Man, is Mr. Levine having a good time these days.
First story: Basic Capital.
Business model? Intricate financial engineering that allows people to do 4x leverage on their retirement savings to buy more equity.
Idiot fiat stuff, eh? Except maaaaybe not:
"What percentage of her net worth should a 30-year-old professional have in the stock market?"
I mean, at least a 100%... but perhaps a lot more...?
There is, however, a good theoretical case that the right answer is really 200%, or 500%: Most of a young professional’s economic wealth is the present value of her future employment income, and borrowing money to buy more stocks is a good way to diversify away from that one risky asset.
Even Mr. Buffett (#978652) agrees
Worse,
many 30-year-old professionals buy houses for considerably more than 200% of their net worth, and putting 200% of their net worth into the stock market could again be useful diversification.
so we're already doing it... maybe just extend mortgages to everyone to lever up absolutely everything.
This product is a pretty complicated way to put 75% of your net worth (that is, 15% of your assets, which are 500% of your net worth [5] ) into the stock market. (And then put 425% of your net worth into, like, credit spreads. [6] ) The smooth intuitive thing that one wants here is a way to put 500% of your net worth into the stock market, but this isn’t that, because that doesn’t carry. the problem with borrowing a lot of money to buy stocks for retirement is that it has negative carry: It requires you to pay cash every month, rather than bringing in cash. You are buying stocks for capital appreciation, not steady income, and you have to make years of interest payments to get the payout at the end.
Can't speak to the implementation -- seems to be a hundred ways that structure can go wrong -- but love the income-smoothing/assets-across-time idea here.
YES, LEVERAGE THE SHIT OUT OF THAT EH
Second story: ah, yes, MicroStrategy has competition:
The basic situation is that the stock market will pay $2 for $1 worth of Bitcoin...
...boring, we know (#975448).
When you discover a financial perpetual motion machine, though, people tend to notice, and you probably can’t patent it. (Nor does MicroStrategy want to: It proselytizes for this approach, which is called being a “Bitcoin treasury company.”) And so companies keep copying the idea: They pivot from being software or biotech companies or whatever to (1) accumulating pots of Bitcoin and (2) selling stock, at a premium to the value of the pot, to buy more Bitcoin.
All those sweet, juicy, financial-engineering arbitrages willlll goooooo aaaawaaaaay.
footnote commentary:
Shouldn’t the arbitrageurs buy actual Bitcoins for $1 instead of mine for $1.80 or MicroStrategy’s for $2? But my main point here is that I have never understood why the stock market will pay a premium for Bitcoins so I am completely in the dark about all of this.)
"...selling $1 worth of Bitcoin for $10 is nice work."
What would Satoshi Nakamoto think? What a strange vision of crypto this is.
in the future, in every country, you will be able to go to your locally regulated stockbroker and pay a premium of 100% or more to buy shares of stock of a trusted local company, denominated in the local currency, that will hold Bitcoin for you. If you want to transfer your Bitcoin across national borders you can … I don’t know, sell the stock on the exchange through your broker, do a foreign exchange transaction to convert rupees into dirham, find a stockbroker in the target country, open an account, pass know-your-customer checks, fund the account with local currency and then buy stock in that country’s local Bitcoin company (at a 100% or more premium).
"Seems like it might be easier to buy Bitcoin? But what do I know."
non-paywalled: