TwoCitiesCapital

This is the Oracle problem. Companies like Chainlink are working on decentralized validators that can inform on prices, weather events, source materials for a good wafer, etc. But this convo should really be taking place in the crypto thread y'all.

I'd like to think this is actually possible, but it doesn't seem supported by historical market action. Always seems to be up-and-away and then crash-and-burn as opposed to treading water for 5-7 years. Too much margin/leverage/momentum positioning to just flatline for years IMO - particularly if I'm wrong and interest rates are rising in a sustainable basis.

Still waiting for the other half of cash to hit my Schwab account. IB paid out in cash today for the whole receivable. Weird. I also only had a handful of shares at IB - tendered all of them and received a full fill.

My Schwab account is doing this with the FRFHF shares I owned. My IB account just shows a line item for a receivable for the full $500/share and no Fairfax shares, but I also owned the Canadian shares at IB which could be the difference.

2015: ~(20) 2016: 24.7 2017: 25.9 2018: (-14.1) 2019: 25.5 2020: (4.80) 2021: 18.8

Money hit my Schwab account and today (before IB even!) But the math doesn't come close to making sense. Only had odd lots so all shares were tendered but the cash is only like $225ish/share so not sure what's up - will see if it's corrected post holiday, but anybody on Schwab should watch this like a hawk.

It's possible, but none of that has mattered to FIH which has fallen even further to $12 in recent weeks. FIH has also had great quarters, growing BV, and near-term catalysts of the Anchorage IPO. Still trades at a 35+% discount to it's NAV post a recent tender at $14.90. If book value and good quarters mattered to the market, Fairfax wouldn't have traded at $400 as recently as October. All that matters in the short term is sentiment and incremental flows. I don't see what would cause immediate sentiment to change (quarterly results have been strong for a bit now) nor do I see anything meaningfully improving flows once those who tendered rebuild their positions. This is all purely speculative, but I'm just saying don't be surprised if in 3 weeks time it's back to $460 USD.

For sure. I've rolled my Apple puts forward - I'll make money on anything below $150 and have risked nothing in establishing the positions. I just know sentiment has basically been in the dog house since September. VIX blew out. Bond yields have cratered back down. And the markets made new highs throughout that. I think we might get another round of complacency before another leg lower. Do generally agree the forward looking prospects are terrible medium and long-term. Short term it just seems like everyone is expecting it.

I dunno. This seems to be mimicking exactlywhat FIH did. FIH tendered for with a high of $15. During the time the tender was in force, shares were between $13-14. After tender completed with fills @ $14.90, share immediately popped to high 14s. Shortly thereafter they languished and moved back down to $13/share. I couldn't make sense of it at the time. Why would it pop to $15 AFTER the tender was closed? Why didn't people arbitrage the tender? We're seeing the same thing here. Fairfax tenders with a high end of $500. Shares remain range bound $450-460 USD. Tender closes and fills at high end of the range. Shares immediately pop AFTER the tender closed. So now I envision shares might languish back down to $460ish in coming weeks after cash is received from tender. I couldn't make sense of it before, but I have a working hypothesis now 1) Few people are buying shares to arbitrage tender spread. This is likely due to tax implications for large, taxable entities meaning only small, tax advantaged investors participate and they likely already owned the shares. 2) the people who tendered positions immediately begin re-accumulating the shares tendered. They want those shares back. Tendering was tactical. This puts pressure on the share price upwards driving it to the high end of the range they expect to receive from previously tendered shares. 3) once those positions are reaccumulated, there are no new marginal buyers. So share price languishes back to prior tender equilibrium between buyers and sellers which would be ~$450-460/share Let's see if that happens

I'd love to see it happen, but everyone expecting is likely the sign that it won't. Seems like we keep grinding slightly higher regardless of the massive amount of pessimism and concern people have

What happens if the rates go down? Then you own a bond with a 1-year max duration redeemable at par at any time afterwards. Even if rates and inflation dropped to 0% at the next reset, you're doing better than buying a 10-year treasury bond and taking no principal risk. Doesn't seem like you can lose. May not win, but there's no losing.

That is the risk. Strarted repurchasing the shares I tendered yesterday to lock in $460 US kn some of them. If we get to the point where we approach $500/share, I'll sell other positions to re-establish the whole thing but hoping we stick to $450-480 where we've been ever since the tender was announced.

I largely agree with the sentiment. I'm not anti-capitalist, but I for sure agree that labor has been exploited by business interest who could buy politicians to gut labor protections and essentially get rid of collective bargaining. It's hard to want to continue supporting a system when the abuse of it is so obvious. Give labor a larger influence at the bargaining table and stop all of these corporate bailouts and I think you go a long way towards stopping the stagnation of the bottom 90% in terms of real wages and etc. Let companies go bankrupt and beef up your social safety net to catch the collateral damage. Certainly has to be better than bailing out billionaires when we have a working bankruptcy process.

Dang. At Schwab and IB it was clicking a box to participate, entering the number of shares, and the tender price. Was done in less than 20 seconds. Send them some feedback about how ridiculous that is.

When it first IPOd, there were plenty who made the case why a 20+% premium to NAV made sense (I wasn't one of them BTW - quite the contrary). Now, despite years of killing it performance wise, we've swung full spectrum to where people seem to believe only a discount is a justified due to some vague notion of fees as if this portfolio could be replicated in public markets. All I know is a NAV valuation has absolutely been justifiable post-fees with their historical performance and at some point sentiment will change and get them there. Likely even a small premium. I don't view FFH any differently. Might be a hair harder to make the case for why a discount of this size is justified, but FIH also doesn't have years of underperformance to come out from under. In both cases, it's entirely sentiment driven and not forward looking IMO and I doubt the sentiment changes in the next month. It is a risk though.

I purchased more shares today and tendered 100% of my position. Same things happened with FIH. Never got anywhere near the auction price until after the auction had closed. And even then, it still went back to $12-13 shortly thereafter. Was a quick buck, improved BV, and allowed me to buy back into the position with more money, but didn't close the NAV gap at all. I'm expecting something similar here.

They're not committed to buying every share tendered - they're committed to spending a specific $ amount. And you're guaranteed to get the price you tendered for OR better if you get filled. They accumulation of shares starts from lowest ask up to the highest ask until the $1 billion is exhausted. To avoid punishing shareholders for bidding on the low end, all shareholders will receive the highest incremental price that exhausts the $1 billion. Fairfax is tendering for $1 billion worth of shares. Below is a hypothetical 700,000 shares tendered at $460 700,000 shares tendered at $470 800,000 shares tendered at $475 1,000,000 shares tendered at $500 In this scenario, Fairfax buying power is exhausted in the $475 level. Everyone who tendered at $460 and $470 get filled for for $475 which was the last incremental price of the tender that exhausted the cash. The people who tendered for $475 will get pro-rata allocations where ~88% of the shares get tendered for $475. The remaining 12% tendered in the $475 bucket and the 1,000,000 shares in the $500 bucket go unfilled. The benefit of bidding lower is a guaranteed fill for your entire allotment knowing that you'll get filled at that price or a better one if the offer is oversubscribed. The risk of bidding high is that you don't get filled if enough people were willing to accept a lower price.

You can get high single percentage yields in stablecoins on services like Celsius and BlockFi. I've mentioned these in other threads, but the reception to them has been less than warm. Feel free to PM me if you want more info. Beyond that, I'm not a closet bull. I've spent the last 2 years accumulating up to ~20% of my networth in crypto. Mostly in BTC, but some in ETH and other DeFi related tokens and have been pretty open about being super bullish on BTC over the long-term. There is another crypto thread here though so maybe we keep the conversation to that one?

It will also depend on your broker. IB had given me my cash proceeds for FIH like a week faster than Schwab did. I can't say what will happen, but the tender by FIH did not provide much a floor under FIH's price and it is now back to lower than it was pre-tender despite having a significant chunk of shares removed from the market. My best guess is Fairfax may perform similarly in that the price will drift back down post-tender. I'm not trying to risk being out of the name to scalp a few dollars so I'll probably roll all of my IB proceeds back in immediately, but since Schwab is likely to take their sweet time getting me my cash I may try to be more opportunistic with that portion of my tender.

Really hoping the momentum traders wait so I can tender some in the auction, make a cool 10% on my shares, and repurchase at a lower price before they jump in. Trying the same playbook that worked out alright for FIH when they did theirs. Then, momentum traders are welcome to pile in.

I think the bond market knows that supply chain issues are temporary and that current debt loads prevent the Fed from hiking rates too aggressively. We couldn't get beyond 3.25% in 2018 despite record low unemployment, recent tax cuts, and a booming economy. How high do you think we can reasonably get today before interest rates choke off growth? Also, what's the alternative for relatively safe money in this environment? Stocks that have never historically maintained 25-30x multiples in an environment of persistent 6% inflation? Real estate already at record highs and limited affordability? Commodities that are already through the roof and subject to major volatility? Seems perfectly rational to me that someone might want the least bad alternative in this environment and for some that may be bonds.

I've been notified by Schwab (FRFHF) and IB (FFH).

Just following up here - We're passed the 365 day limit and IB still has not enforced sales in my account.

Slowly accumulating. Already own a hefty position though so only adding in drips and drabs as I recover cash from covered call sales (on other positions).

Can you elaborate? Because we just had 10+ years of massive and unprecedented deficits...and still didn't get massive inflation outside of asset markets. So, is that it? Inflation was simply contained to financial assets? Or is there something more important to watch than just the deficit?