Stuart D

The oil bull thesis is attractive. Buffett made a similar thesis in 2008 at the BRK AGM. After his statements oil declined for a year, during the GFC but then bounced and stayed north of $100/bbl for almost 5-years straight. He was talking in May 2008, with Oil north of $150/bbl. 2008 Morning session WARREN BUFFETT: "...we’re producing in the world, 86 or 87 million barrels a day of oil, which is more than we’ve ever produced before. We are closer — by at least my calculations — we are very much closer to producing almost as much as our productive ability is in the world, with fields in their current stage of development, than we’ve ever been. I mean, our surplus capacity, I think, is less than, well, any time I can remember. And it’s quite a bit less than most periods. So we don’t have the ability to crank up, in any short period of time, the 86 or 7 to a hundred million barrels a day. But whatever that peak will be, and whether we hit it five years from now or 50 years from now, and then it will just gradually taper down, and the world will adjust to it, and hopefully we’ll be thinking about it, you know, well before it happens, and various adjustments will be made in the world that will cause the demand to somewhat taper down as the available supply. But we will be producing oil far beyond this century. It’s just — the question is whether we’re producing 50 million barrels a day, or 75 million, or 25 million barrels a day. I don’t know the answer to that. WARREN BUFFETT: [Charlie] What’s your over-under figure for 25 years from now, world production oil per day? CHARLIE MUNGER: Down. WARREN BUFFETT: Yeah. (Laughter).That’s not an insignificant prediction. I mean, it — believe me. If oil production is down 25 years from now [2033], it will be a different world. I mean, you — China’s going to sell over 10 million cars this year. I mean, the demand is going to keep [going up]— even at these prices [$150/bbl] — it’s hard for me to imagine demand falling off a lot. So if production falls off, you’ll have some interesting consequences." However..... He expressed this view by buying ConocoPhillips, which didn't work out so well (article below). This is a tough game! https://www.cnbc.com/2009/05/08/berkshire-hathaway-reports-15b-net-loss-for-q1-as-it-sells-conocophillips-shares.html

Yeah, that makes sense. But does this assume the debt ceiling is raised?

Nice! I’m surprised this name doesn’t get more airtime. If the deal closes won’t they have more cash than market cap? Plus management previously said they would use the proceeds to buyback stock.

Nice trade. Another option to selling is selling a slightly further out of the money call. This has the advantage of getting most of the premium up front with the possibility of delaying the transaction close to e.g. 2024.

Thank you for explaining. That helps a lot.

AGO would be up there. Halving their share count in the last 5yrs.

So if the call you sold is exercised in the money, will that automatically trigger the exercise of your warrants? Or Does it being a ‘naked’ call mean you’d need to buy shares at current market price with cash and then sell them to the owner of the call at the strike price? Cheers,

That sounds good too!

Imagine a $75b buyback at PBR A similar cash flow statement to CVX, but a sub $100b market cap. I know, I know. We should be grateful for the monster dividend. One mustn’t be too greedy, lol.

That’s a good question. I’m assuming there is zero liquidity to sell them for any amount, e.g. $0.01?

Thanks for posting.

PBR out of the Money calls. The Brazilian index trades at a 5-10% dividend yield. If PBR trades at a 10% yield, every OTM option is in the money. At a 5% yield, all options are 10-100+ baggers. If oil rips…. the numbers get silly.

Best analogy ever

The November iea report just came out, always an interesting read. https://www.iea.org/reports/oil-market-report-november-2022 Global observed inventories fell by 14.2 mb in September as OECD and non-OECD stocks plunged by 45.5 mb and 19.3 mb, respectively, but were partially offset by a surge in oil on the water of 50.6 mb. OECD industry oil stocks declined by 8 mb, while government stocks drew by 37.4 mb. OECD total oil stocks fell below 4 000 mb for the first time since 2004.

Australia has been far too accomodating (in my opinion) but I wouldn’t put us in the same bucket as Europe or Japan. Rates have never been negative and since April the central bank has raised from 0.1% to 2.6%. There was a lot of media coverage around the most recent raise of 25bps when the expectations were 50bps.

Great post - Trump was on the money with this comment.

@Spekulatius any thought on FMG as another low cost iron ore producer?

If this cost curve chart is accurate then renewables shouldn’t need subsidies right? I keep reading that solar is dirt cheap - yet I don’t see any companies printing money due to solar investment.

Best I can find so far: https://www.youtube.com/watch?v=yeBjFYvQ1tc&ab_channel=JerryBrodie

Yeah, I can’t find one either. Seemed much easier to find last year with yahoo finance/YouTube.

https://podcasts.apple.com/au/podcast/the-power-hungry-podcast/id1519850086?i=1000553518465 Great overview of the Russia/Europe gas situation.

Anyone know what's happened to 6541, Grace Technologies? It was the cheapest company in my screener on every value-metric, but the stock is down 99.3% in the last 12-months. The most recent filing's I can see are from June 2021 and there was plenty of cash (4 billion yen), so I wouldn't have guessed this would be a donut. It's a little bit concerning to see these type of draw downs for seemingly well-capitalized Japanese stocks. There is limited news or analyst coverage and I haven't found any answers yet by bumbling through their IR Information section on their website. Looks as though there was a 2 for 1 share split and revenues waaaay down (50% decrease), but only 2.8b in total liabilities and it was still profitable, so there must be something else that's happened.

Thanks @MattR - much appreciated.

Has anyone listened to the audio version yet? I'm tossing up which version to buy. I'd prefer to listen to it whilst driving to work, but I find some of the more quantitative/technical books e.g. Security Analysis, are easier to digest in a physical book format.

I would avoid it. Anything in hydrocarbon exploration and drilling is going to get fucked. Might be worth looking at the bonds ranking ahead of BRK’s $10b preferred stock. From memory I think the debt maturing 2022 was selling for 60c.