RichardGibbons

I created an auto-trader using the IB API, but it was with C#. It worked as promised.

I kind of reached the same conclusion a few weeks ago, but have been sucking my thumb on it, waiting until it I had CAD cash. I think the easiest way for it to underperform is if the commodity rally is a head fake resulting from supply chains messed up by COVID.

I think it's primarily the combination of zoning, bureaucracy, ideology, and immigration. Essentially, a huge percentage of the major cities are zoned to single-family homes. And, it's hard to change that. If you want to build anything else, you have to change the zoning. That means fighting in front of city council with residents who are worried about the neighborhood character changing. And to even get that day in court, would typically take a couple years, and it might not be successful. And if you are successful, it would typically require paying the city hundreds of thousands or millions for neighborhood amenities. Essentially, the city believes that if, as a result of rezoning, the value of the property increases, then the city deserves to take the money created, rather than the owners of the property. So, there's substantial risk and unusually high expenses associated with any development that increases density. More broadly speaking, municipal politicians are fairly ideologically-driven, typically not believing in market-based solutions. Though they're very concerned about affordable housing, if they could get affordable housing, but in doing so, some property developers would become wealthy, they wouldn't view that as an acceptable solution. One councilor in Vancouver, Jean Swanson, sees affordability as a crisis and cares a lot about the underprivileged, but for two and a half years has voted against almost every proposal for adding more supply (because the poorest wouldn't be able to afford that supply. She doesn't see it as a good thing that middle class will move into the new supply, freeing up less-expensive space for the poor, but rather a bad thing because average rental prices will increase.) Finally, on top of these supply restrictions, Canada has relatively high immigration. But much of the country is a frozen wasteland, so about two-thirds of immigrants end up in Vancouver and Toronto, and 80% in Vancouver/Toronto/Montreal. So, you have constantly increasing demand and artificially restricted supply, leading to high prices.

Greg, to not clutter up the thread with political discussions, I've responded to the political aspects through email. On the non-political stuff... I think it's pretty reasonable to write off things as "conspiracy theory", "far right/far left nut jobs", etc. because that's how one functions in the world. One only has so much time to make decisions in the world, so we mostly navigate the world through heuristics. If someone says something clearly false for ideological reasons fives times in a row, then the sixth time I'm going to spend basically no time evaluating their statement before dismissing it. Applying the critical thinking well takes effort and time, and we need to prioritize our resources. The cost of the critical thinking is high, the probability of the heuristic being wrong is low, and the cost when the heuristic is wrong is also low. So, as someone who owned a Portnoy REIT 20 years ago, I'm fine with writing off any Portnoy REIT off immediately. I have enough historical evidence that management is unlikely to be acting on behalf of shareholders, and I have more confidence in Portnoy's ability to screw shareholders than I do in my ability to identify a Portnoy REIT that won't end up screwing shareholders. Plus, there's thousands of non-Portnoy investments I could investigate instead. So, it doesn't make sense to me to spend any time whatsoever on a Portnoy REIT when I could instead spend that time on another investment.

Yeah, that's exactly what I mean. Thanks, Cubsfan!

I think it's kind of worked, actually. What effectively happened is that people with right-wing views keep talking politics, and people with centrist views have shut up. So, effectively, the "arguments" are much shorter and usually end with something like, "I said something political, and you communist bozos aren't even responding because you've been proven wrong." And the centrists think, "OK, that's not at all what happened, but whatever. I'm fine with sticking to the rules and just talking about investments."

This is pretty interesting, because according to this, so far in Q2 they've made over $12M. It's not clear to me that one can just annualize that 12M, because I don't understand that well how they make their money, so it could've been an aberration. I've been mining for a few years, and, for part of the last few months (when the transaction fees for ETH were high) I was making $16-18/day (using a 3070), while more typically--and for the last few weeks--it's been in the $4-5 range. But, if you could annualize the $12M to $72M, then Yearn's P/S (which is pretty close to its PE, since it doesn't have many expenses), is in the low 20s, which seems stupidly low. It makes me wonder if I'm misunderstanding something since I've only stared at this for an hour or so. They plan to use the profits to buy back tokens and potentially ETH for the treasury (though apparently not for cancellation.)

Thinking about it, I remember I had a roommate back in 1994 who owned Stelco. So I was thinking that it would be fun to go back 20 years and compare the returns of Stelco to a random assortment of businesses that had decent 5-year average ROEs at the time. (Off the top of my head, the one that Stelco would probably beat was Coke.) But it looks like Stelco went bankrupt in 2007, so that makes the comparison less interesting. ?

I agree with most of what you say, petec. I'm not defending Prem's Resolute purchase, or saying it was better than his Stelco purchase. (Just that, if you can accurately predict the bottom of the cycle, the crappiest cyclical will have the best investment returns.) That said, price mostly doesn't matter if you are comparing the long-term results from holding a commodity company and a high quality compounder. Price only matters if you are willing to sell when the commodity producer's discount to fair value no longer exists. People almost always underestimate the power of long-term compounders. If you own long term, you'll get the long-term ROE returns from both. The compounder with the sustainable competitive advantage will have a much better ROE and will reinvest its cash flow at that ROE. The commodity producer will have a terrible ROE, spending a lot of its cash just to run in place (i.e. upgrading to the latest technology at the same time all its competitors do, resulting in a bunch of money spend for no relative advantage, but just to remain a price-competitive business.) If you're holding for the long term, the only thing that matters is sustainable competitive advantage. (Well, outside of extreme, ridiculous situations, like a stock trading at 30 times its estimated PE fifteen years in the future.)

Probably liquidity, unless there's reason to believe that he would have been able to acquire that many shares at the market price.

Yeah, that's fair. My argument rests upon the belief that it's a terrible idea to hold a commodity producer through a full cycle, when you can instead deploy that capital in something that has a long-term competitive advantage selling stuff that isn't commoditized. The only reason I see to ever own a commodity producer is to ride the operational leverage on the up cycle. So, yeah, I think your point make sense. If you think it's a good idea to hold a commodity producer over the long term and don't want to pay any attention to the market cycle, then it makes sense to buy the strongest business.

I think you're actually analyzing this wrong, because at the bottom a cycle that is turning upward, lack of liabilities and good margins are a bad thing for investors (relatively speaking), not a good thing. It's perverse that investors should actually favor the weaker company, but it makes sense because of operational leverage. Like, suppose that you have the leader in a space that's making $1 a year, trading at a PE of 10, selling $5 of goods at net margins of 20%, and no debt. If the price it sells its goods for goes to $6, and it remains at the same PE, then profit goes to $2, and the stock doubles. Meanwhile, Crapco is barely hanging on with a bunch of debt. It's making $0.20 per year selling $5 of goods annually, and trading at a PE of 6. So, its shares are at $1.20. If the price it's selling goods at increases to $6, suddenly it's making $1.20, and no longer looks like it's teetering on the edge of bankruptcy. If Crapco maintains its 6 PE, then it's worth $7.20, skyrocketing 6x. If it gets a better multiple because of less risk of bankruptcy and because of the debt component of enterprise value doesn't share equally in the profit increase, maybe it hits $10, up 8x. Because the lower-margin, more leveraged companies have way higher operating leverage, in the upcycle, investors should get much better returns from the weaker companies, and should favor them. (And vice versa when you think there's a cyclical top.)

Yeah, it wasn't actually UBI, but it was approaching it more than other natural experiments I've seen. I think the two big questions about UBI are: Can we afford it? Will it affect work incentives in really negative ways? On question 2, the historical evidence (e.g. the Dauphin experiment, the experiment Nixon did) suggested the answer was, "No". The people getting UBI who decided not to work as a result of UBI tended to not work because they were either raising a family or getting advanced education. I perceive those as "good" reasons not to work. Raising a family helps to ensure social cohesion and prosperity for the next generation. Advanced education improves long-term productivity. With these checks, I think we're observing that many people in lower-paying jobs aren't going back to work. Though the unemployment rate is 6% (i.e. not super low) anecdotally, it seems like employers are struggling to find labor. And, to me, it doesn't look like it's because people are going to school or raising families. It looks like it's because they don't want to work. That's not to say that UBI is dead in my eyes. Rather, it's that some (sparse) historical evidence made UBI seem like an obvious win if we could afford the cost. This is the first clear evidence I've seen that the changing incentives with UBI might disrupt the labor market. (Which may be an obvious logical conclusion, but to me, it matters that there's now some evidence to support that logical conclusion.) And maybe those disruptions are fine--the effect might be that the price paid for labor increases until the middle management level and corporate margins fall, which might be a good thing for society, reducing income inequality. But it could also have a bad outcome--many small businesses going bust, a massive spike in unemployment, a reduction in the tax base that would pay for UBI, and even more power consolidated in the biggest companies, exacerbating income inequality. So, that's why I've changed a bit. The little evidence we had seemed to indicate no negative effects on the labor market, and now the little additional evidence provided by stimulus suggests there could be massive, potentially dangerous effects on the labor market.

Further to the options strategy, I'm not sure about regulatory limits on Fairfax, but one thing they might want to consider is converting their long position into synthetic calls. (i.e. buy some puts). Edit: Actually, no. Now that I think about it, they have such a big position, they probably couldn't put on such a massive hedge without demolishing the stock price (as the option writer would likely hedge their short puts by shorting shares.)

Well, there was a conversation about it a couple months ago, but the consensus seemed to be that Fairfax would be insane if it doesn't dump the entire position at $12. ? It's also noteworthy that pulp has started increasing as well, though not to the degree lumber has. I've had some Resolute calls since $11, because this situation seems like what options were designed for: It's unlikely to be a position that I'd want to hold for a decade. If lumber stays up for a while, the stock should increase and the options' leverage makes me lots of money. If lumber plummets, I lose much less money than I would if I had a comparable position in shares.