TwoCitiesCapital

The MacroVoices podcast also interviewed the Logica guy (BTC bear) last week. I think he made a better case there than on this podcast. I just really felt like this whole thing was bogged down and debating semantics and words and papers (papers that they both agreed were low quality) instead of getting into the crux of BTC. I wish Grant did a better job moderating.

Them not selling BB wouldn't force me to sell the shares in FFH since that wasn't my thesis for acquiring most of them to begin. Fairfax is unequivocally cheap and BB just made it even more so. But if they don't sell, it certainly will make me call into question how much credit I'm willing to give them in the future. Once it stops being cheap on an asset basis, the quality of management and their decisions becomes the primary driver and this would be a strike against that outlook and expected value for the shares.

I'd bet that is because of massive account closings, more so than their exposure to GME. They really destroyed their relationship with their core userbase today. I don't know why they'd need cash to close accounts. All those investors need to wait 1-3 days for whatever trades to settle to withdraw. No need for capital at RH to be impacted. Now - if they're sitting in a hole from margin loan losses, that's a different story.... IBKR chairman on CNBC today: https://www.cnbc.com/2021/01/28/interactive-brokers-restricted-gamestop-trading-to-protect-the-market-says-chairman-peterffy.html He is very worried about a broker or clearinghouse failure. He doesn't mention which counter-party he is worried about, but RH says they are restricting long stock purchases due to CAPITAL requirements. This suggests RH is thinly capitalized. I know RH investors aren't sophisticated enough to understand this, but if I was sitting on $20M paper gains at RH, I'd be very worried about the viability of my broker. Disclosure: long IBKR Edit to add: When you say that IBKR should permit bear call spreads, you are saying that IBKR should accept the counter-party risk on both legs of that trade. The trade might be low-risk for you, but very high risk for IBKR. That is an angle I hadn't considered. Thanks! But my understanding was that the OCC clears every options trade. So IBKR's counterparty on my options trades is always the OCC. If the OCC went down that would be a systemic risk, and I think there is a 100% chance the US government would bail them out. And IBKR reducing GME volume probably doesn't make any difference to OCC's solvency. These aren't OTC derivatives with a specific counterparty like the Bear/Lehman issues. IBKR CEO estimates gains/losses are $10-15B from GameStop options alone. Someone made, and someone lost, $10-15B. As of this time, its not clear who those parties are and if they can sustain those losses - but relying on the US govt to backstop a counterparty so your business can run as usual is a very poor form of risk management IMO.

That was a helluva of a turnaround on his part!

There have been multiple days where trading volumes would've allowed them to sell. Selling is also just 1 way of reducing the long position. Could've sold calls. Could've bought puts. Could've entered a 6-month TRS contract. Any of these would've have reduced long exposure and not been constrained by the average volume of daily shares even though those volumes were sufficient.

What legal theories are you referencing? I am only familiar with Rule 10b-5, which is here: https://www.law.cornell.edu/cfr/text/17/240.10b-5 A 10b-5 violation requires a material misstatement or omission of fact. Speculative statements of opinion ("This stock is going to the moon" or "Buy GME, can't go tits up") don't count. And there are more hurdles than this in the law. Importantly, the Supreme Court held in Ernst & Ernst v. Hochfelder (https://supreme.justia.com/cases/federal/us/425/185/) that there must be intent to deceive. On top of that, you actually have to show that the misstatements or omissions caused someone to buy or sell the stock in question, AND that they lost money. Are regulators really going to trawl through millions of posts from 20-year-old kids looking for deliberate factual misstatements to trace to individual buy/sell decisions? I doubt it. I would've thought it would've been more around the intentional manipulation, but looking back at Porsche/VW, the courts ruled in favor of Porsche. They ruled in favor of Porsche because what Porsche did (buying options on VW to gain control) was plowed in Germany at that time. Hedge funds who were in that trade wrongly assumed that it wouldn’t be allowed (in fact it would not be allowed in the US and many other countries) but they didn’t really know the rules. i don’t think you found more than a handful souls in Germany who felt sorry for the hapless guys. Right now, there is a lot of odd trading going on where shorted crap stocks go up and perhaps better stocks go down. It seems to me that long /short traders and institutions are wetting their pants because they are afraid they get blown up in an infinity short squeeze, so they unwind their positions. This means that likely interesting opportunity may represent themselves. For example, I suspect that some folks are long Dell and short VMW. This makes sense perhaps, but now VMW is going up and Dell looks a bit sickly. I am long VMW and it think interesting things could happen in the short run with the relatively small float in VMW. I bought VMW for fundamentals reasons so no big deal either way. I might buy some Dell too, if things get silly. I thought there was an aspect of Porsche saying publicly that they weren't looking to acquire VW while actively acquiring the options to do so?

What legal theories are you referencing? I am only familiar with Rule 10b-5, which is here: https://www.law.cornell.edu/cfr/text/17/240.10b-5 A 10b-5 violation requires a material misstatement or omission of fact. Speculative statements of opinion ("This stock is going to the moon" or "Buy GME, can't go tits up") don't count. And there are more hurdles than this in the law. Importantly, the Supreme Court held in Ernst & Ernst v. Hochfelder (https://supreme.justia.com/cases/federal/us/425/185/) that there must be intent to deceive. On top of that, you actually have to show that the misstatements or omissions caused someone to buy or sell the stock in question, AND that they lost money. Are regulators really going to trawl through millions of posts from 20-year-old kids looking for deliberate factual misstatements to trace to individual buy/sell decisions? I doubt it. I would've thought it would've been more around the intentional manipulation, but looking back at Porsche/VW, the courts ruled in favor of Porsche.

No way to know how markets react tomorrow, but BB is down 25% after hours following WSB going invite-only. GME down 23% AMC down 37% BBBY down 25% Seems it's fairly widespread.

+1 It's not just short-squeezes though, right? I mean that exacerbated this, but short squeeze lifted the shares from $140 to $300. It was redditors and Gamma that lifted it from $4 to $140. The idea that a board of 2+ million members can be mobilized/weaponized to lever the F up and distort the trading of ANY asset/market IS problematic - for businesses, for pensions, for markets in general. What if Pepsi makes a political donation reddit decides it doesn't like and they short its shares into oblivion taking down pensioners assets with it? Is that ok? What if these guys get into FX futures/future options and all simultaneously enter longs into the EUR/USD pairing and blow the EUR USD pair to 3-4 USD temporarily? You don't think that could be problematic for businesses all over the world? What if they decide that they all think the Fed is exploding the dollar and decide to drive oil into the stratosphere by all loading into the front-month contract (the exact opposite of negative prices in April)? These things matter. Yes - those are all bigger markets. But it's a growing community now (1+ million recent member adds). More on the way. And HFT/trend follower/momo strategies that will ride their coattails. This is a HUGE pile of liquidity that can really slosh anywhere it wants that that is NOT healthy.

Yes! Not sure what I’m nervous of though! I feel exactly the same way. Surely to heavens Prem is selling portions daily as this rally goes on. I would feel much better about Prem having $2B in cash to take advantage of whatever opportunities might exist when this blows up versus hoping for another turn in Blackberry. I'm nervous that he DOESN'T sell - not that he sells too soon :/ I don't care if BB goes to $400 - I'm not going to be mad that he sold at $25.

A few days ago I thought the best case outcome for BB was takeout by an industry player. Who knew all you needed to do was give retail traders a ton of leverage and promise them "tendies" to improve upon that result.

I agree. SEC is going to come down on market makers IMO. Not that they're the ones at fault here, but they certainly contributed to the effect and the rules for how they offer/manage options exposure will change from here. Also, I think there might be further fuel to burn for internet platforms being responsible for the content they host - we're already hearing about that on Facebook/Twitter do to the political riots and etc. Now we've got redditors potentially destroying the livelihoods of legitimate market participants just because they wanted to. No one feels bad for billionaire hedge fund owners, but I guarantee there were retail traders short this as well and this sort of thing shouldn't really be allowed.

I own GBTC in an IRA at Schwab and didn't have to sign any additional agreements. Given that GBTC doesn't have any distributions associated with it, I don't think you'll encounter similar taxable issues as owning MLPs in an IRA. It's my understanding it's just a publicly traded trust more akin to REITs than ETFs/stocks/MLPs/etc. I believe your understanding is only partially correct. You are right that GBTC has no income, so currently it has minimal tax implications. However, it is not akin to REITs - it is a grantor trust and its income/expenses flow through to shareholders. So if it had income, you would have to pay tax on it. Whether that would mean K1 or some other IRS form and whether it would have tax implications for IRA, I am not fully sure. In that sense it is way closer to a partnership than to REIT. Maybe this question is academic since it does not have income currently (and foreseeably). https://grayscale.co/wp-content/uploads/2020/02/Grayscale-Bitcoin-Trust-BTC-2019-Tax-Information_Final.pdf Thanks for the clarification.

I own GBTC in an IRA at Schwab and didn't have to sign any additional agreements. Given that GBTC doesn't have any distributions associated with it, I don't think you'll encounter similar taxable issues as owning MLPs in an IRA. It's my understanding it's just a publicly traded trust more akin to REITs than ETFs/stocks/MLPs/etc.

How likely to deploy in a prolonged bear market of 50+%? I'd say the odds are VERY high. Not comparable to 2020 because 1-month of being down only 35% from the peak before a massive recovery despite incredible earnings and balance sheet damage hardly screams "deal of the century" to me. But in a prolonged 50% draw down over 12-18 months, similar to 2008/2009 or 2000-2002? Yea, I think they have red the time to assess the outlook and who is cheap relative to that outlook, and put money to work.

This post was made when BTC was around 23k. Obvioulsy BTC topped out at 41k following GBTC premium exploding to 40% (sell signal above 25%) and the Mayer multiple topping at 2.9x (sell signal @ 2.4x). Obviously this went significantly higher than the "reasonable" top by these technical indicators, but basically pointed to late December being the time to sell. Now? GBTC premium is single digits (buy signal) and Mayer multiple is back to being 1.8x where it was when I posted on December 17th. First time it's been below 2x since that time as well. Obviously, BTC can undershoot to the downside like it overshot to the upside, but this is probably the first time since mid-December where the technicals start supporting accumulating again. Particularly if you believe that this is just a pit-stop on the way to a larger rally like we saw happen multiple times in 2017

Where are you located and are flights included? Any interest in coming to St Louis if I lose? ;D Boston. Last time I visited St. Louis was in 2005. The food was good from what I remember, so I might be able to drop by. Assuming - if I lose - that I have enough money to drop by. 8) Lol - I'd be lying if I said I wasn't interested, but so far being bearish has hurt me plenty without adding to the tab. Really thought about it though!

Because it can't be leveraged 50x with options forcing a gamma squeeze.

Agreed that shareholders would respond poorly if either turns out to be wrong. So he could take the middle path with options. Selling long-dated OTM calls here probably captures quite a bit of cash premium given vol levels - doesn't protect 100% on the downside, but would free up cash and be opportunistically taking profits while still riding the shares higher. Maybe structure it at varying strikes between $25-35 over the course of the next. Calls @ $25 for Jan 2022 expiry currently trade for $8+. Wouldn't be hard for FFH to take 25-50% of cash off the table while still riding underlying shares significantly higher.

I don't remember the exact numbers, but they trimmed the equity position a hair when the initiated the converts.

You'll feel differently when it hits $50 on Friday ;) $50? I thought it was going to $100. You're missing a few 000s. It's going to moon!

Where are you located and are flights included? Any interest in coming to St Louis if I lose? ;D

This is what I've been wondering. I think it's harder to pin on anyone since there's no one single orchestrator, but yes - it's a similar effect. I imagine regulations will have to change to reflect the scale of social media platforms. I mean despite the scant warnings against market manipulation, you have a ton of guys on these sites who are now aware of gamma and it's effects and who are purposefully bidding up names like GME simply to burn the shorts and not because of any fundamentals. Was on a BB thread on WSB today, someone mentioned BB's press release how the company wasn't aware of any reason why the stock price would rise and the response was "as long as the stock keeps rising, who gives a f*ck". These guys are just there for the momentum - not any belief in the underlying fundamentals at this point.

It is because pressure on hospitals has eased: [/img] How dare you use science and data to make decisions. LOL the same "science and data" Cuomo used when NYC hospitals were overcapacity and needed 30,000 ventilators in April but then in August when launching his book, all of a sudden they had more ventilators than they needed and the hospitals were apparently never even close to capacity? Or the science where men can become women overnight due to a "change of mind"? You tell me bud... Well, the only way the difference between April and August could be true is if....lockdowns worked? ::Audible gasps::

I don't believe there has been since they delisted from the NYSE