Spekulatius

GMED

@mcliu yes rising US production was factor but there were several more - prices were relatively high to begin with (Crimean incident) and then Saudi Arabia decided to fight back for market share and opened the spigot. That was really what trashed prices all of a sudden. Iran also had reduced exports before and came back in 2014/2015. In other words, it was more the Opecs doing than the US, although Opec's moves were triggered by the increased US production to some extend. FWIW, demand destruction is not a binary thing that sets in at a specific price. It is a gradual thing that slowly kicks in when prices move higher. Same with supplies.

Less usage by some is still less usage. You will see the biggest reduction in usage in emerging markets, imo. Anyways, drilling in the US has very little impact on energy prices, it's more impacted by prices than any political posturing or ESG. US oil production is about 11m BRL and was down ~800K in 2020, during the Trump presidency. That had nothing to do with politics too, it was due to low prices and lack of demand. US production is rising again and we may get back to peak production levels from 2019 this year. All those changes are tiny compared to the Russian oil production of 11M brl/day which may get off market if sanctions work and is roughly equal to US production. Simple math. I actually agree that canceling the pipelines is a mistake. However, i don't think it has a major impact on US oil production. These pipes would take years to build anyways, so earliest impact would have been in 2024 or thereabouts even in the best case scenario.

Less usage. It's what higher prices do.

Yes, I get this example. Reflectivity is a real thing when you are in a confidence business like any company in the financial sector. I just don’t think Lehman would have made it either way.

I would seriously doubt that Lehman and a bear sterns failed because of short sellers. Lehman ran at a ~30x leveraged ratio going into the GFC with a lot of impaired assets. There was no way they could remain solvent. They were already dead, they just didn’t know it yet in 2008. Short selling has nothing to do with this.

I think the end game is that the iron curtain is going to go up again, with different borders this time. This is what it’s going to boil down to.

One fellow stated that naked short selling has driven thousand of companies out of business. Can you tell me one that was driven out of business by short selling, and more specifically naked short selling? People are mixing up cause and effect here. Even Overstock or Gamestock were not driven out of business by short selling. Nobody mentions promotes like 90% of the SPAC’s, Chamath and many others in this lengthy TV special.

His KEDM letter is worth considering, it is quite an extensive piece of work. I do think his risk management is no nonexistent. There is a reason his track record before 2018 or so disappeared. Also, take his Twitter takes with a grain is salt - first he talks about owning a “fukton” of RSX then it’s just a few hundred BP of losses. He also was long a Kasachstan Fintech that lost 2/3 of its value very quickly.

I don’t know - many perceived differences wouldn’t survive a blind test. that’s true for many things, but especially spirits. https://www.npr.org/2018/03/01/590022606/is-there-really-a-difference-between-expensive-vodka-and-cheap-vodka

@nafregnum Thanks, I missed that. Very important distinction.

Join a local Angel investing Keiretsu or at least get to know some people from there.

Interesting. Shell buying crude for….$28.5/ brl from the Russians including delivery. https://finance.yahoo.com/news/shell-buys-russia-flagship-urals-161930283.html I don’t think the Chinese and North Koreans will pay more. If this continues, they are sooo screwed.

Any risk due to the Ukraine invasion hiding somewhere within insurers? I don’t think much insurance was written in Ukraine, but business interruption insurance or is insurance for stranded assets like AER planes could require some payouts. Thats not a BRK specific problem, but I think BRK due to their size may see some of this.

We will see. My thinking is that as long as the Ukrainian are willing to fight, we should help them. It’s not that anyone really will put his life on the line, because he gets encouragement from someone else on TV. Yes, maybe Putin can declare territorial victory of some sorts, but I think Russia swallowed a brick and sanctions will have the economy set back for a decade and they become another Iran. As for Refugees, I am going to flip this around and state that this is a great opportunity for any demographically challenge European countries try to replenish ranks and get a lot of hard working people that are way easier to integrate than the million of Syrians.

Expensive vodka is a waste of money. Vodka has no taste basically.

I think a lot of Russian oil will make it to the market, western boycott or not. It will be funneled through Chinese or other sources who buy it at a deep discount most likely. I think we will see Supply reduction from Russia, but it is not like the whole production is just going to disappear. Anyways, Russia oil production is ~11M barrel and consumption is ~3.6 M barrel (daily), so the export gap is ~7.4M , but I think large part of this will make it to the market. I also think that due to sanctions, it is likely that Russian oil production is going to shrink in the longer run. For comparison, the US oil production in 2021 was about the same ~11M barrel.

US production will be back to pre pandemic levels in 2022: https://www.cnbc.com/2021/12/30/us-oil-production-to-increase-further-in-2022-oil-expert-dan-yergin.html Venezuela doubled oil production in 2021: https://www.aljazeera.com/economy/2021/12/27/how-venezuela-this-year-almost-doubled-its-oil-output

Small adds in PAH3 / POAHY, ROST, FYBR.

I think it is important to note that Iraq attacked Iran and not the other way around. I don't think they are that expansionists either, but they do sponsor terrorism (Syria, Lebanon to exert influence ). The Iran sees themselves surrounded by enemies (US, Iraq, Israel, Saudis), even the Russians. They see having nuke as an insurance policy. I believe most of their actions are more defensive than offensive by intent. Not that I think the hardline Mullahs are nice guys, but i think there are a lot of people underneath them that can be reasoned with.

I hope they and their family stay safe and they can relocate to a safe space. @Liberty keep us posted.

Wel wil definitely see some impact from sanctions in many companies. For example, I was surprised that ~4% of VISA’s business is related to Russia and Ukraine (including cross border revenues). European will take the biggest hit - the European car makers struggle with supply chain issues due to lack of wire harnesses, which were produced in western Ukraine. This could well cause a recession there.

@Pelagic thanks for sharing a perspective on how the war goes. It looks like. It jut the Russian economy , but also the Russian military will get wrecked. this will be tough to rebuild too with shortages everywhere.

Fair, my comment was related to the following claim: (a) Likelihood of western nations going in after China with their warships, soldiers, planes etc is close to zero I believer believe the US will absolutely fight for their own interests, The chips that Taiwan are supplying are essay, as is Taiwan from a geostrategic POV. It was @wabuffo who countered this argument.

Yes, China would unlock tremendous value if they were to democratize. Just a few years ago, it very much seemed like it would happen, but now they have been walking backwards and I think the equity valuations reflect this. As for monetary policy keep in mind that with the Yuan pegged to the USD, their monetary policy is tied to US monetary policy. If they want to go on their own, they would need to let go of the currency peg.