jfan

I understand that the methodology to calculate LCOE is highly tweekable and the outputs from various agencies can also vary. I came across EROI or EROEI as a concept as well for energy sources. It seems that depending on the organization publishing this data, the "value" of various energy sources can vary dramatically. Just wondering if anyone can give a primer on the difference between the two and what in your opinion is closer to the "truth"?

@Spekulatius I would agree that price volatility could get oil back to $50 at some point over the next 10 years. The question for me is will oil structurally fluctuate at a higher level than prior cycles? After listening to one of the recent Odds Lots podcasts, it seems that there is significant paucity of individuals interested in this industry and the replacement of tacit knowledge will be challenged. They speak of no students applied to a major Canadian university's petroleum engineering program due to lack of interest. Furthermore, they also speak of many of the existing talent pools retiring in the near term due to age and better oil markets affording an exit. This lack of talent may cap the supply response to demand over a longer time frame than the past. People are still apprehensive in believing that oil companies can sustain profitability and afford to provide well-paying jobs with employment security into the future. I can imagine this will gradually slow down project development velocity (unless technology can reduce the number of engineers needed). There seems to be industry consolidation now which I'm sure is to acquire people as well as property. With fewer players, couped with the EV, ESG, end of oil narrative and resulting financing hesitancy seems be leading to more rational industry behavior. I recall that finance went through a similar cycle in the 70s and early 80s with no one ever wanting to go into this field due to poor job prospects. Over past 3-4 decades, finance has now become the place to be. I wonder if this is an indicator of things to come. With that said, does anybody have any hard data in this? Finally, I am sure that Buffett's big Occidental bet is a based on his assessment that oil prices will remain elevated for longer than prior cycles. His historical oil track record is not stellar, but I don't think his prior bets were ever this big. Given how much value he places on certainty, I wonder if this may be a valuable data point to adjust your prior base case probabilities.

https://en.macromicro.me/collections/34/us-stock-relative/24033/wilshire5000-to-us-m2 This is the sp500 to m2 money supply (using this as a gauge of inflation). Not sure how valid this is.

A Decent overview on the oil markets with Josh Young

What is the downside of having multiple competing currencies within a single nation especially if tied to a basket of commodities?

I've attached a very recent report on the vulnerabilities of Blockchain especially as it relates to Bitcoin and Ethereum. Alot of it is quite technical and my grasp is a bit limited. However some salient points to consider. @Spekulatius keep these movies coming... 62af6c641a672b3329b9a480_Unintended_Centralities_in_Distributed_Ledgers.pdf

That clip is hilarious. I was rolling over laughing and fell off my chair.

@Spekulatius Thanks for Taleb's paper. I did quite enjoy his Antifragile book but, maybe its me, but his writing style is really verbose and meanders quite a bit. He is quite biased and makes very little attempt to offer a balanced critique. He also doesn't provide much evidence or data in his paper. A few highlights and thoughts from his paper: 1) "Earnings-free assets with no residual value are problematic to value." - this assumes this is a fad and will fade with time as people move onto something else. 2) The bitcoin ledger requires constant maintenance costs unlike gold which are minimal. - I'm not sure this is true. My understanding is that the public ledger is an open-source database that require no maintenance costs and that the costs are associated with transactions. Running a node especially a bitcoin node (to store the ledger) requires nothing more than a raspberry pi computer that costs $300 to make. Gold has substantial verification, storage/security, and transport costs. 3) Absorbing threshold is an interesting physiologic concept and quite true with respect to human body. If the number of people interested in bitcoin falls to a small number (?? number), it still suggests that this community of individuals is still interested in Bitcoin as a currency/store of value/signalling virtue/etc. With 8 billion people in the world, if the Bitcoin community is very small and there are very few transactions on a public exchange, the value of the bitcoin is the marginal price that the last person is willing to pay for getting into this group. It could be argued that if the group is small, it would suggest that these are "true believers" and might have the religious fervor akin to a cult where their conviction is so high that price to get a membership in this situation could be very high. In that case, the absorbing threshold may not apply. 4) "The fundamental flaw and contradiction at the base of most cryptocurrencies is, as we saw, that the originators, miners, and maintainers of the system currently make their money from the inflation of their currencies rather than just from the volume of underlying transactions in them." - I think is a valid point. The transaction costs are currently 10-20% of the block reward. I don't have any data that suggests that the transaction fees (priced in USD or satoshis) are going up. In fact that transaction volumes seem to be going down over time. I wonder if this is related to the HODLING ethos that is being promoted. 5) Gold and Silver as inflation hedge commentary. I'm no expert. But here is a decent link to some charts are data on this subject. https://www.gold.org/goldhub/research/beyond-cpi-gold-as-a-strategic-inflation-hedge. Trying to get through the Hayek paper, it is equally a difficult read with periods of lucidity about what makes good money. 6) Bitcoin as a payment system. I recall reading the original bitcoin whitepaper and it did espoused the purpose was a peer-to-peer electronic cash system to be used as online payments. To @SharperDingaan point, this likely will service large value transactions vs small value transactions with requirements in layer 2 technology (eg Lightning network) with final settlement on the layer 1 blockchain analogous to daily banking vs global settlement processes. Overall, imo, his paper falls a bit short for me. ,

May give you some insight

People may have already come across this already.

https://blogs.imf.org/2021/04/05/how-rising-interest-rates-could-affect-emerging-markets/ https://blogs.imf.org/2022/01/10/emerging-economies-must-prepare-for-fed-policy-tightening/ This is an interesting blog for those following emerging markets by the IMF.

Agreed that how people value things doesn't have to be fully rational to have worth something (eg non-transactional relationships are for the large part emotionally based). Wrt to using gold/crypto for coffee. Certainly a valid point that the friction and costs are too high for this use case. Lyn Alden was prolifically written on this subject. Her "What is Money" piece is good overview on this broad topic. I found a couple concepts such as the layers of money and bearer assets useful to think about the potential for Bitcoin specifically as well as how it compares to government legal tender. Also agreed with the point that the Bitcoin pandora box is open and it is less likely to be able to be put back in. I did ask at the Helios Fairfax Partners meeting about their view on crypto in Africa and found their response to be more open than I expected. They said that digital currencies have potential given that lack of stable infrastructure and general distrust of their governments. They also surmised that CBDCs won't likely have massive adoption due to their low confidence in their politicians. That said, historically, governments will probably do all that is in their power to limit the adoption of private money, China being a good example. Will BTC be a 3-5x in a few years? Maybe or maybe not. Drunkenmiller quotes in a recent interview with John Collision that Gold will do well in a stagflation but BTC will do better in an inflationary but growing economy. Longer term who knows but there are possible outcomes where it could be worth a lot more. For those willing to expose themselves to the right tail of outcomes, it could provide a meaningful return. Finally, as to the volatility, don't value investors keep themselves that the price charts wiggles and beta coefficients, don't necessary represent intrinsic worth and that the things should be evaluated on a 5-10 year time frame.

It is rather interesting that the debate about Bitcoin specifically is so polarizing. Inevitably it seems that one side says its a ponzi scheme and the other side will say it is the hardest form of money. Similarly, intelligent and respectable people in the investment world have similarly polarizing perspective (Buffett, Munger, Watsa vs Stahl, Miller, Drunkenmiller). Money is ultimately just a social construct. It's value is dependent on other people valuing it as well. And because of this, it can change with time and space with varying degrees depending on who ultimately has control of the broader psyche/trust of the community of individuals and its value chain. Parsad, you often quote that Bitcoin is backed by nothing. Yet it does take energy, computer infrastructure, land, and people and their belief in the concept. This is likely not dissimilar to government legal tender. The only difference is that the price volatility is visible with Bitcoin and the volatility in purchasing power is hidden with respect to legal tender. I'm just trying to keep an open mind to the possibilities. Is it not the credo of value investors to find nuances in reality that conventional wisdom brushes aside? Perhaps viewing Bitcoin from only from a financial lens is incomplete and that integrating it with a sociological/behavioral and non-developed world perspective would provide a better understanding of its potential. Just my 2 CAD cents (or 92 satoshis).

https://www.veritascorp.com/events/webinars-fact-finding#05052022 Veritas hosts talk on why Bitcoin is "bad". I've also attached F.A.Hayek's book that often is mentioned by some as why Bitcoin could be money. Denationalisation of Money.pdf

Thanks everyone for the great advice. In other words: 1) Got to be right on the business first 2) Patience 3) Spread out the orders over time 4) Create a liquidity event at a price above market (as long as you are happy with the price) using limit orders Much appreciate your insight!

I've been digging in the wastebasket of illiquid stocks recently and was wondering how to best establish a position in these businesses without 1) affecting the market price and 2) without incurring significant trading costs? Hoping to get some advice from experienced investors. Thanks

https://www.whitecase.com/publications/insight/africa-focus-spring-2021/private-equity-africa-trends-and-opportunities-2021 https://thecapitalquest.com/2022/01/14/meet-the-most-active-private-equity-investors-in-africa/ Helios gets a mention in the 2nd article.

Pardon the long and rambling post. Just trying to reason in my own head about the value? of BTC. 1) BTC is too volatile to store value. But as value investing disciples, we all believe that asset volatility does not eliminate the fact that it can potentially still preserve purchasing power over a "long term". Just because BTC was $60K last year and $30K this year, doesn't necessary mean that it will not serve this function 10-20 years from now. Volatility and price discovery should go hand-in-hand. A stable currency like the USD may just be an illusion and could be particularly fragile to unknown unknowns. 2) BTC is valueless because it does not generate free cash flows and not amendable to a discounted cash flow model of intrinsic value. But at the same time, governments are threatened by BTC's ability to challenge its authority and monetary control, and people in low trust environments find BTC a better way to protect their savings than their local currencies. How can something be completely valueless if there are population subsets that find it useful or very threatened by it? 3) BTC is used for illegal activities, money laundering, tax avoidance and gambling. But these activities all preceded the invention of BTC. These activities will occur whether money is in the form of fiat, gold, BTC or seashells. Swiss bank accounts, counterfeit bills, shell corporations, stock market speculation are all elements of our financial system. Does this mean that dollars and stock markets should be banned too? 4) If the reason why investing in stock xyz is a good idea is because its money generating capabilities is predictable and growing over time. What happen if the money it generates is not trustworthy at scale to store the value of the work this business performs? Money, being a social construct, can change over time from one form to another. It would also be hubris to believe that only 1 type of money (or monetary technology) would be valuable at any point in time. Why does the USD have to have a monopoly over the world? Metcalfe's law, Lindy effect, utilization of market forces, very low probability event of a coordinated global ban, and lack of a centralized decision-making body in my mind makes BTC an interesting form of insurance. However, that said, I'm still worried about the incentives for developers to maintain and update the code base, the ability of the general populace that run nodes to understand the value of various upgrades and adopt appropriately, the centralization of mining activity, and the transition from block rewards to transaction fees to maintain network security.

https://first10em.com/monkeypox/ A quick clinical review for those interested

I guess I just enjoy self-flagellation and the prospect of throwing more good money at bad investments. At these current prices, it seems that we might be getting an opportunity to buy a (decent? good?) African asset manager at very reasonable price with the downside backed by FFH and Conlog assets (from their CIG investment). Almost everything else has been written off or some collection of debt has occurred already. The demographic trends seem right. Access to private capital is limited but improving. Seems like fertile ground for a decent asset manager to find opportunities. The structure seems about right with alignment between Helios and FFH. The questions are: 1) can they raise enough 3rd party capital and get their AUM to $6.9 billion (roughly double of their AUM pre-merger) and achieve 40% pre-tax operating margins (pre-merger margins at Helios Investment Partners were ~ 18-20% assuming a 25% tax rate)? 2) How much better is Helios at achieving decent returns? So far they are raising capital for Fund IV, invested in Trone and NBA Africa, and I assume as well as rejigged their public market investments (Not much disclosure here but the portfolio is above costs). https://qz.com/africa/2158408/private-capital-flow-into-africa-more-than-doubled-from-2020-to-2021/ https://www.weforum.org/agenda/2021/05/study-shows-virtual-capital-for-african-startups-is-steeply-increasing/ https://www.brookings.edu/essay/africas-economic-recovery-financing-robust-post-pandemic-growth/ Can someone talk me down from the edge (again)?

FB, FOM.V

Sold a quarter of my cco.to position to lock in some gains and to raise some capital

Interesting article by Lyn Alden https://www.lynalden.com/what-is-money/

How valid is this Eric Nutall claim --> demand destruction occurs ~ 5-6% of global GDP which suggests WTI of $130-140/bbl? https://financialpost.com/commodities/energy/oil-gas/eric-nuttall-making-the-case-for-an-oil-bull-market-that-lasts-five-or-six-more-years#:~:text=What then of,become a problem.

Thanks @SharperDingaan and @Gregmal for the insights! Much appreciated.