TwoCitiesCapital
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Same could be said for people who rehash the same arguments against that have been addressed for years. The difference? I admitted I was wrong about BTC after 6-7 years of celebrating its crashes. I changed my mind after actually deciding to research what it was and the value it provides after it clearly demonstrated its staying power. So to suggest that I'm stubborn and not open to changing my mind simply because I refuse to hold Bitcoin to a different standard than literally everything else in my life seems like a made-up narrative. I understand arguments like its volatility prevents large scale adoption. I understand why central banks may not want to give up their monopoly control of the money supply. I understand that there are competing cryptos that MAY become more dominant. What I can't understand is why someone who uses a traditional banks, or Christmas lights, or streaming networks, or drives an electric vehicle , or participates in countless other activities that leverage electricity to make life more convenient can pretend to have a moral issue with Bitcoin's power consumption.
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+1 No doubt in my mind that we'll experience a 50% decline at some point this year. I doubt due to regulatory action from Biden et al as is being suggested but simply because Bitcoin booms/busts like any new technology that is rapidly gaining traction but is still unproven. These are the same arguments that were made back in 2017 (energy intensity and criminal usage). The information is out there to suggest we're blowing both WAY out of proportion, but people would rather latch onto confirmation bias of why they missed out on it as opposed to changing their thinking (btw - this characterized me back in 2017 as I also latched onto the energy intensity argument but ultimately changed my mind with new information). Nobody cares how much power google data centers use when they're watching a cat video on YouTube or streaming Netflix. Nobody cares how much energy intensity goes into centralized banking with ATM and branch networks. Nobody cares that the USD has been used in ransomware attacks and to finance terrorism and drugs. Nobody cares that Tesla sells vehicles in coal powered jurisdictions that make their vehicles dirtier than gasoline burning engines. But god forbid Bitcoin use any electricity or be used in a some ransomware attacks because that obviously makes it evil....
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And as if to prove my point... https://finance.yahoo.com/news/bitcoin-wallet-used-darkside-ransom-195933543.html The wallet used for the BTC transactions in the pipeline hack have already been identified, the techniques for laundering the cash supposedly unveiled, and the potential to identify the individuals exists. Oh, and they were hacked themselves because ALL of this is on a public ledger....
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The 9/11 terror attacks were literally financed in USD, but not one single person here is demanding that we drop transacting in USD because it's "disgusting" or "evil." Companies were hacked before Bitcoin. Ransoms were demanded before Bitcoin. I don't blame Bitcoin for their continued existence. I don't blame the US dollar for 9/11. And as stated several times, anonymity on a public ledger is a pipe dream as every transaction/node is a security risk of exposing you.
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Guess we're just going to ignore all of the ransoms ever demanded that were denominated in U.S. dollars and all other currencies as well. Why don't we blame the currencies in those instances but rather the bad actors? I guess Bitcoin made them do it...
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I don't disagree that there will be a top and another probable large collapse. But I also think we're underestimating this thing. 1) prior rallies have been 10-40x from where they started to accelerate. We're only really at 4-6x this time around. 2) even as it's price stabilizes, you'll have a single crypto that will likely be accepted most places in the world and will likely be significantly more valuable than the 50-60k we're seeing today. At that point, the network effects will likely be enough to dominate any competition. 3) we're still @ less than 10% global adoption. Hell, we're probably less than 10% adoption in the U.S. This is at the very bottom of its S-curve and the value of it's network effect. While we might be topping near term, I don't think it matters in 3 years. Just like ultimately it didn't matter if you bought the top in 2018. They estimate ~40-50% of BTC mining is done via renewables with more moving over time. There is a HUGE incentive to make the shift too as energy consumption is one of the largest cost centers for miners so this WILL move over time as competition forces it too. How much energy does global banking consume? I saw figures that suggested JPMorgan alone used 15% or so of the energy consumption of Bitcoin. Now consider other massive banking institutions like BofA, Citi, US Bank, UBS, HSBC, etc etc etc. Why is no one bitching about their energy consumption? They have even less incentive to switch to renewables quickly because energy is likely LOWER on their cost input list. Hell, I saw something the other day that showed just hanging up Xmas lights in the US is 1/3 as intensive as BTC. Surely a global payments network provides more utility and value than Xmas decorations and nobody is crucifying light manufacturers. Most electric cars sold in China are charged using coal which is dirtier than gasoline. No one is jumping up the butts of Tesla and Nio's about ruining the planet. I think this energy issue is a non-problem that is already getting better on its own and is a very shallow bone to pick where it's ignored everywhere else in our lives.
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I've said it before, and I'll say it again - if you want to remain anonymous with your transactions, having a public ledger of every single one of them is a very poor way to do it. Each payment sent/received is then a node for potential security failure with the entity receiving money from you, or sending money to you, and security risk in identifying you when the authorities come knocking. All it takes is a single break and all of your transactions ever made from that wallet become identifiable and linked to you. This far less useful than using physical cash for anonymity purposes and I'm growing really tired of hearing people make it out as argument against crypto. If regulators can work through vast webs of corporate shell entities and electronic accounts to identify individuals committing tax fraud and terrorist funding - they can do the exact same thing with crypto. I'd even hazard a guess it's easier.
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I mean - I generally agree, but there are certainly instances where that may not be the case. The curve was inverted in 2019, but buying long-term bonds was the play the worked - not short-term. So I think it matters on what your outlook for rates are as well as not just the steepness of the curve.
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When do you guys think they'll deploy cash? They weren't buying bonds in 2018 when the 10-year hit 3.25% - will it be different this time around? Or are we waiting for a 4-5% treasury yield for the team to actually start buying duration?
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Pretty sure buying USO @ 150% of NAV and Hertz @ $1.00 were bets that were 'bailed out' by trillions in direct stimulus. Ultimately these guys made money. I didn't. I'm ok with that. But I don't think it means it was 'smart' or 'right' to do. They just got lucky.
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While appreciating the potential of disruption, I also appreciate a network. Facebooks has been an inferior social network IMO, but retains top dog status because of it's network. Same could be said for the eventual adoption of QWERTY keyboards and VHS va Betamax and etc. Often times its not the best one that wins - just the one that has the largest network of users committed to it. I think despite their problems, people are overlooking that no other crypto currency network looks anything close to Bitcoin or Ethereum.
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I was one of those people and am still convinced Hertz would have been worthless in any normal recessionary scenario. The fact that the surviving auto rental companies were shedding cars at that time (and not buying them as they are now) AND the fact that Hertz was considering issuing shares at like $1.50 - $2.0 both very much supports that thesis. No way Hertz would have sol equity at $2 if they were confident they could get $8 at an auction. Process, not outcome, is what should be judged. I don't view this as being any different than people who bought GameStop at $100 or people who bought USO @ 150% of NAV thinking they were buying negatively priced oil. Both bets 'worked out' - but I don't think that means they were 'smart' or 'good investors'. They were gamblers who got lucky. We're simply in an environment where the Fed and the Treasury have agreed to support this type of malinvestment with trillions in direct stimuls, trillions in corporate subsidies, and interest rates at zero. I imagine for as long as that occurs, these types of bets may continue to pay off - but at some point they wont and someone will bear the losses. My guess is that it will be primarily people who believed that these were the "for sure" bets who didn't have a clue of the risks or potential likely outcomes to begin with. We all know gambling in a casino typically means you lose to the House. One guy winning by putting it all on black doesn't change my opinion of that. These examples don't change my opinion of the sophistication of the investors who made them or appropriateness of the trades.
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Network utilization, new wallet growth, developer support, etc. And the DeFi space is becoming more like traditional finance. What is the value of the Synthetix token? The ability to collect exchange fees. What are those fees? 0.3% of transaction notional. How much will transactions grow? What will fees be? How many coins will be outstanding? What's your return at today's price? A lot of tokens are more akin to traditional finance than you might think. Basically just look at the top 20 minus the clearly ridiculous shit that might occasionally pop onto it like Doge.
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Elon is a troll and is pumping Doge just like he pumped TSLA stock with his 'taking private' tweet. This is all meme-worthy behavior, but I do not necessarily judge the crypto space by my feelings towards Doge. That being said, things are getting hot and are overvalued relative to fundamentals for most coins - but history has it that they tend to get RIDICULOUSLY overvalued and then bust so I imagine much higher upside remains. Also, network growth is still at such high rates that for any of the 'successful' coins that still have a use case in 3-years, buying at the top probably won't prove problematic. Just like buying Bitcoin and Ether at the top in 2017 didn't prove problematic in hindsight. TL;DR - prices for bluechip coins today are probably just fine with a 2+ time horizon even if you aren't speculating that the bubble blows bigger.
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The unlimited inflation cap and 10,000 DOGE mined every minute vs 900 BTC mined per day and a hard cap of 21 million is a VERY, VERY significant difference when it comes to potential price appreciation as a result of network growth.
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This is correct in that they'd potentially have a cash liability in a month/quarter where the stock declined. Not quite the same as shorting though as the most they can pay is the 100% of the contract notional if their stock goes to $0 - where shorting your losses are unlimited.
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Typically they swaps will "reset" on a monthly or quarterly basis. But they're not like options - there is no upfront premium so a dollar gain in the stock = a dollar gain in the swap (less financing costs). So if you buy $1B of swaps that go up by 50%, the seller of the swap would pay you $500 million and you'd pay them the financing (LIBOR+spread) for the period. In reality, the payments are netted and flow one direction. Then, the swap "resets". The notional is now $1.5B and all P&L and financing will be paid on this $1.5B figure now. The LIBOR+spread rate resets to the new observation point and P&L and collateral obligations are reset for the next period. Now, it's NOT clear to me if Fairfax is discussing these things at cost or not. The move from $1.4B to $2B - is that a difference in cost implying Fairfax added $600 million in additional swaps? Or is it reflective of the 30+% rally we've seen in USD terms meaning Fairfax only added $150-200 million on new swaps and the old swaps reset for $1.4B to $1.8B? This is what I would have to look more into to know for sure.
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Agreed. It would be poor optics and a signal, once again, not to invest alongside FFH but rather in FFH if you want to participate. Ideally, Fairfax India could arrange some similar repurchase agreement w/ a total return swap or borrowed funds to repurchase ~10-15% of the shares at these prices. Particularly since they've announced the sale of one of the funds holdings and will have cash on hand. I think this is the better play for them long-term - and for them to grow that economic pie they should announce a share repurchase to 1) demonstrate a commitment to ensuring value realization for the holders of Fairfax India stock 2) improve historical return optics to more closely align with the book value appreciation and 3) to get them back to the place where they have optionality of issuing new shares if interest in the vehicle/market grows.
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I mean - following 2007/2008 we held rates at 0% for 7 years until we did the first 0.25% - and then took a whole year to do another 0.25% raise to start the trend of higher rates every quarter or so. So rates were effectively at 0% for ~8 years and we had a slow climb upwards for ~2 years before the economy ground to a halt with the 10-year hitting 3.25% for a very short-duration. I tend to agree here. The supply disruptions, the stimulus, and the competition of exceptional unemployment benefits boosting wages will likely result in a one time boost to inflation for a year or so. But then all of the forces that resulted in disinflation will likely be back because they're still here: high debt levels, aging population/boomers retiring, increased productivity/technological advancement, massive demand for duration/USD keeping rates low, and globalism are all still active (though the last one less so). Commodity prices may rise, but commodities were in the dumps from 2011 - 2018 or so. I don't think one year of them finally getting back to prices that incentivize new production is scary when many of them were below incentive prices with no new growth in production for the last decade. Ultimately, unless if Biden is committed to continue passing multi-trillion stimulus bills until the mid 2020s when millennials hitting their earnings stride offsets the impact of boomers retiring, then I think disinflation re-asserts itself in 2022.
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Probably the latter. This would have been OTC type swap and it unlikely anybody in the market was looking to specifically short FFH at the same time FFH was looking to buy their own shares. They probably entered into an arrangement with a market maker. The market maker would hold the position, get paid a small spread + LIBOR to do so, and then would hedge the position by buying shares as you alluded to. No risk for them unless if FFH defaults, which is a minimal risk with either monthly/quarterly P&L settlements and they collect a floating LIBOR+spread for accepting that credit risk.
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Very interesting that the buyer got a control 'discount' instead of a paying the typical control 'premium' 31% off fair market value just seems steep without explaining the why behind it?
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Would also add there is no designed utility. It wasn't created to serve a purpose or fulfill a need - it was created only to show how stupid the proliferation of shit-coins was in 2017 and here we are ...
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My only point is to say I don't think Einhorn is waiting for the SEC to take down Musk as justification of his short in Tesla. I think he knows its unlikely the regulators will do anything. I don't think him publicly acknowledging that is necessarily anything more than him stating the obvious - action should have been taken and wasn't. I doubt it's the reason he's short or the reason his short isn't working.
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It's tough for me to say because I don't have the data, but it's just questionable to me the argument that millennials are the buyers when I literally went to college in the South, worked in the Northeast, and now live in the Midwest and none of the millennials I know in any of those three locations are buying. I get that it's anecdotal, but it's a very fair cross-section across geography and affordability. I think the recent surge has more to do with demographics of ALL ages leaving cities for more lax restrictions in the suburbs and smaller cities. Why pay $3,500-4,000/month for rent in NYC if everything is closed and you don't get any of the benefits when you can pay the same $2,500/month for 4x the space in St. Louis, still make high wages from your NYC company, and have way laxer covid restrictions (or more space to be locked up in). This isn't millennial math - it's everyone math.