Brilliant commentary as always. Well played. Hitting all the high notes.
1. Is a tight distribution low or high volatility?
2. You can mitigate risk by knowing about operating the underlying industry. I once bought a 16% preferred bond from a REIT because I knew the company backwards and forwards and that the preferreds were mortgage backed.
The rate was so high because it was a tiny issuance and could not attract or absorb corporate attention.
3. As to asset class, there are some powerful mitigations in real estate as an example. Within real estate there are sub-classes -- apartments as an example -- that have a known response to changing economic conditions -- talking to you, inflation.
4. One of the problems with crypto is the basic issue of is it a trade or an investment? Nothing wrong with either one.
This is why something like Coinbase -- picks/shovels/overalls to crypto -- is such a brilliant play.
5. Lastly, a lot of the interest in crypto is simply because it is easier to buy/sell/own from a pure infrastructure perspective. It is paddling into the mainstream which means its regulatory day of reckoning is on the horizon.
No nation/state is going to allow a financial instrument that creates anonymity, funds crime, crosses boundaries, and can be used to cheat on taxes.
tight distributions are lower vol since variance is less, and of course, standard deviation is less. You are "more sure". Your second point is a perfect one on taking risk. Lack of liquidity forced the issuer to pay a higher price to get capital in. It also leads to what we know, the more background work you do, the luckier you are. The issuer was willing to absorb the higher cost because they calculated that they had a higher opportunity cost by not getting money....and you had a lower opportunity cost than 16% for the money you invested....aren't economics and free markets great? Agree that the crypto exchanges have made it super easy to invest. But, as you know, easy to invest doesn't make it a good investment!
Jeff, what do you think about this article by David Goldman, who had senior positions at Bear Stearns, Bank of America and Credit Suisse. https://fred.stlouisfed.org/series/WFRBST01134
Brilliant commentary as always. Well played. Hitting all the high notes.
1. Is a tight distribution low or high volatility?
2. You can mitigate risk by knowing about operating the underlying industry. I once bought a 16% preferred bond from a REIT because I knew the company backwards and forwards and that the preferreds were mortgage backed.
The rate was so high because it was a tiny issuance and could not attract or absorb corporate attention.
3. As to asset class, there are some powerful mitigations in real estate as an example. Within real estate there are sub-classes -- apartments as an example -- that have a known response to changing economic conditions -- talking to you, inflation.
4. One of the problems with crypto is the basic issue of is it a trade or an investment? Nothing wrong with either one.
This is why something like Coinbase -- picks/shovels/overalls to crypto -- is such a brilliant play.
5. Lastly, a lot of the interest in crypto is simply because it is easier to buy/sell/own from a pure infrastructure perspective. It is paddling into the mainstream which means its regulatory day of reckoning is on the horizon.
No nation/state is going to allow a financial instrument that creates anonymity, funds crime, crosses boundaries, and can be used to cheat on taxes.
Keep it up and Merry Christmas.
JLM
www.themusingsofthebigredcar.com
tight distributions are lower vol since variance is less, and of course, standard deviation is less. You are "more sure". Your second point is a perfect one on taking risk. Lack of liquidity forced the issuer to pay a higher price to get capital in. It also leads to what we know, the more background work you do, the luckier you are. The issuer was willing to absorb the higher cost because they calculated that they had a higher opportunity cost by not getting money....and you had a lower opportunity cost than 16% for the money you invested....aren't economics and free markets great? Agree that the crypto exchanges have made it super easy to invest. But, as you know, easy to invest doesn't make it a good investment!
Sorry, wrong link below Jeff. Here is the correct link: https://asiatimes.com/2021/12/quantum-hackers-can-bring-down-bitcoin-expert/?fbclid=IwAR0TgwbQc1JcCaW-gFgI0ckJzNg6v6wI5S_FkZ--ECl0CVt_LSpVc-w6iNA
Jeff, what do you think about this article by David Goldman, who had senior positions at Bear Stearns, Bank of America and Credit Suisse. https://fred.stlouisfed.org/series/WFRBST01134
Yup. This. Keep your HNT for a few years. You'll do very well.