TwoCitiesCapital
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Posts posted by TwoCitiesCapital
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This system is designed such that people trade time/expertise for money and then the government purposely devalues that money so that they're forced to take risk of loss just to run in place for the time/expertise already delivered.
It is theft, it is immoral, and it is absurd to suggest that this is a foundational teaching that should be put forth in schools.
If you want to start calling the USD a "transaction" vehicle, then be my guest. But everyone else currently calls it money, and that word implies something is a means of exchange, a store of value, AND a unit of account. Otherwise, we're all just bartering collectibles and back to the days pre-gold.
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10 hours ago, Jaygo said:
Yeah but this is nothing new. Currency debasement is not some new idea. Its the way the monetary system works. If my money was going to be worth more tomorrow i wouldn't spend it today and our economy would stop functioning.
Inflation of the 70s was a supply shock as well as a major war. We may repeat that but there is no guarantee imo.
And to think that people may not invest in America again after some Financial mess is crazy. How many wars has germany started and lost and destroyed itself only to be the strongest economy in europe again in the last 100 years. People go where the getting is good and the getting is good in North America and likely will be for a while. Inflation is part of that. Japan has been dead money for 30 years at a time of no inflation so your argument is not accurate.
This simply isn't true. Just like I don't put every dollar into bonds/CDs/etc because 'they'll be worth more tomorrow" and still actually spend money each and every day.
At some point you feel sufficiently comfortable with your level of savings, and have desires to be met that you'll spend for. I think you can argue people will be more discerning with their spending - but it's not like people stop wanting things.
Inflation distorts this picture and encourages people to spend more and more money, take more and more risk to earn returns, and hoard assets all because we can't simply hold cash and have it retain the value we put into earning it...
And then when wages/etc aren't benchmarked to that inflation - it means a % of the population is falling behind daily. If you create a system that does that, it's not surprising poverty and homeless have become rampant issues in major cities that have experienced high inflation over the last ~3-4 years.
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I don't disagree with y'all about Biden, but Trump literally invited an angry mob to try and lynch Pence for not overturning election results....
And literally took the first steps of undermining democracy by dismantling what 'truth' is and casting anything you see in media, and from official sources, into doubt in favor of believing your own 'truth' - like the election being stolen with literally no evidence turning up this entire time....
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7 minutes ago, Jaygo said:
What if you borrowed to build a highway or bridge to increase productivity. As long as the money is not burned on military shit who cares If the deficit goes up as long as the standard of living also goes up. We have all seen that 100 dollars of dept today is essentially worthless in 50 years so why not just keep kicking the can down the road. Sure if I save 100 dollars that will also be worthless but I dont save, I buy assets that tend to hold their value.
I think if you were a sinking island nation with few prospects than dept would be an issue but the North American landmass is going to be habitable for longer time frame frame than any of us should care so id say lets keep spending and building and getting better.
Should Baltimore reconsider thier bridge because of interest rates? I'm not replying to argue, Im just trying to wrap my head around things like this.
Would just point out that if everyone thought along the lines of "$100 of debt today is essentially worthless in 50-years" then you will have no one to issue the debt to...
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6 hours ago, Spooky said:
But this interest expense is interest income in people's pockets.
To an extent. But there are a ton of foreign treasury holders too. And its not an insignificant portion that would be transferred from U.S. to Japan, China, Saudi Arabia, etc. on their reserves to be recycled into global trade. So more income at home, but also more income leaving, and if we're having 20-30% inflation every 5 years then fewer of them may be wiling to roll those treasuries, reinvest that interest, or to price goods in U.S. to build those reserves.
3 hours ago, blakehampton said:So with this deficit thing, we are essentially selling our wealth in return for consumption right? Is that how that works?
I’ve also heard talk of a possible fiscal crisis where people could possibly start dumping treasury bonds. I’m interested if anyone has any insight on this.
Its more complicated than that because 1) we're the reserve currency and 2) the largest owners of the debt are U.S. institutions/citizens. So we're borrowing from ourselves to consume.
How do you that? Print more currency to pay off the debt while continuing the consumption.
That's hyperinflationary, right? Perhaps. But the world is constantly needing USD to pay for global trade and finds itself constantly short USD for USD denominated debt globally. So it isn't...until it is.
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18 minutes ago, Vish_ram said:
Everyone is focused on inflation picture. The unemp side is slowly getting uglier.
Af. Am. unemp is a canary in the coal mine. It is trending upwards
https://fred.stlouisfed.org/series/LNS14000006
The other indicator is "temp help". This is trending down solidly.
Leading causes of inflation are housing & car insurance right now. These two are the most lagging ones too (As per Siegel). There's a good chance that politicians will ramp up pressure on Fed once unemp. goes higher.
+1
Have been conservatively positioned since 2021 and have been wrong thus far to be light on equities - but the data is still there to support a fairly dramatic slowing IMO.
Fixed I come hasn't been a terrible place to be over that period, but the last ~18 months or so have definitely closed the gap and "risk on" was the place to be.
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1 hour ago, rkbabang said:
Even if I was sure there was going to be a pull back to $60K-$65K, paying 15-20% federal capital gains taxes would stop me from selling with the expectation of re-buying. I'm just going to hold and keep DCAing. If we get a pullback I will increase my buying, but I will not sell. Not only is timing the market as much luck as it is anything else (i.e. gambling) capital gains taxes make it not really worth it even if you guess correct.
+1
I trade a little around my IBIT held in my IRAs. I don't trade BTC directly for these reasons other than to capture losses on recent lots of we dip.
I have a suspicion we'll see a dip - but I don't know how much and think odds aren't insignificant that it's small or doesn't occur at all.
Instead of trimming positions, I've been selling OTM puts in my IRAs instead of buying outright exposure.
Basically getting paid 2-3% every 2 weeks to have limit orders 5-10% beneath the market. Will be assigned on the dips, if any, and in the meantime getting fat annualized returns if I don't get assigned.
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16 hours ago, Gregmal said:
IDK. In Q4 2021 I was told real estate was gonna crash when they raised rates. I bought a townhouse on the lake instead(in a blue state at that!). Today my neighbor, identical unit, closed on the sale of their unit at 37% premium. I haven't calculated what t-bills woulda done for me. No substitute for just using common sense. Real assets will do well in the current and future environment, regardless of what the little monkey boys bidding up and down stocks assure us.
That's great. I've owned a condo whose price has gone nowhere in 7-years judged by the asking prices of my current neighbors. Significantly negative inflation adjusted returns on the gross asset value.
Oil/gold/Tbills are available to everyone - and accessible in brokerage accounts. Your neighbor's house isn't
Just a little to easy to cherry pick anecdotes in hindsight without considering the availability/luck involved with that. Really seems like the approach here is a rather flippant "it's easy to make money in real estate" and "if it didn't go up, you shouldn't have bought it" while ignoring every example of people who've lost money holding/buying real estate in the last few years. My brother is also upside down on his mortgage from 2021 - and he lives in an entirely different state/city/environment. Real estate is NOT working out for everyone for the last few years.
Would also put many oil producers/gold miners against that 37% return. I've made more than 37% on most of the ones I own just this year - let alone their returns since late 2020.
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Am torn between
1) BTC will drop immediately after halving as desperate miners sell and
2) We're in a new paradigm with ETF access opening tens of billions of dollars in regular, consistent, slow-trickle secular demand providing a floor
Guess I'll just keep DCA'ing and rolling short OTM puts on BITO for fat premiums.
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33 minutes ago, blakehampton said:
I have a couple of questions for anyone willing to answer:
- Do you think that short-term treasury bills are a good inflation hedge?
- What are some future implications of deficit spending and how would they coincide with higher long-term interest rates?
Depends on how short, but in general are a better inflation hedge than most other assets. The best immediate inflation hedge is oil. But oil is also exposed to idiosyncratic risks like cratering demand if the economy is also weakening (and politics!).
So a basket that is heavily skewed to oil, some to gold, and some short-term fixed income should be a reasonably good hedge against inflation.
Oil is immune to interest rates, but not immune to the economy. Gold/short term bonds are largely immune to the economy, but not real rates. As a basket, they should diversify the idiosyncratic risks of real rates, nominal rates, and the economy while hedging inflation.
Future implications of deficit spending? More volatile inflation going forward.
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On 4/4/2024 at 1:22 PM, changegonnacome said:
The hard money folks - gold, BTC - forget the secret sauce of FIAT, for all its failings and there are many, it acts like a shock absorber in times of crisis and allows the fiscal/monetary authorities to flood the system with liquidity....fiat money becomes an almost instantaneous redistribution mechanism. The hard money Satoshi Nakamoto folks would choose to literally watch Rome burn instead.
Didn't Rome still burn, and later fall, despite devaluing their currency multiple times?
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Wanted to go, but certain items came up that made it difficult to do so.
Perhaps next year.
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4 hours ago, sleepydragon said:
Hi gfp, unlike other miners, they sell all their bitcoins. I would think this is a good thing? If bitcoin stay at current price, they are certainly undervalued. If bitcoin goes down, their margin is currently at 20ish%
This is the age old question of commodity producers - hedge or don't. By selling every BTC they produce, they hedge their risk. They lock in profits/cash today and will be less volatile than their peers. They also will benefit a fraction of the amount for any rise in price in BTC relative to their peers who may be holding a portion, or all, of the BTC they mine.
If selling BTC today, they lock in prices of ~70k. If BTC continues to rise, as many of us expect, they could be selling the same BTC for 100k in a few months at significantly higher margins and could have simply financed that additional gain at a cost of ~5-10% if issuing debt/equity to pay the daily expenses while they wait.
2 hours ago, gfp said:Since the rewards for mining Bitcoin get halved in a couple weeks I would not count on the business staying the same.
+1
There will be a period of consolidation in the mining business immediately after halving when revenues for miners get cut by 50% waiting for the price of BTC to double to make up for it.
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2 hours ago, longlake95 said:
Viking:
I apologize if you covered this in the various threads already, but, don't you find it very interesting that the TRS counter-party is the Canadian banks. I guess they (the banks) really do have a "Chinese wall", when you have the investment research side of the banks basically all pounding the table on FFH now. If the analysts are already onside/or coming on side recently, as to the value in FFH, then who the hell is making the call to be the counter party to the FFH swaps? Just seems very peculiar.
LL
Muddy Waters, perhaps? I generally agree the banks were likely long the stock and then short the swaps collecting the financing spread for the bulk of the trade, but if they have a client who wants to short then they could offload some of that exposure to them by having them be the short-side of the swap that Fairfax is long and collect a spread from both counterparties while having no capital locked up themselves.
It's possible that overtime they're unloading the share-hedge and offloading the short-risk to other clientele.
49 minutes ago, gfp said:It really isn't a dressed up share repurchase unless they ask the banks to close out the swaps by delivering the shares to them when they are ready to end the trade. A share repurchase consumes cash and doesn't effect profit / loss or produce cash flow. This trade does not consume cash (when it moves in their direction), directly effects profit / loss like any other equity position, and produces cash inflows (if it moves in their direction).
Agreed. It doesn't make sense to mark the shares as cancelled either. Effectively, it gives Fairfax the economic benefit of going long its own shares, but it's not the same as cancelling them to other shareholders. Fairfax can exit the position at any time and is no longer exposed to the fluctuation in cash flows while the shares outstanding number doesn't change one iota. I think Viking's way of accounting for it (like it were any other MTM investment) makes the most sense until Fairfax cancels the shares.
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1 hour ago, Sweet said:
You just have to lol at wachtwoord's comments. I'll say it again... arrogant.
Recently Nvidia has outperformed bitcoin significantly, you have to go back to the first half of 2017 before you find meaningful outperformance of bitcoin. Warning - this requires 'stronger self-reflection' to acknowledge there was a better place for your money.
Nearly all the gains in bitcoin was made from buying extremely early and just holding. Raise your hand if you bought in 2012 or before (date wachtwoord's article) and continue to hold those bitcoins?
I know a two people that had bitcoin back then and not a single person held.
I started DCA'ing in 2019. I'm up near 20x on certain lots acquired in 2020. 7-10x on most lots purchased in 2019/2020. And even up 1.5-2x on the most of the lots purchased in 2021.
Have I outperformed NVDA? Hard to say - I haven't calculated my exact performance, but not outperforming a single stock for me isn't a sign of failure. Its a recognition that I would have been unlikely to pick NVDA in 2019 as a conviction pick and commit to holding it for years like I did for BTC.
What I did instead was allocated to BTC with the thought it would likely outperform the average stock. It has done so in spades. As well as outperforming all of my individual stock picks - even fantastic ones like Eurobank, Fairfax, and Rolls Royce - all of which were acquired at great prices from the 2020 drawdown.
You didn't need to buy BTC back in 2012 to do well. You just need to DCA with a 3-5 year time horizon. Will BTC achieve the same level of returns it had in 2013 and 2016? I doubt it. But that doesn't mean it still won't be the best place for incremental capital for most of us.
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18 minutes ago, james22 said:
Butthurt much?
I mean, I agree to an extent. Me buying Bitcoin and holding it is nowhere near the achievement of Carnegie, JP Morgan, Rockerfeller, etc.
But just like one could simply get rich but buying Amazon stock and "white knuckling it" from 2002 onward, I don't see why BTC is any different.
We saw the opportunity. We capitalized on it. We yelled its sermons of hard money and fiscal responsibility from the mountaintops. And we waited years to be proven right while few listened. I don't see any issues with being rewarded for that foresight, patience, ridicule, and risk undertaken.
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I'm not finished - but the book has definitely improved my impression of Musk.
I was unaware of how involved he actually was with the start of Tesla prior to taking control. Same with OpenAI. His contributions are even more impressive and his work-ethic is maniacal.
That being said, it also doesn't paint him the best light when it comes to home life and how he treats others when he's in one of his moods and what he expects from others who work for him who aren't necessarily devoting their entire lives to launching an electric vehicle. It's also obvious to me now why Tesla had all of the quality control issues it has when he was "deleting" even minor details like going from 6 bolts down to 3 to secure things.
There's absolutely good to his approach of "delete, delete, delete" and hope for the best. And while that is excellent for cost control and efficiency, the cavalier attitude in which it is approached echoes his attitude towards things auto-pilot deaths which are problematic when we can point to competitors like Google who have none.
Overall - it's a good read. And leaves you with a mixed impression of Musk.
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11 hours ago, petec said:
I find it highly unlikely that FIH would sell a crown jewel asset like BIAL to buy a struggling bank.
It would also distort FIH to the point of absurdity.
This is too big. It's a FFH+OMERS deal IMHO, with FIH participation. Could be wrong.
BTW I don't *think* they have ever committed to doing *everything* in India through FIH. Correct me if I am wrong.
I believe the commitment was every new, non-insurance indian investment would be done via FIH to prevent a conflict of interest in determining which shareholders get access to which deals.
If FIH and FFH are both contributing proportionately due to a deal being too big for FIH, I wouldn't be upset because it doesn't upset the apple cart of favoring one group over another.
If it's structured where FFH gets the bill and FIH a token amount, I think you'll see problems.
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4 hours ago, petec said:
On a separate topic, is anyone else bemused as to why they took the FIH fee in cash? If it is so undervalued should they not (given the FFH board's fiduciary duty is to FFH shareholders) have taken it in shares?
They can take it in cash and buy the shares at the same discount and end up with the roughly the same number of shares.
The difference being float/tradable shares decreases (as opposed to increases) which may help close the NAV gap in the future AND is does NOT adversely impact FIH shareholders (including the existing balance of FIH shares Fairfax holds) via unnecessary dilution.
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1 hour ago, LearningMachine said:
And, people think they are diversifying when buying Mag 7 and S&P 500, when they all share a high severity & medium probability common risk of high growth expectations and P/E multiple, which when it materializes, some will call it a black swan event even though it is clear ahead of time that it is a common shared risk.
You'd be safer to be in a handful of lower probability and lower severity independent risks that all won't materialize at the same time than Mag 7 & S&P 500 that are exposed to a common risk that when materializes will impact a lot of them.
This is why, historically, equal weighting has tended to outperform over long-periods of time. Hasn't been true of the last 10-15 years, but is likely to revert and come true for the decade ending 2030 IMO.
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1 hour ago, Saluki said:
The 2 bull cases for BTC going up are 1) the greater fool theory, and 2) some use case for BTC that is better than what we have now.
3) more people finding value and using it... as has been the case for the last ~15 years
1 hour ago, Saluki said:I lose/forget/misplace passwords all the time. I was forced to make a new one for one of my accounts just last week. If I had a personal wallet with a lot of money in it and it would be worthless if I forgot the password, that money is as good as gone.
There are pros and cons to self custody. If you had a lot of money in a wallet and didn't take steps to safeguard this potential, it's on you and is a con.
1 hour ago, Saluki said:So what is the killer use case?
Long term store of value
Online digital payments with immediate settlement
Censorship resistance
Cheaper payment processing than credit cards (when using L2 networks like CC networks are)
Ability to remit payments across borders w/ no unnecessary fees/taxes/intermediaries
I'm sure there are more.
1 hour ago, Saluki said:Pay for things in a store without fees? Credit cards are free to the consumer (less than free if you include cashback etc) and they are quick.
They are NOT free as all prices rise to reflect the cost to the business and
They are NOT quick for the receiver. Cash is by far the loser here as you pay the higher prices and get no reward for it.
Everything the consumer sees is a papering over of the problems that the processors/businesses see on the back-end of the financial plumbing.
Some things I don't like as a consumer?
1) I don't like waiting 5-days at Schwab for the money to settle when I'm trying to do a IRA contribution/backdoor conversion.
2) I don't like waiting 3-5 business days when moving cash between one financial institution and another.
3) I don't like waiting 2 days for trades in my brokerage account to settle before the money can be withdrawn or redeployed into other securities with faster settlement.
4) I don't like paying wire fees to ensure large payments need to get where they're going more quickly than the standard 3-5 days when I had to close on my mortgage.
BTC transactions settle in 10 minutes for lower fees than a wire transfer and BTC/blockchain solve the above issues.
And these are just the issues I see as a consumer. It doesn't consider the immense pain/resources/delays that actually occur within the financial plumbing that we expend untold resources/time navigating it.
1 hour ago, Saluki said:It takes a while to transfer small payments in bitcoin and the merchants don't want it.
No, it doesn't. It takes 10 minutes for the payment to be finalized (as opposed to days/weeks with a credit card).
Lightning Network does it in seconds.
1 hour ago, Saluki said:Send money to a friend at no cost? Venmo and Paypal already do that for me. Sure, if I was sending money overseas using Western Union, there might be costs involved, but for most of what people in the developing world do, it's not needed. Anonymity? There is a record of every person who ever sent you money and everyone who you ever sent it to, so if they arrest someone who gives up the names of everyone they did business with, it's the opposite of anonymous. It's worse than cash.
Bitcoin doesn't SOLVE every problem.
But it's superior to cash/credit cards in the ways that matter (long term wealth preservation) with other solutions to make it more competitive in areas of less importance (buying a latte).
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3 hours ago, Milu said:
% of my net worth into bitcoin and ethereum back in Mid-2020, and have just held ever since. As of today this is now close to 17% and is my largest position.
It was 20% of my net worth at the beginning of the year. Definitely higher now and predominantly in BTC with a little ETH.
Wish I had been as hands-off. I lost 10-15k learning DeFi and altcoins in early 2021 by buying near the top and riding it down and then lost another 0.4 BTC in the Celsius bankruptcy.
Would be doing quite a bit better had I just stuck with Bitcoin and kept it in my wallet.
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4 hours ago, JRM said:
It seems like the Bitcoin bro's are 100x more bullish right now than gold bugs. Gold is hitting new all time highs whereas Bitcoin has not, yet. Probably because gold bugs have years of brain damage and trauma to overcome. Gold miners are still lost in the wilderness.
Im sure it depends on which currency you're looking at, but Bitcoin is hitting ATHs in several currencies including the USD.
We just hit $69k+ a day or two ago surpassing the prior ATH by a few hundred $. In many non-USD currencies, the highs are more notable and 2021 levels surpassed much earlier.
And while I understand the point that gold is up over the last 3-years while BTC is flat, would also note that 1- and 5- and 10- yr returns all favor BTC and that it's notable that we hit a new ATH before the supply shock of the halving which has never happened before - so I'm optimistic we're gonna turn the 3- time frame as well.
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On 2/20/2024 at 8:48 PM, TwoCitiesCapital said:
Countries looking for alternatives are ones that have previously failed. I don't why that isn't obvious to everyone out there. The countries who will switch first are countries who have everything to gain, little to lose, and likely have failing currencies.
Perhaps Egypt will be the next country where a BTC parallel currency makes the most sense.
How is the Fed going to cut rates with inflation over 3%?
in General Discussion
Posted · Edited by TwoCitiesCapital
I mean I literally said I agree with y'all about Biden...
But if one of them is operating within the political apparatus and the decisions can be undone at a later date by others in the same political apparatus
And the other is unleashing angry mobs of violent populism and calling into question the very meaning of truth so he alone can be the purveyor of absolute truth to said angry populist mob regardless of reality/evidence/critical thought would suggest...
Then yes, I'll take the former any day.
Ideally these wouldn't be our choices, but America is so focused on not "wasting your vote" by supporting an alternative option, but end up wasting their vote on one of two bad ones...