Harris Kupperman: My Favorite Ponzi Scheme (Part II)

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Let’s go back to what I wrote about Grayscale Bitcoin Trust (GBTC – USA) hoovering coins. At the end of July when I wrote about it, there were 406.6 million shares of GBTC outstanding. As of Friday November 13, that number had grown to 531.6 million, or an increase of 125 million shares. That’s equivalent to about 119,000 additional Bitcoins purchased during a brief period of time. To put this into perspective, the total “free float” is somewhere between 6 and 8 million coins. Hence GBTC purchased somewhere between 1.5% and 2% of the “free float” during this brief period of time.

Now add in the 38,250 coins that Microstrategy (MSTR – USA) purchased and the 17,732 that CEO Michael Saylor personally owns and you have almost another 1% locked up. There are dozens of entities also hoovering up coins, many of which are not likely sellers in the near term. Almost every week, we learn of a new vehicle with big marketing resources behind it. Do you think Fidelity is launching their Bitcoin vehicle without a substantial marketing campaign? In their mind, unless they raise a few billion dollars, their fund has been a failure. Just think about what that sort of inflow would do to such an illiquid market.

Jesse Felder: Extreme Valuations

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John Hussman: Pushing Extremes

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In calling the current market the third “Real McCoy” bubble of recent decades, Jeremy Grantham described, in his own words, what I call the Iron Law of Valuation: a security is nothing more than a claim on some set of future cash flows that investors expect to be delivered into their hands over time. The higher the price an investor pays today for some amount of cash in the future, the lower the long-term return the investor can expect on that investment.

However, there’s a difference between those long-term return prospects, which are driven by valuations and discounted cash flows, and short-term return prospects, which are driven by the psychology of investors – particularly their inclination toward speculation or risk-aversion. I talk about this in terms of market internals. Grantham describes it as a “psychological node.” We may navigate that aspect of the financial markets in different ways, but both of us recognize that the long-term prospects implied by valuations don’t condense into short-term implications for market direction.

Meb Faber: Episode #266: Best Idea Show – Kiyan Zandiyeh, Sturgeon Capital, “We Have A Blank Canvas To Potentially Create What The Technology Ecosystem Of That Country Will Look Like Over The Next 5-10 Years”

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In episode 266, we welcome our guest, Kiyan Zandiyeh, Chief Investment Officer for Sturgeon Capital, a leading frontier markets investment boutique focused on technology-enabled businesses that offer a product or service which solves an unserved, acute pain point for a large addressable market.

We’re covering Kiyan’s best idea: frontier markets. With the U.S. markets near all-time highs, investors may want to look around the globe for other opportunities and frontier markets offer a unique risk/reward. Kiyan walks us through the current landscape and what countries he’s most interested in. He covers the most common risks investors need to be aware of, and why he’s focused on private companies utilizing technology in the ecommerce and enterprise SaaS spaces. As we wind down, he walks us through a couple real examples of investments he’s made in countries like Iran and Uzbekistan.

Capitalist Exploits: Why You Won’t be Allowed to Participate in the Greatest Bull Market

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The good news is that Communism is coming and the shortages are going to be following close behind.

But really Chris… Communism?

Yes.

Remember, when capital is allocated based on its highest marginal return, individuals… you and I… will invest where there is legitimate value, where we believe our highest risk-adjusted returns will be.

On the other hand, when capital is allocated based on some other set of metrics, such as which company is the most “socially responsible”, this is simply a thinly and poorly masked form of communism.

“The key to understanding the appeal of communism, despite the grim reality on the ground, lay in the fact that it allowed so many followers to believe that they were participants in an historic process of transformation, contributing to something much bigger than themselves, or anything that had come before.”

― Frank Dikötter, The Tragedy of Liberation: A History of the Chinese Revolution 1945-1957

Debunking Modern Monetary Theory (MMT)

 

Old wine in new bottles, and it never tasted good.

Lyall Taylor: Unravelling value's decade-long underperformance (and imminent resurgence)

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In a recent (generally excellent) podcast with Inside the Rope with David Clark (#78), John Hempton discussed (amongst other things) value's past decade of underperformance, and opined that the primary driver was the fact that the pace of technological change had accelerated, such that we have seen an unprecedented level of disruption to traditional business models. Value investors have apparently spent a decade naively riding doomed low-multiple companies like the Myers of this world into oblivion. 

This is a very commonly expressed view/belief, and intuitively it feels right. The danger with intuitively-satisfying beliefs though is that they can discourage you from looking for evidence to confirm whether those intuitions are in fact true. It seems true, so it must be true, right? A surprising amount of the time, the answer is no. Just because something is intuitive does not mean it is correct (after all, it was intuitive to pre-modern humans the world was flat, and it's not very intuitive we evolved from primordial sea creatures), and as Mark Twain once noted, "It ain't what you don't know that gets you into trouble, it's what you know that just ain't so". The story of the emergence of the scientific method is a story of humans starting to demand evidence instead of merely relying on our unsubstantiated intuitions.