TwoCitiesCapital

I'd argue the reserve status is already threatened. You already have large countries like China trading in yuan/rubles with Russia to buy oil/gas. The weaponization of the U.S. dollar is not just a burden for the handful of countries we target - it's also a burden for all of our allies to have to rework their entire financial systems to comply with our restrictions. Consider how frustrating it must be to be Germany right now with the US sanctioning Russia to prevent the Nordstream pipeline that Germany wants. But Germany also has to force its financial system to comply with the USD sanctions to prevent money from flowing to the construction of the very pipeline that it wants to be built. At some point, our allies will grow weary of effectuating U.S. foreign policy via the weaponization of the USD, the countries targeted by sanctions will find willing market participants to trade in a currency other than the USD (like Russia and China currently do), and the U.S. status as reserve currency gets eroded by slowly reducing it's required involvement in global trade. We're witnessing this slow erosion happen as we speak.

It shouldn't matter. Whether the carrying value is above or below the market value, FFH's portion of earning (net of dividends) will continue to stack up on FFH's book value (i.e. carrying value). In equity accounting, market value is only relevant as a yardstick for analyst to question the carrying value. Then let us hope Eurobank is on it's way to sustainable earnings growth instead of constantly being plagued by large one-time writedowns and restructuring costs like it has been for the past several years. Agreed - although in their defence, most of those costs were predictable and I think management have handled the situation well. On the other side of the coin, if things go well they have the potential to go very well. For example, due to tax loss carryforwards they expect to generate more capital than earnings in the future - in fact they guide to generating 100bps a year from 2022. That’s 25-30% of the market cap generated annually. Dividend potential is significant. Yes. I am bullish and bought more in the March/April dip, but it has been a frustrating ride! I was wiped out in 2015. Rebought back in when momentum was going well, but covid-19 took all of that away as well. Now we're back to the bottom of the range it's bee in since 2016 and even a double from pre-earnings price only takes it a hair above its 2016 and 2018 highs. Hopefully the completion of the spin-outs, the corporate restructuring, and the pandemic all in the rear-view we can finally get to a sustained trend of earnings growth (and dividend potential), but I don't think this stock is going to move much until that happens. And it'll probably trade at a substantial discount to book like all European banks do even if it pays a 6-7% dividend. We're really banking on massive book value growth to make this work for us.

I still struggle to grasp the value of "digital" art that isn't hanging on my wall - but ultimately I do think the concept of NFTs, or the use of a blockchain to track authenticity and uniqueness, makes a TON of sense for the luxury goods world. While we're on it, can somebody build the blockchain to track home ownership so we don't have do a damn title search/title insurance everytime a piece of property is bought and sold?

It shouldn't matter. Whether the carrying value is above or below the market value, FFH's portion of earning (net of dividends) will continue to stack up on FFH's book value (i.e. carrying value). In equity accounting, market value is only relevant as a yardstick for analyst to question the carrying value. Then let us hope Eurobank is on it's way to sustainable earnings growth instead of constantly being plagued by large one-time writedowns and restructuring costs like it has been for the past several years.

ADRs are American Depository Receipts. These are sponsored by the issuing company who works with a bank/custodian to issue shares into custodian account and issue ADRs as claims on shares in that custodial account. You can own foreign shares directly - they just trade OTC and will have way less liquidity as it's not sponsored or backed by millions of shares in custody. Most ADRs have a 5 digit ticker ending in Y (i.e. TCEHY for Tencent) Foreign shares traded OTC will end in F (i.e. FRFHF for Fairfax trading OTC).

More concerning for bond longs, but not so much for the Fed yet I don't think. I imagine that much like employment, inflation is a trailing indicator that always appears at it's "best" prior to a downturn - we'd need to see a sustained rise before it becomes an issue. Not just a few months worth. Also, I have to believe the tarriffs are a portion of that meaning it's transitory and potentially reversible and not emblematic of an elevated trend in inflation. Obviously didn't foresee covid happening - but think this is important to note in an environment where everyone is expecting sustained inflation again. Inflation is a trailing indicator. Rates can continue higher in the intermediate term, but ultimately they're capped by the debt burden on society and will likely peak below their prior peak in the last cycle. Also attached is a piece from Doubleline's presentation today. Foreigners have been fleeing treasuries since mid-2016 and I don't quite see a reason for that to stop - even our higher nominal rates are still negative in real terms. More likely people continue to buy inflation hedges now that negative real rates are becoming a global phenomenon, but we don't need foreigners for rates to come back down like we didn't need them in 2019.

https://bitinfocharts.com/comparison/bitcoin-transactionfees.html Currently costs about $19 per BTC transaction. Which is amazingly cheap for large transactions. If you were a large institution which had $1B in gold in your safe in the US and you wanted to move it to another institution in Japan. How long would it take, how much would it cost, and what safety precautions would need to be taken? Even moving dollars rather than gold it would be much easier, quicker, safer, and cheaper with BTC. And as far as I know there is no other way to cross international borders carrying tens of thousands to billions of dollars safely in your head by memorizing 12 words. Yes - as of right now the transaction fees make it superior for LARGE payments. They're still working on the solution for small everyday payments. But even the article you shared regarding VISA showed that credit cards were also a disaster and not practical for small transactions when they first started. Only through decades of iteration and improvement have credit cards become ubiquitous and taking more than half of transactions. BTC is moving much more quickly in that direction than even VISA did, but it's not there yet. Same with Ethereum - while I can get very attractive returns on the Ethereum network simply from savings/lending stable coins, it does cost money to get into it and those fees are a current barrier to entry for the average person who isn't moving 20k at a time AND a barrier to increasing acceptance. This is also being worked on, but I'm optimistic that there will be a solution given the benefit of DeFi versus 2017 when ethereum was known for cat trading cards....

If that's their "only" function it's a pretty critical function. And the cost of a new entrant to replicate V and MA's networks is such that no new competitors will emerge. They own the space and are building services all around it. "No new competitors" is a weird way to say "Bitcoin". As mentioned above, it's already a global payment network with hundreds of thousands of transactions processed daily - in less than 12 years from being just one guys' hobby. That's a pretty powerful track record and it's getting faster and cheaper with new second layer solutions (like Visa exists on the second layer of USD infrastructure). And no one is saying that's its NOT an important function. That's the only value I ascribe to BTC, so of course it's important. My only reason in saying that was to juxtapose Visa's purpose with BTC's purpose which is that they're the same. And if BTC can do what Visa does more quickly, more securely, and more cheaply - than it's hard for me to see how BTC doesn't accrue that value while Visa likely loses a good portion of it. And if I'm right on that, than Visa and Mastercard will NOT retain that value - it will be ceded to BTC.

I generally agree. I'm not buying bonds hand over fist, but have started rolling my short-term bonds funds to intermediate and long-term allocations as I don't think interest rates can go much higher sustainably.

Why does a company whose only function in society is moving cash from point A to point B have an enterprise value > $450 billion? Yet we've all determined this is what Visa is "worth" and they're not the only payment processor. Back in 2018 when I first understood BTC's "purpose" in payments, all I did was sum the enterprise value of first 5 payment processors I could think of. Visa, MasterCard, American Express, PayPal, and Square and then divided by the maximum 21 million coins that will eventually be outstanding. The outcome of that rough calculation? 50k per coin. To me, that was the value American society had placed on "processing payments." It's a rough analysis - doesn't consider other payment processors in America (or globally), other use cases, lost coins, or the fact that 21 million won't be outstanding for awhile - all of which drive the terminal value above $50k per coin but it was a start and the start I needed to begin acquiring. Because they make money and pay dividends. Only along as they remain the most convenient and relatively cheap option. Those dividends are funded by Visa taking a 1-2% cut of e-commerce. Crypto has the potential to change that and take a much smaller cut - and it has an easier time growing/spreading than any of Visa's prior competitors. Heck, it's already a global payment network that processes hundreds of thousands of transactions a day (just on BTC - not considering DeFi on ethereum) and we're just 12 years from its advent and haven't even hit the vertical climb portion of its S-curve yet. It's possible these credit card companies will dig out their own niche in the land of blockchain - but it's going to be MUCH more competitive for them from here on out and their value proposition will have to evolve. My guess is companies like AmEx will find it easier to adapt - the desire for overspending on revolving credit won't disappear just because blockchain allows you to do it quicker and cheaper.

Why does a company whose only function in society is moving cash from point A to point B have an enterprise value > $450 billion? Yet we've all determined this is what Visa is "worth" and they're not the only payment processor. Back in 2018 when I first understood BTC's "purpose" in payments, all I did was sum the enterprise value of first 5 payment processors I could think of. Visa, MasterCard, American Express, PayPal, and Square and then divided by the maximum 21 million coins that will eventually be outstanding. The outcome of that rough calculation? 50k per coin. To me, that was the value American society had placed on "processing payments." It's a rough analysis - doesn't consider other payment processors in America (or globally), other use cases, lost coins, or the fact that 21 million won't be outstanding for awhile - all of which drive the terminal value above $50k per coin but it was a start and the start I needed to begin acquiring.

Maybe you should ask yourself what it is that Square, Visa, PayPal, and other payment processors who are expanding the use of digital currencies must see since they're the experts. It's not just a couple of guys on a forum telling you this stuff. The industry is rapidly moving that direction. We can talk til we're blue in the face to get you to understand what it is and that it has value - or you can just look what the experts are doing. Acquiring crypto and developing crypto solutions... The reason the transactions aren’t instant is because of regulation. The government is trying to prevent criminal activity. That alone should sound serious alarm bells. They must have skipped the criminal activity part https://perspectives.dtcc.com/articles/leading-the-industry-to-accelerated-settlement Q: Why stop at T+1 or T+½? Why not go to real-time settlement? A: Real-time settlement is a simple technical solution but a very complicated market structure change. While the industry should continue to aspire to real-time, it is more pragmatic to reduce the settlement cycle in stages to capture the benefits faster. With real-time settlement in today’s market structure, the entire industry – clients, brokers, investors – loses the liquidity and risk-mitigating benefit of netting, and that is particularly critical during times of heightened volatility and volume. For example, on a typical trading day, NSCC processes an average of about $1.7 trillion in equities transactions. The multilateral netting process reduces that number by about 98%, and the total value settled is around $38 billion. Netting allows brokerages to transfer that $38 billion between parties only once at the end of the day. In a real-time settlement scenario, netting is not possible and trillions of dollars in cash and securities must move through the financial system on a continual basis throughout the trading day. This creates massive market and capital inefficiencies, increases credit and operational risks, and increases costs between trading parties, possibly undermining the stability of the markets. Accelerating settlement requires careful consideration, industry coordination, and a balanced approach so settlement can be achieved as close to the trade as possible (for example, T+1 or T+½), without creating capital inefficiencies and introducing new, unintended market risks, such as eliminating the enormous benefits and cost savings of multilateral netting. I'm very confused. Why are you guys referencing settlement times for equity securities? I can quite easily transfer small dollar amounts of my money to another individual today, instantly. Anything large has limitations and takes more time, due to regulations. What am I missing? You're missing that no settlement happens INSTANTLY in today's financial system. Not for securities. Not for cash. ACH takes 3-5 business days. Stocks take 2 business days to settle. Wires can still take a few hours and cost $. Even solutions like Venmo that seem instantaneous take a few days for cash to reach your account. The only solutions where cash moves "instantly" are solutions where a liquidity provider is giving you their cash while they wait for the cash you transferred to arrive (like trading Schwab allowing me to trade my cash deposit immediately or paying a fee to use an ATM). Cash does NOT move instantly in today's system - this is a result of the plumbing and structure and not of government regulation.

Altius Renewable Resources (ARR) IPO'd. Fairfax's interest is in Altius Minerals (ALS) which owns a portion of ARR, but I don't believe Fairfax owns any ARR directly. Ultimately, there will be some pass through benefit if ARR succeeds and raises ALS' price/visibility and Fairfax is able to earn more profits on the conversion of its preferred shares, but ultimate benefit to Fairfax of ARR's success will be likely be small.

Maybe you should ask yourself what it is that Square, Visa, PayPal, and other payment processors who are expanding the use of digital currencies must see since they're the experts. It's not just a couple of guys on a forum telling you this stuff. The industry is rapidly moving that direction. We can talk til we're blue in the face to get you to understand what it is and that it has value - or you can just look what the experts are doing. Acquiring crypto and developing crypto solutions... The reason the transactions aren’t instant is because of regulation. The government is trying to prevent criminal activity. That alone should sound serious alarm bells. Nah dawg. Settlement delays in securities industry has nothing to do with trying to prevent criminal activity. As someone who used to process them, can guarantee that's not the cause and that's it's just a result of the plumbing and the systems in place. Pretty certain its the same in banking and the regulatory involvement is primarily on the KYC side of the business and not throttling every single transaction to be reviewed.

Maybe you should ask yourself what it is that Square, Visa, PayPal, and other payment processors who are expanding the use of digital currencies must see since they're the experts. It's not just a couple of guys on a forum telling you this stuff. The industry is rapidly moving that direction. We can talk til we're blue in the face to get you to understand what it is and that it has value - or you can just look what the experts are doing. Acquiring crypto and developing crypto solutions...

I, too, own FMCCJ at IB

I'm sorry that the entire financial system doesn't get rebuilt overnight. And yes - there a DeFi options, there are CeFi options, and there are hybrid companies that currently bridge the gap (crypto exchanges, BlockFi, etc). If the US is serious about releasing a digital dollar, you likely won't need companies that straddle both as your on-ramp as the digital dollar will likely be immediately available as an on-ramp into DeFi without using one of these intermediaries

Bitcoin IS the network for transfers and payments. The token is how you access and use the network AND what is sent through it. Basically it is simultaneously the oil and the pipeline at the same time. For DeFi and etc buying Ethereum is basically buying the fuel the entire network needs to run on. So not owning the network outright, but owning the required input for the network to operate and to provide value. It's like other energy commodities - you'd expect that demand growth over time would result in higher prices as this is a necessary input for that growth. You can also stake tokens in DeFi platforms and collect a percentage of their profits (similar to taking a common equity position). So no one OWNS the system like no one OWNS the internet. But you can have stakes in individual pieces of its success. Instead of owning owning Google, Amazon, Facebook, etc to take advantage of the growing trend of online internet adoption you can stake Synthetix, Aave, Uniswap, etc. Own a portion of the value these protocols create. The primary difference is buying stock in Google means you're entrusting Google to manage that exposure on your behalf and hopefully capture the success of the internet. When staking exchanges, you get a say in the evolution/changes within the protocol yourself and are not entrusting a third party to act on your behalf.

I'm just going to say, I haven't been a crypto head forever. I have watched it since 2012 and felt satisfaction every time it busted because "I told you it was a bubble." This includes the recent bust in 2017. It wasn't until late 2018 that I realized I WAS WRONG. Despite being "right" everytime it was a bubble, I missed the opportunity of buying an asset that went from $100 to $3000 (at the bottom of the 2018 bust) over the same time I was telling everyone "see...I was right. It WAS a bubble." When focused less on the investment merits and more on the technological merits, my mind was changed and I realized that it had the potential to eat the entire payment/processing/settlement industry at the very least. Once accepting there was a valuable use case, you can then begin defining that use case and begin putting a value on it. I decided back when it as ~$8k/coin that it was worth ~50-60k/coin minimum if it met my base case scenario and replaced a large portion of Visa/MasterCard/AmEx/Square/PayPal etc and began accumulating. Is it overvalued now? Probably since it hasn't actually replaced them yet - but it also has a history of trading at extreme overvaluation relative to it's current potential and growing into that. And I have a habit of underestimating its potential. So am willing to give it a little room to run and imagine that in 5-years it won't matter that it was "overvalued" today - just like it didn't matter it was "overvalued" in 2017 and 2013.

Quite a sensationalized title and only if you extrapolate November 2017's monthly 25% energy growth rate over 3 years (as that part of the article mentions). The full analysis is found here: https://digiconomist.net/bitcoin-energy-consumption Which estimates that today, the bitcoin network uses about as much energy as Chile. On a per-transaction basis, each bitcoin transaction uses 741 kWH of energy as of 2020, up from 686 kWH in 2019. (https://www.statista.com/statistics/881541/bitcoin-energy-consumption-transaction-comparison-visa/) By comparison, 741 kWH would power approximately 497,000 transactions on Visa's network. This is why I don't think Bitcoin can work for high volume of transactions. How could as humanity justify building power plants to support something that can be done 1000000 cheaper in energy. If you are a government that wants to nail Bitcoin for taking over your currency just control the supply of electricity. Furthermore, wait till bad press related to CO2 emissions get there... Farms in China are not powered with solar. Technology will not save Bitcoin, we are already at ASics. Only a major protocol change can do it. Will it happen? Beerbaron It's only "cheaper" when you're only considering energy as a cost input and not wages/time/buildings/marketing/etc. all required for the current financial system On an all-in basis, BTC is cheaper and faster and is getting even cheaper and faster with the advent of new technologies to exist on top of the blockchain so not every individual transaction has to be run through the blockchain. You used to transact in gold/silver. Then we found out its cheaper and easier to transact on the second layer which was paper representing that gold and silver. Then we went even further and found it's cheaper to transact with eltronic blips that represent the paper money that used to represent gold and silver. BTC is likely to be the foundational layer for payments (gold and silver) and there will be improvements and developments on top of it that make it even easier/cheaper to transact in going forward - we're already seeing this. Visa and all their employees do not consume the energy of Chile. Beerbaron Once again, Visa is just one company in a network of companies required for Visa to work. Visa doesn't custody assets - just process payments. So you also need to consider the electric use if the custodian bank who is sending and receiving cash on behalf of Visa processing. And Visa doesn't just work with one bank - it's entire value is premise hinges on "it's everywhere you want to be" because it works with the bulk of banks globally. So to consider the energy consumption of Visa to deliver on its value proposition, you have to consider the energy consumption of all of its network banks as well. And many of those banks are insured by private, or by public, interests. You have to consider the energy consumption of those insurance companies/govt agencies because otherwise they wouldn't have the scale of operations they do. And now you're approaching something that's comparable to BTC - and something that consumes vastly more energy. I just don't understand why people compared BTC to each single company. It's not here to be another competitor. It's aiming to be THE option in an entirely new paradigm and value chain based on blockchain. Bitcoin and a handful of other smart-contract based tokens have the ability to replace the entire global infrastructure for finance if they can figure out how to get it to scale at reasonable cost. If you adopt crypto and DeFi, you don't need traditional banks. You don't need custodial banks. You don't need insurance companies. You don't need Fed payment network to settle transactions and move cash. You probably wouldn't need a brokerage account and a separate custodian and SIPc insurance for that. All that is replaced by a single blockchain which is more energy intensive than any single part, but less than the collective whole. And once again, as a broken record, I'll point out that it's energy consumption in aggregate becomes less important as renewable resources take up a larger and larger part of the processing power. Renewables aren't a scarce resource - crypto supports the addition of capacity and what's that capacity is issued it's basically there for very very minimal incremental cost for energy production. What global financial institution can say half of their global energy consumption is from renewables? Crypto is doing far more for renewable investment and adoption than traditional finance is doing whole consuming less total energy.

Quite a sensationalized title and only if you extrapolate November 2017's monthly 25% energy growth rate over 3 years (as that part of the article mentions). The full analysis is found here: https://digiconomist.net/bitcoin-energy-consumption Which estimates that today, the bitcoin network uses about as much energy as Chile. On a per-transaction basis, each bitcoin transaction uses 741 kWH of energy as of 2020, up from 686 kWH in 2019. (https://www.statista.com/statistics/881541/bitcoin-energy-consumption-transaction-comparison-visa/) By comparison, 741 kWH would power approximately 497,000 transactions on Visa's network. This is why I don't think Bitcoin can work for high volume of transactions. How could as humanity justify building power plants to support something that can be done 1000000 cheaper in energy. If you are a government that wants to nail Bitcoin for taking over your currency just control the supply of electricity. Furthermore, wait till bad press related to CO2 emissions get there... Farms in China are not powered with solar. Technology will not save Bitcoin, we are already at ASics. Only a major protocol change can do it. Will it happen? Beerbaron It's only "cheaper" when you're only considering energy as a cost input and not wages/time/buildings/marketing/etc. all required for the current financial system On an all-in basis, BTC is cheaper and faster and is getting even cheaper and faster with the advent of new technologies to exist on top of the blockchain so not every individual transaction has to be run through the blockchain. You used to transact in gold/silver. Then we found out its cheaper and easier to transact on the second layer which was paper representing that gold and silver. Then we went even further and found it's cheaper to transact with eltronic blips that represent the paper money that used to represent gold and silver. BTC is likely to be the foundational layer for payments (gold and silver) and there will be improvements and developments on top of it that make it even easier/cheaper to transact in going forward - we're already seeing this.

Quite a sensationalized title and only if you extrapolate November 2017's monthly 25% energy growth rate over 3 years (as that part of the article mentions). The full analysis is found here: https://digiconomist.net/bitcoin-energy-consumption Which estimates that today, the bitcoin network uses about as much energy as Chile. On a per-transaction basis, each bitcoin transaction uses 741 kWH of energy as of 2020, up from 686 kWH in 2019. (https://www.statista.com/statistics/881541/bitcoin-energy-consumption-transaction-comparison-visa/) By comparison, 741 kWH would power approximately 497,000 transactions on Visa's network. 1. I'm skeptical that 741 kwh is the actual power usage for a single BTC transaction seeing as the average electricity consumption for a household in a day is ~30 kwh. No way the transactions that requires 20x my daily household usage of electricity only costs ~2x as much. Maybe it's talking about a single BTC block? But then - each block contains dozens of transactions so also not quite a fair comparison then. 2. Average size of Visa transactions? ~$60. Average size of BTC transaction? $400,000 which makes up some ground on the per dollar efficiency as well. Also, for smaller transactions of the likes that VISA tends to process, the solution would likely reside on a second layer solution or something like the Lightning Network which are massively less energy-intensive. The argument wasn't that BTC used less than a single bank - but rather that it uses less than the banks it could replace. You're making a fine point by showing that JPM alone has 2.5% of the energy use of BTC. What about once we consider Citi, BofA, Deutsche, BNY, Santander, US Bank, State Street, Goldman, TD, HSBC, all local banks and credits unions, dozens upon dozens more international institutions etc. etc. etc. What about all of the support functions like payment processing from the Fed or Visa/MasterCard/Amex? What about the required 3rd party intermediaries that audit balances and books? What about insurance co's that support the custody of the assets or the FDIC? What about all of the electricity/carbon used by their employees to get to and from work OR to remote in using video conferencing and telephones? I think it's laughable to think the global financial system could operate with fewer than 40 companies with JPM's energy consumption which is what it would take for them to "underspend" BTC on energy consumptions. And again, a large and growing portion of BTC's consumption is renewables so it matters less what the actual consumption is because it's not a finite resource any longer.

Well, who is being disingenuous now? :D The finance industry does a lot more than clear transactions. I am curious on your thoughts on whether you think eventual concentration of crypto-mining resources is a potential risk. So does crypto. I've got savings accruing interest denominated in ethereum based stable coins. I have loans outstanding collateralized by BTC. I have "staked" DeFi exchanges which is similar to making an equity investment in their operations. Crypto as a whole replaces A LOT of what traditional banks do. It remains to be seen if they can scale it for primetime, but I'm optimistic. And while the REAL comparison would be electricity usage for ALL cryptos versus the financial industry, I still think you'd find that the global financial industry dwarfs crypto energy demands by many, many multiples.

Transaction fees can be charged instead of receiving newly minted BTC. That's still likely decades away though. Also, as we've seen over time there is a HUGE incentive to locate these operations where energy is cheap and plentiful - which often means the use of renewable resources like hydro and solar. Something like ~40% of BTC energy consumption is estimated to come from renewables and that trend is growing. To get to the energy consumption questions, you cannot say BTC has huge energy consumption while ignoring the energy consumption of the modern financial industry. How much energy does your bank use? What about their custodian for financial/physical assets? What about the third party admin or auditors who sign off on those balances? What about the Fed payment system for when you're trying to process the movement of those balances? It's exponentially more than what BTC uses, likely not derived in meaningful part from renewable resources, and BTC (and other tokens like ETH) stand to replace a lot of what it is these companies do which ultimately drives a reduction in energy consumption over the intermediate term.

Saw this too but can't find any news. Maybe just catching back up to where it trades pre-Covid which was still cheap?