SharperDingaan

Thieving everywhere depends primarily on the economic tide; when the tide is rising everyone will do well, but if you also own the best thieves in the biz ... the results are spectacular! - even when the thieves are stealing you blind! However, when the tide is falling ... even the best thieves will have a sh1tty year. Hence ..... to own a GS is to BOTH own a very good thief, AND to own the changing economic tides. Volatility, and the need to swing trade around a core position, to fully benefit from the exposure. Shares for the economic cycle, and tactical put options for the inevitable periodic 'misses'. Of course, if along the way you should become even just half as good as they are .... that's bonus SD

Come to think of it they should also be a high weight core holding, to allow for swing trades. The scum is no good if its rubbish, and there's always a need for a good thief! Just always keep an opposing option position so as to also benefit from the funny money SD

Some pretty obvious choices to us ... US weapons, booze, and the cure for venereal disease! SD

I hear you, but the comment was based on buyer expectations - NOT the issuers. The buyer has a negative real rate of return, on the same credit risk, whether they buy the CDIC insured GIC or the Canada. But if they buy the GIC they only lose 1.9% (real return), vs 6.9% (inflation) if they do nothing. Had the GIC buyer bought the Canada and held to maturity the buyer would lose 3.9% (real return). Identical credit risk, identical zero risk to capital (Canada held to maturity), yet the GIC has a 200bp improvement in real return? The GIC buyer via an actual transaction, is demonstrating an inflation expectation 200bp lower than the market. Inflation at 4.9% within 1 year (our time estimate). We also know that negative real returns are NOT the norm. Hence, if that GIC buyer determined -1.9% real rate were to simply return to a neutral zero, inflation would have to be 3.0% within 1 year (our time estimate). Were the BoC were to achieve its 2% target, the real rate would have to rise to 1% - or about the long-term average. WEB would call this ‘inversion’, and if the market is in ‘balance’ – it should tie up with CB pronouncements. NOT the media line, hence it appears to be ‘shocking’ ….. SD

Does it really matter? Assume a 100K investment (CDIC insured at Canada's credit rating). Yesterday I could buy a 5yr Canada for 3.00%, a 5yr GIC for 5.00%, and current Canadian inflation was 6.9%. If I buy the Canada, I am assuming a negative real return of 3.9% (3.0-6.9). Whereas if I buy the GIC, I am assuming a negative real return of 1.9% (5.0-6.9). Put another way, the real world (main street), expects inflation to fall 200bp (-1.9-3.9 real) in the near term, and another 190bp (-1.9 real) over the longer term; or Canadian inflation falling to 4.9% in the next few months, and 3.0% over the next year. In relative terms, if that is better than the US/EU; CAD strengthens. Quite a bit different to what the media/Bay street would like you to believe SD

Look a little closer at the magnitude of your swing trade gains/losses, and compare against the magnitude of your YTD gains/losses on holdings that weren't traded. Then look at the magnitude of the gains/losses avoided PTD on things sold, had you not sold them. Was half (or more) of your gain/loss made via trading?, or was it made via simple buy/hold? Between forced trimming, capital repatriation for our UK property, and routine swing trades; most of our gains did not come from buy/hold. We also very much lucked out on crypto (primarily due to sloth/venture distraction), as much of our new capital avoided the meltdown. Point here is that one can't plan these things; but one can't benefit from them either, unless one exposes oneself. Happily our vodka and caviar found a buyer last week, and the 'collective' chess has seldom been so good. Fueled by a little Beluga, crackers and caviar for Christmas. SD

I have great confidence in the abilities of both the boc and mathematics. All else equal if inflation goes down 300bp so do interest rates! SD

Canadian floating rate mortgages work a little differently. At the time the mortgage is issued, the borrowers ability to make payments is stress tested at the current rate (ie: 3%) plus 200bp (ie: 5% trigger rate). The monthly payment is then the mortgage balance x the trigger rate for the length of the mortgage. At current rate (3%) < trigger rate (5%) the monthly payment includes a modest debt repayment. At current rate > trigger rate (5%) the borrower must make a higher payment. Typically the payment remains the same, the monthly difference added to the outstanding debt, and the term extended (25 to 30 year) if needs be. The reality is that while it is not impossible, it is pretty hard to default on a floating rate mortgage. Media estimates (strongly manipulated) currently place > 50% of all Canadian outstanding floating rate mortgages at above their trigger rates.; selling both fear and armageddon as the monthly payment is no longer covering the interest cost. However, as/when the current rate falls below the trigger rate again, the mortgage will instantly return to performing status as debt repayments resume. The BoC has been raising the market rate, and the floating rate mortgage rate to combat inflation. The pace of the increases has been widely telegraphed as about to slow, most would expect inflation to be at least 200-400bp lower 6-9 months out, and the more aggressive the decline - the more room the BoC will have to lower both the market, and floating rate mortgage rates. Raise hard, and raise fast; and most would expect the bulk of floating rate mortgages > trigger rate to be back to performing within 12 months. The only folks bitching are the media and Bay Street ..... everybody else is just thankful for a way out, and ability to keep their house. Media is paid to sell a game set-up that punters are expected to lose at, and it is very good at it. So ... take a page from Nash (game theory), and change the game set-ups - thereafter let the best manipulator win, and no holds barred! However, you can ALSO exit the game whenever you wish, .... whereas the media - not so much Good luck! SD

Lots of unpredictable drama, disruption, and 'accidents' - but ultimately it settles when a sanctioned barrel goes for the same price as an unsanctioned one. Sanctioned barrels trade at roughly a 25-30% discount - the higher cost of transport (transfers & additional distance) - the costs of bribes/'insurance'. A simply spilt of the difference, and the price of an unsanctioned barrel drops $15-20. Of course, should a key sanctioned facility experience a similar event to the Nord Stream pipeline, the rise in the unsanctioned price gets offset by the presence of the sanctioned oil - and everyone doing all they can to get it back into production .... SD

The bear case is largely two-fold (1) ESG is repealed as just too difficult to do, market floods with new supply (2) Russia/China successfully pull off an entirely alternative supply/demand market for sanctioned o/g outside of 'western' control - linked to the conventional market via OPEC membership. Both are possible high impact events, but with a low probability of success, net of western interference - simply because Infrastructure cannot be used/repaired without western complicity. Three big buyers (China, Asia, India), three big sellers (Russia, Iran, Opec+), settlement in Yuan vs USD, and processed via China's financial system. Uninsured ships and cargo's, loading facility/ship/cargo security/sinkings's just another cost of doing business, whistle for pollution cost restitution. No different to driving drunk, and uninsured, down the highway; not good, but an everyday occurrence in much of NA. Most would argue that of the two, ESG repeal is the easier to implement. To gage probability of success, think of how difficult it would be to achieve that ... if you do NOT live in the world's o/g basins! SD

In our area, prices have settled down but the froth is now gone. You still have to pay up, but you aren't offering 20-30% over the ask anymore. Supply is also quietly rising as inflation has driven up condo fees, property taxes, etc. - and the next round of gentrification is taking over..... It's also noticeable that a lot of those whose sold to rent a while, have discovered that renting is only 'predictable' as long as the place you are renting isn't sold out from under you. Forcibly have to move once and its shame on me, but if I have to move a second time - it's back to another house that I've just bought! McMansions essentially exchanging into upgraded smaller condos that are easier to clean. Amusingly, a growing number of those condo's are also owned by groups of little old ladies whose spouse have croaked out. They all live together, keep each other company, travel when/where they like, hire a maid/chef to do the chores once/twice a week, and enjoy a combined free cash flow through the roof. Nothing wrong with grandma! SD

Canada has already had this, and for quite some time - in Alberta, it is the Alberta Carbon Trunk Line. Primarily funded by the six major tar-sands producers, and arguably - using monies that would otherwise have gone to a windfall tax. While the media might argue otherwise, the reality is that the Canadian o/g industry is collectively both very proactive and very pragmatic; their families/kids want to save the planet as well. Sadly, it's a requirement, when the local provincial leadership is often useless. https://enhanceenergy.com/actl/ SD

Key takeaway is a global industry in run off. Fundamental change that nullifies much of the historic investment experience over the last 70+ years; as well as many of the well-established historic trends and correlations. Consolidated reservoir operation/ownership; drilling largely limited to delineation, fewer but more complex/expensive new wells, production enhancement (floods, longer laterals, rebores, etc.), and well decommissioning. Historic rig count largely meaningless, as today’s environment is quite different. The best o/g reserve is the one that is never opened. So, expect much of the high cost off-shore and arctic reserves to permanently strand, Reserve Reports to remove it as ‘uneconomic’, and some potential debt ratio disruptions. The 2nd-best o/g reserve is the one operating as efficiently/effectively as possible. Hence the consolidations, declining average inventory life, refinery/pipeline decisions, and carbon-offset CCS to counter the higher throughputs minimizing fixed costs/bbl. Lots of operating disruption. The 3rd-best o/g reserve, is the pollution offset. Reuse of spent reservoirs for CCS, investment in both green energies and electric versus gas, carbon-trading platforms, lands/water reclamation, ESG reporting, etc. Hated by many, but frankly – where the future opportunities are. O/G has had a long and very good ‘run’ - but eventually everything comes to an end. However, if you have spent much of your working life in o/g the reality is that you are rapidly becoming obsolete – and it isn’t wearing well. Whether you’re an investor, analyst, or any of the myriad of industry support workers. Creative destruction. Nobody likes it, but the result is almost always better. So …. if you are a young person, grab the disruption by the cohunes and squeeze! This is your future!! SD

Don't follow CNQ. SD

No opinion. They are well managed, and are simply in the process of turning over their assets. Like everybody else, it's better to have scale and be the #1-2 in any given reservoir, versus scattered across many; concentrate in the best opportunities. Lot of ways that could be done, and the debutante is indicating a willingness to listen. Swing trader at current prices, re the special dividend. Buy the day before ex-date to claim the div, sell on ex-date, and repurchase >30 days later to claim the tax loss. All else equal on ex-date, the price drops by the amount of the dividend; triggering the 'bots to pile on, and tax harvesters to add to the dump. SD

Fracking requires a lot of cleaned up water; hence return water is often treated (desalinated) through a series of osmosis membranes before it can be reused. In the old days you just continually took fresh water from a nearby river/lake, emptied into a descending series of pools, and drained the last pool back into the river/lake. Today, you have to clean up your act. Not a bad thing. https://www.watertechonline.com/wastewater/article/16211374/desalination-trends-in-the-oil-and-gas-industry SD

Keep in mind that unions are just the collective worker reaction to sh1te management and governance; both of which have been truly sh1te for a very long time. The reality is that a business/government either pays up, or the labor walks. Attitudes, ideology, etc. mean squat. Ontario recently had its Bill 124 struck down as a violation of charter rights; the bill capped public sector wage increases at 1%/yr for 3 years, and materially contributed to staffing shortages in Ontario public health care. Burnt out staff left, and rational replacements worked everywhere else, BUT public health care - for higher pay. Ontario has announced that it is going to appeal the ruling; amidst threats to alternatively use Canada's constitutional 'non-withstanding' clause if it doesn't get its way. Not just sh1te governance, but also blackmail and incompetence! https://www.theglobeandmail.com/canada/article-bill-124-ontario-public-sector-wage-increase/ Like it or not, all around Canada there will be material wage increases - and all else equal, they will be inflationary. Yet almost everywhere you look there are 'help wanted' signs everywhere, and business owners complaining they can't get the staff. Given that more than 50% of floating rate mortgages have hit their trigger rates, and evidence that the economy is now sputtering, the obvious monetary solution is to simply sit tight ... and let existing stimulus run out. Simply let supply/demand do its thing, and CPI sink to target level. NOT WHAT THE MARKET WANTS TO HEAR. By definition, value investors are anti-market (buy when there is blood on the streets). Let the good times roll ! SD

China relaxes zero-Covid, a lot of people die, they have to admit their approach failed, they have to start using western vaccines, and they have to start targeting. Big loss of face. But if it is reaction to protestors demanding change in how Covid is managed?, and avoids another Tiananmen Square ??? Big gain of face ..... and a practical way out of the problem. Very smart, and very much the party. SD

You might want to research around the recent protests; lot of people are increasingly seeing it as a 'face saving' prelude to China modifying its zero COVID policy, in the name of 'keeping the peace'. https://www.cbc.ca/news/world/china-protest-covid-1.6665822 SD

The discussion is permanent disposal of small nukes, typical of submarines and shipping; fuel rods is just a small part of disposal, the containment/processing areas in close contact with the rods are highly radioactive as well. Straight forward to remove/reprocess just the rods, not so much the rest of it ...... However, many of these reactors are now small enough, and rocketry now reliable enough, that the space solution is becoming a practical alternative. https://en.wikipedia.org/wiki/United_States_naval_reactors#:~:text=Reactor sizes range up to, rely on steam turbine propulsion. Yes it means swapping one set of risks for another, but the result is a permanent solution vs sinking decommissioned nuclear ships in the Mindanao Trench and relying on subduction to take them into earths core. We just don't want to hear it, and don't want the ESG folks screwing up the existing 'bury and forget' disposal practices. https://en.wikipedia.org/wiki/Philippine_Trench Few dispute that nukes are a good solution - but it will be materially different from the current full life-cycle approach. We routinely put small nukes on satellites, and they all fit/launch on rockets; yet apparently we can't routinely do the same thing with small nukes on 'terra firma' ? Of course we can, .... we just don't want to hear it. Not a fan of Musk, but he has recognized that space is commercializing and is acting accordingly. Per o/g, the more the 'established' nuclear industry resists change, the more runway o/g has to run off its existing reserves. Goods/services still have to move, and for now - o/g remains the near-term transition fuel of choice. All good! SD

Thing is, it is not just the fuel and/or its recycling/disposal. It's also the materials of the reactors themselves, and the associated pumps/equipment - the 20-30 years to fully decommission a plant, which might have a 40 year working life. Folks laugh at the space solution, but in many cases an entire decommissioned small nuke can be disassembled enough to fit into 1-2 cargo bays, and disposed of both cleanly and entirely. Relatively straightforward for a SpaceX to prove the concept, and thereafter commercialize it. New and better solutions for new times. SD

No one is going to touch a spent fuel pool - simply because the fuel is already 'disposed'. But in the 'new' world of ESG, most would argue no new nukes without new and reliable permanent disposal, for less than the cost of simply firing it into the sun. SD

Much as Viking states, we are also very bullish on NA. We just think it will be 5-10 years+ and include introduction of a new industrial revolution (payments, blockchain, robotics, EV, infrastructure replacement, return to space, etc.) - and an almost endless list of innovation. Everyone steals IP from the Americans for a reason - it's truly game changing, original, and it works. However ever since the start of the GFC - the last decade+ of economic focus has had to be on the avoidance of a global depression that took us back to the 1930's or worse. The Fed put, QE, helicopter money, negative interest rates, etc., were not 'normal'. Rapid rises in global interest rates to counter inflation, evidence that it is now done, and that we are entering a new world. Nukes are great, so long as you can reliably and permanently dispose of the waste. With the now reliable rocketry, and the load capacity to fire that waste into the sun, one can instantly unblock a lot of the current bottlenecks. Base load power to supply EV, wind/solar/hydrogen via battery, o/g as the transition fuels. 5-10 years to become noticeable, but it IS coming. The NA grid power has to be rebuilt, payments/banking upgraded to CBDC, blockchain integration begun on the operations of most all businesses. We aren't there yet, but again it IS coming, and sooner vs later. Hard to find a better place than NA to be in. SD

All that talent .... going to such great waste! Far better to use them as tame thieves working for the gov, and set them to work catching other thieves as bounty hunters. Quickest way back to your former riches is to catch the bastards who put you there, and get paid millions to do it! Much better than breaking rocks SD

Downside knowledge ... Circle of competence. The more in-depth your technical competence, the more industry experience you have, and the more sophisticated your financial expertise; the higher your portfolio weighting can be: 80% vs 15%. However that 80% is spread over 2-4 names, NOT one name. Water/gas flood. Hated by many as it isn't sexy and costs a lot to initiate; however, typically the more the better, and the more emphasis on ESG the higher the payoff. Significantly reduces maintenance capex by lowering the decline rate, extends reservoir life by getting more out of the reservoir, but very field specific - and you get paid to inject the well waste water and CO2 driving the flood. The end of a CCS pipeline is a spent reservoir being gas flooded. Hedging. Sadly a great many o/g companies use hedging to 'take a position', versus protect a critical drilling budget or M&A financing; so ... they end up over-hedged in price runups and unable to participate until their excess hedge runs off - screwing shareholders. You typically get to buy quality cheap, and the offending hedges mature in 1-2 quarters. Psychology. Recognize that human nature is to over-enthuse over a string of positive news, under-enthuse over a string of negative news, and that o/g is a cyclical industry. When everyone is expecting a buyback, or a special dividend, and the decision was to reinvest in production versus pay out - what typically happens? Risk Management: HF's hate commodities, largely because commodities have put so many of them in the graveyard. Most advisors/retail investors hate commodities because it is a risky recommendation, it is not a 'easy' sell, and to be successful - largely a WEB anti 'buy & hold' strategy. Yet .... commodity investment has been the well-worn path to many a great fortune. Casino Management. Consistently take your money off the table, and put it where everyone else is not - “Please God, give me one more oil boom. I promise not to piss it all away next time.” Stay rich when everyone else is visiting the food bank. Now had you known all this when you were in your 30's ... how wealthy do you think you would be by your 60's ? Even if there had been a few separations along the way. Obviously o/g is not for everyone; but those who choose to put the time into it can expect to do well. Good luck! SD