cheek. If not, really?! Do banks own real estate and rent out the property? Aren't REO properties gotten rid of asap? Are banks in Canada interested in carrying on holding foreclosed properties and renting them out? Hardly seems plausible, but then again, what do I know? The bank cares about getting its money back as reliably as possible, assumes the homeowner is bankrupt, and tries to minimize its 'trashed place' risk by repossessing and evicting as soon as practicable. Thereafter it's more about managing earnings risk. If the sale means only a modest loan loss, it'll be liquidated - & the loss either written off against provisions, or added to the bankrupts debts (assumes there will be a collection). If the individual sale means a large loss, & the volume of sales would further depress the market; the house is held off the market. It'll be rented out at market rate to minimize ongoing losses as much as possible - until the house is eventually sold for enough to recover all the costs to date. The more expensive the house/neighborhood (1.5M+) the more likely this will be the way it'll go. If you could afford to buy, you wait for the blood to flow; & then make the bank an offer to lease the place for X years, subject to a purchase right of first refusal. SD

You might want to look out a little more long term - and apply some context. Prem's getting old, and planning for the next generation; it's why there have been all the spin-offs into Africa, India, etc. - paid for by issuing stock. Referring to Singleton strongly suggests that the stock was issued at a high price, and that over time - the intent is to opportunistically buy much of it back at a lower price. They hold their treasuries in part because it's an OSFI requirement of most FI's; but it also allows them to buy back what they've issued at any time. http://www.osfi-bsif.gc.ca/Eng/fi-if/rg-ro/gdn-ort/gl-ld/Pages/LAR_index.aspx http://www.osfi-bsif.gc.ca/Eng/fi-if/rg-ro/gdn-ort/gl-ld/Pages/tlac.aspx They haven't had any big UW losses in a while; but we all know it's a numbers game, and that both the frequency and severity of weather related loss is getting higher. While it's highly likely they've re-insured much of the risk, it's pretty much a given that at some point they're going to take a hit. Lowering price, and triggering Singleton strategy buy-backs. So you are really buying a quality shop + an implied put (Singleton strategy buy-back). All good. But as an investor - could you not do the same thing for less? Simply sell when Prem issues, sit in treasuries, & buy when he repurchases. They haven't had any big realized wins on their bow-wow investments in a while either. However, if they were going to fail - most would expect that they would have done so by now, and that these things are going to be worth quite a bit as the economy starts to improve. SD

Not really. Recent marginal buyers would have to have had a > 20% down payment, and ability to absorb a 200bp increase in interest rate on their HELOC. As today's buyer has to meet the same criteria - all sales (albeit at much lower prices) are into relatively strong hands. Systemic stability. If the buyer bought the place to live in, nothing has changed - as there is no intent to sell. Sure the buyer might be pissed, but that's it. Systemic stability. If the buyer bought the place to flip, they knew the risks. Millions of people make stupid decisions every day - welcome to life. The bank just forecloses, and simply rents out the property until the market turns around. Systemic stability. Same as the buyer was doing. The pigs get slaughtered, valuation returns to more normal levels, and the sector becomes a lot healthier. No real risk to system stability, while the market does its thing. The way it's supposed to work. SD

Add to this that > 50% of the market is driven by trading algorithm, and that most of the algo's will have fairly similar rule sets (everybody copies). As they all buy/sell largely the same universe, at the same time - a bet against the market, is a bet that one of these algos fails (triggering a run) as market complexity keeps compounding. A bet on a systemic collapse, driving at least one or two players to fall onto the 'too big to fail' safety net. A DB, or HCG, all over again. The only question is whether the dice are weighted or not, and in what direction. Feeling lucky? SD

For most people; it's either buy an index (ie: o/g) - or buy the individual equities. Both are just trading vehicles. Most times the index is by far the more attractive of the two - if only because its more o/g companies, and more liquid. I care only about lowest cost (<1%/yr), and hold it purely to trade the index cycle; the fund manager is of minimal value-add to me, as I have no intent to 'buy and hold forever'. I buy equities because I expect to be there a long time; either by intent, or because I screwed up - and now need to 'work it out'. I'm there as the garbage man; buying the hated when they stink, and selling for gold later when the smell ain't so bad anymore. Like the garbage man I'm paid to put up with the stink, and process sh1t into compost. The 'money in muck'. Nobody wants the garbage man at their cocktail party; if you want adoration, don't buy sh1t - buy quality business. Sound familiar? The garbage men or women dressed in Armani or Dior don't smell :D Hence what value-add is your fund really offering you? I could easily replicate the 'promise' of more money by simply buying a wad of lottery tickets every month, & get better odds. There are of course a great many people who are very good at what they do; many of whom post on this board. But if your expectations are not realistic, nobody can help you. SD

Welcome home, we missed you ;) SD

You may want to look at this a little differently. What if the 6% is in the last 2% of the 'bell curve' of returns? and the mean is actually closer to 4.5% (but unknown)? Pay 1.5%, and most of the time you will be giving up 33.33% (1.5/4.5) of your annual return. For what? And if the portfolio is 1M (500K equity + 500K margin), that 1.5% is now also 15K and not 7.5K. For what? If you did nothing more than annually commission an advisor to review your position and write you a report, a 2-5K fee would be very generous . Thereafter it's simply a low-cost self-directed execution of the reports recommendations, that you could easily do yourself. So what additional value-add are you getting for your 1.5%? and is it enough for what you are paying? Different strokes, but questions that have to be answered. You're the person paying the bill. SD

Think of a share price as an intersection; the positive of higher earnings from improving business conditions, versus the negative PV arising from higher interest rates. The higher the P/E multiple, the stronger the PV discount as we’re discounting more years. If the discount rate is already high, the PV of the additional years doesn’t matter much; different story when the discount rate is small. Then add in that earning effects take a while to materialise, whereas discount effects are immediate. A central banker increasing the discount rate is confirmation of an improving economy, and higher earnings – all good. But if the earnings promise was over-hyped before the rate increase, it’s a negative for earnings growth. Given that Trump was over-hyping, and hasn’t been delivering – most would expect a neutral/negative earnings impact. As interest rates are at historic lows, and P/E’s are high (pre-paying for more years of current earnings), the negative PV effect is also currently exaggerated. Pretty hard to see how prices go much higher, until Trump actually meets his economic promises. So far it’s been zero, in how many times out? Given that central bankers in NA have been raising discount rates, and that most would expect them to continue doing so – the medium term economic position looks pretty good. Just not so much in the short-term. SD

I think it's a bit of both. I think there's a cyclical part to it. Part of it is the end of a long bubble, sort of you had your fun with it but you took it way too far and now we're gonna step in before you break any more things. The other cyclical thing is that the regulator probably wanted to step in for a while but they weren't sure if the economy could take it. You don't want to pop a housing bubble on top of an oil crash. But now maybe they feel that the economy is in better shape and they went for it. But a big part is the cultural thing that you just weren't aware of. Why is it this way? Tradition has a lot to do with it. It's always been thus and it's worked pretty well in the past. The government/regulators are very powerful (when I was at RBC in London we were kinda worried about the FSA but terrified of OSFI) and they care about the stability of the system. From a stability perspective it's easier and more elegant to do it this way as opposed to naming names and triggering bank runs. Yes, you and I can't make the profits on our shorts that we want. Then there's gonna be dumb investors that put money into these guys and are gonna loose a lot. But our gov't can be pretty ruthless that way in the name of stability of the system. HCG is a case study. They were made an example of. The regulators (mainly OSFI) were probably all over these guys for a while (Canadian style) to clean up their act. But most likely due to hubris and/or stupidity they didn't listen or cooperate. So they had a regulator, in this case the OSC, drop a bomb on them. Now if this was in the US and the SEC issued the letter you would had maybe a 5% stock drop and nobody would have cared much. But over here on that action you're done, cause it's not just an OSC letter. Yea, it's murky, and you, I or the next guy may not like it. But it's just the way things work here. Each Big-5 has its own unique 'Charter' and operates at 'the pleasure of her majesty' - a historic quirk that literally goes back to Canada's founding years; OSFI is essentially her majesty's representative. Add in that early Canadian bankers were primarily Scots, that grew up in the 'clan' system; & you get today's banking system. Canada's modern day version of banking is very effective, and retains the 'help yourself' underlying nature of the clan system - ensuring that it is generally market responsive. Totally counter to the American approach, hence the dissonance. Can't game principles, can't fragment authority over multiple regulators, can't bully because they're smaller than you, can't steal their best people - because you're just too small. They don't do democracy either, and you will do as you're told - when you're told. It's not a discussion. While stability is prized, complacency isn't; so new innovations are permitted to root, & demonstrate the business case. They enjoy time-limited 'protection' until they abuse the privilege. No different to the drug, oil, or arms trades - just a lot better run. Typical Scots. SD

The course ran on July 14 and 15 - so it is no longer listed on the link. As it was very successful, it is highly likely that it will be run again in August, on either a Thursday/Friday or a Monday/Tuesday so that folks flying in can make a weekend in Toronto out of it as well (it's Canada's 150, and the 'Invictus' games are also in Toronto this year). We're having the discussion, Monday next week. For those who cannot travel to Toronto we will also have a 4-5 week on-line course, with the first run being either early September or October. Alumni of both courses will also have the option of participating in an underlying 'meet-up' group of Business Analysts, Coders, Others, etc. swapping contact information. The idea being that the more folks who pass through the course; the bigger the 'meet-up' group becomes, and the more valuable to anyone looking to do some preliminary due diligence. We also do a 1-day off-site version in client offices, and are currently in one of Canada's big-5 banks. The target market is senior management; with one per bi-annual rotation period, and one per quarter making the most sense. We would like to broaden this, so if it is of interest - either PM me, or contact UoT directly. It is not restricted to just FI's. As the UoT also offers a short course in AI, and some other very useful innovative courses; the possibility of a bundled road-show of multiple courses is also on the table - i.e.: travel to City X for 2-4 days, with 1-2 days 'on-site', and 1-2 days in client offices. The first road-show most likely being this Fall. There are a few other things as well, but I only have 2 hands. SD

We just invest the same small amount every quarter, and try to be opportunistic along the way; sometimes we're right, other times not so much. Ideally the weighted average realizable value of our token doubles along the way, we sell 1/2 to recover our investment, and let the rest ride. Bitcoin isn't the best at what it does; but like it or not it's the benchmark standard against which others are compared - if only because its the most liquid and best known. They have first mover advantage, much as RIM had at one time with the Blackberry. If it turns out to be the next Apple, we look like Forest Gump. If not, no big deal - as long as we've recovered our original investment. SD

The $50,000 bitcoin? http://fortune.com/2014/02/18/could-there-be-a-50000-bitcoin/ The article speaks to a back-of-the-envelope valuation approach that is just one of many; but you may want to just go back to the very basic supply/demand model, and think of it as the price set by supply/demand as at a point in time. At any one point in time the supply is essentially fixed. As new coin is added only by the mining process, at a insignificant rate that is not a function of price - the supply curve is vertical at any point in time. However, over time - the supply will increase from today's 7M to the maximum 21M per the design specs. Hence almost all the price change, reflects demand change; find new ways to raise demand for bitcoin, and the price must rise. Could be by a virus demanding bitcoin as ransom, could be via textbooks citing bitcoin - as the technology is rolled out and the masses buy some to play with, could be by treating bitcoin as an asset class - no different to a stock, and it could be by creating credit swaps with bitcoin and cash as different legs of the swap. Lots of ways - all increasing demand for the coin - and thereby its price. All technology rides a 'S' curve, and crypto-currency is in its very early days still. As the technology begins to ride the neck of the 'S', a $50,000/coin exchange rate at some point is not unrealistic. Nothing says you have to buy a whole bitcoin at 50K to participate, just as nothing says you have to buy a full BRK share at a few hundred thousand; baby B's are widely available. Sometimes, the simpler the better. SD

Just to encourage further interest, a couple of snippets from the course .... Were a charity to use a blockchain application for fund raising purposes, it might expect to save approximately $206,000 per $1,000,000 raised by eliminating transaction fees and uncollectable pledges. Furthermore, it could expect to raise an additional $989,000 through donor leveraging and network expansion. The current effort to raise $1,000,000 would raise approximately $2,195,000 instead; a 120% increase in productivity. Were the public sector to use a blockchain application for fund raising purposes, it might expect to save approximately 40bp/year; through elimination of sales commissions, reduced cost of borrowing, and lower labor and office space requirements. It becomes economic to offer self liquidating state-backed interest bearing overnight bonds, as an alternative to non-interest bearing bank deposits. Needless to say ... Fundamental changes to the 'plumbing' of industry. SD