TwoCitiesCapital

My main concern is that in a 6% interest rate environment no one can service their debt and you're not getting 5-6% rent raised but stagnant, or declining, rents. Maybe you still come out on top - haven't done the math. But at 6% interest rates my concerns are the govt is spending 40-50% of current budget on interest coverage. Government largesse stops. Corporate buybacks stop. Equities no longer look reasonable at 22x earnings. Profits? Stagnate because revenues can't keep pace with financing cost growth. Raises/bonuses/wage growth slows as corporate profitability stagnates, etc. If lower interest are a financial boon. Then higher rates must be the opposite. And so I don't think you can count on 5-6% rent growth in said environment when the price was so high to have required 5-6% rent growth to be attractive to begin with. I'm not in the inflationist camp - I think rates stay lower for longer. But my fear for the markets is that I'm wrong (as I often am), because a 6% treasury yield would absolutely wreck the economy.

Not an accounting professional, but I think this is right. My understanding is you have to consolidate anything where you have substantial control. Hard to argue that isn't the case here regardless of their % ownership.

My only guess would be because it's easier to get out of a treasury. I think 1.5% on a 10-year treasury is a terrible deal. Anyone who buys and holds to maturity is likely looking at a negative return. But I might be inclined to buy it for the next 6-12 months to collect that 1.5% safely and I can sell whenever I want to if it seems like rates are moving higher. Seems to me it'd be harder to get out of the multifamily property without fire sale pricing so people recognize that while 3-4% cap rates makes sense today - they don't expect it to make sense in 2-3 years and may not feel confident in their ability to get out before then.

+1 I generally identify well with the Libertarian idealogy, but I also like roads, and bridges, and defense, and the internet, and etc. I agree that taxes are necessary and I value the services the government provides. Even if I don't drive on every bridge or road in my city, I'm the beneficiary of the economic activity they bring to the area. Even if I don't have children, I support programs that help children of those in need bec society is better for it. Etc. Etc. Why must we raise taxes? Because, we the people have had multiple opportunities to support candidates who could've lowered spending over the last 21 years, but we as a country always chose not to. So if we're not gonna cut spending, higher taxes it is.

I mean since China has spent 7 years ensuring that it's influence on crypto was minimized, I honestly could care less if it's "different" this time. Without their banks handling it, their companies mining it, or their people spending it...what could they possibly do to it?

I personally feel the TRS were brilliant - particularly at the price struck where risk of further decline was relatively minimal given the already sizable discount. I probably wouldn't want them to do more at these prices just because an ill-timed 10% decline (like we've witnessed overhe last few weeks) will be problematic with a large enough notional, but the size of the current contract doesn't bother me. Keep it on. Roll it every month/quarter. And buy physical shares to remove supply from the market.

I dunno. Bitcoin and Ethereum have the same network effects that have benefitted Facebook and other tech cos. And Bitcoin has survived 12 years and multiple 70-90% crashes. Something tells me it has staying power that AOL never had. Ether is plagued with problems - I think they'll get them fixed, but it's possible some other service supplants them. I don't currently see a viable competitor to BTC.

China has just made all crypto transactions illegal. This is much wider reaching than their prior bans on mining and exchanges. Certainly not a bullish development, but how bearish is it seeing as just about everyone expected it from China at some point? BTC is only down 5% on the news. Fairly mild reaction IMO.

Eh, the estate stuff isn't "tricking" YOU out of your wealth. As long as you're alive, you can spend the proceeds of the IRA tax-free. That's not tricking YOU out of anything. Spend what you want, when you want, tax-free. Seems like a good deal to me! It's the family who didn't earn it, didn't save it, and didn't grow it, but still feels entitled to it that is "tricked"... and they're still receiving a hefty chunk for nothing by virtue of the ovarian lottery. Ultimately agree that this shouldn't be applied retroactively. It's unfair to change the rules of the game after you've won. But I don't mind there being a reasonable cap on Roth IRA allowances in the future. I'm also ok with getting rid of backdoor IRA contributions. I've used the strategy myself the last 2 years, but it is clearly an abuse of the intended limitations given the income restrictions they have on direct contributions. As long as it's legal, I'll do it - but absolutely in favor of closing this loophole.

I just keep track of all my account balances in a spreadsheet. Every time I add money, or withdraw, I take a tally of all portfolio values and sum them. Then I can adjust the sum by the withdrawals/additional a la your traditional Time Weighted Return calculation and you've got yourself returns adjusted for flows - a simplified version of how funds would calculate it.

Yes. It's cheaper and will continue to get cheaper as long as the share price remains stagnant while it's insurance companies, investments, and equity associates continue to make money every quarter.

Did you actually expect the company so out of favor to trade at a 20% discount to it's NAV would outperforming companies that are trading at a premium valuation when people feel compelled to sell? This is just market behavior - what's in favor does well (on a relative basis) and what's out of favor does poorly...until that favor changes.

Fingers crossed. I wouldn't be angry if it persisted for another year or two to give Prem the opportunity to make good on his Teledyne comparison.

BlockFi has also been targeted. We will see how it turns out. As of right now, my interest is still being paid on both. As it stands now, BTC and ETH have already been determined not to be securities, but stablecoins are operating in a gray area. I wouldn't be shocked if they end up being regulated similarly to money market funds and BlockFi and Celsius will need to register with the appropriate regulatory bodies to have customers "invested" in these "money market" instruments that accrue interest.

https://multicoin.capital/2021/09/16/daos-manage-risk/ Thoughts on DeFi token value and how sustainable a competitive advantage is.

I would assume that we're in a semi rational market where premiums would rise to reflect expected losses and valuations wouldn't be the flex factor. I know that's not always the case (a la Katrina), but it's not like the potential increase for extreme weather due to climate change is an unknown that no one is talking about. It's a fairly well known and well telegraphed phenomenon where they can price those trends into new policies. I don't understand the reason for their discount today that wouldn't have also been valid when they were at a premium in 2018. I'm just assuming it's the market having too short term of a view OR that it's enamored with sexier stocks at the moment because Fairfax is a way better investment today than in 2018 even without considering the difference in valuation.

Dunno much about Paxos other than their stablecoin. Will definitely look into them, but I also trust IB has vetted them more than I could. Seems like Paxos is very regulatory friendly though, so have fewer concerns about them since they invite standards and scrutiny.

Might have to get rid of my Coinbase account and trade through IB!

Now that FHA is removable at will by president, there's hardly a difference.

Agreed that it's unlikely. I'm not a bank trader to know precisely how they hedge the exposure. In most cases, I doubt they would just outright buy 100% of the shares just due to how much capital that requires versus the few basis points of profit they can scalp. I'd expect it would be some combination of shares, options, and/or market making the opposite side of the trade. That being said, Fairfax has limited derivatives available since it's not NYSE traded (not sure if there are options available in Canada or not) and I doubt any combo of 1-3 hedge funds were willing to short that many shares so that might have been the path of least resistance.

This. I think in general remote schooling options have meant kids stay home. I know a few masters students going to school comply remotely. Can live with their parents and don't need a job to pay rent and etc. I imagine same is true for many undergrads. Also, the data is fairly conclusive that higher minimum wage does absolutely lead to higher YOUTH unemployment. So maybe some of this is on the companies too. If you're paying $15/hr, do you really want the unreliable highschool/college student with limited experience and a school/sport/weekend schedule to work around? Or are you gonna hold off for someone with experience and flexible scheduling? How many of those people are out there to fill these roles? Seems like most of the shortages I'm seeing tend to be in the entry-level service industry which supports this thesis. The McDonalds near me is closed erratically due to staffing shortages, the Starbucks today was only serving plain coffee to avoid overwhelming the single person who showed up, restaurants in the area are limiting seating due to not having enough servers/bus boys, etc. Doesn't seem like we're having trouble finding workers for the financial firm I work for though

That would be the easiest way in this instance, but they could also find a party willing to bet the opposite direction on Fairfax shares. Or partially hedge with OTM options to avoid tying up the capital simply to earn a few bps.

Give me a break. Estate taxes would impact ambition, progress, and etc far less than income and capital gains tax do. Why? Because once your dead you stop giving a shit....some people even before then. I think it'd be nothing but net positives to reduce income and capital gains and increase sales taxes and estate taxes. I'm all for shutting down the loopholes and doing away with Trust-like structures and insurance products whose primary purpose is to avoid taxes on generational wealth which is how the wealthy get around stuff like this.

Honestly, it makes sense that these products would be regulated similar to money market funds and securities lending so I don't mind the SEC stepping in. I do mind that they're stepping in to say "don't do it" rather than to say 'how can we get this done in a way that protects consumers and is on par with other products'. Seems like instead of regulating to protect consumers they're trying to be the arbiter of what actually gets offered to consumers who are demanding these types of products.

We don't regulate how much you can spend, but we do currently regulate how much you can gift to them in a given year, and over your life, already. I don't see why this is any different. And higher estate taxes and closing loopholes aren't mutually exclusive. I'm for both and view both much more favorably than income taxes and capital gains hikes