Spekulatius

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.

Polish interest rates. Oof:

Yep, money is getting tighter in some areas. Add to this the increase in risk free rates and the tightening becomes substantial: https://fred.stlouisfed.org/series/BAMLH0A0HYM2

ATVI (merger arb). Sold part of my HENKY (crystallizing tax losses) and bought AKZA (AKZOY) from proceeds.

4% risk free means that corporate bonds in the BBB- range trade at 7%, maybe higher if spreads go up. I think it will be enough to slow down the economy. One thing to keep in mind is that Powell just got re-confirmed and is pretty safe, especially with inflation being front and center with both parties and in the headline news.

I think Airbus (AIR.PA) is much better risk adjusted bet than BA. Better blance sheet, much better management and better products. WBD is too tough of a call to me with the knife fight in streaming. I agree on the merger arb opportunities.

The commodity supercycle is going to get cancelled by the next recession. Works every time.

Margin call time for the clowns:

These are the components of the CPI. The Fed wants to bring the inflation down from 8% to 2%, so the inflation for largest components (housing, food, transportation, energy) will have to come down, otherwise its mathematically impossible to get there:

Because his then intoxicated relative likely doesn’t have any money. As the insurance Bible says “Thee who can pay, get slapped with a lawsuit!”

Speks rule: If everyone predicts one thing it wont happen.

Why choose when you can combine the two - it’s called Cuba Libre.

AC erst ing inflation cant be good for insurance companies writing a long tail insurance. I would think that any underwriting assumes a certain inflation rates for the claims to be paid in the future. One measure I quickly look at when looking at an is ursnce co and the “length of the tail “ is to calculate the reserve to premium ratio. I think property insurers have a ratio of reserves /premiums of about 3 typically, which implies a 3 year tail (it takes 3 years to lay a claim on average). So you have exposure to 3 years if inflation. now if you underwrite with the assumption that we see 2% inflation in the next 3 years, but inflation is really 8% for threes years, well thats a 18% delta in payout. This get much more fun , if you think about long term care insurance, which had already underwriting issues before that and now get hit with an additional dash of inflation. Haven’t seen much issues yet, but I sure would not want to have exposure to this sector right now. I admit the above is all a simpletons view and there much more nuance to it.

You dont have to go to Japan- same is true in many rural areas in Europe. You can buy houses there dirt cheap. The village I grew up with had population of 1200 when I was born and has below 900 now. The same thing happens in many places, countries in Europe and even in the US. This is due to compounding effect of demographics and people (like me) moving away.

You say people do not understand the banking and monetary system? I am not surprised: