Crypto Level 3 Data

Sometimes for certain tradeable assets, (not limited to Perpetual futures) there are ways people can actively short tokens by placing a large limit buy order at below market price. Once it's filled it gets at the lower price, price will typically revert to the mean. Combing this knowledge wallet tracking of institutional holders. You will know both short term movements and long term sentiment of instutional fat whales. It's literally playing poker with mirrors. They did this in US equities markets like NYSE and NASDAQ, they are doing this again now. This practice, called selling of order flow, is extremely advantages in capable hands.

25Apr22 

Im gonna bet on Wayfair. With S&P Global's calculator.

Assumptions (2022-2025 only) 

Growth: 2%

Growth of unlevered cashflow: 2.8%

Tax: 9.8%

Valuation: +364.5%

Commentary on DRIP token as a possible investment

 Good evening, today we will be considering the merits of DRIP NETWORK as a possible staking type of investment. This came up after viewing the video "High Yield, High Risk Defi: Drip Finance" on Youtube. 

Before I dive into my analysis, let's break down my notes. 

1% a day (with possibility to compound daily by recurring vists to site) for 365 days
deposit/stake action cost 10%
withdraw action cost 10%
converting DRIP back to BNB would cost 10%
at 1:31 he notes that to BE (be profitable) must stake for atleast one month

I have had experience with evaluating schemes like these and I found out the hard way that staking coins in hopes of great profitability will pose a risk similar with all crypto staking where the price of the investment plumets prior to your staking duration. This is similar to the conondrum faced by bond investors where as in hopes of before you can redem the face value, the value of the bond devalues to a point where the interest earned does not break even the initial capital deployed. This investment (if you can call it that), both in characteristic and in risks will be similar to buying penny stocks and hoping the price will go up. This is not a lending model. I say this for two reasons, (1) Unlike other lending platforms, this DRIP community platform offers payout of (the 1% promised interest) in DRIP itself, thus whereas you can recieve regular daily 1% "income" to your overall holdings, you face a possibility of incurring a price reduction risk, it doesn't matter if it is 1% a day if your underlying falls 50%. I illustrate this below with an example of a 10,000 hypothetical investment:

Firstly, you pay a 10% tax meaning 10,000 becomes 7,000 and it is that sum that is compounded onwards. Where from there, DRIP offers 1% compounded annualy

======================================|

PV=7,000                                                      |
Rate=1%                                                         |
Compound period = Every 1 day             |
Actual T = 12 = 365 days * 1 year      |

======================================|

The formula then becomes            

7,000*(1+(0.01/1))^30

Staking One Month Returning                                     9434.94 dollars                        

BE on (cost of staking) in 36 days                                               10,015.38 dollars                    7,000*(1+(0.01/1))^30

Staking Two Month Returning                                     18,166 dollars

BE on (cost of staking+withdraw) in 47 days                              10,056.45 dollars                    (7,000*(1+(0.01/1))^47)*0.9)

BE on (cost of staking+withdraw+convert) in 59 days                10,072.77 dollars                    (7,000*(1+(0.01/1))^59)*0.8)

Staking Three Month Returning                                     17,140 dollars

10% Profitability on Initial Deposit                                              11,126.60 dollars                    (7,000*(1+(0.01/1))^69)*0.8)

20% Profitability on Initial Deposit                                              12,169.01 dollars                    (7,000*(1+(0.01/1))^78)*0.8)

30% Profitability on Initial Deposit                                              12,169.01 dollars                    (7,000*(1+(0.01/1))^85)*0.8)    

Few things to note about above, first BE does not occur in 30 days like he erroneously mentioned, nor does it occur in 36 days, as you must take into account an additonal 20% reduction (7,000*(1+(0.01/1))^36)*0.8 to redeem and convert your DRIP earnings back into your currency of choice. So he messed up.  Further, remeber that payout of interest and redemption is calculated in DRIP NETWORK's own token, meaning the "profits" could return as significantly less than the model calculations.

You need to return to the website and click "compound" button to stake it for 69 days before you even see a 10% "return", think about it, given the conditions in this volatile enviourment, are you willing to hold for two whole months before you see any positive cash flow? 

I would talk about the token holders themselves, but at this point, I'm already talking too much, simply knowing that I need to stake 69 days before I break even, exposing myself to unlimited drawdown risk. I know this will be a absurdly idiotic investment.   

Custom Terminology:

BE Break Even

deposit/stake ("stake") action: when you deposit your earnings and initiate staking process

redemption/withdraw ("withdraw") action: when you withdraw your earnings

convert action: when you swap DRIP token back to BNB binance token

Personal Notes:

see 08Mar22(finance-tempwritingpads) for in-depth breakdown

General rule:

if you CAN'T figure out 
drip liquidity order book depth
you must rely on thesevaluation  strategies (Google these terms)
how to model portfolio profitability as an option
how to model lending risk and price reduction in currency

For number of holders, use BITTIMES, query bittimes + "name" token

https://thebittimes.com/token-DRIP-BSC-0xfb4BA3d6F0f7302e02a1D0a23BE4b121f48e331B.html
https://thebittimes.com/liquidity-0xfb4BA3d6F0f7302e02a1D0a23BE4b121f48e331B-BSC.html

For liquidity or available supply measures

https://coinmarketcap.com/currencies/drip-network/
https://coinmarketcap.com/currencies/probit-token/

REIT (Real Estate Investment Trust) Valuation Blog

 REIT Valuation Approaches... Coming Soon

Microsoft Blog Commentary

Some Intros

So before you begin to find some objects why are we trying to look at the intrinsic value of this company. The purposes are twofold: Firstly, I want to try to do a little bit of preparation for CFA examination and the topics that have always interested me are in-depth financial analysis and the techniques to use to do comparable valuation, so I thought I’d start there first. Secondly, I have some spare time on my hands and I thought perhaps looking at the current state of Microsoft could perhaps give me a larger viewpoint of the overall health of the financial market such as the S&P 500 index and taking a close in work as specific firm before zooming out  to look at the larger overall state of things in terms of stock investing. I know before I’ve said before that I was prepared to value Nvidia NVIDIA Corporation (NASDAQ: NVDA) the last blog, but I think the majority of their price increases half can largely be attributed to their 40 billion takeover of Arm, and to be frank, I haven’t spent much time doing M&A Valuations before. So, instead I’ll be valuing sticking to a more traditional tech company like Microsoft where a lot of people will also be analyzing it when you so in the least we’ll benefit from this as a learning process by knowing whether we are that far off the mark in terms of finding an ‘accurate’ intrinsic value.

Starting with the Stock Price

Some interesting things to know about Microsoft stock performance is that — starting from 2016 — within 1 year of  holding onto gives you roughly 63% returns, for 3 years 223%, and for 5 years 450%. While on the revenue side for the year-over-year 2020 to 2021 Microsoft has a revenue increase of 17.5%, for 3 years it's 52.2%, for 5 years it’s 84.2%. I think this gives you very interesting insight into investor expectation of revenue increases relative to the stock price performance in the long-term future. Just from this small string of data you can make out (and to an extent reverse engineer) the general public expectation of the stock prices performance in the long-term future. Further, You can observe an interesting relationship between the stock price of the common stock and the magnitude of how it’s annual revenue growth affects the also “second-order” growth in the growth of the company’s stock price aswell.

Math:

1.00*(1+0.059)*(1+0.143)*(1+0.14)*(1+0.136)*(1+0.175) = 1.842

1.00*(1+0.14)*(1+0.136)*(1+0.175) = 1.522

1.00*(1+0.175) = 1.175

Breaking down their Revenue into Segments

In order to provide for more accurate values for the specific components of Microsoft’s business, instead of restoring to common “price/earnings” ratios that give you no useful information whatsoever about the competitiveness of their product line. Let’s break down their Revenue by specific segments. So primarily, on their relations they break down their revenue by 3 segments: Productivity and business processes,  intelligent cloud, and more personal computing. However I think we could go a little bit more specific into that.  We know Microsoft is famous for their operating systems windows,  that's why we can assume the majority of their revenue comes from. Then we have consumer Communications platforms like Microsoft teams, where the major competition comes from Discord, Zoom Communications, Facebook Messenger, etc. A lesser known product is Dynamic 365, which operates in a business to business environment providing data analytics for companies. Last but not least gaming which has the new Halo as came out. I personally have bought the new Halo infinite which is very fun to play on but they're Xbox system sales seems to stagnate compared to other competition like PlayStation Nintendo switch even.

Growth of Costs versus Revenue 

Let’s compare their long term “growth rate of operating income with growth rate of operating cost” This is the data I’ve compiled showing the growth rate of their operating income vs operating cost. Interestingly, from 2020 to 2021 Microsoft increased their PP&E and Operating right-of-use lease by 35% and 26% respectively. Does this mean their are perhaps expanding in some sectors? Probaly. In which one? Super computers? Data centers? Giga factories? One can only guess... Before I know more, I will intuitively guess that this is a substain increase specifically both horizontally (comparable in it's own year in the asset category) and vertically (comparable to it's previous historic years). And... I was correct. This is really intriguing then, saving this for later.

EBIT

So EBIT (Earnings before Interest Taxes) can be simplified as Operating Income. For the year 2021, EBIT is 69,916 adding back depreciation & amortization 10,900. We won't be using EBIT as a driver in this model, but rather but summing up all the Net Income of the subsquent years and using Excel's built in net present value formula of =npv().

Our Assumptions

The following numbers are the crucial numbers for our valuation. The numbers next to the blue marked text indicate it is a future forecast value, while anything prior to it is historical.

	Q122	Q222	Q322	Q422			2021	2022	2023	->
R y/y	22	17	15	30			18	21	10	3
GM%	70	70	70	75			69	71	63	63
OM%	45	41	45	51			42	43	34
Tax%	0	0	15	15			14	15	15

Conclusion

Briefly looking at Quant Metrics, here's what I got. Keep in mind there are baseless predictions, and simply premises a reversion to the mean.

Conclusion

The entire market is overvalued right now, Microsoft moreover is leading this "overvaluation". If you want to buy stocks, fine, just find something more fairly valued. I have done this DCF valuation from the ground up, there is no bull or bear case that will justify this lack of a margin of safety. If you buy Microsoft and hold it, don't expect astronomical gains.

Download Model

Run-in with the SEC

Run-in with the SEC

On the 3rd of December 2021, TD Ameritrade (Toronto-Dominion Bank), a partner of Schwab (Charles Schwab Corporation) made the unjustified decision (unceremoniously, I might add) to "illegally" seize my account, this was premised on the reason that it was done to protect the client's interest, for the purposes of fraud and money-laundering investigations. This happening to me was rather strange, as I was absolutely positive that I had indeed submitted all the necessary required documents, and all the information was reported correctly. Further, I had used TD Ameritrade before back in 2019, and I've had a pretty good experience with the ThinkOrSwim platform, so such a drastic action with no forenotice nor follow up semmed — out of place. 

I should note this was done unceremoniously aswell, as the S&P 500 had falled by 4% since peak, prior to this occuring, thus, I wanted to take advantage of the (hopefully) temporary drawback. 

The service represenatives informed me that they will have to contact the fraud represenative departments to verify my (the client's) identitfy, before they can properly give an answer as to why my account was closed. To say I was shocked, would be understating it. I'd thought given my past experiences with TD Ameritrade, that, as a broker they would be atleast responsible to send me an notification, or give me a call to inform me that something was awry with my account and further communication was needed before I can trade. None these things happened. Thus, I thought, this must have been a unique occurance to me. 

So, in the meanwhile, I'd thought to take a look in community chat forums to hoping find some advice or solance in other users that had previously experienced such a frustrating issue. I didn't have to look far. Wikipedia, Quora, Reddit, the more places I look, the more shitty news I hear about TD Ameritrade, the more acqusitions I heard of TD's utter negligence and malpratice them demonstrate in handling client accounts and how lack-luster their communication skills are with their clients, and the more distrust grew inside me. Here are a few examples:

In a post made by u/CasualCorona titled "Locked out of my $54,000 account for over 3 weeks, TD Ameritrade has been radio silent. ", a fellow commenter stated

"I kept calling and badgering customer service / the fraud department until they finally looked into it and re-opened the account. Unfortunately, unless you're in direct contact with them I doubt you'll hear anything / have any sort of status change"

   riticalcreader - Reddit, 8 months ago

Here's more disgusting evidence... Another commented on TD's actions to restrict and shut-off a client's ability to buy and sell their holdings.

"Then, ... I have tried to start buying all the sudden to being restricted. I freaked out and started reading comments how bad is that scam from TD Ameritrade."

Finally, one hits it right on-the-money.

"They love to use the method of falsely claiming there's fraudulent activity on accounts that are net positive and in good standing so they can freeze and or close them."

    thelsuera - Reddit, 8 months ago

So ... what... Am I fucked? Can I really trust no one going forward? Even one's that are meant to "keep it professional" and one's that you will last expect to resort to shady tactics to support the profitability of hedge funds and big banks? Can I (as a consumer ) still reasonably expect a level of respect and regard to be kept for client privlleges? Unforunately, I can't come to this conclusion in this blog post, but it did reinforce this notion: Brokers aren't your friends.

Why is this important? Why should you care? If you're like me, a consumer stock investor, you should have very right to buy and sell the assets your assets. Stocks, derivatives, they are your property — yours to buy, to sell, and to do with as you please. The very fact that TD restrictions your right to do this, and tries to justifies this with the bogus claim on pre-emptive consumer protection is just absolutely unresonnable and quite scary to think about in the implications of Who can you trust? I knew brokers aren't your friends, but fuck me, this is wild.  

Timeline:

Midterms Interim: Fed Action + Nvidia DCF Valuation

23Nov21 

Hey guys! Hope you're doing well, it's been a while. Today, on 23rd November, 2021, we will be doing a quick macro analysis on Bonds and the effect on Index performance. I have a suspicion that the recent Fed announcement of dialing back purchases on Treasuries will lead to an uptick in nominal interest rates, thus a small decline in SP500 Index growth (in basis points). As a bonus, i'll be also doing a DCF analysis of Nvidia in the near future, so keep an eye out.

The PIMCO Study Summarized

The research conducted in 2013 by PIMCO can be summarized as follows: (1) Short term negative correlations between stock growth and bond growth can be observed. Meaning that generally, in the short term, if stocks fall, bonds rise. This has also confirmed my observations in intraday movements on VOO (a SP500-like ETF) and TLH (a Midterm ishare treasury bond ETF). (2) The negative beta between stocks and inflation may become less pronounced over longer horizons. From what I gather, the relationship between inflation and stock price growth is not immediately clear, as many have pointed out that the tremendous rise in Index value can be largely attributed to Fed Powell’s monetary policies, i.e. money printer go “BRRR”, and would seem to indicate that high inflation levels had indeed correlated positively with a high index. Even so, however, we must still be cautious as this assumption of continuous growth can only last up to a certain point. This inflation-driven ‘euphoria’ can only be sustained until the general market deems the inflation level at peak is severely imbalanced to the extent that the effects of a prolonged widened economic imbalance outweighs the nominal index basis point growth.

Since 2008, ST correlation (between stocks and bonds) has been negative. The ‘million dollar’ question PIMCO aims to answer is this: “Will higher interest rates or rising inflation in the future make the correlation less negative?” Thus, the majority of their research focuses on discovering whether a correlative relationship can be observed between four macroeconomic factors: real interest rates, inflation, unemployment and growth. Furthermore, to what extent can these relationships continue to be relied upon to make inference and predictions for future Index movements?

Practical Solution going forward

Stock-bond still provides a nice way to strategically allocate assets. However, if inflation volatility is predicted to (or show signs of) increases significantly, then the correlation between stocks and bonds can reverse from negative to positive, thus the quantitative strategies that hold this underlying assumption will have to be look at more carefully from here on out.

Coming Soon

Machine Learning in Law School