TwoCitiesCapital

Jeezus.... You just can't win, can you. No mention of last year's profits being goosed by $1.2B from the per insurance sale.... No lower quality than the $1.2B in losses taken last year for interest rate moves. Most of these gains won't be given back because it's not reflective of premiums to par as much as it the reversal of prior discounts to par from interest rates running higher in 2022 as well as the amortization of those discounts as portions of bonds come nearer to maturity.

I'm giddy myself Is gonna be high quality earnings (not accounting/paper gains) and a killer report

The hand wringing is largely just due to the liquidity drag it can potentially create. Just like I was paranoid about their duration until they got around to locking it in. There has been a history of mistakes made that we don't want repeated. Fairfax damn near run afoul of covenants and cash @ holdings company before. Having to come up with cash to front the movement on 7% of it's shares every quarter is not chump change. Particularly as the share price has moved from $500s to $1000s. This isn't like their other equity investments because those wouldn't necessarily require additional cash infusions to continue holding through a downturn. And as the financing hurdle rises, and as the stock price rises, the potential cash cost of holding a position through a downturn is rising significantly For now, I'm comfortable with it. But I would prefer them to let it go too early than to be forced to let it go too late. "Buy fear, sell dear". Selling dear by definition means it hurts to sell and you don't want to do it.

This. All currencies have sucked relative to the USD over the last 10-15 years. I've been surprised by the staggering amount in some countries that aren't really "hyper inflationary" and the currency drag is the predominant reason my EM value plays at 3-5x earnings didn't trounce the S&P. The below aren't peak to trough - they're just rough approximations of the exchange rates that existed in 2011 compared to where they're at today. Mexican Peso is down like ~40%. Brazilian Real is down ~70%. Korean Won is down ~20%. Euro is down ~25%. Australian dollar is down ~40%. Yen is down ~50%.

Jokes on us. Brett Horn hired MW just to have a second voice agree with him

This indicator is less relevant with multi-national companies that exist today. At one time, it made sense that the capitalization of companies in the US would be tied to the incomes/economy of the U.S. and could not meaningfully grow beyond that. This was the case for much of Buffett's early career. But now? Companies do a ton of business overseas and are no longer linked to just American incomes (what GDP is measuring) allowing for higher multiples to U.S. incomes to persist. I doubt we see 70-80% again outside of some economic depression.

Yes and no. As mentioned by others, the index essentially represents the best of the best (not always, but a close approximation) and thus isn't representative of the "average". Also, a chunk of revenues/profits are derived overseas which may be less sensitive to the ebbs/flows of U.S. specific economy.. Historically, they are related but not perfectly correlated. If only because weakness in the overall economy tend to lead to weaker consumers which will hit even the best of companies, a slowdown in the US can cause slowdowns elsewhere globally given how much we import, and because as people are laid off there are fewer $ flowing to excess savings/investments to bid up shares. But they rarely coincide perfectly - stocks often lead, and sometimes lag, the developments in the economy.

Good call - hadn't realized it was already in the Canadian models either so I suppose still good news to me, but certainly less impactful. That being said, hard to say it won't be a road map for US models now that the ETF is approved.

What's interesting about all of this, to me, is the 10% move today had me buying shares and increasing my position by 10%. But I wasn't increasing my position by 10% when we were at this price 4-6 weeks ago. Probably 1/2 anchoring bias and 1/2 knowing earnings announced next week are gonna be amazing

Cash would flow out of Fairfax to the counterparty. But this dip so far only takes us back to where we were in January, so nothing to be concerned with on Q1 at this point as it's just reversing cash that would have been due to Fairfax. Plus, we've got blowout earnings coming in a week that may take us right back up. TRS is only concerning when the economy actually tips IMO. Then you'll likely have falling asset values AND falling liquidity as it drains cash from Fairfax's coffers.

Yea, I dunno about how he expressed the short, but I tend to agree with Greg's take here. I'd prefer Fairfax without all of the inter-related transactions, paper gains, etc. because it definitely muddies the waters That being said, the transactions that are the most questionable are tiny, the transactions he points at that are off-balance sheet debt have already been identified as such here and were obvious done to raise liquidity and stay compliant with bond covenants amongst other things, and ultimately I would argue it's probably a good thing Fairfax has these relationships and avenues for recognizing value when the market won't give it to him given the regulatory importance of book value and liquidity for underwriting. Just glad I got to pick up more shares before what is likely to be an absolute smasher of Q4 earnings. Looking at $1+ billion just in fixed income gains/coupons - not even touching equities or insurance which we know also did strongly.

Thank you, Muddy Waters!

Just updating here: Received a second separate distribution of 0.1055 BTC. Not sure how they decided the make up of BTC and ETH for the recovery, but I wasn't expecting two separate payments. Better than what was implied by my original post but still a far cry from the crypto lost

In other news, it has begun.... No shock that Fidelity is first to incorporate it for model-type portfolios

Just got my Celsius distribution today. Had a hair over 0.5 BTC there and ~4k of stable coins. My distribution today was for 1.6 ETH. 85% loss in nominal terms compared to what the crypto would be worth today had I just held the BTC and stable coin in my wallet No idea what the value of the private mining co is ,or when I'll get my shares and it'll IPO, but that is supposed to be the bulk of the recovery. clawvacks from on going litigation could add a few more %, but it's looking ugly so far in comparison to my cousin was made whole in BlockFis bankruptcy

Why own the 10-year? Because a money market won't go up 10-15% if the Fed cuts to 2%. It's total actually falls as every day a portion of the money market resets to lower yields. Govt duration is a primary hedge in most risk-off environments. 2022 was an exception given that it was an inflation scare and yields started at 0% at the start of it.

I purchased the ones that had the largest discount to notional that traded regularly enough for me to establish a position. At the time, that was FMCCJ and that is what I still own. There are other more liquid shares at higher valuations as well as different coupons which some have theorized may make a difference in damage calculations and potential recoveries, but I haven't speculated about any of that.

This. Overall earnings growth is still not great for most other companies, even with easy comparables from the prior year contraction. And it's all quite a bit worse when you adjust for inflation over the last 2-3 years to gauge the real earnings growth/contraction.

Yea, have been holding/adding since 2012. Has dwindled from a 10% position to a 2% over that time as this has taken way longer than I thought, the courts haven't been as kind as I thought, and I've allocated quite a bit more to other positions over time (and those positions have grown). I have more confidence in the preferred given any value accruing to the common, requires certain assumptions on capital levels, how that is split between debt/equity, and the timing. And I have no ability to know the outcome for any of those three variables. But if the common is worth $0.01, then my preferred are worth at least $50 and I'll 7-10x my investment at minimum. As far as the run-up? Seems to be a 'Trump trade' as a bet on the outcome of the presidency. Not that Trump was particularly great for them last time around, but he's probably better than Biden if you want to see this handled.

The most recent 'What Bitcoin Did' podcast with Preston Push was interesting IMO. Two accompanying slides stood out to me The first showing $ cleared on-chain versus payments cleared by Visa/MasterCard. This doesn't reflect Lightning Network Transactions which I think is the more apt comparison, but definitely goes to show that Bitcoin is a force to be reckoned with in terms of clearing value. The second showing price and time both in log-scale which is a new representation I haven't yet seen. Not sure I quite grasp the intention behind the log of time, but it's an interesting visualization of the tops/bottoms on the cycle, when it provides good value (like now), and the accompanying 'mooning' after the historical halvings.

Mayhaps. I'll know more when I get my payment due Celsius, but my cousin was in BlockFi and was made whole on his entire Ethereum stack - not the USD value on the date of their filing. So there definitely IS a difference somewhere.

You said they weren't tethered to the US economy, but rather the the global economy, as an explanation for why the stocks might be doing well while the US economy overall wasn't. I was just pointing out that they appear untethered from ANY economy seeing most of them aren't doing hot.

The US is one of the better economies globally. Eurozone basically in contraction and its stocks are basically as cheap as they e ever been relative to the US. China not doing so hot. P/E of 12 on the A-shares index. Hong Kong index hitting levels first touched in 2000. Japan also in contraction judging by PMIs. What are these global economies lifting the Mag7, and others, if not the US?

Ah, interesting! Hadn't caught that. Is there a reason FTX bankruptcy is paying out dollar denominated claims as opposed to the underlying crypto? BlockFi paid back depositor claims in the respective crypto that was deposited. Celsius hasn't paid back yet, but it's supposed to be some denomination of BTC/ETH and equity in the surviving subsidiary - not some $ based claim as far as I've followed. Why is FTX doing $ claims and being treated differently than the other bankruptcies in the space?

What investments of FTXs hit it big? My understanding from all the coverage was they supposedly lost hundreds of millions in Terra Luna. Hundreds more in failed investments in other crypto startups. They bailed out BlockFi and Voyager for hundreds of millions apiece - both of which went under after FTX did. I know some money was able to be clawed back from real estate, Robinhood stake, and executive comp, but what "bet" paid them back for the hundreds of millions in losses in Luna, BlockFi, Voyager, etc that were financed by customer funds? Am legitimately curious. Because I'm unaware of any coverage of monster successful trades they've made that covered the supposed losses. As it unravels, it seems like the money was always there and just not in the correct accounts and what was lost was the net equity of the firm - not deposits or money needed for creditors/liabilities. Which is still problematic, still a crime, and still a very real black-spot on their risk controls - but not quite the same as taking customer funds to Vegas.