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“The Mother Of All Fat-Tails” – Bill Miller Says ‘No Other Asset Has Bitcoin’s Upside-Potential’

"The Mother Of All Fat-Tails" – Bill Miller Says ‘No Other Asset Has Bitcoin’s Upside-Potential’

After a 35-year career at mutual fund mainstay Legg-Mason, Legendary fund manager Bill Miller has been a vocal bull for bitcoin for a number…

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3 years ago

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"The Mother Of All Fat-Tails" - Bill Miller Says 'No Other Asset Has Bitcoin's Upside-Potential'

After a 35-year career at mutual fund mainstay Legg-Mason, Legendary fund manager Bill Miller has been a vocal bull for bitcoin for a number of years, initially shocking many of his establishment peers with his position, which has now become increasingly mainstream among institutional investors.

Most recently, last week in a filing with the SEC, The Miller Opportunity Trust reported that it is seeking indirect exposure to bitcoin via the Grayscale Bitcoin Trust, marking a significant departure from the usual investments in equities and derivatives for the $2.25 billion fund..

With the fund’s Bitcoin exposure limited to 15% of its assets under management, the GBTC outlay could top $300 million. As part of the filing, the trust did comment on price volatility, stating, “There is relatively small use of Bitcoin in the retail and commercial marketplace in comparison to the relatively large use of Bitcoin by speculators.”

Miller's perspective has evolved over the years.

In 2017, he wrote:

“My view on bitcoin is that it is a technological experiment that may or may not prove to have any long lasting value,” Mr. Miller wrote in his letter.

“I believe there is still a nontrivial chance bitcoin goes to zero, but each day it does not, that chance declines as more venture capital flows into the bitcoin ecosystem and more people become familiar with bitcoin and buy it.”

And now in 2021, as many of his forecasts have come true, he has written to investors once again, laying out "The Value Investor's Case For Bitcoin" in his most recent letter:

First, what is Bitcoin?

Bitcoin is a decentralized network of value storage. Its core technological breakthrough lies in users’ ability to transfer value to other network participants without any central administrator or authority. This means that users can shift large quantities of value to each other around the globe almost instantly, 24 hours/day, 365 days/year, using only another participant’s “public key” and little administrative hassle.

“Miners” verify transactions in exchange for new coins, though the reward for each mined “block” decreases every 210,000 blocks, or approximately every four years. Unlike the dominant systems of account now in use (currencies), the supply of measuring units is predetermined and will never exceed 21,000,000.

While aggregate participation in the network is effectively unlimited, there will never be more than 21 million spots (“bitcoins”) on the ledger, which means that more network participation makes each spot on the ledger more valuable.

Each bitcoin is divisible into 100 million units, or “satoshis,” and one satoshi is worth ~$0.0004 as of this writing. At a price of $1,000,000 per bitcoin, a satoshi would equal one cent.

Now that we know what Bitcoin is, why might someone want to own some?

The short answer is that there is no other asset that combines Bitcoin’s liquidity with its upside potential. Bitcoin is still an emerging and under-owned technology in an enormous addressable market, and it has a brilliant, logically consistent protocol with distributed governance. Data from the World Bank, IMF and OECD imply that the total amount of broad money in the world at the end of 2020 was north of $130 trillion.

At a market capitalization of $700 billion, Bitcoin represents approximately half of one percent of all the accounting systems in the world, despite some clear advantages over them. Between the end of 2019 and October of 2020, the globe’s stock of broad money grew at a 20% annualized rate. In comparison, the supply of Bitcoin grew by 2.5% in 2020. In other words, Bitcoin’s total market capitalization today equates to just half of the global money printed during an average two-week period in 2020. Its supply is known and will not change due to new constituencies, policy-making errors or unanticipated consequences. No one will threaten to temporarily shut down owners’ access to Bitcoin because of a pandemic. It is harder to steal than other stores of value, and it changes hands much more easily.

There is more information and transparency around Bitcoin than there has been around any currency in the history of the world, and buyers know what they are getting.

Perhaps most importantly, Bitcoin has been the best performing asset over eight of the past ten calendar years, and its annualized performance has blown away the next-best performer, the Nasdaq, by a factor of ten over the past decade. Not owning any Bitcoin has been a massive mistake, and we expect that will continue to be true. A long-term candlestick chart shows progressively higher lows despite significant volatility, clearly representing growing demand from long-term holders willing to tolerate the swings.

There is a twelve-year track record of demand growing consistently faster than supply, and failing to own any Bitcoin at this point implies a belief that there will be a reversal in a long-prevailing and increasingly powerful trend. Almost every long-term holder of Bitcoin has earned a higher rate of return in Bitcoin than in anything else, and those who understand it see little reason to put their excess marginal liquidity into other assets at this point. The world is ruled by fattail events, or seemingly improbable occurrences that have an outsized impact, and all indicators so far point to Bitcoin being one. Preferred mediums of exchange tend to move in long cycles, and we may be in the midst of a major global transition that continues to go largely unnoticed.

Bitcoin is not without its doubters, and any serious investor must consider the opposite perspective and weigh its merits. We have thought through some of the common objections, which follow:

  • “It’s a Ponzi Scheme.” This is easiest to address, because it demonstrates a lack of understanding of both Bitcoin and Ponzi schemes. Bitcoin is quite the opposite of a Ponzi scheme, which involves a central criminal extracting value from current investors using new investors’ money to fund redemptions while falsifying stated returns. There is no middleman in Bitcoin – only a network of users governed by an established protocol. Indeed, the value of the network grows with its aggregate usage, but users share in the value growth as new users adopt the technology. The market’s deep liquidity and supporting infrastructure leave no doubt that the price and stated returns of Bitcoin are as real as it gets.

  • “It Produces Nothing and Therefore Has No Intrinsic Value.” What it “produces” is the ability to store and transmit value according to a logical, predetermined algorithm and decentralized governance. The value of any asset that pays no dividends, like Berkshire Hathaway stock or the US dollar, is what buyers and sellers collectively believe it is worth. At Bitcoin’s current market capitalization of $700 billion, buyers and owners believe it is more valuable than all but six companies in the S&P 500 (all of which are tech companies).

  • “Some Other Coin or Technology Will Replace It.” Unlikely at this point. A look at the history of new technological standards would show many instances in which the winner is not always the most robust technology but the one that is early and robust enough. Bitcoin’s market cap is over 5x Ethereum’s, and while Ethereum may be a survivor, there are ways to mimic its functional benets with Bitcoin.

  • “It’s Too Volatile to Be a Store of Value or Medium of Exchange.” Indeed, as we agged earlier, it has done much better than simply “store” value. When Bitcoin’s volatility approaches that of Treasuries, its market cap and price per bitcoin will be immensely higher and leave little room for excess return. At that point, one could imagine Bitcoin transitioning to become a more commonly used medium of exchange.

  • “If It Actually Works, Regulators Will Ban It.” It has worked for twelve years with little regulatory interference under multiple administrations. In fact, the regulatory outlook for Bitcoin in the US has never been brighter, which may explain why so many institutions are now getting involved. In 2014, a senior member of the Federal Reserve Bank of Saint Louis studied Bitcoin and concluded that, “enforcing an outright ban is close to impossible…well-run central banks should welcome the emerging competition.” The Office of the Comptroller of the Currency, which is a branch of the United States Treasury Department, has said that chartered banks can now custody cryptocurrency and use blockchain technology to settle transactions. The US government collects capital gains taxes on Bitcoin and has auctioned over $6.5 billion dollars at current market value to the public. It would be an abuse of power to sell property of that much value to a government’s constituents, collect taxes on it and then ban it. The new head of the SEC, Gary Gensler, is a Bitcoin fan

While we believe the next decade will see adoption grow at a much faster rate than it did during Bitcoin’s first decade, it is unlikely that Bitcoin will work so quickly that it becomes disruptive to long-standing reserve currencies, and to the extent it does, it will be worth a lot more.

*  *  *

So much for Warren Buffett's "rat poison squared'?

Tyler Durden Mon, 02/08/2021 - 11:10

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Key shipping company files for Chapter 11 bankruptcy

The Illinois-based general freight trucking company filed for Chapter 11 bankruptcy to reorganize.

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4 hours ago

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March 14, 2024

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The U.S. trucking industry has had a difficult beginning of the year for 2024 with several logistics companies filing for bankruptcy to seek either a Chapter 7 liquidation or Chapter 11 reorganization.

The Covid-19 pandemic caused a lot of supply chain issues for logistics companies and also created a shortage of truck drivers as many left the business for other occupations. Shipping companies, in the meantime, have had extreme difficulty recruiting new drivers for thousands of unfilled jobs.

Related: Tesla rival’s filing reveals Chapter 11 bankruptcy is possible

Freight forwarder company Boateng Logistics joined a growing list of shipping companies that permanently shuttered their businesses as the firm on Feb. 22 filed for Chapter 7 bankruptcy with plans to liquidate.

The Carlsbad, Calif., logistics company filed its petition in the U.S. Bankruptcy Court for the Southern District of California listing assets up to $50,000 and and $1 million to $10 million in liabilities. Court papers said it owed millions of dollars in liabilities to trucking, logistics and factoring companies. The company filed bankruptcy before any creditors could take legal action.

Lawsuits force companies to liquidate in bankruptcy

Lawsuits, however, can force companies to file bankruptcy, which was the case for J.J. & Sons Logistics of Clint, Texas, which on Jan. 22 filed for Chapter 7 liquidation in the U.S. Bankruptcy Court for the Western District of Texas. The company filed bankruptcy four days before the scheduled start of a trial for a wrongful death lawsuit filed by the family of a former company truck driver who had died from drowning in 2016.

California-based logistics company Wise Choice Trans Corp. shut down operations and filed for Chapter 7 liquidation on Jan. 4 in the U.S. Bankruptcy Court for the Northern District of California, listing $1 million to $10 million in assets and liabilities.

The Hayward, Calif., third-party logistics company, founded in 2009, provided final mile, less-than-truckload and full truckload services, as well as warehouse and fulfillment services in the San Francisco Bay Area.

The Chapter 7 filing also implemented an automatic stay against all legal proceedings, as the company listed its involvement in four legal actions that were ongoing or concluded. Court papers reportedly did not list amounts for damages.

In some cases, debtors don't have to take a drastic action, such as a liquidation, and can instead file a Chapter 11 reorganization.

Truck shipping products.

Shutterstock

Nationwide Cargo seeks to reorganize its business

Nationwide Cargo Inc., a general freight trucking company that also hauls fresh produce and meat, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Northern District of Illinois with plans to reorganize its business.

The East Dundee, Ill., shipping company listed $1 million to $10 million in assets and $10 million to $50 million in liabilities in its petition and said funds will not be available to pay unsecured creditors. The company operates with 183 trucks and 171 drivers, FreightWaves reported.

Nationwide Cargo's three largest secured creditors in the petition were Equify Financial LLC (owed about $3.5 million,) Commercial Credit Group (owed about $1.8 million) and Continental Bank NA (owed about $676,000.)

The shipping company reported gross revenue of about $34 million in 2022 and about $40 million in 2023.  From Jan. 1 until its petition date, the company generated $9.3 million in gross revenue.

Related: Veteran fund manager picks favorite stocks for 2024

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Key shipping company files Chapter 11 bankruptcy

The Illinois-based general freight trucking company filed for Chapter 11 bankruptcy to reorganize.

Published

4 hours ago

on

March 14, 2024

By

The U.S. trucking industry has had a difficult beginning of the year for 2024 with several logistics companies filing for bankruptcy to seek either a Chapter 7 liquidation or Chapter 11 reorganization.

The Covid-19 pandemic caused a lot of supply chain issues for logistics companies and also created a shortage of truck drivers as many left the business for other occupations. Shipping companies, in the meantime, have had extreme difficulty recruiting new drivers for thousands of unfilled jobs.

Related: Tesla rival’s filing reveals Chapter 11 bankruptcy is possible

Freight forwarder company Boateng Logistics joined a growing list of shipping companies that permanently shuttered their businesses as the firm on Feb. 22 filed for Chapter 7 bankruptcy with plans to liquidate.

The Carlsbad, Calif., logistics company filed its petition in the U.S. Bankruptcy Court for the Southern District of California listing assets up to $50,000 and and $1 million to $10 million in liabilities. Court papers said it owed millions of dollars in liabilities to trucking, logistics and factoring companies. The company filed bankruptcy before any creditors could take legal action.

Lawsuits force companies to liquidate in bankruptcy

Lawsuits, however, can force companies to file bankruptcy, which was the case for J.J. & Sons Logistics of Clint, Texas, which on Jan. 22 filed for Chapter 7 liquidation in the U.S. Bankruptcy Court for the Western District of Texas. The company filed bankruptcy four days before the scheduled start of a trial for a wrongful death lawsuit filed by the family of a former company truck driver who had died from drowning in 2016.

California-based logistics company Wise Choice Trans Corp. shut down operations and filed for Chapter 7 liquidation on Jan. 4 in the U.S. Bankruptcy Court for the Northern District of California, listing $1 million to $10 million in assets and liabilities.

The Hayward, Calif., third-party logistics company, founded in 2009, provided final mile, less-than-truckload and full truckload services, as well as warehouse and fulfillment services in the San Francisco Bay Area.

The Chapter 7 filing also implemented an automatic stay against all legal proceedings, as the company listed its involvement in four legal actions that were ongoing or concluded. Court papers reportedly did not list amounts for damages.

In some cases, debtors don't have to take a drastic action, such as a liquidation, and can instead file a Chapter 11 reorganization.

Truck shipping products.

Shutterstock

Nationwide Cargo seeks to reorganize its business

Nationwide Cargo Inc., a general freight trucking company that also hauls fresh produce and meat, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Northern District of Illinois with plans to reorganize its business.

The East Dundee, Ill., shipping company listed $1 million to $10 million in assets and $10 million to $50 million in liabilities in its petition and said funds will not be available to pay unsecured creditors. The company operates with 183 trucks and 171 drivers, FreightWaves reported.

Nationwide Cargo's three largest secured creditors in the petition were Equify Financial LLC (owed about $3.5 million,) Commercial Credit Group (owed about $1.8 million) and Continental Bank NA (owed about $676,000.)

The shipping company reported gross revenue of about $34 million in 2022 and about $40 million in 2023.  From Jan. 1 until its petition date, the company generated $9.3 million in gross revenue.

Related: Veteran fund manager picks favorite stocks for 2024

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Tight inventory and frustrated buyers challenge agents in Virginia

With inventory a little more than half of what it was pre-pandemic, agents are struggling to find homes for clients in Virginia.

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7 hours ago

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March 14, 2024

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No matter where you are in the state, real estate agents in Virginia are facing low inventory conditions that are creating frustrating scenarios for their buyers.

“I think people are getting used to the interest rates where they are now, but there is just a huge lack of inventory,” said Chelsea Newcomb, a RE/MAX Realty Specialists agent based in Charlottesville. “I have buyers that are looking, but to find a house that you love enough to pay a high price for — and to be at over a 6.5% interest rate — it’s just a little bit harder to find something.”

Newcomb said that interest rates and higher prices, which have risen by more than $100,000 since March 2020, according to data from Altos Research, have caused her clients to be pickier when selecting a home.

“When rates and prices were lower, people were more willing to compromise,” Newcomb said.

Out in Wise, Virginia, near the westernmost tip of the state, RE/MAX Cavaliers agent Brett Tiller and his clients are also struggling to find suitable properties.

“The thing that really stands out, especially compared to two years ago, is the lack of quality listings,” Tiller said. “The slightly more upscale single-family listings for move-up buyers with children looking for their forever home just aren’t coming on the market right now, and demand is still very high.”

Statewide, Virginia had a 90-day average of 8,068 active single-family listings as of March 8, 2024, down from 14,471 single-family listings in early March 2020 at the onset of the COVID-19 pandemic, according to Altos Research. That represents a decrease of 44%.

Virginia-Inventory-Line-Chart-Virginia-90-day-Single-Family

In Newcomb’s base metro area of Charlottesville, there were an average of only 277 active single-family listings during the same recent 90-day period, compared to 892 at the onset of the pandemic. In Wise County, there were only 56 listings.

Due to the demand from move-up buyers in Tiller’s area, the average days on market for homes with a median price of roughly $190,000 was just 17 days as of early March 2024.

“For the right home, which is rare to find right now, we are still seeing multiple offers,” Tiller said. “The demand is the same right now as it was during the heart of the pandemic.”

According to Tiller, the tight inventory has caused homebuyers to spend up to six months searching for their new property, roughly double the time it took prior to the pandemic.

For Matt Salway in the Virginia Beach metro area, the tight inventory conditions are creating a rather hot market.

“Depending on where you are in the area, your listing could have 15 offers in two days,” the agent for Iron Valley Real Estate Hampton Roads | Virginia Beach said. “It has been crazy competition for most of Virginia Beach, and Norfolk is pretty hot too, especially for anything under $400,000.”

According to Altos Research, the Virginia Beach-Norfolk-Newport News housing market had a seven-day average Market Action Index score of 52.44 as of March 14, making it the seventh hottest housing market in the country. Altos considers any Market Action Index score above 30 to be indicative of a seller’s market.

Virginia-Beach-Metro-Area-Market-Action-Index-Line-Chart-Virginia-Beach-Norfolk-Newport-News-VA-NC-90-day-Single-Family

Further up the coastline on the vacation destination of Chincoteague Island, Long & Foster agent Meghan O. Clarkson is also seeing a decent amount of competition despite higher prices and interest rates.

“People are taking their time to actually come see things now instead of buying site unseen, and occasionally we see some seller concessions, but the traffic and the demand is still there; you might just work a little longer with people because we don’t have anything for sale,” Clarkson said.

“I’m busy and constantly have appointments, but the underlying frenzy from the height of the pandemic has gone away, but I think it is because we have just gotten used to it.”

While much of the demand that Clarkson’s market faces is for vacation homes and from retirees looking for a scenic spot to retire, a large portion of the demand in Salway’s market comes from military personnel and civilians working under government contracts.

“We have over a dozen military bases here, plus a bunch of shipyards, so the closer you get to all of those bases, the easier it is to sell a home and the faster the sale happens,” Salway said.

Due to this, Salway said that existing-home inventory typically does not come on the market unless an employment contract ends or the owner is reassigned to a different base, which is currently contributing to the tight inventory situation in his market.

Things are a bit different for Tiller and Newcomb, who are seeing a decent number of buyers from other, more expensive parts of the state.

“One of the crazy things about Louisa and Goochland, which are kind of like suburbs on the western side of Richmond, is that they are growing like crazy,” Newcomb said. “A lot of people are coming in from Northern Virginia because they can work remotely now.”

With a Market Action Index score of 50, it is easy to see why people are leaving the Washington-Arlington-Alexandria market for the Charlottesville market, which has an index score of 41.

In addition, the 90-day average median list price in Charlottesville is $585,000 compared to $729,900 in the D.C. area, which Newcomb said is also luring many Virginia homebuyers to move further south.

Median-Price-D.C.-vs.-Charlottesville-Line-Chart-90-day-Single-Family

“They are very accustomed to higher prices, so they are super impressed with the prices we offer here in the central Virginia area,” Newcomb said.

For local buyers, Newcomb said this means they are frequently being outbid or outpriced.

“A couple who is local to the area and has been here their whole life, they are just now starting to get their mind wrapped around the fact that you can’t get a house for $200,000 anymore,” Newcomb said.

As the year heads closer to spring, triggering the start of the prime homebuying season, agents in Virginia feel optimistic about the market.

“We are seeing seasonal trends like we did up through 2019,” Clarkson said. “The market kind of soft launched around President’s Day and it is still building, but I expect it to pick right back up and be in full swing by Easter like it always used to.”

But while they are confident in demand, questions still remain about whether there will be enough inventory to support even more homebuyers entering the market.

“I have a lot of buyers starting to come off the sidelines, but in my office, I also have a lot of people who are going to list their house in the next two to three weeks now that the weather is starting to break,” Newcomb said. “I think we are going to have a good spring and summer.”

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