STRC, SATA and the onset of digital credit

void said:

what are your thoughts about these relatively new instruments?

STRC and SATA are variable rate preferred stocks on paper.
20 years ago the SEC would have jailed me for even thinking about offering something like that to the public.

void said:

these "stablecoins" with yield (or inflation hedge if you will) seem to be an interesting alternative to bitcoin backed lending or even saving accounts for those whose risk tolerance or investment horizon doesn't match with direct purchase of bitcoin

There are no stablecoins with yield. You, the foolish owner of stablecoins, are the yield.

Yield must be earned on investments, not on the capital. Any roi implies a risk, by definition.

void said:

there is risk, nobody said it isn't
it's proportional to the return

what should be the proper return for giving out your stablecoins to an exchange or similar?

void said:

STRC for example is very different kind of "stablecoin" (hence the quotes) as it's supposed to hold it's value but has very different purpose... i.e. to act as a savings account bringing unparalleled return compared to the other securities with similar risk level or volatility

This is just misleading marketing. STRC is a preferred stock like plenty of others, with the difference that this particular company does… what exactly?

Quote from their docs: “we provide industry-leading AI-powered enterprise analytics software, advancing our vision of Intelligence Everywhere”.
Any idea of what this software does? How does it sell?
They also say something about how they manage their finances:
“By using proceeds from equity and debt financings, as well as cash flows from our operations, we strategically accumulate Bitcoin and advocate for its role as digital capital”.

Can somebody explain why I should buy this stock?

void said:

it has nothing to do with their primary (nowadays better to say original) business which is BI software

I took their business description from their current official documents.
How a company manages its finances doesn’t describe its business.
And what a company publishes is only its own interpretation of reality within the SEC’s guidelines.

void said:

I can try...
buy if you seek preferred stock with cumulative dividend (around 11%, paid monthly) and almost zero volatility backed by one of the safest balance sheets in the world

I’m sorry but every time I look at mstr I think Luna 😩
Look at my portfolio and see how difficult it is to achieve that kind of return. I spend quite some time on it, do research, run stress tests, buy only what I understand, and diversify a lot - vital, because I am not always right.
What does the Strategy guy do? He buys btc on credit.
What do I do? I buy btc with my earnings.
Which is more sustainable? You decide.

void said:

exactly, you work, you're an investor (taking risk in exchange for yield)
not everybody can do it (right) and not everybody wants to do it

Then pay someone who can do it for you. The simplest way is to buy JEPI or just SPY.

void said:

he constructs several kinds of securities to choose from depending on what you want - from MSTR (levered bitcoin on steroids, high yield, high volatility, some would say also high risk) over STRD, STRF, STRK to STRC (zero volatility, low risk, attractive yield)
they create products to satisfy the demand... like everyone else

Yes, like Luna.

void said:

this is no product for us but we are not an average retail investor or pension fund or wealth manager - some can't digest the volatility (yet),

Buy 10y gov bonds then, or whatever preferred stock you like with a real company issuing it.
With STRC you are not buying btc, you are buying the story of a guy who claims to be buying btc and do things with it as part of the financial strategy of a company that sells a rubbish software.

void said:

some are not allowed to buy bitcoin directly by law or by the board or by the shareholders

Buy IBIT then.

void said:

1/3 - 1/2 return compared to STRC

Yes but with 1/1000 of the risk.
If you want more return, buy JEPQ: 10-11%, strong asset base, clear and transparent strategy, serious issuer.
Want to risk more? Buy QQQY: 30% return, paid weekly.

void said:

this is more of a case with MSTR but fair enough... it's not buying BTC, it's openly something else for somebody else

A preferred stock is still a share of the company: you are buying the same corporate equity, with different financial treatment and higher priority in liquidation than common stocks. Ergo: same end risk, no upside potential. If Strategy goes bankrupt (which it can at any time irrespective of what btc does) it will have zero assets to distribute. Or maybe the IP of its worthless software.

You are basically buying preferred shares in a boutique investment house. Do you believe in the manager’s ability to continue to increase value and provide return? There are a lot of nice high yield bonds, dividend stocks, ETFs, REITs, etc., with better propositions, in my opinion.

I like STRC.

I think the risk corresponds fairly to the return, the balance sheet is good, the amplification advantage of MSTR is reasonable. I also think it's a highly engineered derived financial product, but it makes sense as a few % of the portfolio and is better than investments into general corporate bonds and/or holding too much in stablecoins (+ better than stablecoin yield products).

Interesting (over optimistic) video:

View on X

Paratore said:

You are basically buying preferred shares in a boutique investment house. Do you believe in the manager’s ability to continue to increase value and provide return? There are a lot of nice high yield bonds, dividend stocks, ETFs, REITs, etc., with better propositions, in my opinion.

It’s not an investment house, it’s a software company. Big difference in terms of regulations, protection etc.

void said:

you're wrong here... forget the software and this kind of assumptions

Strategy will be likely the biggest and most powerful company in the world in 10 years, interesting times we live in

Until the wind changes. There are plenty of ways to make it fail.

JohnnyDoe said:

It’s not an investment house, it’s a software company. Big difference in terms of regulations, protection etc.

Fair point. An unregulated boutique investment house.

Paratore said:

Fair point. An unregulated boutique investment house.

Like Luna, with lower returns.