Spekulatius

You could buy an acre of land in the town I live to build on. We have a friend from town who bought a lake house (actually just a property with a tear down build on it) in Southern NH. Not a bad area but pretty remote from where we live (~1.5h away). We think he vastly overpaid - he bought in winter 2020/21. Probably too remote for AiBnB even, since the next restaurant is about 25 minutes away. Prices are being reduced a lot for similar properties in this areas (houses around lakes), since those are discretionary purchases. However, I also noticed that many smallish towns in NH seem to be much lively than before the pandemic. Example is Hillsborough NH which is a great neat little town with a bunch of great restaurants, I highly recommend a visit or stop if you are in the area. These towns have benefited from the structural changes from the pandemic and we saw many license plates from MA and CT etc there. I don’t see this going away and it’s great for them. Hillsboro https://goo.gl/maps/9VqXKNcmDkhnWcLT7

VISA and MC themselves only charge 0.2% though , the rest goes to other participants. Thats why everyone still uses VISA and MC because replacing them isn’t worth it. The blockchain needs to be maintained and because it is terrible inefficient relative to centralized networks the transaction costs are terrible (see the Etherium gas fees). They can never beat a simple centralized networks on transaction speed and cost. I would even think that consumer protection is an issue. If you buy and pay for something , and the product or service is defective , there would be no recourse with blockchain, depending on how it’s designed. Who would handle request to reverse a transaction if noone is responsible? This blockchain stuff makes no sense, if you think it through from a simple user perspective.

Blockchain offers no advantage for financial transactions. What problem would moving on a blockchain solve? For sure would make any network way slower. it might be something for really huge transactions, but to buy a coffee or even pay a $200 bill it would increase the direction quite a bit. The problem with moving off from Visa and MC is how would Apple include all the merchants? The vast majority of the world does not live within the Apple ecosystem. We have already stuff like cash app, but even those go mostly over VISA and MC rails.

No way Berkshire can do 15% earnings growth. I even take the under on 12% from current levels, unless we have persistently high inflation.

He didn’t finish that thought, but clearly with weakening demand, and more new supply (and increasing existing home supply), house price growth will slow sharply. Rent growth should slow too. (But house prices will be up 20%+ year-over-year in the Case-Shiller report next week due to reporting lags!) If I had to guess - housing prices are already down 5-10% from the peak earlier this year, it just hasn't shown up in the numbers yet.

Germany has these facilities too, but they probably have been idled too a long time ago. There is a lot of things that can be done, if we get serious about this. Germany should consider themselves in an war with energy being the fulcrum commodity and act accordingly. It's going to happen but it takes time. The new leadership (Scholz) is already an incremental improvement over the past one (Merkel), even though he is member of the socialist party (SPD) versus the conservatives (CDU, Merkel). I take a "socialist" with common sense over a "conservative" without any day. Maybe we are seeing the same thing in Brazil - Lula was governing quite well in his day compared to Bolsonaro, I think, despite the fact that he was booked for bribery later.

https://twitter.com/RammityCap/status/1529931356758609921?s=20&t=RYjTZFbIYL6i79fPl3vluw

The focus should be on making alternative energy more competitive/cheaper rather than making hydrocarbon based energy more expensive. As for Germany, getting natural gas from the US rather than Russia seems to be a no-brainer move right now, but won't come cheap (LNG is more expensive than pipeline delivery). I think for both parties, LT contracts with fixed pricing or at least pricing brackets makes sense. Germany is now restarting the coal wheezers for electricity generation and people are told that thermostats are going to be regulated down (in multifamily housing, heating is often included in rents) next winter. That's what failed energy policy looks like.

I just listened to this one and it's excellent. The issue with getting people to work in the industry is serious one and it's not something that is going to change. If you are technically inclined and deciding on a career - would you consider getting into mining or petroleum engineering? Quite frankly, such a choice would make no sense, because even now, you can make way more money in tech. The industry needs to incentivize people enough with great profit sharing plans that people actually can get rich there rather than just pull a comfortable salary for a couple of years in boom years and then have to live and work in fear of getting laid off for half a decade when the energy bust comes which is inevitable. We may need an immigration program to get people from other countries to work here for example. Back when Chavez started to wreck PDVSA a lot of skilled labor came to the US (one of my buddies worked there as a material scientiest and moved to the US).

Why is $20k a fundamental barrier? Which fundamentals are we talking about? Did crypto rebound because Musk was pumping dodge coin on Sunday morning 2AM?

Thx, wasn’t aware of this. It helps that the Uk has no car industry to speak of. Also, the hybrid loophole is a a huge one as the industry is trending toward hybrids anyways. I think there will still be a lot of gas sold in 2040 and even 2050 because the lifespan of cars has been growing and now cars on average are on the road for 13 years and I think it will be 15 years by that time. Your local gas station will be around for a long time, most likely.

Tobacco is much better business than oil because Capex is minimal and there is no risk that prices are going to fall by 50%. I understand that most people here are bullish on energy prices, but 50% + price drops for the commodity are well within the realm of possible. I say this much - if prices fall to $90/ brl, there will be 25%+ losses in energy stocks in short order from current levels and higher with small cap/ micro cap.

@jfan I agree on Taleb style getting more verbose. His best book by far is his first “Fooled by randomness” and quite frankly, that’s all one needs to read rom him, as the rest does not add all that much value. I think the idea off an absorbing barrier where a medium/system becomes less valuable and useful with decreasing usage introduces some fragility that is also inherent with other systems like social networks etc. In a way BTC is just that. Gold has the same issue and there were indeed times when gold was not useful, but you could bury it in your yard and dig it out a few years later and you would be good to go. This is basically the Lindy principle (the longer something lasts, the safer it becomes). So I own a little gold as an inflation hedge but overall I stick with stuff that has cash flows that can be valued. BTC is probably big enough that it won’t go through and absorbing barrier, but I think something like Dogecoin and many more of those coins probably and maybe even Ethereum which it’s functionality as a transaction medium does not turn out to be what the bulls think it will.

There is no country that plans to phase out the sale of ICE vehicle by 2030. The earliest I have seen is the EU planning to phase out the sale of ICE vehicles by 2035. I think there is just one or two states in the US that perhaps plans to end sales of ICE vehicles by 2035, but that’s not a sure thing. However, even if that’s is true, stopping the sale of new ICE still means that a lot of ICE vehicles will be on the roads and need gas 10 years after the sales have stopped, so even in 2045, we will consume a lot of gas. Then there is the fact that this does not apply to trucks and other modes of transportation like rail, which consume mostly diesel. I don’t see why it matters if gasoline consumption starts to go down after 2045, because any news field that is developed now, will long be depleted by then. Shale oil wells deplete failure quickly and most oil is gone in 3 years and after that they have a long tail of much lower production. Huge oil field in the deep sea mostly last perhaps 10 years and then go into a fairly rapid decline (unless satellite fields are found). Anyways, even if all this happens , oil demand will continue to increase slowly for another 25 years at least so all this does not really matter. None of this has anything to do with what happens to prices in the next 6 month be my take is that the whole Ukraine affair should not be that big of a deal for crude market because the Russian crude does not disappear from the world market, at least not directly. Now NG is a different matter and here we might have a real shortage as the Russian gas more or less disappears for quite some time and the shortfall needs to be made up from different sources.

Great material for infrared reflectors, its a good electronic conductors when high durability is required. Does not oxidize at high temperatures, looks good as jewelry and has been used as a store of value for more than 5000 years (lindy pricinple). You can dig out 5000 year old gold coins and they are basically as good as new, but more valuable (because of collectors value). One of the best critiques of Bitcoin and cryptocurrencies comes from Taleb, he talks about an absorbing barrier. What that means is that crypto becomes more vulnerable when it is used less and hence becomes cheaper. Any cryptocurrencies has to deal with what he calls an “absorbing barrier” at which point a cryptocurrency may become useless as it falls in value. I think this partly explains why the volatility of all cryptocurrencies is so high. Ironically a cryptocurrency becomes less of a buy and more fragile as it falls in value, since there is no inherent value other than network usage to fall back on. https://www.fooledbyrandomness.com/BTC-QF.pdf

Except its not the end of quarter. Anyways, energy has become a momentum trade with the boat fully loaded at one side. Have you seen single bear lately? Anyways the @Spekulatius rules says that whatever everyone expects is not going to happen. I think energy prices are going back to where they were before Ukraine eventually, since the Russian oil still makes it to market just through other channels. NG however should stay elevated since the Russian supply to Europe is dwindling and eventually is going to disappear and need to be replaced from elsewhere. Contrary to crude, the Russians cannot just redirect their NG elsewhere, their NG will remain stranded for quite some time, until they can build infrastructure to sent it to China etc.

Severodonetsk has become another Stalingrad. Absolutely nuts. If you ever watched the movie with Jude law and Ed Harris, at the end this will look like the “impossible shot scene”. Supposedly one guy did not make the gap, but it’s not shown. Similar to Stalingrad for the Germans, the city is sort of worthless strategically, but has become a trophy price for the Russians. The Ukrainians using this to draw in the Russian resources in a meat grinder (at least that what it looks like)

So it trades at 4x EV/ Cash flow. That's actually not that cheap for an E&P producer. What's their value add ? They are not doing any exploration and the production itself is apparently outsourced, if I understand this correctly.

Several blogs talk about this including the war in Ukraine youtube channel. Here is a CBS article. Many of the ukrainian volunteer/conscripts units take heavy losses upon contact with the enemy due to lack of heavy weapons and training. Keep in mind that most casualties are due to artillery right now and while Ukraine has received some from the west, it isn't enough to counter Russian firepower. Those conscript units often have no artillery whatsoever. https://www.cbsnews.com/video/ukrainian-forces-lacking-essential-equipment/ We should be producing hundreds of Howitzers right now, so we can sent them to Ukraine. Enough artillery in Ukrainian hands and the Russians become mincemeat. They are very good at using them, but they don't have enough and in addition ammunition for their Russian made (which is still the vast majority of their existing material) are running out, because it's only produced in Russia.

The Fed has no way increase energy supply. How would they do that? The Fed can reduce demand via putting the breaks on the economy and thats why they are raising interest rates. Even if the US would be able to increase crude supply by 10%, it would be 1% of total crude supply in the world, not enough to make a difference. It seems that all our economies run too hot and the supply of goods isn’t keeping up. And it’s not just energy either, semis, cars , ag goods, housing, you name it. So now we are reducing demand with a mild recession most likely.

Yep, thats it in a nutshell. Who cares what Putin thinks at this point. His nukes are useless - using them even on tactical level will get NATO involved (likely with a massive conventional response ) and makes him lose the war very quickly. Just remember that we had wars between nuclear armed parties before, it is nothing new.

The difference between Afghanistan and a Ukraine is that the people of Ukraine are willing to fight for their independence, while the Afghans were not. So, if we supply the Ukraine with enough weapons, Ukraine will defend themselves and the Russians will continue to get into a meat drinker until their army is in shreds and the Ukraine can go I into the offensive and win their territory back. Russia is afraid to mobilize because it will risk considerable civil unrest and their conscripts have to will to fight could repeat the 1917, which led to a Revolution. The US and the west has to start ramping production of weapons to supply the Ukraine with everything, Advanced artillery, tanks, armored vehicles, Anti tank, aircraft, anti aircraft weapons, fins body armor, ammo, basic supplies - everything to keep their army going. It will be expensive but much cheaper than dealing with Putin if he wins.

This is basically the inflation is transitory argument that got pretty weak in late 2021, I think. I cant go into detail but in my job, I am seeing cost increases in the order of 10% pretty much across the board, give or take. The firm I am working for is also increasing pricing by similar magnitude starting late. 2021. Something like this has never happened before, even during the boom time in 1999. These are blanked increases and there is very little to no push back, which is pretty much unheard of. This all looks like inflation really got rolling and starts to feeds on itself, these are not “supply chain ripples” any more than will go away by itself. I think the inflation is just about everywhere and thats why the Fed is putting the break on the pedal finally and will reduce demand via increased interest rates to slow down the economy. Its the only way, because we are unable to increase the supply apparently.

5% interest rates would still be negative with 8% inflation, that's the issue. We are likely going from negative to less negative and even that is a problem.

I don't think the Russian can get Odessa. They have trouble to even get Severodonetsk and they are losing tons of material and troops. bthe west just has to keep supplying more and better weapons and the Russian army will just expend themselves in a meat grinder to gain a few miles here and there. The Russian Ruble is up because the Russians can't buy much with it due to sanctions so the proceeds from energy sales just pile up. In the mean time the rest of their economy is slowly shutting down.