TwoCitiesCapital

Loading up on some Chainlink this AM. Seems like a platform agnostic bet on a token that is absolutely dominant in the oracle space. Hard to place a value on it, but network valuations suggest a significantly higher price from here AND potential for staking to earn yield is upcoming.

I'd be lying if I said I hadn't considered it myself this AM. Instead, looking to take some profits from my call spreads on TLT and GLD once they expire tomorrow and will likely be adding on Monday. Trying to temper this weird mix of excitement and nausea

I can't say, but what a perfect advertisement for a censorship resistant form of money. We often take a too Western view and ask why we would ever need crypto when we have stable governments and "low" inflation. JPMorgan refusing to process OnlyFans payments is one example. Canada changing laws, granting emergency powers, and freezing assets of individuals not yet convicted of crimes is another. You might be on the right side of the law, but laws can change over night OR you're just on the wrong side of someone else's morals. Bitcoin fixes this.

Trimming Whitecap Resources and Altius Resources. Buying Sberbank and Resolute Forest Products.

My June $175 Call options that were purchased OTM several months back are looking decent with this recent breakout from the recent consolidation. Risked less than 0.5% of the portfolio, but now ITM on a notional that is ~20% of the portfolio value. Gold has often bottomed just before the first set of rate hikes so I think mich of the hiking is already priced in. I know everyone here likes stocks for an inflationary environment, but the track record of gold in response to negative real rates/financial repression is enviable.

How do you know it's not? Most of it is. But take a look at Bitcoin. Its been around for 12 years with multiple booms/busts, always bottoming higher and topping higher, and growing at 100+% per year on average when it comes to user base. It's been more quickly adopted than any other network comparable (telephone, internet, social media, etc). All of this is more indicative of a secular growth trend than a one off bubble. So the answer to your question about what's worth investing in? Bitcoin.

Currently it's carried at $2 billion with the fair market value being $3.3 billion as of Dec 31. But that fair market value was $12.5/share when NAV was $19.6/share so a big step up from $2 billion carrying value to NAV. You'd have to write the value up from $2B to 5.25B to reflect the $19.6 price. But as I think through this, they consolidate Fairfax India, so that $2B is the whole of Fairfax India with an adjustment for minority stakes elsewhere and I didn't reduce by the minority stake in my math above. So probably closer to $700/share instead of the $800 mentioned above.

Maybe they do. But then you'd expect CPI to be outpacing PPI. That isn't happening yet. I'm just observing the data.

PPI outpacing CPI over the last 12 months. Producer prices are up ~9.7% YoY while CPI is at 7.5% YoY. This likely means margin compression even if revenues are growing. Could be painful for bottom lines - especially when considering rising labor costs. Secondly, Druckenmiller was fond of using oil prices, interest rates, and the USD to forecast earnings recessions. All 3 are currently significantly up over the last 6-months signaling tighter financial conditions (higher rates), higher input costs (energy), and less competitiveness with overseas revenues (USD). Seems to me that it's becoming increasingly likely we'll see an earnings contraction in the next 12 months. Maybe nothing happens in response like 2015, but 2015 didn't have as high of a multiple on the market nor a Fed tightening into the face of high inflation. With TLT plumbing the low end of its 1+ year range, I'm tempted to start inching into long-dated bonds here. I dropped my position in PFIX (hedge against rising long rates) today for a modest profit. Forward yield curve is already inverted for 2s-30s in 1-year out. Market is currently pricing in significant fragility by early 2023. I'm thinking that bonds might actually be the play for the next 12 - 18 months.... exactly at the time nobody wants to own them.

I did not adjust for taxes because I do not know what they'll be. To some extent, like BIAL, I expect many of the holdings to be decade-long, or more, type investments. So much like Berkshire's forever time frame, not sure taxes are super impactful here. But ultimately it's $365 million on associates, $400 million on Digit, and something like an additional $3 billion on the carrying value if Fairfax India versus it's NAV.

If we take the $630/share as reported, write it up for the $400 million to be booked on Digit, the $360+ million on associates, and write Fairfax India up to it's NAV, we're sitting at something closer to $800/share or 0.65x adjusted book.

Markets are already pricing in cuts like 2 years out. The bond market is pretty clear that any aggressive rate hiking cycle is likely to be a policy error. Will they be right? But I have a lot more faith in the market then the Fed, seeing as the market has predicted Fed action with a great deal of accuracy and a multi-month lead time historically.

It's not the first time he's entered the trade so doubtful if it's useful as a topping indicator. I can't remember if he made money, or lost it, the first time but basically he said he couldn't handle the volatility and was out pretty quick. Probably was useful the first time he entered to temporarily signal pain in the market. But now? Supposedly buying for a long-term hold after it's fallen by 50+%? Doesn't have the same topping pattern ring to it.

Davey Daytrader was WAY more entertaining! He recently bought a $1,000,000 of Bitcoin after giving up on it earlier in the year. Fingers crossed it works out for him.

I try to never proactively mix money and relationships. My 10-years in the industry has humbled me enough to know that I'm wrong quite a bit. It's not just about finding the right investment or companies - its also getting the timing right, the sizing right, and managing it versus other opportunities in the interim. Despite me never brining it up, I still have families members ask every once in awhile my thoughts on something or what I would recommend. The only investments I endorse are ones that I'm personally invested in and I spend more time discussing my prior mistakes and that I could be wrong here versus the investment itself. The hope is to disclose, disclose, disclose and hope they remember the disclosure if they choose to get involved and lose money. The hope is also that I will be losing more in those circumstances and was never paid for the advice. This approach has served me well so far - even through a few small misses - but I haven't had anyone invest in one of my blowups yet which would be the real test.

I would love it. But since he didn't bite in 2018 and there hasn't been an acknowledgement that it was a mistake, it makes me feel they're still waiting for rates above 3.25%. And my fear is we probably won't see that. Not in a sustained way at least.

I don't trade the options or futures myself, but I do swing trade the ETFs that do. My strategy has been a fixed $ position to SVXY which shorts the VIX via futures and options. By keeping it a fixed $, it means I'm regularly taking profits every 5-7% (as VIX falls) so have removed a portion of the position when VIX is low. And add those shares back every 5-7% fall (as VIX rises) and future profit outlook improves. Not as antifragile as being long VIX, but works most of the time and by taking money off the table it allows you to still benefit from a rising VIX by increasing future returns on your new additions. Have made multiple swing trades over the last 6 months and have managed +7-8% on the position despite the recent rise in VIX to above 30. And that rise is setting me up for another 7-10% over the next few months I imagine.

They don't get much talk because they basically moved into short-term debt in 2016 and there hasn't been much to talk about since. The initial move was brilliant. Rates went up. But, they missed the re-entry in 2018 and so it's just been a matter of collecting lower and lower interest for the last 4-5 years as rates have moved lower. Nothing really to trade. No major gains/losses. Bradstreet has a great track record for sure, but I do think it was a mistake to not have been inching out in 2018 into 2019 as the curve inverted and predicted a recession. Missed the whole drop from 3.25% to 0.5% while collecting declining interest when could have been making capital gains and slightly higher interest. After getting the initial call right and missing 100+ bps of rate hikes, might've made sense to start locking some of that in even if you didn't go all of the way out to 10-years - particularly with the yield curve predicting lower rates to come.

Except for Apple, but maybe it's day will also come.

They'll benefit from rolling 1-2 year bonds at higher rates. For instance, 1-year ago 2-year treasuries only paid 0.1-0.2%. now they're paying 1.2%. So interest income will have a massive YoY percentage gain, but the actual dollars to Fairfax will still be quite small. I doubt they moved into longer dated bonds. They passed on the opportunity to do so in 2018 @ 3.25% on the 10-year. As far as I know, they've never really addressed that or said anything to suggest that they view missing that as a mistake. So hard for me to believe they'll suddenly find value @ 1.8%.

It's a brand new industry an unclear if these "tokens" fit the current definition of a security. The way SEC defines security today basically suggests you have some ownership in, or interest bearing security of, an enterprise. But the way most of these tokens work is that owning the token doesn't really give you much of anything. It's what you do with it. For example, there is a decentralized crypto derivative exchange called Kwenta. The exchange backs each trade (as opposed to finding an offsetting counterparty). Who capitalizes this exchange and ensures that the derivative profits are paid to traders? That's where SNX token holders come in. In exchange for trading fees and new SNX issuance, SNX token holders post their SNX as collateral for the exchange to back/settle all trades. But buying the SNX and holding it doesn't entitle you to anything. It's only the act of posting the SN as collateral, and risking it's loss, that you achieve any return. So is the SNX token a security? By buying it and holding it you've accomplished nothing and have no economic interest in any Enterprise or activity other than solely being exposed to price fluctuations. Owning SNx doesn't pay you interest. It doesn't entitle you to vote. It doesn't entitle you to a proportion of economic gains/losses. It literally does nothing....unless if you stake it as collateral. Is that a security? It might be...but it doesn't fit the current definition or look like anything else that we call a security. But any further convo on this should probably be taken to the crypto thread so we don't derail this one.

Can't speak to Exxon specifically, but energy as a whole held up VERY well while the S&P itself was down like 10%. Want to say energy, on average, was up double digits in January while S&P was down like 10%. A spread of 20-30% in a single month is VERY meaningful for comparative returns and attracting flows. 2022 might be the year commodity companies get some credit for massive earnings.

Not super familiar with the service, but sounds like a mixer where coins are deposited, mixed with other deposits, and redistributed to make tracing hard? My guess is that the 5 dApps singled out in the WSJ article are similar services - though it doesn't say. I'm not a forensic cryptographer myself. Struggling to do my own DeFi taxes at the moment so my level of expertise in following on-chain transactions is relatively low. Buy my understanding is such services make it more difficult, but not impossible, to follow the money. Also, in a regulated world where on-ramps and off-ramps have KYC, you'd have to ask yourself what would be the purpose of anyone using such a service other than for criminal activity be since KYC negates the privacy argument. So would be a red flag for any wallet that touched one at that point and you don't have to follow the specific coins but rather just the wallets that interacted with the dApp...which is also publicly viewable.

Same with people who complain about the "wasted" energy - or dirty energy - used without considering how much energy intensity other industries have, how much the alternatives currently use, or how much of it that use comes from green energy. Anyone care to take a gander at how much energy is consumed from global streaming of entertainment television, how much of it was sourced from renewable energy, and why that energy usage is so morally superior to a global payments infrastructure to have escaped similar scrutiny?

"Cryptocurrencies" is used as a catch-all now even though most of these don't purport to be currencies nor do they have the properties to be so. That is reserved for BTC and a handful of others. The remainder? Largely what would be considered utility tokens. Nearly every dAPP that is made comes with its own token. That token could be used for any sort of function. It could be required for governance votes (i.e. tokenholders vote on future direction like a stockholder might) OR tokenholders could be the ones capitalizing the project and reaping its rewards, or there could be differences in the issuer/trust levels like the variety of stablecoins currently in circulation that all have the intended purpose of tracking the USD in some different way or by a different issuer. So think of most of these crypto currencies as "tokens" or similar to stocks. How many stocks/companies do you envision to be in existence? There is the possibility for each one to be replaced by a token.