Don't say I never warned you

S2N spotlight

One of the things I will be doing in the near future is including a section with my active trading ideas so that new readers and old can have an easy resource to find out how my ideas are working out.

In this letter in December last year titled “Why Pay a Premium,” I suggested that the 100% premium on Bitcoin by buying MicroStrategy (now Strategy) would disappear. I said this: “Over time I believe this premium will evaporate, and so will many billions of dollars.”

MicroStrategy’s current announcement marks a significant shift in its capital and Bitcoin acquisition strategy. Michael Saylor, the company’s Executive Chairman, announced today the easing of restrictions on issuing new MSTR stock by removing the self-imposed limit that prohibited issuing shares below a market-to-asset value (mNAV) premium of 2.5 times over its Bitcoin holdings. Previously, this limit was meant to protect existing shareholders from dilution whenever the stock premium over Bitcoin dropped, but as the premium narrowed to around 1.6x, Saylor revised the rules to allow more flexibility.

A month ago Saylor said he would not sell MSTR below 2.5. I have warned before: this guy is delusional, and I am starting to think he's just a plain old liar as well.

You can see the price movement of MSTR and BTC over the last two years, with the ratio in favour of MicroStrategy reaching its high in December 2024. It was then that I said the premium was nuts. So shorting MSTR and going long BTC has been a good trade and is not done yet.

S2N observations

An Australian company that I had never heard of 6 months ago is featured in the WSJ today. Who is going to pay for these valuations? Almost every AI startup with a former OpenAI employee (it doesn’t matter what they did there) is raising money at a valuation of $1 billion plus. Who is going to pay for these valuations?

Palantir Technologies was, I think from memory, the top-performing US stock last year. Nobody seems to know what this company actually does, but it is down 15% over the last 5 days; maybe somebody does know something after all. As you can see, the current drawdown is small compared to what this company has been through in the past. I am watching closely.

S2N screener alert

What the f... just happened in Hong Kong? It smells like intervention. This is a great showcase of the power of looking at moves in Z-scores. A 0.27% would not pop up on too many screeners. But my Z-score was more lit at 6+ than a Snoop Dogg after-party.

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