Brett Guiley, CFP®

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One must presume the activity mentioned in the post below actually accounts for a meaningful share of capital in $STRC and the other Strategy preferreds -- it is a classic carry trade. A subset of the capital base will be unencumbered longs who are in the position unlevered because they view it as a high income play that seems attractive relative to their perceived level of risk for the instrument. The rest of the capital in the trade by definition is doing exactly as the post below lays out: long the higher yielding Strategy credit instrument, funded by either margin borrowing against the security holdings or "mental accounting" against another liability with a lower stated interest rate. I saw Strategy's CEO Phong Le saying he's doing exactly this in a video snippet on my feed this very afternoon. He stated he's long $STRC at ~11.5% (as currently market priced) against his 1.75% mortgage (presumably a 2020/21 vintage). This all amounts to a classic carry trade, only differentiated from a countless heap of others that came before by the fact that it is riding the #Bitcoin tailwind. But it is worth noting that in this latest instance, everyone currently involved in the trade is biased on one side of the trade (lined up on one side of the boat): they're all long $STRC paired with a short against another liability with lower interest rate. If you do happen to know anyone taking the reverse side of the trade (going long a presumably rock solid, lower yielding credit and shorting $STRC or another Strategy preferred) I'd color myself shocked and ask that you please introduce me to them. That Michael Burry-style trade idea needs to pay 8% carry, which makes it very difficult for anyone to hold for any extended period of time. But if I were management thinking defensively, I'd focus on being ready as sharp money is always going to try to find a way to attack the carry trade for a payoff that only continues to grow larger with every tap that upsizes the preferreds. You can see the health of the carry trade reflected in the the spread measure that the longs pick up by being invested in the higher yielding instrument less the lower yielding funding instrument. This is the economic incentive that attracts the longs into the trade in the first place: they are allocating capital in because they perceive a risk mispricing that accrues with the amount of time invested. Consequently, by pouring more capital into the trade the excess return should presumably diminish *rather than continue to widen*. The fact that the $STRC vs SOFR spread is not closing as time goes on is your classic "dog not barking" that all may not be well here. There are only two ways that the carry trade closes: the spread either converges or it blows out. The former would reflect a resolution out of underlying strength, where the spread falls as the yield between $STRC and the funding interest rate (e.g. the margin rate on a broker loan from $IBKR, $HOOD, etc) falls as the market's pricing corrects its incorrect previously held perception of the creditworthiness of the issuer. That's exactly what falling credit spreads are communicating. The latter resolution path to equilibrium arrives through price: as the spread fails to converge -- also important in this case, Strategy's management continues to upsize the issuance and grow the amount of capital in the trade -- each round of expansion requires greater amounts of dollar capital inflows into the trade complex to maintain stability of the spread. Any sudden interruption to this balance, whether it comes from rising funding rates in short-term money markets or a slowdown in liquidity flows in the global dollar capital complex more broadly, and you may see a violent snap to equilibrium that would materialize through a fall in price. In that case, brokers would pressure the levered longs in the carry trade to margin cover as the brokers seek to de-risk themselves amidst the broader decline in dollar liquidity. Temporarily it wouldn't be a fun ride for anyone involved in Bitcoin broadly, and by calling out this possibility I'm certainly not rooting for it. And FWIW, the spread between $STRC vs SOFR has consistently risen on a month-to-month basis since its IPO in July. For the Digital Credit advocates, this is not the positive market signal that you'd want to see. I'd recommend caution and careful consideration for anyone considering allocating capital into this trade, but realistically I don't expect a constructive response on this platform for pointing this reality out. Best of luck to everyone out there.

thebluestable.com/colts/film-bas… Colts 7-round mock draft! I tried to write the player reports a bit like how a scouting report would read. I believe this is as detailed of a mock draft as you'll find. Had a lot of fun watching more prospects than ever this cycle! #Colts #NFLDraft

No one is proud of their first opinion of Bitcoin. When I first heard of it, I called it "Minecraft money" or imaginary money. @MattGolliher, a college of mine and Co-Founder of OHW, called it "digital beanie babies." What was your first opinion? Please Read and Share!