TwoCitiesCapital

Yes - for tax deferred or tax free savings. That's the bulk of my savings outside of home equity and Bitcoin.

So I was listening to a podcast of a value manager recently where he talks about one of the reasons of his having significantly high concentration in the portfolio is because historically most stocks have underperformed t-bills and he wants to concentrate on the handful of stocks that do so. I know I've had the debate here ad-nauseum of long stretches where bills/notes/bonds outperformed equities broadly, but I don't think I realized it was a big of a performance differential more broadly over time for most companies. Most of the outperformance of broad equities can be attributed to fewer than 100 companies across history. You just don't see the underperformance in the indices because, by design, they're geared towards survivorship bias and the handful of companies that do outperform. Now that rates are nominally high relative to equities (and current inflation), seems it's pretty easy to beat t-bills going forward in fixed income. Take a little spread exposure in mortgages, corporates, high yield to increase yields 1-3% above bills and take a little govt duration exposure to lock some of that in for 2-4 years to hedge the spread exposure/falling rates components - and you have a high likelihood of outperforming t-bills over the next 3-5 years. Which apparently fewer than 1/2 of equities might be expected to do. I think I'm coming around to the idea of Blackrock flipping the 60/40 to 40/60 on a longer term basis. Focus heavily on bonds to get safe, reliable, high single digit returns, take index like exposure with ~1/2 of my equity exposure to lock in the bias of indices to those ~80-100 names, and then take individual positions in things like Exor/Fairfax/Altius to supplement and attempt to outperform those indices.

What's everyone's thoughts on BTC's rally this year despite the liquidity drain globally? Historically, BTC price was highly correlated with global liquidity. This was a much better predictor of its price than even the years where it was highly correlated with the NASDAQ. But here we are in 2022/2023 where there has been consistent contraction in global liquidity and yet BTC bottomed and doubled. Thoughts on what might be driving that and how sustainable it is?

Excellent points on the evolving social mood of what is considered an "investment"

I disagree. The higher the value, the more people will be using it and/or holding it. The more people holding it, the more people will need to pay to get a hold of it to use it. This the price. Just like anything - real estate, equities, art, etc. The more money flows into it, the higher the price gets to convince those already holding it to let go of some. More people using it = more money flows into BTC = higher price. The value is in the network. The network. The price will rise due to its scarcity and the increasing number of people/money flowing into it.

No, the utility expands exponentially via the growth of the network and the increasing places you can send/receive it along with a growing number of individuals holding it making it more scarce. The utility isn't what drives the value from 1k to 35k - it's the growth of the collective utility. Not unlike a social network.

It's very possible. I haven't considered much of what would drive the price at that point outside of just fundamentals of population growth, but it makes sense that population growth is just a rough approximation of productivity At this point BTC is my only taxable asset outside of my home. As a portion of my networth, it's ~12-13%. Considering that net worth has been building for ~16-17 years, and BTC only 4 of it, it's come along way from when I started accumulating in 2019.

I DCA into it adding ~$500/month give or take pending the price. Sometimes throw extra at it when bonuses are paid. I do expect the price to go up which is, in part, why I buy it. I'm not intentionally trying to lose money. But ultimately, what I care about is not it's denomination in USD but it's real purchasing power relative to other assets like houses, the S&P 500, etc and the value it affords me to have a portion of my wealth denominated in it. The reason I expect the value of it to go up is it's scarcity paired with the value it offers people in having a system of portable wealth, censorship resistant spending, and immediate access to digital payments system without requiring the current intermediaries(or fees) that exist today. At some point, the price of BTC will be more like gold. It will have been globally adopted and accepted as an asset class with a sufficiently high market cap and it's price action will likely roughly approximate population growth. But that's once it's been globally adopted. As demonstrated over the last 5-, 10-, and 14-year periods, it trounces traditional asset classes as it's going through that S-curve growth phase.

I converted most of my alt coins to BTC earlier this year to capture tax losses and because I expected BTC dominance to rise. While that overall trend has been true, I would've been way better off holding onto my Chainlink

I'm definitely a believer that we underestimate the impact long term and overestimate it short term. Just because some CEO is excited about what his company is working on doesn't necessarily change much for me. After all, Adam Neuman was excited about We work. But we'll see.

Well, he's either dead OR not subject to similar motivations as the rest of us . Because if he's still alive, he's one of the richest men in the world and hasn't touched a cent of it.

Was more than that this year. Was 7-9% last year. But who's counting?

Always fun to trade around these positions based on the immediate sentiment. Have made several rounds trips in WCP position I've been in since late 2020. 6-7 weeks ago, I sold a slug of shares @ 11.51. today I'm repurchasing them for 10.01. Love it!

All this upward volatility making my head hurt. Should probably move to USD....

Though I'm skeptical coke will be around in a billion years. Can't even recall the last time I had one myself and without other brands owned by coke, pretty the volume of soda in general is probably down over the last 10-years. Like I said, it's a lazy argument that breaks down when applied to anything other than a biased view of BTC. Despite the supposed negative blot of volatility, BTC still has outperformed EVERY fiat currency over a 5-year period But weld prefer to have long-term savings in depreciating currencies for certainty of value?

The liquidity risk is also what concernse the most. I don't need them to eliminate the TRS position, but an orderly wind-down over time is desirable IMO. Wouldn't mind if they took 10-15% of it off the table at prices between $900-1000/sh. Considering the extra liquidity they would have to hold at HoldCo is probably earning less than the financing spread, and quarterly movements in the stock are unpredictable even if the longer term direction is up, I'm ok with leaving money on the table to manage some of the liquidity risk.

At the maturity of the contract, they'd have that option. As long as the counterparty had other ways of hedging the exposure I can't see why they would. They're collecting the financing and the spread - as long as they priced it sufficiently and hedged sufficiently, Fairfax should be able to continue to roll it.

Because it's financed at a floating rate. The moment the floating rate is higher than the forward expected return of Fairfax, it becomes a book value drag. Before then, it can be a liquidity drag in any quarter that the stock doesn't go up by at least 1-2+% because you're paying the financing rate AND any negative returns in cash. As pointed out, they've made over $1B on this investment. That is $1B that has been paid to Fairfax in cash over preceding quarters that has been used to repurchase subs and shares for positive economic benefit in addition to the $1B return. But that also means we can reverse and Fairfax could owe that $1B back if shares return to prior levels. Unlikely, but any given time, some of the prior returns are at risk until Fairfax closes the contract.

You guys are right. I wasn't subtracting out the capital used to buy the shares and messed up the math. My bad

Yes. 100% of the intrinsic value will accrue to it in that 1 second that some nameless face calls it a currency - and not a penny before!

This whole conversation is pointless. I made the comment that it was like any other commodity in terms of it's pricing being set via supply/demand a yesterday. He was dismissive of that suggesting that other commodities have industrial uses and BTC doesn't. Now, he's right back to acknowledging it's like other commodities, but continues to dismiss it because there's no cash flows so any price above $0 is "speculation" which we know is a cardinal sin among value investors still hasn't addressed your, or my, points that there is plenty of valuable use cases as a payments and wealth storage/transportation mechanism. The goal post keeps moving, there's nothing intellectually interesting about the lazy dismissal of BTC, and there hasn't been any arguments made that don't fall apart when applied to any other commodity that have non-zero prices.

Plenty of people value a portable, fast, secure, censorship resistant form of wealth preservation. Plenty of people value immediate access to online payments without requiring traditional financial intermediaries. Who are you to tell them that those needs and wants are invalid, or rebrand them as speculation, simply because you don't value them?

Same. I pitched the idea to a friend who was an analyst at a very value oriented org and he basically said they could just never get comfortable with Prem and how the money was managed and just wrote it off entirely. This was back in late 2021/early 2022. Even pitched Fairfax India to him too simply for the discount to NAV, but no dice on either.

It is exactly like any other commodity PoS can lower energy intensity and potentially decrease costs of transactions while increasing throughput. It does so by giving up security and censorship resistance which are probably not worthwhile sacrifices I don't see why this has to be any different then other monetary systems - most transactions will take place on layer 2 type solutions and side-chains. But having the optionality of layer 1 is still valuable

I've never called BTC a stable currency. But I'm not making the mistake calling the US dollar one either. I've explicitly said in the past that I don't think BTC is necessarily here to replace the USD (at least not any time soon), but rather here to replace the payment processors like Visa (which I still believe). BTC has several hurdles to get through before becoming a useful currency. The first of which is a store of value. We've been proving that out since it's inception . Basically 100% of people with a 3-4 year time horizon have outpaced inflation with BTC. If a store of value is all BTC ever becomes, it'll still be incredibly valuable. If it masters that and then masters being a transactional currency via layer 2 systems, then we can discuss it being a unit of account and a reserve/stable currency. I have mixed feelings on whether or not increased/transaction throughput will stabilize it's price or if it'll always display the characteristics of something perfectly inelastic (and therefore volatile AF). Time will tell - but it has many characteristics of a stable currency that the USD has lacked since severing ties with gold.