Viking
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3 hours ago, Spekulatius said:
The bridge from Kerch to Crimea needed to go, so that’s great news, and it looks like it’s mostly gone. It may need another strike to totally severe and make it unusable.
We can see now the broad strokes of a giant encirclement. First the 15-20k army group north of Dnipro is pinned down and probably get’s destroyed. Then I think Ukraine can attack and cut off the land bridge to Crimea and whatever is there going to be sealed off as well.
Frigging Putin can end this - take the balls and go home. Claim it all was the plan to begin with and Ukraine is de-nazified successfully. Apply doublethink playbook. Blame whatever failure there is on his army generals and throw them out of the window or sent them to Siberia. It has been done before and that’s how I see the war ending.
It looks like Russia will view this as an escalation of the war by Ukraine. In this game of chess, what will be Putin’s next move?—————
Impact of Kerch bridge blast will be felt all the way to the Kremlin
…..When the Russian president opened its road span on 15 May 2018, driving an orange Kamaz truck across the bridge, he boasted of its significance.
“In different historical epochs, even under the tsar priests, people dreamed of building this bridge. Then they returned to this [idea] in the 1930s, the 40s, the 50s. And finally, thanks to your work and your talent, the miracle has happened.”
… How Moscow responds is the big question, but one that had been looming ever more powerfully as Ukraine has successfully pressed its counteroffensive in recent weeks amid mounting disquiet among Russian elites and commentators over the conduct of Putin’s war.
In April, Dmitry Medvedev, former Russian president and prime minister, and currently deputy chair of the Security Council of Russia, said: “One of the Ukrainian generals talked about the need to strike at the Crimean Bridge. I hope he understands what the retaliatory target will be.”
At the very least it is a huge propaganda victory for Kyiv that will be held up as a sign that not only is it unafraid of Putin’s nuclear threats but that it believes it is winning the war.
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The Ukraine war has been a disaster for Russia. The longer it goes on the weaker Russia becomes. The weaker Russia becomes the less influence it has in the former Soviet sphere. China is licking its chops. Ukraine, with its success dramatically weakening Russia’s military, is now helping China grow its influence. (Makes one wonder why China is not sending Ukraine weapons :-) As this becomes more obvious, got to wonder when Russian’s wake up to the reality of what is going on.
Putin invaded Ukraine to re-establish Russia’s former empire/influence/glory. It is becoming more and more clear he is achieving the opposite: Russia’s standing in its former empire is deteriorating badly. The decline in its influence is accelerating. And glory has been replaced with defeat and shame. I am starting to wonder how long the war can continue along its current trajectory…
—————A Distracted Russia Is Losing Its Grip on Its Old Soviet Sphere
- https://www.nytimes.com/2022/10/08/world/asia/russia-putin-soviet.html
Russia’s domination of Central Asia and the Caucasus region is unraveling as the Kremlin focuses on the war in Ukraine — and border violence is flaring.
… “Until Ukraine, China and Russia were not interested in open competition in Central Asia,” said Asel Doolotkeldieva, a senior lecturer at the OSCE Academy in Bishkek, a center for postgraduate studies focused on security issues. “There was a tacit division of labor: security for Russia, economics for China. But Russia is not doing its job anymore. It has shown that it is unable, or unwilling, to protect the region.”
….. “Putin is no longer the great invincible leader that everyone wants to meet,” said Emil Dzhuraev, a researcher in Bishkek with Crossroads Central Asia, a research group. “He has lost his aura.”
By contrast, Mr. Xi has become more assertive. On a visit to Kazakhstan last month, he pledged to “resolutely support Kazakhstan in the defense of its independence, sovereignty and territorial integrity,” a remark widely interpreted as a warning to Moscow not to try anything.”
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When you look at the various asset classes, so far in 2022, bonds (@-20%) and stocks (@-30%) have gotten absolutely crushed. The clear winner - and its not even close - has been cash. With an average duration of 1.2 years at Dec 31 and still the same at June 30, Fairfax’s $35 billion bond portfolio is as close to cash as an insurance company can get. This positioning is shaping up to be a massive winner for future Fairfax shareholders.
There were costs to moving to this very low duration.
1.) Interest income was much lower than it otherwise would have been in past years. But this cost was largely borne by past shareholders.2.) Fairfax in 2022 is reporting large mark to market losses as its bond portfolio is revalued as yields across the curve move to much higher levels. This cost is being borne by current Fairfax shareholders.
There are big benefits of the move to very low duration.
1.) Fairfax is immediately able to earn much higher interest income on its very large cash balances. And as bonds mature the bonds will be reinvested at much higher yields (with 1.2 year average duration lots of bonds can be reinvested each quarter).
2.) in the future, if bond yields fall, Fairfax will record large mark to market gains on its bond portfolio.
These benefits will be reaped by Fairfax shareholders in future quarters and years.
How big will the benefits be? Well, that will depend on a number of factors:
1.) how high do interest rates go?
2.) do spreads widen?
3.) does Fairfax extend duration?
4.) does Fairfax shift into higher yielding munis/corporates etc.
The math of the impact of higher interest rates on interest income on a $35 billion bond portfolio is pretty compelling. (For reference, interest income was less than $500 million in 2021.)1.) 3% = $1.05 billion = $44/share (pre-tax)
2.) 3.5% = $1.23 billion = $52/share
3.) 4% = $1.4 billion = $59/share
4.) 4.5% = $1.58 million = $66/share
My guess is Fairfax’s run rate yield on their bond portfolio will be over 3% at the end of Q3 and perhaps approaching 3.5% by year end 2022 (setting them up Jan 1 to be on track to earn $1.2 billion in interest income in 2023).
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The Fed is telegraphing the terminal Fed funds rate to go to 4.5% and stay there until late 2023. If this happens, both bonds and stocks will likely continue to sell off and cash will continue to outperform.
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8 hours ago, Rustycage said:
Some good advice in this thread. I’m aiming at 10-15 holdings: I’d like to concentrate it further but I think it would affect the “sleep at night” factor
One quote I always think about was from Andrew Jones in “The Art of Value Investing”: “if the only way you can get comfortable about an idea is to own less of it, to my mind that tells you something about the quality of the idea”. He basically says to look elsewhere if you won’t make something a 5%+ position. Part of the reason I don’t bother with tracker positions
I use sell offs as an input. If a stock i own goes down and i:1.) get worried (my gut) it usually means my understanding/thesis is weak.
2.) want to but more (my gut) it usually means i am on to something.
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Time to take a closer look at Teck Resources? Coal and copper (with a big copper mine coming on stream shortly)…
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So what did we learn today?
1.) we are in a new geopolitical world. And the middle east is either neutral (and simply looking out for its own interests) or aligned more closely with the pro-authoritarian block (Russia/China) than the West. Biden’s calling out of the Saudi prince is having serious economic consequences. Not a surprise.
2.) OPEC wants $100 oil (average). I think it will get it. And as we come out of this economic ‘gully’ and the global economy expands, $150 oil is looking pretty likely to me. (Also because Western governments/ESG will not allow supply to increase materially.)3.) as oil prices stick at $100, and move higher on signs of economic strength ($150), inflation will continue to remain elevated.
4.) central banks will need to keep interest rates higher for longer.
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I am starting to drink the Kool-Aid that high inflation (4-5% on average) might be with us for years. With lots of volatility. Up to 8% (now). Maybe down to 3 or 4% in a year (mild recession). And than back up to 5 or 6% in 2024 (as the global economy picks up). I think the Fed’s target of 2% is a pipe-dream right now - unless we get a severe global recession.
—————-Fed seems committed to positive real interest rates across the curve. If inflation stays elevated for years then interest rates likely also remain elevated for years. The question is how does all that cheap debt get rolled over at much higher rates (US government i am looking at you)?
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Persistently high inflation. And historically high debt to GDP levels in most Western countries. Financial repression like we saw in the late 1940’s? Not what the Fed is saying today… The super interesting thing today is how out of step the Fed is from other Western central banks (Europe, Japan, Australia) where i think they view financial repression as the preferred policy option (let high inflation rip and keep interest rates low for as long as it takes to bring real debt to GDP levels into line).
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2 hours ago, maxthetrade said:
Position sizing is very important! In general I agree with you but you have to take into account different goals and abilities. Would you concentrate if you're already rich and have way more than you need?
When I was 25 I didn't mind to put 100% of my portfolio in one name (and did so), today I wouldn't do that under almost any circumstances.
I'm not Druckenmiller, Buffett or Li Lu, so I don't invest like them. Especially Druckenmiller is an enigma to me, I couldn't invest like him if my life would depend on it. I guess I'm no good at macro investing.
@maxthetrade i agree entirely. The ‘problem’ i am having is i am learning old habits are hard to change (especially when they have worked well for +20 years). -
Well it certainly looks like the air is coming out of the greater Vancouver real estate market. Unit sales are at something like a 30 year low; which is telling given significant population growth. Inventory is growing. And, as expected, prices are coming down (much more in the suburbs). But benchmark prices are still up 4% from a year ago. The problem today is sellers remain anchored to Feb/March bubble highs. And because of much higher interest rates, what buyers can pay has dropped considerably. So we have a bit of a staring contest going on between sellers and buyers. I was wondering if we were going to see buyers step up in Sept and we now have our answer (a resounding no).
—————it is fascinating to compare US and Canadian mortgage markets. In Canada today a regular 5 year fixed or variable can be had for around 5%; much lower than the US which i think is closer to 7% (30 year fixed). That is a big spread. That has a very big impact on house prices (affordability).
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i am beginning to wonder if we do not see the Bank of Canada follow Australia and pivot dovish. Australia also has a property bubble like Canada - and i think like Canada mortgages are short term in nature (5 years or less). Short term mortgages become a huge problem if we see years of much higher mortgage rates. So i am wondering if the Canadian $ is not the sacrificial lamb. I was thinking Canada’s oil/resource position would support a stronger C$. But weakness in housing likely trumps strength in resources.
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- https://members.rebgv.org/news/REBGV-Stats-Pkg-Sept-2022.pdf
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Great topic. Super important And severely under-appreciated by most investors. The financial services industry cannot suggest an investor should concentrate their portfolio. They will likely get sued / fired / disbarred if an investor blows up their portfolio (lots likely would given enough time). And so we are all taught that concentrating is dumb, stupid, idiotic, gambling…
I love Druckenmiller’s thinking on position sizing. This is from the ‘Stanley Druckenmiller interview (2018)’ thread:
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Great interview with Druckenmiller from June 9, 2022 (link at bottom). Some thoughts:
1.) to do what Druckenmiller does (in terms of strategy) you pretty much need to be a full time investor; at a minimum very committed/focused. That is my (Viking’s) opinion.
2.) where are we now? 6 months into bear market that has some more room to run.
- there is no historical analogue for the situation today
- he is trying to be open minded about all the possible outcomes
3.) what are you doing today? Waiting for a fat pitch.
- low conviction now- had been aggressively shorting
- owns some oil
4.) general strategy:- looks out 12-18 months
- develops high conviction idea 3-4 times per year
- put all eggs in one basket; watch very closely
5.) lesson from Soros: sizing is 70-80% of the equation
- its not whether you are right or wrong
- its how much you make when you are right
- and how much you lose when you are wrong
6.) are you on a hot or cold streak (like a batter in baseball)?
- know the difference; size positions accordingly7.) actual mechanics when you find an opportunity
- intuition says yes; also fits macro view
- buy
- then do the analysis
- get out if it doesn’t pan out
- if you wait to but you may miss the first big move
8.) current set up:
- high oil prices
- rising interest rates
- rising US$
- has ALWAYS BEEN TERRIBLE for corporate earnings looking forward
9.) advice for new investor
- DO NOT INVEST IN PRESENT
- envision the world in 12-18 months and what will drive security prices
- focus on what will move the stock (learned this from his original mentor); what will be the catalyst
- how are people going to think differently in 18-24 months about the security from what they are thinking today; it is change that moves the security.
10.) macro investors perform best in bear markets
- perhaps that is why so many macro people are so bearish
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2 minutes ago, stahleyp said:
https://www.pionline.com/investing/druckenmiller-says-risk-reward-stocks-worst-hes-seen
He's not dumb...but he's not right a lot of the time either. In fact, I'd guess he's been more wrong then right the past 10 years (maybe even 15).
That was from May of 2020!
The important point is what is being discussed on another thread: position sizing. What matters is not if Druckenmiller is ‘right’ or ‘wrong’ at any point in time (like what he thinks the day he is interviewed). What matters is how much you make when you are right and how much you lose when you are wrong. All Druckenmiller is saying is right now he does not have the conviction to make a big bet. Given the set up i outlined above that sounds pretty rational to me.
—————Now if the data quickly turns then a rational investor would also pivot. Perhaps on Friday we learn the US job market has stalled out and unemployment is rising. Or global economic data gets much worse. Or something breaks in global financial plumbing - causing the Fed to pivot back to QE. That ‘be open minded’ thing…
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We have:
1.) spiking interest rates - thank you Fed
2.) spiking US$
3.) rising oil prices - thank you OPEC
4.) persistently high inflation - increasingly driven by persistently strong labour market (check out the multi-year increase rail workers just got…).
What do you think happens to corporate profits with this set up? Drukenmiller is not a dummy.
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Here is a quote of Druckenmiller’s from the CNBC Seeking Alpha conference just held:
STANLEY DRUCKENMILLER: …. But right now, I like everything I’m hearing out of the Fed, and I hope they finish the job. They made a big mistake. They seem to have owned it, but it’s easy to own it when employment is strong. Let’s see what happens if we get a hard landing. I just hope they stick to their guns because this stuff was terrible in the ’70s. You have to slay the dragon. And the chair is right. You’re probably going to have some pain.
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The Fed is in the Disney phase of tightening - employment is strong. Can the Fed continue to do what is necessary to slay inflation when the economy turns down hard and employment weakens a great deal? We should have our answer by the end of 2023. Given this Feds track record i am not optimistic - but i remain open minded (to steal one of Druckenmiller’s favourite lines.
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2 hours ago, Parsad said:
It looks like things are starting to slowdown nicely...the FED should be careful how much they raise rates from here and how fast. I would imagine no more than a 50 basis point rate hike next and maybe even do a couple of 25 basis point hikes over a couple of months rather than at once. I think if they do this they will maintain a slow expansion...probably not 2% inflation, but acceptable levels of inflation and an economy still growing. Cheers!
https://www.yahoo.com/news/u-manufacturing-activity-slowest-almost-140513525.html
@Parsad i think you are far too optimistic with your suggestions of what the Fed should do. Most people seem to think inflationary pressures are magically going to disappear… like the ending of a Disney movie. As soon as financial markets get a whiff the Fed might be slowing increases (or done) they will rip much, much higher. Stocks will pop. Bond yields will come down (further out on the curve). Credit spreads will tighten. The US$ will sell off. In short financial conditions will ease. (We saw this movie play out mid-June to mid-August.) And the Fed will be screwed.History teaches us there is likely only one way to solve an embedded inflation problem (like we have now). And that is a Paul Volker type of tightening that last much longer than 6 months and that likely causes a more than mild recession. Has a recession happened? No. Is it coming? Given the strong employment reports, no. The fever has not broke yet.
—————The dilemma the Fed has today is the rest of the world cannot handle what the US is executing. So something will likely break (like what almost happened in Japan 2 weeks ago and the UK last week). If the plumbing of the financial system breaks the Fed will have to pivot. And then inflation will likely roar again. And then Powell likely looks for a new job.
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Commodities will rip higher at the first sign of an economic expansion. Because production is supply constrained. And that will fuel inflation. Oil, steel and lumber are all on my watch list for when we get to the next expansion. Jeff Currie has an interesting theory about the inflation of the 1970’s… he said perhaps one of the reasons it lasted so long because it took 7-8 years to solve the significant supply constraints that existed at the beginning of the 1970’s. i wonder if we do not have a similar set up today. This means It wasn’t just Volker that slayed the 1970’s inflation dragon. If that is true, then we could see persistently high inflation for many years (because ESG/government policy will ensure new supply capacity does not get built out on the scale needed to happen).
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What we are learning is how well positioned the US is today. The country is economically positioned much better than any other major economy in the world. And it is not even close.
- China? Property bubble is popping. Xi is returning country to its communist roots. Globalization is dead. Zero covid is a joke. Its like the guy running North Korea has a long lost brother who we discover is now running China (for life). Happy thought for the day.
- Western Europe: without cheap energy you are screwed. Will take years to fix. Higher interest rates will kill southern Europe. The ECB is screwed.- Japan: economy can only function if interest rates remain at zero. Good luck with that if inflation remains elevated for years.
- Canada: housing bubble is popping. Only question is how hard is the landing. Immigration, resources and having US as neighbour will get country through the tough period coming. -
1 hour ago, StubbleJumper said:
@Viking Thanks for the update on the equities. It provides a more precise view of what we knew was going on -- there will be a mark-to-market loss reported when Q3 gets published in November, and then the benefit of the takeovers won't likely show up until Q1 2023. So, the headline EPS number will have a M2M loss on equities of $310m, and then looking at the fixed income sensitivity table published on page 20 of the Q2, a 100 bps parallel shift in the yield curve would be a mark-to-market hit to the bond portfolio of $263.2m. Call it a M2M loss on investments of $500-600m when the numbers are released.
The headline numbers won't be pretty, but maybe it'll set up FFH to initiate a buyback at favourable prices.
SJ
Stubble, yes, Q3 reported results could be ugly:1.) mark to market equities -$350
- my estimates are usually light (of whatever the trend is)
2.) mark to market bonds -$500
- i think the move in rates was larger than Q1 or Q2. In Q2 the loss from bonds was +$400 million?
3.) hit from hurricane Ian could be substantial; RBC is saying large size of losses could hit reinsurers like Fairfax hard.
- this will be the big unknown going into earnings.
———-—Looking past Q3 earnings we will have BV with:
1.) equities valued at close to bear market lows
2.) bonds valued at close to 4% treasury yields across the curve
3.) hard market in reinsurance
Bottom line, book value will have digested pretty momentous changes in financial markets. If Fairfax has been able extend duration the earnings power of the company will be very good. And the opportunity to grow book value will be large.
—————i think you were thinking FFH could get to US$450 during hurricane season… well done! Perhaps we see US$400 if Mr Market does not like Q3 results and the overall market continues to sell off. One can hope. I am back up to 40% cash and would love to add to my position
The fly in the ointment to getting a much lower share price might be the pet insurance business closing. That could be a big catalyst for shares. When they did the deal Fairfax said 2H closure. During Q2 conference call i think Prem said ‘next quarter’.
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Here is an update of Fairfax's equity holdings for Q3. Bottom line, equity holdings are up $372 million. It is a tale of 2 cities: the mark to market bucket was down a bunch and the associates equity accounted / consolidated equities are up a bunch:
- mark to market/derivatives - $310 million = @ - $13/share
- associates - equity accounted + $576 million
- consolidated equities + $104 million
Total + $372 million
Movers:
1.) Atlas = + $398 million - take private (Poseiden)
2.) Resolute = + $221 - being purchased by Domtar
3.) Recipe = + $142 - take private (Fairfax)
4.) FFH Total Return Swaps = - $126
5.) CIB = - $90
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The oil market right now resembles one of those great Ali-Fraser boxing matches. With haymakers - that are connecting - getting thrown by both sides (bulls and bears). Love the volatility… And all the back and forth rhetoric might actually give Ali a run for his money.
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What a shocker. Oil is at $80 and OPEC is floating the idea of CUTTING output by 1 million barrels per day. Guess where OPEC wants pricing… higher than where it is today. Guess where Russia wants oil prices… yes, higher as well. OPEC and Russia are aligned on wanting higher oil prices. Guess where oil prices are going in the near term?
—————At the same time, what is the US doing? Continuing to release 1 million barrels from the SPR. Now pushed into November. WTF?
—————i continue to think oil markets are going to be wickedly volatile. I have already started lightening up on some of my oil purchases from last week (quick 10% gain). That rent, not own thing that others have mentioned. If oil spikes higher heading into the OPEC meeting on Wed i will continue to lighten up on my holdings. And then patiently wait for the next panic sending oil stocks lower…
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Oil Jumps as OPEC+ Mulls Biggest Production Cut Since Pandemic
- https://finance.yahoo.com/news/oil-jumps-open-opec-considers-221955684.html
Oil surged in early Asian trading after delegates said OPEC+ was considering cutting output by more than 1 million barrels a day when the group meets this week to stem a slide in prices.
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On 9/29/2022 at 10:52 AM, thepupil said:
BBB 10 yr spreads are currently 230. The average since 2000 is 260. The average for the past 10 years is 240.
For perspective covid was ~430 and GFC was 600. December 2018 was about where things are now.
It's true. Spreads are not really wide and are pretty much average.
I have a much lower return requirment than @Spekulatiusfor bonds. I think if one can get 6-7% with decent duration (10-20 years) from a very healthy company that that has a role in a portfolio. it's just a safe way to build up a mortgage offset and to increase ones recurring cash flow for reinvestment. I do not want to be 100% equities forever, because i don't plan on having enough money to where i'd be comfortable with a really really low withdrawal rate. having a portion of the portfolio that's spitting out cash and not dependent on market for return is nice (and is structurally ahead of equity).
I do not think we revisit covid like spreads given that tsy bonds are offering decent yields. IG bonds are at all in yields that solve a lot of asset owner problems. To an insurance company, a 400 spread over 2% 10 yr (covid) is the same nominal return as 200 spread over a 4% 10 yr. Absolute yields matter too. we are at the highest absolute yield on BBB 10 yr debt since September 2009 (6%). 10 yr average is 3.5%. 20 yr average is 4.5%
Corporate (and by that I mean large cap IG corporate) credit quality is spectacular. BBB historical default rate is 0.3% and corproates will enter this period with the most interest coverage, longest duration, lowest coupon debt ever. the bonds are all getting chopped to discounts well below par because coupons are so low which provides theoretical downside protection (though i don't think that really matters because virtually none will default).
also i think we'll see less creditor unfriendly things like debt funded buybacks in this environment. on the margin companies will deploy incremental capital to deleveraging. a negative for equities, but a posiitve for the owner of healthy corporate debt.
I also think there's an argument that why even bother with corporates when you can buy mortgages with no credit risk for similar yields (but less convxity and predictability of cash flows)
Thanks for providing the historical averages and where spreads are today. The lack of widening is quite the head scratcher. And definitely something worth monitoring moving forward.
—————-I haven’t owned bonds in years. Bond substitute type stocks (my loose definition) in Canada have come down the past 2 weeks (@10%). But given the size of the increase in bond yields this year these stocks actually look expensive. People who own these stocks for yield/safety likely do not realize bonds might now offer a better risk/reward tradeoff.
Utilities: Fortis 4.3% yield
Pipelines: Enbridge 6.7% yield
Telecom: BCE 6.35%
All of these companies have massive debt levels. What happens if interest rates stay high for years (i.e. the next 5). What happens to the business model when they have to issue/roll over debt at a much higher interest rate?
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7 hours ago, maplevalue said:
https://www.linkedin.com/pulse/starts-inflation-ray-dalio/
Dalio has been spot on since start of COVID in his evolution from 'cash is trash' -> 'cash is trash but equities are trashier'. Well worth a read. Particularly interesting is his view inflation stays elevated.
@maplevalue thanks for posting. I find Ray’s mental model very appealing. I have been constantly underestimating how high interest rates have gone. But it looks to me like we are getting to the ‘something breaks’ part… so we might stop at the low end of Ray’s estimate for interest rates. Super interesting time right now… -
5 hours ago, Spekulatius said:
Bought a starter on LEVI again. Maybe not the cheapest consumer stock, but one of the most durable brands. I also like management. They have done an excellent job to during the epidemic etc.
Followed you back into LEVI. Only jeans i have ever bought (yes, i know dumb reason). Also bought a little Nike (just bought a pair of runners). Also bought GOOG today… some days my hours watching Youtube is starting to rival my time watching regular TV (if i exclude sports). This weekend i will be spending time reviewing my buy list… JPM just hit a new 52 week low and BAC is within a whisker of $30 - both are trading close to where they were 4.5 years ago.
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1 hour ago, Spekulatius said:
For the US to sabotage these pipelines makes no sense. The pipeline was non-operational to begin with and there are no plans from the German side to put them into operation. So why risk a huge political rift, if US were involved into this?
I think it’s just a covert operation from Russia to keep us guessing. It coincides with the Baltic pipeline from Denmark to Poland becoming operational and the area where this happened is very close to this. Russia did this to make a cover threat to more important pipelines that are operational and very important with the current NG shortage.
Its low risk for them because if they were to be caught red handed, they would said it’s failed repair of their own pipeline as ridiculous it may sound. Russia could have destroyed the pipeline closer to home, but that would appear less threatening.
Putin is a KGB guy who loves to saw doubt, discontent (guessing that someone else within the West did it) and all those little cat and mouse games. same with thr sanctioned Turbine just a few month ago that was in repair in Canada. He let Scholz run through hoops and in the end it didn’t matter at all. My guess is that next they will offer to repair the pipelines in exchange for lifting sanctions etc.
Maybe the only purpose is to distract from another Russian defeat in Lyman, where the Russians are for all practical purposes encircled and probably take another beating.
+1. Putin is messing with everyone. Every post i see suggesting US is responsible without a shred of (demonstrable) proof is exactly what Putin was hoping for. Pretty soon it will be ‘common knowledge’ in most of the world (and a large swath of the US) that the US was responsible for blowing up the pipelines. Smart bastard. -
Pretty good summary of where energy markets are at. Intelligent and unbiased commentary. What a mess. Especially Europe.
My take-away: Over the medium term, oil investors will likely make a lot of money (they just need to get through the next year).
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Here is the latest from Eric Nuttall - the bull case for holding energy stocks. What appeals to me the most about energy is how profitable oil companies are at even $$70-80 oil. Energy stocks look like they are discounting $60 oil (or lower). My guess is OPEC will cut production if oil gets close to $70. Russia also does not want low oil prices. My read is there is a floor price for oil that is high enough that energy producers will continue to make very good money. And the oil market is tight enough that OPEC/Russia will be able to manage the price to where they want it (even if we get a recession in Europe /US next year). My guess is OPEC/Russia does not want the oil price to fall much below $80.
—————Ninepoint Energy Fund Marketview- September 26, 2022
- https://www.ninepoint.com/commentary/commentaries/2022/092022/energy-fund-market-view-september-26/
“While the drawdown is nausea inducing and can serve to shake conviction in the absence of data, it is we believe only temporary. We have learned that the best opportunities come when fear is rampant yet fundamentals are strong. That is our assessment of things today. With the SPR ending, China signaling the potential slow return to normal, US shale growth stalling, and OPEC ready to cut production should the oil price sell off, we view valuations today as extremely attractive and potential outsized returns compensating for the additional volatility that the sector carries.
With our average holding trading at an estimated 2.5X EV/CF at $80 (1.9X at $100WTI), down 37% from June highs, global oil inventories continuing to draw, and several potentially positive catalysts in the months ahead, we remain bullish.” -
Just now, changegonnacome said:
Totally agree - own now what you would own in 5/10/15 years time......this is an episode inside of a much bigger narrative called long term investing.....the prices you see today are offers to buy/sell.....not verdicts on underlying business value
Stocks (S&P500) is down about 25%. The 10 year US Treasury now yields about 4% = 20% about bear markets in bonds? The time to be really worried about stock and bond markets was back in January. Now if the global economy goes into recession in 2023 then financial market averages will likely continue to struggle. Lots of good values out there today (especially for investors with a longer term holding period).
Russia-Ukrainian War
in General Discussion
Posted · Edited by Viking
Ukraine is fighting being invaded by a foreign aggressor, Russia. The West is supporting the local population. The lesson from Afghanistan is the local population, if motivated and well armed, is eventually able to push the aggressor out. And that is what we are seeing play out in Ukraine (just much quicker than anyone thought).