TwoCitiesCapital

Seems like th discount to NAV has been closing via the NAV coming down. Surely we should all praise the management for closing the gap, no?

I bought a small amount of put spreads on SOXX for July expiry. Purely a gamble that this is getting out of control and much of this spending isn't going to prove economic, but we'll see. 2-months may not be enough time for it to come down to earth.

I think a 6+ month reversal in a multi year trend that was basically uninterrupted is more signal than noise

The difference is the ROE. Buying $1 billion of TRS requires only ~150 million plus maintenance margin. Buying $1 billion of stock requires $1 billion. In both instances you'll get the return of the stock (less a small financing and taxes in the case of the TRS), but one of them you put up 6-8x as much capital to achieve.

Continues to rise - back to levels from a year ago.

The TRS should are likely to be taxed quarterly as an exchange of cash flows and a reset of the position are probably on a quarterly cadence. Is how exchange traded TRS on indices work. I'm not sure the rate applied - TRS function similarly to a rolling of futures contracts, but not sure they get the same tax treatment as futures do or not.

Hormuz is closed again? Didn't we decale victory weeks ago? Has no one told the Iranians?

You did read the part of the post where I specifically said it takes away Iran's leverage, right?

"You can't block the Strait of Hormuz! I'm going to block the Strait of Hormuz!" Is very "you can't fire me! I quit" vibes. Absolutely takes away Iran's leverage....by shooting yourself in the foot. Buckle up boys. This ain't gonna be over anytime soon.

I would've preferred the straight copper exposure, but I suppose there are worse outcomes than diversifying with gold. Also, probably puts a higher floor under the share price if we get an economic slowdown here in the mid-term, so maybe not all bad.

I don't disagree. I view this as a risk everytime I enter as a minority investor alongside Fairfax. I was in and out of Kennedy Wilson, but bought near the lows. I didn't own Atlas. But there have been others as well. Ultimately though, those were all third parties Fairfax invested in and took under after problematic performance which allowed some semblance of control and recover of their investment thereafter. Fairfax India strikes me as different. Fairfax COULD have chosen to do this in house themselves, but opted to launch the vehicle instead. I'm guessing they wanted the fee income and a vehicle devoted entirely to India that didn't distract from the primary insurance co. I'm guessing those incentives still exist. Additionally, performance hasn't been challenged when measured by book - just challenged when measured by those who paid a premium to book now getting a discount to book...and Fairfax didn't pay the premium.

They were also working through a bid process to buy a company that was way larger than anything they can take on by themselves. And that may still be an option. Perhaps all of the creative financing flexibility has been dedicated to IBDI bank and not buying back their own shares to jeopardize their ability to do that? Not particularly. I think they've delivered on the promise and if we take a less conservative approach to the valuations, I think they're earning it. I also only buy at significant discounts to NAV to compensate me for the fee structure. It's not like they're sitting around doing nothing. Anchorage IPO is work. IBDI bidding is work. Indian stocks had a really good run in 2023/2024, decent 2025, and a tear into early 2026. I can appreciate Fairfax may be expressing price discipline instead of chasing returns just to be buying something. I expect the energy shock may present opportunities and any closure around IDBI one way or another may open up the ability to be able to do some additional deals as a result.

He will do what every Fed chairman before him has done. When confronted with systemic failure that will be blamed on him due to inaction or inflation to save the system, he will choose inflation. Nobody is going to take the blame for the system failing on their watch even if it's failure is inevitable and the summation of all the bailout decisions made before their time. They will kick the can down the road until kicking it becomes ineffective. At that point, you'll probably be using the currency to keep your fire lit for warming your home.

It's hard to blame management for this. The ONLY reason the LT holders have suffered is 1) because they didn't sell at a premium to NAV pre-covid and 2) the fund now trades at a discount to NAV post COVID Premiums/discounts to NAV are inherent in the CEF structure and should have been a well known possibility to shareholders. Is why I WASN'T buying at massive premiums pre-covid and AM buying at massive discounts since. I'd love to see the discount close. I'd also love to see Fairfax have the ability to do another large tender at a massive discount post-Anchorage. I'll wait and see which comes first and not blame management for a change in sentiment. They're doing what they should be which has been buying shares and continuing business as usual.

If Anchorage hasn't IPO'd, not sure they have the capital to make anymore bids. Is it ethical to report their performance as the share price vs book value when they only control one? CAGR on book value has been 7.9% after the fees and stock based comp you're upset about and is largely agreed to widely understate the actual value/performance of some of the private assets. Is investment performance determined by returns? Or how many new investments one makes over time? 2% of the market value is held in cash. Unless if they monetize their investments, or borrow debt, there isn't anything to buyback with. We can debate if they should be selling or borrowing to do it - but you haven't proposed a path to discuss. Just complaining that it isn't being done. Considering the paths available to them would force a confrontation of the pros/cons of each which may lead you to an understanding of why it isn't happening at this time. Significant buy acks DID occur in 2021. And the discount to NAV remained. The management is not responsible for the discount nor are they responsible for closing it as long as they're making reasonable capital allocation decisions in the meantime. Just above you were upset that they had only made one new investment. Now you're upset that they're making any that aren't their own shares? Which is it? As a reminder, you DON'T have to own this.

This is my view. The value to BTC is that there is a finite cap of 21 million. Not that people lose them or let them sit for years and years. Nobody knows for certain who Satoshi is, if he's dead, etc. to the same extent, they don't know who owns ANY of the dormant addresses and if they're dead, lost, or just long-term HODLers. I don't think it's up to the developer community to effectively "steal" those coins to prevent their future theft. Perhaps it's a university research project that cracks them? Or a white hat hacker? Or even a bad actor who does it, but then simply doesn't dump them. Not sure sure we need anyone to decide here and can just let what happens happen.

What is really the debate around the lost/static/Satoshi coins? Why would we need to do anything about them? Not sure it should be developers' decision what happens to coins not owned by them. Even if the coins get stolen by a quantum computer? So what? The coins can be tracked - people can decide whether or not they'll accept coins from those wallets - and we move on with our lives. Not sure it should be up to developers to decide which coins are at risk and then take actions only applying to those coins.

Theoretically "can be done" is quite a bit different than "will be feasible in real life". We'll see. I'm not expert in this space, but was my understanding the primary "flaw" this exploits is using known data from the public key. So all you have to do is move your BTC when you spend it or have a separate "savings" wallet you don't spend from and do you daily transactions on lightning. And that's before they do any BIPs to protect the network further. The only real coins at risk here are those that are neglected/lost form wallets that have previously sent transactions to the network.

It helps that it was down majorly before all of this. If you drop 50% before your peers do, you don't necessarily have to sell off sympathetically with them.

Lol Ackman goosing his quarter end numbers again....

Have they ever addressed why they're not doing buybacks or when they'd consider them? Expected return of doing so is ~120% vs this 10% their investments are producing? Seems like SOME capital should be allocated to this activity and yet outstanding shares are increasing?

I don't disagree. I was also quite a bit more cautious early one. The first two stocks I ever purchased were Ford and Bank of America in 2006/2007 respectively. Watching them go down by 90% might've influenced something in me. I still place a lot of importance on macro, and still watch things like inflation trends, interest rates, etc. but have moved more towards the center of buying things when cheap (like I'm still buying JACK, and MOH, and Foran Mining, Fairfax Finacial, and Fairfax India today). But that being said, I don't think this progression you linked above is necessarily natural and the right way. I think it's just a reflection that we have had ~25 years of the Federal Reserve and Federal Government bailing out markets at any point there is trouble. Something that may end sooner rather than later. Any history pre-2000 shows that macro is, in fact, important. Investing through the 70s was catastrophic. -50% inflation adjusted returns over the course of a decade is a far cry form the 7-9% and positive real returns we were told to expect and count on for retirement. The market has spent the last 20 years loading up on duration that was mispriced for a low rate environment (long high multiple tech). That concentration still exists in the market structure today but the low rate/low inflation environment might be changing. And I believe it is precisely the WRONG concentration to have if interest rates/inflation are not going to be remain at generational lows and may move to a higher equilibrium. You want energy and materials - probably the sectors that are most underweighted in the indices today. We don't need runaway inflation of the 70s to get terrible returns for the average equity - you just need inflation average 3-4% year to wreck equities trading at 20-30x earnings which make up the majority of the index. It gets even worse if that 3-4% isn't a consistent 3-4% but rather spikes to 9+% and valleys of 0-2%. I think we might be witnessing the regime change that makes something like a Tobin's Q all the more important again. Hard assets > GPUs for the next 5-10 years IMO.

Is that what happened in 2007? I tend to think you're right here. Even after what was experienced in 2021/2022, it basically guaranteed higher average inflation for the decade. And here we are again in another energy shock. Does it play out the same? Flat GDP with inflation turning back up a la 2022? Or do we actually get a recession and government spending a la 2020/2021? Either we see the inflation from the energy shock OR we see the inflation from the money printer IMO. Question is how much and whether it's a 2026 or 2027 event. I think Gundlach might already be right. He has talked for a few years about high yield's ability to refinance in a rising rate environment. Look what's happening to private credit and PIKs and finding buyers banks to fund these ventures now? HY spreads are still quite contained, but I expect the trend upwards may continue.

If rates are normal at 4-5%, is argue that should mean 'normal' positioning - i.e. offsetting their liability duration of ~3.5-4. Moving to zero when rates are 0% is fine. But they're no longer at 0%, are no longer "rising" as defined by the longer term trend, have been well in excess of trailing inflation for the last few years. That doesn't guarantee rates are going to go down, but I'd argue at the very least it should imply neutral positioning instead of an underweight. I just want to know that when the TRS is bleeding cash, and their equity portfolios are cratering, which will happen at some point, that Fairfax has the guarantee of billions in fixed income interest coming in and doesn't find themselves rolling bonds at 0% too ..

It just depends - we could go back and forth on what the "right" positioning was every 6-months when they go up, or down, 0.50% in response to something. Even with this rise, they're still not as high as they were in 2023, or mid 2024, or most of 2025. So maybe it wasn't the best they ran at 2.5 years? My point of view isn't so much I think they should be going long bonds because bonds are going to kick ass or that rates are going to crater. It's more of that the neutral positioning for Fairfax shouldn't be 0-years of duration, but rather the duration of their liabilities. They can make moves around that, but ~3.5-4 years should be the default if they don't have a view on rates. Rates were broadly declining for the last year (until the last 1-2 months) and as mentioned are still lower than many points over the last 3 years. Maybe in 6-months, the energy shock will have sent the global economy into a recession to ease off the energy demand and we're back below 4s and will be wishing they had locked in 4.33% for the next 3-4 years