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Patrik Korda

Patrik Korda
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  • Why Volatility Is An Essential Asset Class To Own [View article]
    Great and timely article considering the stock market is at all-time highs. I would add that the stock-bond diversification dichotomy is a bit outdated. An ideal portfolio will include stocks, bonds, and oil, which reduces the volatility of the portfolio while simultaneously increasing expected returns.

    The issue with holding these volatility ETN's is that they cannot be treated as an asset class belonging in a portfolio. One is forced to get in and out of these things. Moreover, I don't think a costly mutual fund is the answer to the problem. Until there is a real solution, the proper way to play the market at all-time highs is to either stay away or to hedge your long positions via shorting the most overvalued stocks.
    Jul 30 02:33 PM | 1 Like Like |Link to Comment
  • Tesla As By-Product Bubble Of NIRP [View instapost]
    YTD Update: Tesla remains priced as if it can deliver a mass-produced and affordable vehicle. However, the science and the economics simply do not add up. Consider that hydrogen has the highest energy density on a per unit mass basis. Yet, hydrogen is not used as a fuel because it has a rather low energy density on a per unit volume basis. It is the combination of a relatively high energy density on a per unit volume and per unit mass basis that makes liquid fuels like gasoline ideal for transportation. When it comes to lithium-ion batteries, the energy density is rather poor on both fronts.

    More importantly, as this article has stressed, there is no Moore’s law when it comes to thermodynamics. The price of lithium-ion batteries will not decrease dramatically and the energy density will not increase dramatically over time. With the Model S selling for significantly more than the sticker price and the Model X likely to sell for even more, there can be no doubt that Tesla remains trapped in the luxury car market. The stock remains overvalued by literally every valuation metric there is. Despite this massive overvaluation, the debt on the books still greatly exceeds the equity of the company. I fully expect Tesla to post yet another net loss in Q2, whether or not Mr. Market will react in a sane manner to this news remains to be seen.
    Jul 23 11:34 AM | Likes Like |Link to Comment
  • Tesla As By-Product Bubble Of NIRP [View instapost]
    "That's the problem with dogmatic value investors - they arrive too early and leave too early"

    Value investors have statistically outperformed any other brand over the long-term by a wide margin. There is nothing dogmatic about taking a time tested approach. The reasoning for this is precisely that they leave too early i.e. they do not lose money. I am not interested in catching bottoms or tops, and insofar as I have it was mere luck (e.g. HPQ @ $12 based on the stock falling below book value).

    "It is possible to find a happy middle, but it's much more rewarding to actually create capital than it is to just trade it around"

    I agree, which is why most of my money is in private deals. However, it makes no sense to write about companies like Zero or TruTouch until they go public.

    "How them xrps doing?"

    I buy in installments precisely because I do not know when the bottom will be reached. My largest purchase thus far was in late May when the price collapsed. Later I found out that this was because Jed McCaleb announced that he will be selling his position. Today, I am a XRP millionaire and am willing to buy more if the price should fall further. I have two reasons for getting into XRP.
    (1) Bitcoin bubble 3.0 seems to have deflated. Altcoins simply follow the price of bitcoin in a leveraged way i.e. they rise more on a percentage basis on the way up and they also fall more on a percentage basis on the way down.
    (2) Unlike the vast majority of other altcoins, XRP is technically superior to bitcoin. Bitcoin cannot scale for technical reasons, while XRP can handle literally millions of transactions per day. Moreover, XRP transactions clear in a matter of seconds on average versus bitcoin transactions which clear in a matter of minutes on average.

    This article was about a bubble in Tesla stock. Going forward, please stick to the subject. I remain confident that TSLA will pop no later than after Q2 earnings are announced.
    Jul 10 12:34 PM | Likes Like |Link to Comment
  • Tesla As By-Product Bubble Of NIRP [View instapost]
    I have no way of proving when you blocked me. I have never blocked anyone so I do not know whether you can check the date. Nevertheless, I will make a few points.
    (1) I received plenty of friend requests from bitcoin bugs shortly before the bubble burst. I did not get any friend requests from bitcoin bugs after it burst. Quite the contrary, the bitcoin bugs started blocking me after it burst. They are not interested in how markets work but rather ideology.
    (2) After me not adding any value to the discussion and after blocking me you decided to discuss TSLA with me? Sounds rational.
    (3) I was right about bitcoin bubble 2.0 and I am confident that I will be right about the bubble in TSLA as well. I am often surprised at how long it takes for sanity to be restored in markets, but early does not imply wrong. TSLA may continue to levitate until Q2 earnings are announced, which implies being "wrong" for an extra 60 days. While in investing you typically want to act after things begin to unfold, this makes no sense in terms of publishing. So unless you expect me to try and time something perfectly I have to be early in order to add value. The alternative would be to write about something after the fact which would be mere reporting.

    As for the humble issue. Investing is about confidence and conviction. I see no reason for second guessing once and if due diligence is done. The reason why markets work is because resources are ultimately allocated from the fools to those who look at the fundamentals. The herd can do some funky stuff in the short-term, but ultimately value wins out.
    Jul 9 08:36 PM | Likes Like |Link to Comment
  • Tesla As By-Product Bubble Of NIRP [View instapost]
    By vanished I simply meant that you were definitely part of the dozen or so people to have blocked me on facebook on the day bitcoin bubble 2.0 burst. You weren't alone, it was a crowd psychology thing. Animal spirits are at the heart of every bubble. It's like a life-long catholic priest coming to realize there is no god, hard to handle. I would suggest you give the following a read.
    The Crowd by Gustave Le Bon
    Extraordinary Popular Delusions by Charles Mackay
    The Art of Contrary Thinking by Humphrey B. Neill
    Security Analysis by Benjamin Graham
    I would also suggest taking a course with Robert Shiller the next time it is available. Although he tends to be a bit too much on the mathematical side, the principles embedded in the course are quite good.
    Jul 8 09:29 AM | Likes Like |Link to Comment
  • Tesla As By-Product Bubble Of NIRP [View instapost]
    Suppose it ends up being the case that TSLA goes bankrupt and XRP follows the price of bitcoin. I don't see why any of this will matter. After all, you were one of the numerous figures to have simply vanished on the day bitcoin bubble 2.0 burst. I've seen this movie a number of times. Early = wrong + once the process triggers = silence. It's a lose-lose situation in the short-run. You get mocked before the trigger and despised after the process unfolds.

    My first experience with crowd behavior was selling silver in April of 2011. It seemed like an eternity until the bubble finally burst in May. Musk has already dodged a number of bullets before TSLA, but ultimately you cannot undo the laws of thermodynamics. Electric cars will remain inferior products while electric motorcycles will continue to gain adoption. I remain bullish on Zero and bearish on TSLA.
    Jul 7 11:21 AM | Likes Like |Link to Comment
  • Tulips On Asteroids [View instapost]
    YTD Update: Nothing significant to report yet regarding Planetary Resources. The company is still very much under the radar as commodity prices have remained flat over the past year.
    Jun 6 09:26 AM | Likes Like |Link to Comment
  • Bitcoin Bubble 2.0 [View instapost]
    YTD Update:

    Not only did we see bitcoin bubble 2.0 pop, but we also saw the inflation and bursting of bitcoin bubble 3.0 in 2013. Google Trends does a rather excellent job of showing off the three bubbles.

    I was going to write an article about 3.0, however I think the likes of Peter Schiff and Robert Shiller did a pretty good job of covering it. Bubbles aside, I also think my “hyperinflation in substance” argument is unfolding as was anticipated. Consider that when this article was published, there were just a handful of digital currencies out there. Today, there are over 145 of them.

    As much as I would like to say “three strikes, you’re out” my faith in humanity is not that strong. I suspect we will see at least two more bubbles before people come to understand that digital currencies imply aggregate hyperinflation. Moreover, I expect the proper altcoins to continue to outperform bitcoin itself. Consider that bitcoin went up 5,952% in 2013. Litecoin, on the other hand, went up 33,214% in 2013. Not only do I expect this “hyperinflation in substance” to continue, but I fully expect the market capitalization of all the other digital currencies to surpass that of bitcoin this year. In fact, I would not at all be surprised if bitcoin was surpassed by a single digital currency this year. The most likely candidate at this point seems to be XRP. I have used the bursting of bitcoin bubble 3.0 to stock up on XRP (cost average $0.0137) and am also keeping an eye out on zerocoin, which has the potential to go up dramatically for ideological reasons, although economically it is an inferior product.

    There were a number of arguments charged against my article. I will address the most common one, which revolved around the regression theorem (RT). I think people are looking far too deep into the RT and are overcomplicating things. The RT is tautological in nature. The RT states that a commodity money must first be used as an industrial commodity. However, it does not mean that money itself must first be an industrial commodity. For example, credit money empirically predates commodity money. Thus, instead of trying to perform all sorts of mental gymnastics and coming up with nonsensical arguments, it is far more rational to simply accept the fact that bitcoins were never industrial commodities. In retrospect, I probably should have omitted the entire classification issue, as it draws attention away from the primary arguments made in the article. Nevertheless, it has proven to be quite entertaining to see the sort of nonsense that people have come up with to “prove” that bitcoin is in accordance with the RT.
    Mar 5 07:38 AM | Likes Like |Link to Comment
  • Tesla As By-Product Bubble Of NIRP [View instapost]
    Let's forget about every little bit of news that comes out and just stick to the calendar. The forecast was TSLA sub $20 by Wednesday, July 23rd.

    I'm certain that between now and then a ton of news, both macro and micro, will come out to make the crash obvious. The trick is to spot the obvious before it becomes obvious, and that is typically accomplished via looking at the valuations.

    Let's wait and see.
    Feb 28 04:15 AM | Likes Like |Link to Comment
  • Tesla As By-Product Bubble Of NIRP [View instapost]
    The term was coined by Graham/Dodd and has a very specific meaning. As for fixed income securities, there are valuation metrics that one may look at to see if there is in fact a margin of safety present. I know of no stock that has ever traded several dozen times above book value, had more debt on the books than equity even at its hyperinflated valuation, was not making any profits, and which ultimately ended up as a success. TSLA is not an emerging company that needs to be incubated, it is a developed car company that simply is not economically viable. It cannot scale because it is selling a luxury product, and it cannot bring the costs down because Moore's law has never, does not, and will never apply to the laws of thermodynamics. Electric cars are and will continue to be economically inferior to gasoline cars as they have been for over a century.
    Feb 21 03:51 AM | Likes Like |Link to Comment
  • Tesla As By-Product Bubble Of NIRP [View instapost]
    Margin of safety is a Graham/Dodd concept, it refers to securities that are trading below book value, have a P/E of less than 10, have low debt levels, etc. Tesla has not had any of that since IPO. There is no margin of safety when it comes to any and every company not making a profit.
    Feb 20 11:25 AM | Likes Like |Link to Comment
  • Tesla As By-Product Bubble Of NIRP [View instapost]
    The company only lost *$16.2 million*. But hey, that's less than Mr. Market had thought, so I guess that's good news.. After quite a bit of waiting, I am finally going short TSLA. If you are confident in TSLA, I would suggest you go long (at all-time highs and bubble valuations by every metric).
    Feb 20 06:40 AM | Likes Like |Link to Comment
  • The Insecurity I Like Best [View instapost]
    YTD Update:

    Bad News: I was too early on ACI, which is trading at $4.00 today (34% decline since the article). I have stubbornly continued to cost-average downwards and will continue to do so unless the fundamentals change for the worse.

    Good News: The fundamentals have been improving. Natural gas, trading at $5.31/mmbtu today, is up significantly since bottoming out on April 20th, 2012 at $1.82/mmbtu (up 191% since). While thermal coal prices have remained flat since this article came out, in-between thermal coal prices have formed an inverse head & shoulders formation. This is definitely a bullish sign when taken along with the dramatic rise in natural gas prices.

    Conclusion: I remain a holder and buyer of ACI until and if the macro picture starts to rapidly deteriorate. I fear there is the potential for a recession in 2014, in which case I will not hesitate to sell. Thankfully, energy stocks and commodities have a habit of spiking into recessions. Thus, the macro picture is not an issue as of yet.
    Feb 6 08:33 AM | Likes Like |Link to Comment
  • Tesla As By-Product Bubble Of NIRP [View instapost]
    'Hold on - you're simultaneously early in calling this bubble and the bubble still hasn't burst?'

    Actually, the bubble has already burst. The all-time top was in at $194.50. It simply hasn't fully deflated yet.

    'And you're comparing yourself to Shiller?'

    No, I am making the assertion that spotting something early is what I was actively trying to do. Have a look at my piece on Planetary Resources, that's a potential bubble that is literally years ahead of time.

    'A correction in an overbought asset is not "a bubble that has popped" as you asserted'

    Your assumption that TSLA is merely going through a correction is wrong.
    Nov 13 06:48 PM | Likes Like |Link to Comment
  • Tesla As By-Product Bubble Of NIRP [View instapost]
    I don't try to catch the tops with my sa articles. The fact that I was somewhat early in calling this bubble is a point of pride. Should Shiller have his Nobel taken away because he was too soon (years in fact) in calling both the dotcom and the housing bubbles?

    If you bothered to read this article, then you would have come across the following:
    'Forecast #1: The price of TSLA will trade at below $20 within 12 months'

    Tesla has lost over 6 billion in market cap over the past month.
    Nov 9 10:16 AM | 1 Like Like |Link to Comment
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