TwoCitiesCapital

Cross-border remittances? Long-term store of value? Instant-payments via the lightning network? What other significant economic applications are you looking for that would it give it credibility and legitimacy that the above don't?

If Trump really wanted to help them, couldn't he have forfeited the Treasuries' defense in court and admitted that the institutions were stolen from shareholders, and pillaged, at the direction of the Treasury and the prior administration? He didn't.

+1 Sounds like your specific example is very similar to mine. Agree that mortgages have not fallen 50%. The monthly principal payments make them less duration sensitive than a similar maturity bond - they just happened to be MORE duration sensitive than the 10-year everyone benchmarked them to as prepayments go down and mortgage spreads widened. I am reducing other debts, even where it doesn't maximize the full financial value I could receive from the leverage, but the mortgage is a harder equation for me for me to decide on.

They're still not able to really build capital. Every $ of retained earnings is offset by a liability of $ owed to the Treasury via liquidation preference. They get the benefit of having access to that liquidity, but any return it generates is still owned by the Treasury and not shareholders. The only real benefit of "reforms" made by the Trump admin is it put an extra layer of trouble for the Treasury in accessing those funds that they technically own - basically made a current asset a deferred asset. Shareholders do not benefit from this arrangement though - it seems more designed to punish the next administration then improve anything for the stockholders. People have argued it was set up to incentivize additional negotiations between the two parties to come to an agreement in the middle, but here we are 4-years later with 0 progress made there. It was a hard argument to make as a positive twist then and significantly harder argument to make today with the benefits of hindsight.

I've rented the guest room on and off over the last 6-years. But my location doesn't really have the demand for me to be able to cover the note/HOA in consistent rent unless if I'm looking for high turnover tenants like travel nurses - which is work and risk unto itself. Love the condo - but do long for the flexibility.

It doesn't work like that. Because your monthly mortgage payment amortized differently and requires principal AND interest. It actually requires quite a bit more than the principal in treasuries to cover the monthly payment. Something to the tune of ~60% greater than the balance of my mortgage in treasuries where the 6-month coupon would cover 6 months of payments - Treasury balance can decrease with time/principal reduction. And then the HOA fees? Total would be more than double the mortgage balance to be covered in FCF from treasuries.

+1 I'm torn on this. Because I have a mortgage @ 2.75% and know financially it's the very last thing I want to put marginal $ towards. But I also hate my job and would love to quit and just take some time, and the mortgage is basically the only impediment to quitting and/or taking a lower paying, but more satisfying, job. Freedom and flexibility is hard to put a price on. But it's worth something. Same as anything is born with instinct - just like babies instinctively root and mouth for a nipple when they're hungry.

I tend to agree with rkbabang Bitcoin is unique regardless of what the US govt approves or doesn't approve. Ether was bleeding vs BTC since long before the BTC ETF was approved... Whether on Ether ETF gets approved or not matters little to the long term thesis of BTC - it only impacts short/intermediate flows and only marginally so (IMO). In other news:

I'm going to go ahead and disagree with all the social media hate. Let's not forget most boomers don't have enough to retire either and they lived in age before social media when pensions were a thing. Our government, made up of boomers, spends like drunken sailors regardless of which party is in charge. It's just humans, in general, struggle with delayed gratification and savings. It's not a particular demographic or social media's fault. It's that people, in general, suck at this.

This is my concern. It's easy to say "I couldn't do anything because I couldn't fire someone" but they also didn't really do much in favor of shareholders when they COULD do something after the firing. I don't think Trump cares about anything other than what's good for him and what makes his opponents look bad. If he's previously disclosed an ownership stake, I'd agree. Until then, it's whatever is good for him @ the time is what we can expect he'll do so I expect the issue to continue being ignored. The courts have failed us, thus far, and are our primary remedy

+1 Have been rebuilding my stake in Altius that was sold in 2021. Have been rolling short puts on FCX monthly for a bit. The call in copper was obvious with the political will to electrify everything.

Was anyone calling it unethical when employees were expected to be in the office for "face time" even when they completed their work? As far as the contractor example goes - as long as they finish the job that I asked them to do, within the budget and timeline we agreed, I honestly don't care if they're leaving each day at lunch.

Mayhaps that is how they treat taxable accounts, but this is NOT allowed in my IRAs there. It always refused to take the trade unless if there is sufficient settled currency in the account to cover it. regardless - the new functionality should fix whatever the issue is I covered for both taxable and qualified accounts if you so choose to use it.

I saw somewhere recently that Grayscale had received its first inflows since conversion to an ETF. Which begs the question - who is buying the ETF with significantly higher fees than ALL other available options? I understand capital gains trapping some current investors - I don't understand new inflows. Anyone have the angle here?

Probably depends on the merger. If paid in cash, you'll receive cash. If acquired by a US listed company, my guess is you'll receive US listed stock. If acquired by a foreign listed company, my guess the ADR sponsor receives the shares, sells them, and distributes the cash to you. But I cant say for sure it will likely vary pending the scenario.

The primary reason would be just the simplicity and access. Most domestic brokers don't trade in foreign markets OR they charge exorbitant fees to do so. The only downside of buying local markets on IB was that you had to convert enough currency to make the trade and it was hard to get the right amount without uneconomic residuals sitting in the foreign currency. That being said, I believe they just announced auto-conversion of currency balances which SHOULD mean that this is taken care of and you can buy foreign stocks with USD balances and IB auto-converts the appropriate amount for settlement/commission on your behalf. I only own local holdings @ IB. I use ADRs in my accounts at Schwab. The other piece is liquidity - there may be a handful of notable instances where foreign companies listed on major exchanges via ADR might actually have more liquidity in the US than their home country, but I don't know how often this might actually matter for us smaller individual investors.

This is interesting. What do you make of India, and the rest of the BRICS, seeking an alternative trade currency for use amongst themselves in trading commodities? It seems like they'd prefer some form of basket (or perhaps crypto currency) to settle trade without use of the USD. If even India is in discussions to sue something other than the rupee, does this change your view? Exactly. I think this theory is probably true if you're not discussing the world reserve currency pairs. We will break all economic theories with the USD because we have uneconomic participants in its use - global banks, insurance, pensions, world trade participants that are all required to hold some significant amount of debt/currency despite uneconomic pricing. Any fiat currency crisis, even centered on the USD, will impact other currencies relatively harder even with better demographics, better finances, and better inflation profiles. This will happen until the pain of the USD continuously trending higher is deemed unacceptable and a replacement found.

I think he's paying too much attention to the no-moat piece and maybe that's what is holding him back? Let's ignore the moat. Let's assume insurance, and every insurance company out there, is offering a commodity product. Fairfax is still exceptionally well positioned with low duration, little-to-no capital impact from rising rates, and investments/associates that are banging on all cylinders. The earnings power is almost as perfectly predictable as you could hope barring a catastrophe and it's extraordinarily high for the next 2-3 years. Even if we assume no differentiation or skill of management, we know Fairfax will earn ~600 CAD/share over the next 3-4 years. Assuming no reinvestment and just adding to BV as retained earnings, you'd expect the stock price to go up $ for $ and that alone represents an 11-15% annualized return over the next 3-4 years without assuming compound returns OR a rerating of the stock. So why does he assume an equity risk premium of 6-10% for Fairfax with such visibility into its earnings?

This is my long term thinking as well. And my guess is that it's not so much those markets ceding to BTC (other than maybe gold), but much of it may come at the expense of real estates market share. BTC isn't really a substitute for bonds. Equities growth in profits and and assets over time may keep them from ceding much. BTC largely accomplishes the same inflation protection as R.E. with fewer intermediaries/costs/frictions so that is where I envision most of the market share will be lost - but it doesn't produce income not can you live in it so R.E will likely continue to be the largest sector by far.

I know the analyst who used to work for Semper Augustus. The view of FFH was too much blow-up risk at FFH. I dunno if that was from the insurance side or beunf uncomfortable with shorting/derivatives/investments etc, but that was the reason they were uninterested in FFH and Fairfax India when I was discussing them with him.

If the broader market was gambling on a recession, it's doubtful that the long bond would've been down ~30% in 2022. Or that oil would've been up. I think you need to revisit the big picture across ALL asset classes. Stocks down. Bonds down. Oil up. Gold up. Yea, that's inflation driving the market.

Equities also didn't do well in the 70s? Or is that also cherry picking? Can you show me a period of significant inflation where stocks outperformed both short-term bonds and commodities? We all agree that stocks are long duration instruments, but suddenly it becomes controversial to say that they have the same problems with inflation and rates ALL other long duration instruments do? It wasn't ignored. I acknowledged that so far stocks have done better over the full cycle (entirely from margin expansion). I also acknowledged that after ~3 years of this 'multi year runway' that earnings are nominally flat and still significantly negative in real terms. How is that ignoring it? Do we just need to wait another 3-4 more years to catch back up? Stocks are a great inflation hedge IF you have ~7 years to wait for them to be? The absolute peak for the indices was like November 2021. The absolute peak for most names in the index was summer 2021 (you've even pointed this out before). Using the beginning of 2022 was convenient from a calendar year perspective because 2022 is when inflation really showed up and rate hikes really started. It was a few months/percentage points off the top for both stocks and bonds, but it doesn't look much better if you rewind further back into 2021. It improves the nominal peak-to-trough drops (for both stock and bonds), but also extends the time in which stock returns underperformed inflation That hasn't mattered in prior inflations when stocks did very poorly. Why does it suddenly matter now?

Isn't the rule of thumb that they can invest roughly the accounting equity of the business in equities? The remainder is reserves/float for the insurance? So they could probably add another $10B in equity if push comes to shove. Maybe more as long as we avoid major catastrophes over the next year or two. I think the big win will NOT necessarily be from adding $10B of equities - but being able to roll a large portion of the $35B+ in fixed income into corporates/mortgages opportunistically to add another ~1-2% to the portfolio yield as well as the realized capital gains when the opportunity presents itself.

I think this is what people are missing. Long bonds were a terrible investment in 2021. They're significantly better today and the risk/reward is skewed to the upside IMO. Even if inflation accelerates, it'd have to go up quite a bit for 30-year mortgages to be a bad bet. You'd likely lose some on the 20 year treasuries, but reinvesting coupons at rates of 5+% on discount bonds isn't a bad way to go IMO even if you show unrealized losses for the first 1-3 years. I disagree. 2022 returns were abysmal for big tech as inflation was accelerating. Meta was down ~65%. Apple was down ~27%. Google was down ~40%. Microsoft was down ~30%. Nvidia was down ~50%. They only turned around once it was clear inflation was abating. Intermediate bonds stomped big tech in 2022. Short term bonds even more so. This is why I keep repeating ad nauseum - stocks are NOT an inflation hedge. They do miserably when inflation is elevated and/or erratic. They do well when its consistent and low. I don't disagree that real returns for bonds will likely be close to zero over a 10-20 year type time frame. But I expect that they will be significantly positive in the intermediate term. This hasn't really played out though. Margins fell pretty quickly in 2022. Companies cannot raise prices as quickly their input costs are rising so margins get compressed at the front end of inflation acceleration. Then, you also have consumers that cut back, or substitute cheaper options, meaning that higher prices often lead to lower volumes and you're still behind. This is precisely why corporate earnings fell in 2022. After 2-years of moderating inflation, rising prices, and etc - corporations have only barely made it back to 2021 in nominal terms but are still significantly negative in real terms. Equities did better than bonds over the whole cycle, but underperformed dramatically on the front of it - even with bonds starting from a historic bubble. What happens if we accelerate again? And bonds aren't in a historic bubble? They probably outperform again - and even more dramatically this time.

I just don't think you need higher rates with GDP where it's at. Under a lowish/stable inflation regime, I'd argue the nominal rate on the 10-year should roughly approximate GDP growth. At this point, were ~2-3x that level. The gold/copper ratio is also suggesting significantly lower 10-year rates. But the 10-year rate probably won't/can't go meaningfully lower until rate cuts occur and 5+% short term rates are absolutely restrictive in a 1.6% annualized growth environment.