SharperDingaan

European option, plus back in the day the spreads were much higher than they are today ... if you could even get a bid. https://www.investopedia.com/articles/optioninvestor/08/american-european-options.asp The reality is that if the strike on your call is much < 30% of the current market, it is a lot smarter for the would be call buyer to simply buy the stock and put up 30% margin. Your LEAP has essentially become worthless until there is a liquidity event - as it has gone no bid; if you need the exit, the bidder wants a minimum 40% liquidity discount. Of course if you don't need the liquidity, and can do something else while waiting, you screw up the bidders plan SD

What the BoC intends has been quite obvious and for quite some time; the chattering class just chose to deny it until they saw it - which is now. We have been successfully rolling into Province of Newfoundland debt for a while now, in anticipation of the coming decline. The BoC intends a short, sharp downtick of negative growth; at worst, maybe a technical recession of two quarters of negative growth. Negative growth and layoffs dropping inflation like a brick, immigration picking up much of the minimum wage work that still has to be done. Many of the laid off also retiring to the CPP/OAS/GIS, and RRSP/RRIF/Pension income much less exposed to the availability of ongoing work. Lower the yield curve by 150bp and everything looks very different. The TMP expansion will also be delivering, and an additional 300,000 boe/d at USD 70 will help out the Balance of Payments in a big way. Debt gets termed out, toxic ministers shuffled out of portfolios, and the spotlight refocuses on good governance. The chattering class also assumes ‘business as usual’. When we know there is a Canadian CBDC in the wings, the BoC has floated components of it for comment, and the US is progressing on BTC-spot ETF’s as a mainstream product. Canada already has BTC-spot ETF’s, as well as the related option market, and has had them for some time; all with no ill effect. Question is: do you make more on a bond-fund rising as the yield curve declines, or on the BTC-spot ETF as/when the next halving does its thing, and/or a US BTC-spot ETF gets approved? The surer $50, or the less sure but $700+ if the stars align? SD

Two of the better ones. Personal vs business life. Way back in the day I worked for a prominent US Company doing business in Canada. I had done very well, and was under overt pressure to move to the US HQ; resistance was meeting with very direct 'phone calls, from high placed people who refused to hear 'No'. While the US was not my first choice, ultimately I was OK with moving; but my girlfriend at the time flatly would have nothing to do with it. End of the day the company and I agreed to amicably part, the girlfriend become spouse, and we're still together decades later. Investment. Long time ago, MX-T used to be in the Nova orbit (now merged into TCE), and per common practise at the time - was overextended. There were issues, the shares were well < CAD 2, and to survive - the company sold 5 yr LEAPS at a ridiculous strike, that rapidly sank like a brick. Methanol is a base industrial chemical, it was clear to me there were no other real choices, and I put nearly all of what I could lay my hands on into these LEAPS. It eventually went my way; but I learnt that when options go very deeply in the money (& stay there) there is no market for them, and they cannot be put up for collateral. I had to sit there for years until the LEAP finally expired, with a house sized unrealised gain that changed daily, unable to do a thing about it. Hence today, we almost always use stock/margin, 'cause that sh1te ain't never happening again! Point to all this is that it's just money; you have to be able to walk away, and you have to understand that it works for you - not the other way around. Lot of ways of accomplishing this, and the colourful 5% are some of the better people to talk to! SD

Keep in mind they are private; we have no idea what their depletion rate is. Assuming their production is primarily shale, they will be depleting at 20-25%/yr. Per the article if 331K was Q2/2023 production, it was 264.8K in Q2/2022. If there is no new drilling, and depletion is 20%/yr; it's back to 264.8K in Q2/2024, plus a good chunk of existing inventory burnt. There is a reason why they are selling. The majors now largely control the US shale basins; and the same as with OPEC+, they will be managed to maximise lifetime value-add. The are also partners in most OPEC+ basins, and the US itself is the 'security' partner in the ME. They will agree a range that everyone can live with, and the more that shale is manufactured the more profitable it will be. Over the long-term, shale fields are really gas basins producing light oil as by-product; and its value is maximised when it can be blended into heavy oil going into refining. The majors are just doing the Standard Oil thing; locking up the vast bulk of domestic gas while they can, then controlling the price as the US is forced to use it - as the transition fuel from gasoline to electricity. No different to the diamond and gold fields of yesteryear. SD

Keep in mind that US Shale is now largely controlled by the majors; deep discounting just lets them consolidate the basins faster, producing field oligarchs with cash break-evens close to OPEC+. The strong-arming happens behind closed doors, as the majors are partners in most all OPEC production. Much of the cartel's power rests on its very low production cost vs everyone else. OPEC's production costs have risen every year for many years, and shale production costs have fallen dramatically as 'manufacturing' has come on stream. Start a price war, and they have to go a lot deeper if the intent is to stop shale; today it's much smarter to just do a business deal with the majors. SD

Demand/Supply thing: Most people would add an annual 1% for natural growth to global demand, then adjust for demand effects primarily from Asia and the US. For global demand growth to flat-line, Asia/US combined need to consume around 1M boe/d less. Global demand is now back to what it was pre-covid; lot of upside should global affairs stabilise. https://www.statista.com/statistics/271823/global-crude-oil-demand/ Global supply comes from 3 sources. Long-cycle oil (mostly off-shore); steadily declining for some time, for a variety of reasons. Short-cycle oil (primarily shale); currently rising as 'manufacturing' kicks in. Disrupted oil ('locked-up' via sanctions, lack of egress, etc.); about to jump by 500,000+ boe/d in Q1/2024 once the TMP expansion kicks in. In the short-term most would expect supply to outstrip demand, hence the current pressure on WTI. Thing is - that short-cycle oil has a depletion rate of 25%, whereas the long-cycle oil depletes at around 6%. Even the simplest modelling, demonstrates material price volatility if things don't go perfectly. Hence the $150+/bbl forecasts. It's also 2023. Full-cost break-evens for field consolidators 'manufacturing' shale in NA's major basins is around USD 42-48/bbl; cash flow break-evens are a lot lower. At USD 70-80 WTI, most producers do very well. SD

Managed to get hold of a signed first edition of poor charlie's almanac for this years family meeting; plus had a couple of his better quotes printed and framed. Our mum always gets a good chuckle from the old guy, as some of his quotes work far better when applied 'to friends in low places'. Which ones .. to remain anonymous! SD

One of a kind. May the rest of us bow before the master! SD

You might also want to keep in mind where your bio-metric scans are, if you have a US NEXUS card. And who is selling/benefiting from your DNA data .... were you fool enough to send it in to an ancestry.com etc. All that you have to do is offer a 'perceived benefit', make it socially popular (social media), and charge a modest sum to process (validates the 'perceived benefit'). 'Somewhat' deliver on the benefit, and the data is yours; no paying people to give it, finding them, legal hassles, etc. ... and all the lemmings rushing to your door. Dictators feed stock. Always a need for good anarchists! SD

It is much more likely he eats/drinks something that disagrees with him; some of his friends catching a similar bug at around the same time. Dictators handbook. SD

No comment, re the use of bonds. Inflation itself is just too much money chasing too few goods; higher mortgage costs have sucked much of the money away, and supply chains are now supplying more goods; significant monthly drops in the CPI should not be a surprise. When Jan data reports in Feb, we will also see the impact of year-end bankruptcies and the Jan inventory liquidations. The good news is that even if the BoC reduced rates, there is a good chance the CPI significantly undershoots the 2% target. Hence, it would appear that the Federal 15B building plan stimulus is not just to get political folks re-elected; it is also a shift away from monetary to fiscal stimulus. Not a bad thing, and well overdue. When construction season restarts, the building plan stimulus will lift the CPI; better for everyone if CPI is < 2% at the time. SD

You might want to do a little data manipulation on the BoC JSON CPI data. Today's CPI of 3.1% suggests that CPI is rolling on at around -0.7%/month, next month's CPI will be around 2.5%; when the December number is published in January - it will probably be < 2.5%. As Xmas retail sales confirm guidance, negative press coverage should accelerate; pushing inflation down further. Then remind yourself that nominal return - inflation = real return; and you could do very well over the next little while! There is a reason for the changing Bond/Equity capital allocation that is currently being touted. SD

Keep in mind that there will also soon be a debt restructuring. Argentina first ..... then others. https://ionanalytics.com/insights/debtwire/argentina-investors-foresee-new-sovereign-debt-restructuring-regardless-of-next-president/ All that is needed is a long-dated zero coupon. Benefit as the zero-coupon reprices to a lower yield, and multiple times again over the medium term; depending upon how the FX is managed. Today it's South America, next week it's Greece; no need to rush SD

You can expect that every Argentinian who has not done so already; will be putting everything they have into crypto, ideally BTC. Mortgage money poured into BTC, and local banks pressured to do everything they can to NOT call in the loans. Today, an Argentine mortgage ($1,000), and a BTC asset ($1,000). Argentine currency devalues by 2/3, 1/3 of the BTC asset sold, $1,000 of Argentine money repatriated and the Argentine mortgage repaid. The true 'intrinsic value' of BTC. All that it requires is someone willing to accept Argentine currency for USD, and there is nothing the Argentine central bank can do about it. They pay for the bribes and whatever Argentine goods they can for export in Argentine currency, and wholesale the cargo for cents on the US dollar as soon as the ship is back in international waters. Within Argentina, good for exports immediately rise by 25%. Outside of Argentina, the price of those goods immediately falls 25%. High value goods (meat) travelling by air. SD

2024, we expect that both the US and Canada end up with new government; primarily from existing incumbents losing, vs the opposition winning. No matter what, both end up more conservative; toss up as to whether Canada has another minority government, versus a majority. We would also expect the faces to change fairly soon after the governments do. Most of the incumbents are toxic; losers have incentive to toss early after their loss, winners after they find out who the new opposition is, Darth Sidious when it serves his purpose. O/G fairly low on the mischief list, independence challenges to the BoC/Fed Reserve (heads on sticks) much higher. Energy wise, our own candidates are reinstatement of Keystone XL, dropping of Kyoto commitments, and a two-stage more rationale energy policy/carbon tax regime; Canada wide first, then Canada/US integration. The industry objection to carbon sequester is the truly-gifted, incompetent policy implementation; the idea itself, is generally well supported. The Kyoto thing, primarily stemming from a realization that the climate models upon which Kyoto was based, are so deeply flawed as to be unusable. They did not adequately allow for the multiple global firestorms of late, arctic melting releasing spumes of methane, ocean waters as warm as bathwater, volcanic activity, etc. Good intent remains, but implementation needs to change. Comes back to strategic swing trading, and the use of liquidity/options to exploit the extremes. One of the better avenues being the sale of out-of-the-money puts, with the intent of getting called; simply 'cause if you were going to buy anyways, you might as well get paid for it as well You don't own O/G, you rent it. SD