Basic Bitcoin: An Investor's Perspective

 

As an investor with a background in corporate finance, my approach to Bitcoin is based on both appreciation for its technology and a keen awareness of associated risks. Despite the different opinions on Bitcoin, I have an allocation in both my taxable and non-taxable IRA portfolios. Here's a short breakdown of my views on Bitcoin:

Risks Associate with Bitcoin:

Regulatory Ambiguity - The lack of clear regulations and the application of outdated rules to new technologies pose significant risk. [This may change under the new Administration, but if so it will be slow]

Lack of Understanding - The industry's newness, complexity and misconceptions surrounding Bitcoin contribute to it's risk. [There is significant educational content available online, but I would focus on reliable resources i.e. on traditional investment firm websites]

Evolving Ecosystem - The rapidly changing landscape of cryptocurrency, being relatively new introduces uncertainty.

Price Volatility - Bitcoin and other cryptocurrencies exhibit aggressive and rapid price movements which adds to the risk. 

Own Worse Enemy - There continues to be a "bro", "hustler", "scammy" personality associated with the industry and some promoters. This is not unique to Bitcoin or other cryptocurrencies and with the involvement in more traditional financial industries this will moderate over time.  However, this personality turns away many.

The Way I Invest:

Investing in Bitcoin or cryptocurrencies is not a casual investment. It requires an understanding of the asset and your risk tolerance. I study the industry regularly,  use dollar cost averaging and don't try to time the market when investing. Finally, I have an set percentage allocation specifically for high-risk investments of which a portion of this is Bitcoin, ETH & SOL (currently maximum 5% of my portfolio in a 90/5/5% split). I do not invest in meme coins.

I encourage others to do the same if thinking about investing in Bitcoin. Bitcoin or cryptocurrencies should never be your only investment and don't go into it blindly.

Common Misconception:

Contrary to some misconceptions that Bitcoin is only associated with illegal activities, it serves legitimate purposes globally. Falling for fear, uncertainty and doubt (FUD) can cloud your judgement. While Bitcoin has been misused and associated with bad actors, so have other fiat currencies. Bitcoin is an evolving investment and potentially decentralized finance (defi) tool.

Use Cases for Bitcoin:

Investment - In the USA, Bitcoin's primary use case IMHO is a buy & hold investment, providing a non-correlated asset in your portfolio. This can be both a store of value or long term growth approach.

Medium of Exchange - While available but less relevant in the USA, Bitcoin serves as a medium of exchange (money). This is particularly useful in countries with political or economic instability.  However, stablecoins are more suited as a medium of exchange.

International transactions - Transacting purchases in a foreign currency can be VERY expensive and take a good amount of time using traditional financial channels. Using Bitcoin (or stablecoins) channels significantly lowers the transaction cost and time.

Purchasing Bitcoin:

Two accessible methods include online exchanges (e.g., Gemini, Kraken, Coinbase) and exchange-traded funds (EFTs) from traditional investment companies (e.g., Fidelity, Blackrock). EFTs offer exposure to Bitcoin prices without direct ownership. 

Personally, I do both. I buy Bitcoin thru Gemini, Kraken & Coinbase for my taxable accounts and EFTs for my retirement accounts.

Secure Handling of Bitcoin:

Consider self-custody by transferring Bitcoin to a hardware wallet for added control and security. While not mandatory it provides an extra layer of protection. Note, this is for Bitcoin and cryptocurrency purchased on an exchange. This does not apply to EFTs.

My strategy is whenever balances exceed $1,000 in my exchange account I move my cryptocurrency and Bitcoin to hardware wallets.

Please be aware however, that current cold wallets have risks as well. You need to keep your hardware wallet safe and secure. You also need to keep your seed phrase safe. Many don't want to take these risks. 

In conclusion, if you decide to invest in Bitcoin or any cryptocurrency be an informed investor and fully understand your risk tolerance.

What I Believe

I believe it's important to have a set of principles you can live by and always fall back on. You also need the courage to update your beliefs as you grow and learn. Here are my beliefs:

1. People need to take responsibility for their actions and accept the risks associated with those actions.

2. People have a right to privacy.

3. Money and lobbying in politics are negative influences.

4. Everyone in the USA should have access to basic free healthcare.

5. Recreational drug use should be legal.

6. Gay marriage should be legal.

7. There are evil people, and they should be dealt with.

8. I believe in God, but it should be inclusive of all religions.

9. Arts and culture are important and should be supported.

10. It's okay for individuals and companies to make a profit.

11. Everyone, including companies, should pay their fair share of taxes.

12. If you make more money, you should pay more taxes.

13. There are biological genders; however, how you choose to express your social gender is up to you, and there should be no stigma around it.

14. Extreme dogmas on either side of an issue are toxic.

15. Organized cancel culture is wrong, but one's actions, words, or beliefs may have negative consequences.

16. Bitcoin and cryptocurrencies are the future and should be properly regulated and supported.

17. Cryptocurrency should exist alongside fiat currencies.

18. Countries have the right to defend their legal borders.

19. Civilized societies are based on laws. If you don’t agree with a law, then work to change it.

20. Just because you believe something doesn’t mean you are right.

21. It is important to educate yourself constantly.

22. If you fall, get up, dust yourself off, and move forward.

23. The world isn’t fair.

24. There should be no stigma in political compromise.

25. You should be allowed to change your opinions or beliefs without negative consequences.

26. You should take responsibility for your actions.

27. Work to be your best self physically, emotionally, and spiritually.

28. If you don’t like something in yourself, make an effort to change it.

29. You should save and invest regularly.

I will continue to update my beliefs as I grow.

Approach to Social Media

 

I've decided to make a switch from Twitter, the dumpster fire social media platform to BlueSky. I initially set up a BSKY account during the invite-only phase, and recently made the full transition. So far, so good! That said, I’ve retained my Twitter account & continue to use other social media apps. I thought I’d share my current approach to these platforms in case others find it useful.

I use (or have accounts on) BlueSky, Twitter, Instagram, Threads, and Mastodon.

BlueSky – This is now my primary text-based social media platform. I use it as a personal journal for photography and other interests. I enjoy reading what others are up to. I mainly follow film and digital photographers & have started following selective (non-political) news sites & influencers.

Twitter – I’ve kept my Twitter account. However, I've stopped posting & no longer check my timeline or notifications. I will use Twitter exclusively for researching local & international news & events. When I need information I'll simply use the search function. Unfortunately, BlueSky hasn't yet reached a critical mass of users to be a primary news source.

Instagram (Portfolio) – I use Instagram as my social media portfolio for studio, model agency, and fashion photography work. I try to post regularly or whenever I have a new photoshoot. This was my "professional" calling card.

Instagram (Film & Street Photography) – This account is dedicated to my film and non-professional digital photography focusing on street photography and general snapshots. I also share images from my tests and the different cameras I use.

Threads – I have accounts for both of Instagram accounts but only occasionally cross-post or view the timeline. I keep Threads as a backup in case BlueSky doesn't work out.

Mastodon – I have an account to reserve my name but don’t post or check my timeline. Like Threads, I keep Mastodon as a backup option in case BlueSky fails.

In summary, I primarily use BlueSky and Instagram, with a few backup social media apps/accounts. This setup works well for me, and I try to stay focused and away from the trolling, bots, spam and negativity that has become Twitter.

Kodak Alaris Update: A Positive Move for Film Photography

As you may have heard, the UK Pension Protection Fund (PPF) sold Kodak Alaris (KA) to Kingswood Capital Management LP (KCM) on August 5th. As a film photographer and former corporate finance executive, I follow industry news closely and with great interest.

As background KA consists of 2 business units: Kodak Alaris & Kodak Moments. While both businesses were purchased, I’ll focus on the film business (Moments) versus the document management business (Alaris). The 2 units are very different IMO so they will likely be managed differently by KCM and may end up going different routes.

While information on the purchase is limited, and PPF was never very transparent about its business operations, I believe this is a beneficial move for both KA and the film photography community.

Why is this a good move? Let me explain:

1. PPF’s Focus: PPF was not a film photography-oriented company. Their primary goal was to maximize cash flow to meet Kodak UK’s pension obligations. Moments is essentially a distributor and product management business. Therefore they needed to excel in supply chain, marketing, price management, social media, and industry promotion. However, their financials did not reflect significant success in these areas.

2. KCM’s Expertise: KCM is a Los Angeles-based venture capital firm that acquires companies to help them reach their full potential. They do this by providing capital, enhancing operations, and identifying growth opportunities. Their business model is standard for venture capital, aiming to provide value to their investors through cash flow or profitable sales of acquired companies.

3. KA Different Businesses: The 2 units operated in different markets and had unique supply chains and management needs. The film business is essentially distribution and supply chain. The document management business is customer development & management, operational management, software & significantly more competitive. Therefore, these businesses can be managed differently within KCM.

Benefits for KA under KCM’s ownership:

1. Experienced Management: KCM brings a management team experienced in analyzing and managing mid-sized companies. I am of the opinion to maximize value from KA they will manage them based on experience with other companies in their portfolio.
2. Profitability and Value: They will work with KA to enhance profitability and overall long term value.
3. Access to Capital: KCM has the necessary capital to grow the business.
4. Strategic Discussions: It’s likely they had prior discussions with Kodak or ensured the Kodak contract is fully assignable.
5. Maximizing Value: They may maximize the value of the Moments business (film) and potentially sell it to another film or photography-oriented company, possibly even back to Kodak or to a company like CineStill (both KCM & CineStill are LA based).

In conclusion, I believe this acquisition is a positive development for film photography.

I’ve reviewed the year end 2023 financials for Kodak. Why? Really no reason except 1) financial analysis was one of the things I did during my corporate life & 2) curiosity as a film photographer. The important facts about financial analysis are to avoid the corporate PR & scripted talking points and simply focus on the facts and numbers. The numbers tell all.

After examining Kodak's year-end financials for 2023, Kodak’s consumer and motion picture film business, housed within its Advanced Materials & Chemicals unit (AMC), comprise 2 of 4 segments: Industrial Film & Chemicals (IFC) and Motion Picture film.

Kodak manufactures and directly markets Motion Picture film (Vision3), whereas consumer 35mm and 120 photographic films are NOT SOLD by Kodak but by Kodak Alaris, a separate entity owned by the UK Kodak Pension Plan. Kodak Alaris holds the exclusive contract for selling all consumer film. Kodak Alaris is listed as a CUSTOMER within Kodak’s AMC unit.

In terms of financial performance, Kodak's total revenue for the 2023 was $1.17 billion, reflecting a 7% decline from the previous year. The AMC unit totaled $255 million of Kodak’s total sales. Earnings from operations are a modest $4 million, with a reported net income of $75 million, largely attributed to non-business related activities. The IFC unit totaled $201 million. On a positive note, Kodak maintains a healthy cash balance, crucial for business operations.

Within the AMC unit, IFC contributes $201.1 million, with sales to Kodak Alaris totaling $86.7 million, representing a small fraction (7.8%) of Kodak's total sales. Additionally, Vision3 sales, part of the AMC but outside of IFC, likely amount to less than $20 million.

Despite Kodak's acknowledgment of the importance of consumer and motion picture film, challenges such as equipment condition, staffing levels, and supply chain constraints have hindered capacity, necessitating additional future capital for improvement.

In conclusion, while Kodak remains a very important player in the film industry, producing film both for consumers (sold to you through Kodak Alaris) and motion pictures, the business's financial returns are not substantial. However, as long as demand persists, Kodak will continue to support the business. The next step will be to review the financial condition of Kodak Alaris. 

Stay tuned!

My New Blog - "The Random"

Hi, I'm Steve. I decided to start this new blog as a place to share musings, thoughts, going on's, issues, etc that don't fit nicely into my other blogs. 

Who am I you ask?

Well, I'm a retired corporate finance executive that decided to leave that all behind a few years ago so I could focus on my real passions including fashion, beauty and portrait photography operating as Steven Brokaw Photography; street photography; operating a photography studio called M10 Studio in Indianapolis, IN; a partner in a boutique model agency called SEEN Model Management as the Business Director; doing film photography for fun; bicycling; trying to stay up on news and politics; and finally hanging out with my family.

Since it's the first day of 2019 I thought I might as well start up the blog to document some of these passions. Mostly for my own use...kind of a digital diary. If others find it interesting, useful or informative then that's groovy.

I make one big promise. I'm snarky by nature, but I will never be disrespectful. That's not my style. Beyond that...no promises. I don't promise to post on a regular schedule, I will be random in my topics based upon what I'm working on (thus the name of the blog). Sometimes my posts will be about biking, or photography, running a modeling agency or some insight I have on a current issue...you get the idea...RANDOM.

So what's in store for 2019 you might ask? 

First, I decided to check off a big bucket list item and ride my bike across the USA on the Southern Tier from St. Augustine, FL or San Diego. Yikes. Next I plan to realign and redesign my photography studio to be more focused on the genre I've been doing exclusively for the last few years. The rest right now will be played by ear.  No other grand 2019 resolutions.

And with that...let's go.