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This 28-year-old short seller's hedge fund made a 24% return last year. Now she's eyeing the ballooning US debt pile.

Short seller Fahmi Quadir, who runs the fund Safkhet Capital in New York, made a 24% return last year. In an interview with Business Insider, Quadir said her winning trades come from focusing on shorting companies with "predatory business models."  The 28-year-old is currently eyeing a private company focused on the student debt market, that may eventually IPO.  She said her fund only makes "conviction" bets because it "can't afford to spend time throwing darts." Click here for more BI Prime stories. Short seller Fahmi Quadir says her Safkhet Capital fund made a 24% return in 2018, an impressive feat for a year that saw hedge fund after hedge fund end up in the red. Her strategy: make big, all-or-nothing bets on companies with what she calls "predatory business models." The tactic was a winner in her bet on MiMedx, a biopharmaceutical company rocked by whistleblower and accounting scandals that led to a management overhaul and a whopping 93% plunge in the stock.  While this year's short bet on German payments company Wirecard hasn't yet tracked the success of 2018, she's already plotting her next target. To find it, she said she started eyeing Americans' ballooning US debt pile.  Quadir said she's lured by companies in that space who have products that are priced higher than those of peers, which "contributes to a debt spiral."  While declining to name any specific names, Quadir said she's researching a potential short trade of a firm focused on student loan debt, which is currently private and might eventually IPO.  "It's more the business model itself that attracted us, we're not making a call on the debt market itself," she said in an interview. "But in these companies that are focused on the consumer, the level of bankruptcies and delinquencies have been ticking up in the past year." According to the Federal Reserve, US outstanding student loan debt has more than doubled to $1.6 trillion in the past decade, while last year US credit card debt hit a record $870 billion. Read more: A 28-year-old hedge fund star who took on Bill Ackman slammed a 'bizarre' ban on short selling a $14 billion German company "If you look at these underlying asset-backed sectors, the underlying accounts are certainly deteriorating," she said. "Then you have companies dependent on these markets to access liquidity, so it becomes more difficult when the quality of accounts has deteriorated so much." She points to the Fed's warning late last year that business-sector debt relative to GDP is worryingly high. "So they've been able to obtain debt at very cheap terms." she said. "What that's led to is being able to keep the doors open, but not necessarily sustainable. Once they're unable to access the credit markets, it's unclear whether they're able to maintain the business."  Fahmi Quadir burst onto the seen in a Netflix documentary Quadir burst onto the scene in a Netflix special called "Dirty Money," where she joined her bearish peers in calling out the drug giant Valeant. With that trade, Quadir took on Bill Ackman, a longtime Valeant bull who lost billions when suspect accounting revelations tanked Valeant's stock and eventually prompted a management overhaul.  She's followed others' lead on some of her other bets as well (Tesla, Wirecard, South Africa's Capitec Bank). "Another thing we look at is companies that have been targeted in the past — investigative journalists, short sellers, consistent criticism over a period of time — how odd that these companies have managed to succeed," Quadir said. "Because usually, when there's that kind of consistency, there's something behind that."            Quadir also wasn't the only one who piled into MiMedx. The short seller Marc Cahodes and Viceroy Research founder Fraser Perring famously pushed the short case on the trade for more than a year. MiMedx replaced its CEO and a key exec after the company found insiders spied on whistleblowers who had called out revenue manipulation.  It's been a rocky year for some big bets. Wirecard, which Quadir's Safkhet Capital is "significantly" short, has seesawed up and down, even rallying year to date — despite several explosive reports from the Financial Times outlining suspect accounting practices. Wirecard has denied the claims.  "Generally, we're focused on fraud and exploitative practices, so that's where we'll be looking first," Quadir said. "That's not thematically driven, but you'll see the connection if you look at our portfolio." Quadir's fund is smaller than most hedge funds. And it only has one analyst, a 33-year-old out of Yale's business school, Christina Clementi. But that's not the only reason she bets on very few trades: "We can't afford to spend time throwing darts," Quadir said. "We would rather spend that time on our conviction ideas."SEE ALSO: A 28-year-old hedge fund star who took on Bill Ackman slammed a 'bizarre' ban on short selling a $14 billion German company Join the conversation about this story » NOW WATCH: WATCH: The legendary economist who predicted the housing crisis says the US will win the trade war
Business Insider

Bitcoin the top investment for Grayscale in the first quarter

Grayscale, a digital currency investing firm, came out with their quarter report covering different topics such as digital asset investment, performance and risk monitor and others. The company had raised $42.7 million over the last three months and trailing 12 months’ inflows amount to $266 million. Cumulative inflow by product of Grayscale for the 1st quarter Source: Grayscale From, the above graph it could be inferred that there was a drastic increase in the inflow for Grayscale from bitcoin, compared to other digital currencies like Ethereum Classic, Ethereum, Zen, Litecoin, Stellar Lumens and others. Between, 25th March and 1st April, an equal inflow of product for the company was noticed. One can also notice a bigger change from 18th Feb to 25th Feb 2019 and only goes on to increase from there. The inflow in terms of USD was the highest from 25 March to 1st April 2019, registering a few thousand short of at $45,000,000. The other coins gave a negligible inflow for the company. Weekly inflow for the Grayscale by product in the 1st quarter Source: Grayscale The weekly inflow for the company can clearly be seen in the aforementioned graph. It is easy to infer that bitcoin is the only digital asset that has again widely contributed to Grayscale. The average total weekly stood at $3,000,000. The highest weekly inflow was on 25th Feb 2019 [$11, 000,000] and the lowest was sighted on 7th Jan 2019. The other digital coins – were again seen providing a negligible contribution to the weekly inflow for the company. Weekly inflow for Grayscale by investment product as per 12 months Source: Grayscale The weekly investment for Grayscale as per the 12-month period can be inferred from the above graph. Bitcoin is still seen as a large contributor to their investment gains. On 26 May 2018, Grayscale received large gains from Zcash and on 23rd June it gained another high through a combination of digital currencies – Zcash, Ethereum Classic, Ethereum, Bitcoin cash, and XRP. The average gain stood at $5,000,000, the highest gain was recorded on 14 July 2018 and the lowest on 5 Jan 2019. Grayscale was not the only firm that received such positive results for their investment. Coinbase Custody too experienced the same, after their recent visit to the UK, they had revealed that their platform has an asset under custody of $1.3 billion which could soon touch $2 billion. The post Bitcoin the top investment for Grayscale in the first quarter appeared first on AMBCrypto.
AMBCrypto

Pocket Change Millionaire Summit: Cannabis Investment Strategy?

Pocket Change Millionaire Summit is an upcoming event hosted by Teeka Tiwari where he promises to “reveal my most powerful wealth-building secret.” On June 26, 2019 at 8pm ET, investor Teeka Tiwari will share his wisdom with the world. Tiwari will explain how he claims to have turned a $1,000 investment into $1.6 million, for […]
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