1st Quarter 2021 Commentary
April 2021 Reading Length: 33 pages | Listening Time: 1 hour 43 minutes

We’ve been getting many more questions in recent weeks about the Texas Pacific Land Corp (TPL) and bitcoin positions. Interestingly, we also received a great many questions about them only a year ago, when the share prices were much lower than many clients felt comfortable with. Now there’s some discomfort with – or, at least, curiosity about – their being so high. The questions touch on valuation, position sizing, and business risk, but all end the same way: is it time to take profits or trim the positions? The short answer is no. But to answer properly requires more than just a company review. Those questions really touch on critical decisions every investor makes, yet makes so reflexively most of the time that they’re not really carefully considered: the validity of price targets (vs. valuation models) and how price targets can actually lead to bad decisions; the opportunity cost of disrupting the power of compounding by ‘locking in profits’; of how an investment that is up 10x can actually be less expensive than when it was purchased. This quarter, we describe some of the reasons we are not concerned about the size of our positions in TPL and bitcoin, and our views on wealth creation vs. preservation in a portfolio context. And the Three Important Things people miss about inflation.

Fireside with Murray Stahl on Opportunities in Japan
April 2021 Listening Time: 41 minutes

Murray Stahl shares his outlook for opportunities in a unique non-indexed sub-set of the Japanese equity market - with Grahamian Value

The Japan Special Opportunity Strategy: Part 4 - Japan Special Opportunity Strategy
May 2021 Reading Length: 5 pages

Part 4 of 4: Japan Special Opportunity Strategy – Deep-value, non-correlated, investment opportunity that we believe is time-limited and unique to Japan.

The Japan Special Opportunity Strategy: Part 3 – The Making of a Generational Opportunity
May 2021 Reading Length: 7 pages

Part 3 of 4: The making of a generational opportunity in Japan – How Japan is changing and unwinding old systems.  Seven years on after the launch of the Abenomics “Growth Strategy” to tackle the challenges of declining national power. Calls to raise productivity and profitability, with regulatory teeth, force transformational changes in decades-old insular corporate behaviors.

The Japan Special Opportunity Strategy: Part 2 – How the System was Built and Failed, and the Slow Beginnings of Its Rehabilitation
May 2021 Reading Length: 7 pages

Part 2 of 4: How the System was Built and Failed: Japan’s spectacular credit bubble burst in 1989, over 30 years ago; Japan spent the first 15 years cleaning up, and the following 15 years on recovery and rebuilding.

The Japan Special Opportunity Strategy: Part 1 – The Japanese Market You Know and the One You Don’t
April 2021 Reading Length: 4 pages

Japanese multinational companies, emerges a unique subset, what we believe is a value investment opportunity in Japan.

James Davolos Interview on ETF Strategies to Hedge Against Inflation (Originally published @ZacksResearch - ETF Spotlight Podcast on March 11, 2021)
March 2021 Listening Time: 58 minutes 44 seconds

02:30 - Quadratic’s $IVOL | 25:31 - Horizon Kinetics’s $INFL

On the Possibility of Outlawing Cryptocurrency
March 2021 Reading Length: 6 pages
Peter Doyle on the Joe Robert Show: Starting & Growing Your Bitcoin Portfolio
February 2021 Listening Time: 59 minutes

Originally Published on February 16, 2021 on the Joe Robert Show

Revisiting an Old Friend – The Thesis for a Defensive, De Minimis Investment in Bitcoin
February 2021 Reading Length: 6 pages

Exactly four years ago, in February 2017, we posted this proposition: that every client, as a matter of prudence and self-protection, should own a very small amount of bitcoin. It was such an unorthodox idea, was considered so risky and ill-advised by conventional portfolio management standards, that great care was taken to introduce it.  The essential complaint, of unbounded risk, was addressed by the essential answer of bounding that risk:  to purchase a de minimis amount that could do no harm in the worst case, yet could – like an insurance policy – be of life changing benefit when it might be needed. In the excitement of the moment, today, what with billionaires suddenly announcing billion-dollar purchases of bitcoin, and news media therefore wondering about it once more, but with more wonder and less dismissal in their tone, it is perhaps timely that this original proposal be posted again. The reasons laid out for its need, the description of its existence, why it is worth something (or anything) at all, and how to use it, have not changed.

Japan Special Opportunity Strategy - An Uncorrelated, Unrepeatable Graham Classic Value Opportunity
February 2021 Reading Length: 2 pages
Horizon Kinetics Launches Inflation Beneficiaries Exchange Traded Fund (INFL)
01/12/2021 Reading Length: 2 pages
View Press Release
4th Quarter 2020 Commentary
January 2021 Reading Length: 33 pages | Listening Time: 1 hour 22 minutes

A period of transition, from the last 10 and 20 years to the next, may be upon us. Of the three major indexed asset classes, cash and bonds are now guaranteed by the Federal Reserve's 2% inflation policy, to lose value. The total market value of the U.S. stock market, relative to GDP, is one-third higher than the Internet Bubble peak. With zero stock market appreciation and normal GDP growth, restoration of normal valuations could take one or two decades. None of the three indexed asset classes offer positive expected return. And that's with 2% inflation. The debt creation rate, though, has matched the money creation rate, which is several times higher than the CPI. A monetary inflation tipping point might have been reached this year. A commodity inflation tipping point might also be pending: key global commodity prices rose at double-digit rates last year. The question is not whether or not inflation will appear. The question is whether a portfolio is at all prepared if it does appear. That requires alternative, non-correlated asset classes and inflation beneficiaries from outside the indexed asset class sphere.

Peter Doyle on Daniel Prince's Once BITten! Podcast
November 2020 Listening Time: 1 hour 24 minutes

Bitcoin Co-Existing with Fiat Currency and the Banking System
November 2020 Reading Length: 3 pages
3rd Quarter 2020 Abridged Commentary
November 2020 Reading Length: 23 pages
3rd Quarter 2020 Commentary
October 2020 Reading Length: 37 pages | Listening Time: 2 hour 02 minutes

Revised to include supplemental information, this quarter’s review is about the energy sector. Investors fear a permanent failure to recover (if not an impending collapse) due to the fossil fuel divestment movement and alternative energy growth. Stock prices already reflect that outcome. Yet, the most comprehensive multi-factor analyses of long-term global energy consumption do not result in that outcome, despite projected rapid multi-decade expansion of alternative energy. That’s a wide and consequential divide. Within that divide there are enormous information advantage possibilities, and we believe it presents one of the most extraordinary of investment opportunities. Neither set of expectations takes account of the historic – and worsening – structural oil & gas supply deficits. The greater near-term danger is a long-lasting oil price shock. The sheer volume of information available from innumerable sources on this complex set of topics can be overwhelming to those seeking to make information-based decisions. This review addresses misconceptions about both conventional and renewable energy. Finally, we discuss two positions that have been mentioned time and again; one provides exposure to the energy sector with a royalty model that limits risk; the other provides (among other potential benefits) a hedge against inflation, which we view as the highest risk to investors.

0:00 – Energy
6:50 – Fact-Based Investing (Nifty-Fifty and Tech Bubble)
13:35 – Fossil Fuel and Renewable Energy Research
18:20 – U.S. Energy Information Administration (EIA) Projections
26:34 – International Energy Agency (IEA) Projections
29:10 – British Petroleum (BP) Projections
31:00 – Renewable Energy Facts - Interruptible
33:34 – Renewable Energy Facts - Carbon Intensity
46:30 – Renewable Energy Facts - Takeaways
49:24 – Renewable Energy Facts - Other Factors
1:04:09 – Natural Gas Supply and Demand
1:09:00 – Oil Supply and Demand
1:17:30 – Fracking
1:27:35 – Are Investors Leaving Oil?
1:31:15 – Texas Pacific Land Trust
1:47:03 – Cryptocurrency
1:53:47 – Addendum: Raw Materials - Supply Limitations and Environmental Impact

Peter Doyle on Modern Value Investing - The Pomp Podcast
October 2020 Listening Time: 55 minutes

The link below is an interview with Anthony Pompliano, host of the Pomp Podcast, and our co-founder, Peter Doyle. Peter discusses, among other things, inflation beneficiaries, bitcoin and risks associated with passive index investing.

0:00 – Background of Peter Doyle, Horizon Kinetics, and the Firm’s Investment Thesis
3:44 – Value investing in the Current Macro Environment
7:10 – Hard Asset and Asset-Light Focus (Texas Pacific Land Trust)
10:00 – Inflation (Monetary and Fiscal Stimulus)
18:55 – Fixed Income and Equity as Part of a 60/40 Portfolio
23:30 – Energy
25:50 – Bitcoin and Mining
39:15 – Financial Exchanges
40:20 – Venture Capital, Private Investments, and International Markets
43:10 – Bitcoin - Institutional Acceptance
46:08 – Final Questions

The AMAGF IT/Social Media Stocks – Some Factual Observations
October 2020 Reading Length: 8 pages

Some factual observations about the S&P 500 and technology stocks. Investors assume that an index like the S&P 500 gives broad exposure to “the market.” The 5 largest positions, 1% of the names, all technology, are now 22% of the Index market value. That 1% has accounted for close to half of the S&P 500 market value increase in the past five years. There are now two essential possibilities: The IT companies fulfill analysts’ 5 -year growth forecasts – higher even than the past 5-years’ growth – and easily double their index weight. At a 45% to 60% or higher IT weight, the S&P 500 is then a technology index of record-high valuation multiples. The IT companies don’t fulfill those expectations. The figures in this review quantify a few central competitive, regulatory and financial accounting risks, all of which are impending and any of which can seriously reduce the growth and profit margins of these mega-cap companies.