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<ul><li><keyword id="2430955" type="General" weightage="100" keywordseo="microstrategy" source="Orion">MicroStrategy</keyword> subsidiary <keyword id="13503177" type="General" weightage="80" keywordseo="macrostrategy" source="Orion">MacroStrategy</keyword> has taken on a loan of $205 million from Silvergate Bank to buy more <keyword id="6354947" type="General" weightage="20" keywordseo="bitcoin" source="Orion">Bitcoin</keyword>. </li><li>MacroStrategy currently has 110,000 Bitcoin in its reserves. </li><li>A sharp fall in the cryptocurrency’s price could lead to complications in paying back the loan and the valuation of both companies.</li></ul>MacroStrategy, the newly formed subsidiary of MicroStrategy that holds most of its parent company’s Bitcoin, has taken out a loan of $205 million to buy more Bitcoin. The three-year loan is backed by the $820 million worth of Bitcoin that MacroStrategy already has in its reserves, according to the company’s filing with the <keyword id="108474" type="General" weightage="50" keywordseo="us-securities-and-exchange-commission" source="Orion">US Securities and Exchange Commission</keyword> (<a href="https://www.sec.gov/ix?doc=/Archives/edgar/data/0001050446/000119312522087494/d312252d8k.htm">SEC</a>). While that may seem like a large amount, it only accounts for around 12% of MicroStrategy’s overall cryptocurrency holdings. At least $410 million needs to be held as collateral. The custodian of the large amount is unnamed but mutually authorised by both the company and crypto-focused Silvergate Bank. The remaining $205 million will remain with the company for spending. <div type="ExtQuote" text="Using the capital from the loan, we've effectively turned our bitcoin into productive collateral, which allows us to further execute against our business strategy" auname="MicroStrategy CEO and chairman Michael Saylor"></div> As things stand, MicroStrategy has spent around $3.8 billion buying Bitcoin. On paper, it has a profit of $2 billion at current prices. What could go wrong? The complication with a loan like this is that if Bitcoin’s price were to fall sharply, the entire company’s valuation would suffer. Moreover, the firm would struggle to pay its debt since the collateral and the new purchase of Bitcoin would lose value. After the disclosure, the company’s <a href="https://markets.businessinsider.com/stocks/mstr-stock?op=1">market value</a> slipped by 0.6% before correcting. Overall, the shares of MicroStrategy have witnessed a 9% drop since the beginning of the year. Meanwhile, the price of Bitcoin saw an uptick of 1%. MicroStrategy is the largest corporate Bitcoin holder in the world <keyword id="10467759" type="General" weightage="50" keywordseo="michael-saylor" source="Orion">Michael Saylor</keyword>’s MicroStrategy ventured into crypto investments when it bought its first Bitcoin in August 2020. Two years later, the company has accumulated 125,051 Bitcoin valued at $6 billion as per current prices. Most of that — 110,000 Bitcoin — is now with MacroStrategy, which was created in June 2020. Using the $205 million loan, MacroStrategy will buy more Bitcoin, pay interest and expenses on the loan transaction, and for general business expenses. The new funds have come at a time when many market analysts are predicting that Bitcoin’s price is <a href="https://www.fxempire.com/forecasts/article/bitcoin-btc-trending-with-50000-within-reach-950533">likely to hit $50,000</a> sometime soon. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/investment/news/microstrategys-michael-saylor-believes-the-bitcoin-lightning-network-can-clean-up-twitter/articleshow/90520807.cms">Twitter is divided over Michael Saylor’s suggestion to use orange tick marks for filtering out bots and scammers</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/personal-finance/news/dearness-allowance-hiked-by-3-for-central-government-employees-and-pensioners/articleshow/90539341.cms">Dearness allowance hiked by 3% for central government employees and pensioners</a>

MicroStrategy’s subsidiary takes on a $205 million loan to buy more Bitcoin

<ul class="summary-list"><li>A veteran analyst says AI is unproven, and stocks such as Nvidia are in a bubble and could wither.</li><li>MacroStrategy's James Ferguson notes that AI remains unreliable and costly to power.</li></ul>Artificial intelligence is still just a <a target="_blank" href="https://www.businessinsider.com/ai-technology-chatgpt-silicon-valley-save-business-stock-market-jobs-2023-5">pricey experiment</a>, AI stocks are in a <a target="_blank" href="https://markets.businessinsider.com/news/stocks/ai-stock-mania-nvidia-dotcom-bubble-crash-cisco-tech-economy-2024-6">dangerous bubble</a>, and Nvidia might wither like dot-com darlings Intel and <a target="_blank" href="https://www.businessinsider.com/nvidia-stock-price-cisco-siegel-dot-com-bubble-ai-tech-2024-3">Cisco</a>, according to a markets guru.AI remains "completely unproven" and "effectively useless," James Ferguson, founding partner of the MacroStrategy Partnership, said on the <a target="_blank" href="https://podcasts.apple.com/ie/podcast/beware-of-the-concentrated-ai-chipmaker-bubble/id1654809850?i=1000661243281">latest episode</a> of Bloomberg's "Merryn Talks Money" podcast.He noted that only a few AI tools have taken off, large language models (LLMs) such as <a target="_blank" href="https://www.businessinsider.com/everything-you-need-to-know-about-chat-gpt-2023-1">ChatGPT</a> can't yet be trusted as they sometimes <a target="_blank" href="https://www.businessinsider.com/chatgpt-openai-ai-dictionary-help-understand-nvidia-2023-12">invent facts and sources</a>, and it takes a <a target="_blank" href="https://markets.businessinsider.com/news/stocks/ai-boom-tests-americas-shaky-power-gridtested-by-electric-demand-2024-7">lot of energy</a> to power AI programs."You end up with something that is very expensive and as yet to prove itself anywhere really, outside some narrow applications," Ferguson said.The veteran analyst flagged a bubble in microchip makers and other AI companies, warning that tightly concentrated markets with stocks reliant on valuations rising faster than earnings "historically end badly."Ferguson also underlined how bubbles can lure investors who ought to know better."Many, many people who think it'll end badly also feel compelled to play," he said, giving the example of the <a target="_blank" href="https://www.businessinsider.com/ai-internet-dotcom-bubble-tech-stocks-nvidia-market-crash-gordon-2024-5">dot-com bubble</a> at the turn of this century."Almost anybody who wasn't a retail punter was looking at these things and saying, 'Well, it can't last. But having said that, if it lasts one more quarter and I'm not playing, I'll lose my job.' So you find a lot of people get forced into the late stages of a highly concentrated, very expensive, parabolic market."Ferguson also took aim at Nvidia, the chipmaker whose stock has surged more than 700% since the start of last year, valuing the company at north of $3 trillion."The more cutting edge the tech, the sooner obsolescence for your particular bit of tech kicks in," he warned.Cisco and Intel were big stars during the dot-com boom but they're "not even also runs in this one, so next time we have a Big Tech bubble, chances are Nvidia isn't even an also-run. It's probably not going to be a player in a decade's time."Ferguson recommended investors diversify their portfolios away from large-cap US growth stocks to limit their exposure if the tech bubble bursts.He suggested seeking bargains in small-cap and emerging-market indexes, and looking into alternative assets such as art, classic cars, and vintage wines that might escape future tax increases.The market watcher added that a crash can allow bold investors to buy quality assets on the cheap, and if the downturn is accompanied by a <a target="_blank" href="https://www.businessinsider.com/recession-outlook-economy-dimon-solomon-gundlach-hanke-unemployment-hard-landing-2024-3">recession</a>, interest rates could fall, boosting asset prices.

AI stocks are in a costly bubble — and Nvidia may wither like a dot-com darling, markets guru says

<ul class="summary-list"><li><keyword id="2430955" type="COMPANY" weightage="60" keywordseo="MicroStrategy">MicroStrategy</keyword> filed to sell as much as $1 billion in shares on Monday, partly to buy more <keyword id="6354947" type="UNKNOWN" weightage="60" keywordseo="bitcoin">bitcoin</keyword>.</li><li>Led by CEO <keyword id="10467759" type="PERSON" weightage="60" keywordseo="michael-saylor">Michael Saylor</keyword>, it already holds 92,079 bitcoins, currently valued at $3.6 billion.</li><li>The company also said it has completed its $500 million bond sale for its bitcoin strategy.</li></ul>Bitcoin bull Michael Saylor's <a href="https://markets.businessinsider.com/stocks/mstr-stock">MicroStrategy</a> plans to sell as much as $1 billion in common shares with an eye to adding to its huge holding in the cryptocurrency, it said in a filing with the Securities and Exchange Commission.The <a href="https://www.sec.gov/Archives/edgar/data/1050446/000119312521190150/d159028ds3asr.htm#toca159028_7">S-3 filing</a> for a "shelf offering" on Monday came as the business-intelligence software maker completed the sale of $500 million in high-yield senior secured notes, offered so it could buy more bitcoin.MicroStrategy said it may decide to sell $1 billion in shares in the shelf offering, which allow a company to issue securities to the public multiple times over a period, based on market conditions. It intends to use the proceeds for general corporate purposes, including additional investment in <a href="https://markets.businessinsider.com/currencies/btc-usd">bitcoin</a>, but has not decided how much to put toward any particular purpose, it said.Under the leadership of CEO Michael Saylor, one of the most vocal bitcoin proponents, MicroStrategy had purchased <a href="https://www.buybitcoinworldwide.com/treasuries/">more than 92,000 bitcoins</a> even before these moves. That hoard is currently valued at $3.6 billion, making the company the largest corporate holder of the digital asset. A newly formed subsidiary, MacroStrategy, is holding the bitcoin, MicroStrategy <a href="https://www.microstrategy.com/en/investor-relations/press/microstrategy-completes-500m-offering-of-senior-secured-notes-due-2028-with-bitcoin-use-of-proceeds_06-14-2021">said in a statement</a>.Shares in MicroStrategy were last trading 1% higher during Tuesday's pre-market session. Bitcoin was trading 2% higher around $40,000 as of 6:30 a.m. ET, but it is down more than 36% in the last two months.Saylor has previously said he <a href="https://markets.businessinsider.com/currencies/news/elon-musk-twitter-exchange-michael-saylor-prompted-tesla-buy-bitcoin-2021-3-1030231136">influenced Tesla</a>, the second-largest corporate bitcoin holder, to invest $1.5 billion in the digital currency. The MicroStrategy chief is the leading light in the <a href="https://markets.businessinsider.com/currencies/news/bitcoin-mining-council-launch-microstrategy-boss-michael-saylor-lead-2021-6-1030515039">recently formed Bitcoin Mining Council</a>, a group of North American <keyword id="2721952" type="PERSON" weightage="60" keywordseo="crypto">crypto</keyword> miners dedicated to tackling the issue of the industry's carbon footprint and improving sustainable mining practices. Read More: <a href="https://www.businessinsider.com/stocks-to-buy-for-strong-risk-adjusted-returns-goldman-sachs-2021-6" target="_blank" rel="noopener noreferrer">Goldman Sachs says buy these 37 stocks that will offer strong returns with minimal risk through year-end as growth names regain leadership</a>

MicroStrategy files to sell $1 billion in shares to add to its vast bitcoin treasure chest

<a href="http://people.hofstra.edu/geotrans/eng/ch7en/conc7en/stages_in_a_bubble.html">The 4 Stages Of A Bubble</a> (The Geography Of Transport Systems via Barry Ritholtz)
"Bubbles (financial manias) unfold in several stages," writes Jean-Paul Rodrigue of Hofstra University. But they go through four distinct stages. 1. Stealth - "The "smart money" gets invested in the asset class, often quietly and cautiously," as prices rise but " often completely unnoticed by the general population." 2. Awareness - Many investors and the media begin to notice the rise in prices. 3. Mania - During this phase everyone notices and is jumping in, while the institutional investors begin to pull out. "This phase is however not about logic, but a lot about psychology." 4. Blow-off - "A moment of epiphany (a trigger) arrives and everyone roughly at the same time realize that the situation has changed."
<div class="image-container" style="width:581px"><div class="image"></div><a href="http://people.hofstra.edu/geotrans/eng/ch7en/conc7en/stages_in_a_bubble.html">The Geography Of Transport Systems/Hofstra University</a></div>
<a href="http://online.wsj.com/article/SB10001424127887324100904578402572793628006.html?mod=WSJ_WealthAdviser_WhatsNews_3_3_Left"> Bank Of America Is Targeting Small Investors</a> (The Wall Street Journal)
Bank of America thinks small investors (i.e. those with between $50,000 and $250,000 to invest) think this pool of investors could be a "big new profit source," according to the WSJ. 
Merrill Edge, an online brokerage, is targeting small investors. Merrill Lynch advisors are working with those with $250,000 - $10 million in investible assets. And those with over $10 million are with Merrill's Private Banking and Investment Group.
<a href="http://www.businessinsider.com/kyle-bass-warns-against-japanese-stocks-2013-4">Kyle Bass Thinks Investors Buying Japanese Stocks Are Just Macro Tourists</a> (CNBC)
Hedge fund manager Kyle Bass is bearish on the yen and expects Japan to lose control of its bond markets. For those diving into Japanese stocks Bass says:
"There's really no great prescription here to "profiteer" from what is going on in Japan. I think it's really important, if you run a global portfolio, or you have a global investment portfolio of your own, it's really important to just not be long yen, and not be long Japanese assets.
"I know there are some people that own Japanese equities in this Pavlovian response to "weaker yen, buy equities," but you have to remember: the Japanese industry has been hollowed out over the last 20 years, very similar to how the U.S. industrial complex was hollowed out in the 1970s. 
"So, I think it's going to be very disappointing for those who own those equities, and I kind of think they are 'macro tourists'."
<a href="http://online.barrons.com/article/SB50001424052748704235404578402322310429526.html?mod=BOL_hpp_highlight_top&amp;cb=logged0.13034454367234516">Stocks Are Being Driven By 'Cheap Leverage'</a> (Barron's)
"Ketchup rather than blood is pumping through the market's veins," writes David Goldman, president of Macrostrategy in Barron's. "Our theme for some time is that the rise in stock prices is explained better by cheap leverage than by growth expectations. Investors are levering annuity-like cash flows from stable companies, above all in the consumer sectors."
The -1.5 percent yield on the five-year Treasury Inflation-Protected Securities (TIPS) is hard to accept as economists get more optimistic about U.S. economic growth. All signs point to a slower pace of growth.
<a href="http://www.businessinsider.com/jp-morgan-sp-500-inflection-points-2013-4">The Stock Market Pattern That Keeps Investors Up At Night</a> (JP Morgan Funds)
This chart from JP Morgan Funds' David Kelly shows the S&amp;P 500 index at various inflection points. As the stock market has hit record highs, some are wondering when it will correct and this chart shows that in the last 15 years after tremendous rallies, they have fallen precipitously. 
<table class="image-container" width="200"><tr><td><div class="image"></div>JP Morgan Funds</td></tr></table>

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MicroStrategy’s subsidiary takes on a $205 million loan to buy more Bitcoin

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