SharperDingaan

You all really need to take a powder .... If I pay 15x earnings, what I am REALLY doing? I am saying current earnings, growing at the inflation rate or better for 15 YEARS, discounted at todays market rate of interest. Yet I know that both blockchain and CBDC are severely disrupting payment rails, and that historic inflation has been a lot higher than the 2-3% CBs are targeting? Most would suggest that future earnings will be a lot less than forecast as activity is lost to competing solutions, and discounted at too low a rate. The multiple is too high. The moat is the payment rails ! it can't be replicated !! Yada, yada .... Back in the day the moat was horse and buggy infrastructure across the land ! yet the motor car utterly replaced it in how long a period? That vaunted 'rails value' is little more than a melting ice cube, melting faster the closer it gets to expiry day. CBDC instantly displaces rails. There is no charge to transact, no fees to pay (or be paid) by anyone, payments are in live-time and guaranteed by the CB, and there is no need for a Visa/Debit card period If you really want points, just buy them at their cash cost. Sure, but it'll never happen !. Yada, yada. Until very recently, Ali Pay and We Chat Pay, held a combined 94% of the payment market in China.- two private companies in a communist country with a near monopoly control over ability to make payment. China took steps, and hard launched the Digital Yuan with the Beijing Olympics ... today that 94% is a lot lower, and continuing to fall quarter over quarter. So much for it'll never happen !! So ,, if you're a VISA/MC investor, and weren't aware of this .... you need to ask yourself why? Leave the cool aide behind. SD

USD 20,000 is roughly the 2017 peak. A price decline convincingly below this, that stays there for a while, shakes out all the gains of the last 4+ years. New financing rounds close off, industry job losses accelerate .... and should a black swan show up, the next layers of technical support are very much lower. If I'm holding BTC puts or short BTC futures, I have strong incentive to break the pegs. Many of the pegs have already broken at much higher prices, and have had to be supported since. That support gets progressively more brittle as prices continue to decline. Hedge settlements go to the banker, and the allowable margin % goes down as the magnitude of the unrealized MTM hedge gain goes up. At an unrealized MTM hedge gain of 50M, maybe the allowable loan is 50% (25M) - but at 100M it gets cut back to 40% (40M) as it has become too risky. The MTM doubled, but it now supports 10M less debt (40-2*25), so boys ... put up additional capital - or watch the pile fail. Brittle. Putting lipstick on the pig, doesn't change the reality .... https://www.theglobeandmail.com/business/international-business/us-business/article-crypto-industry-fears-contagion-as-bitcoin-slips-under-20000/ SD

BTC has fallen through the USD 20,000 'barrier' and fell to USD 18,097 06/19 at 5:41 AM. What do you think happens on Monday when the media starts reporting it? and on Tuesday when the US comes back from holiday And should some pegs break again ...... SD

People just don't get that fields have been permanently put into blow-down. Net depletion drawing down longer term o/g supply at about the same rate (or faster) than overall demand. Ongoing industry maintenance capex being stripped and applied to buybacks and dividends for at least the next few YEARS. Global production not being maintained, will keep O/G prices elevated for a very long time, and allow the price to be used to establish EV (energy source, capital stock manufacturing, etc.). Exxon 'rebranding' from an O/G company into an 'energy' company, providing primarily electricity. Powered from gas turbines, wind, wave, and geothermal. Investors have a hate, 'cause energy is just 'too difficult' - can't just trade a 'story line' anymore. Analysts/governments have a hate, 'cause the industry is winding down - and the 'old metrics' just no longer hold anymore. Spin doctors have a hate, 'cause record quarterly cashflows keep getting jammed in their face - forcing them to talk about it. And as indexes continue to fall ... o/g weightings only look better and better. Nothing like the smell of napalm in the morning. Just enjoy the feast. SD

Come on folks ,,, 2 weeks to go through June 30, average Q2 energy prices have been stela, and come early august, the entire industry will report earnings off the charts. What do you think happens when companies start announcing special dividends and buybacks in a big way? SD

BTC as a payment method is just widely misunderstood ...... At the primary level you are paying for ability to make an anonymous payment - high security, high value, infrequent transactions, for less than the cost of money laundering. For these purposes a 50K transaction fee on a 10M payment is squat. At the secondary (Lighting) level, the fee is divided by the size of the batch, and there is incentive to update just once/day. If all you are going to do is pay for coffee/pizza, you don't need this level of security, and could make the payment alternatively at a lot lower transaction cost - zero if using cash. Sure you could use BTC to pay this way, but this is obviously not the target market, as there is minimal utility. Zero value to BTC! However, if you live in a nation with CBDC, this is one of the very few scalable ways by which you CAN pay for black market transactions when the CB is reducing cash in circulation in favor of CBDC. The real target market, and to whom this ability is worth a great deal. Transaction demand is steadily increasing, and CBs around the world continue to work very hard to make it so! It just isn't the demand you thought it was ... SD

You might find the below a very useful DD exercise Google the halving rate of BTC. Record the miner reward and date 50(inception), 25 (2012), 12.5 (2016), 6.25 (2020), 3.125 (2024). Google the price of BTC June 30, 2012, 2016, 2020, and TODAY. Multiple the mining reward at each halving by the BTC price mid-way (June 30) through that year, divide by 100M to get the mining reward per Satoshi. Multiply by 5,000 to get a transactional cost (ie: 5,000 Satoshi for USD 2.50). Multiple by 100M to get to the mining value of 1 BTC. This is essentially a rough production BE estimate, 'cause were it to cost the miner more than this - he/she would stop mining to avoid incurring a loss. Interesting numbers keep showing up, as well as some implications around continuation of the halving process. That 12-14x that rkbabang refers to, could even be conservative! SD

Agreed. Whether the entry point is 8,000 or 14,000 is just a number. The key point is a entry price lower than it is today, and an exit price a lot higher. Our 50K number assumes a mining cost of 5,000 Satoshi for USD 2.50 - or USD 0.0005/Satoshi x 100M = USD 50K/BTC. Theoretically, the more mainstream BTC becomes the greater the transactional demand for Satoshi, the higher the price, and the higher the end value of a BTC. The actual value N years in the future? .... anyone's guess. SD

Just to throw some numbers out .... BTC-USD peak was about USD 61,308. If 6-10% of 'peak' is the eventual expectation .., BTC-USD is 3.700-6,200. If BTC-USD falls to 16% of 'peak' (average guestimate is 50% too aggressive), BTC-USD falls to roughly USD 9,800. Obviously, to get from USD 22,000 to USD 9,800 - a black swan or two need to show up. Spectacular stable coin failure. Occasionally even a CB doesn't have the reserves to maintain a currency peg (Bank of England/Soros). Stable coin organizations are only as good as the quantity and quality of the collateral ,,,,,, ETF/Whale failure. Underlying a great many crypto ETFs is a derivative transferring beneficial ownership of the whale holding to the ETF. Somebody, somewhere, has a margin call large enough that a whale has to sell part of their holding ..., loss of confidence, along with a deluge of supply all hitting the market at once ..... BTC futures/options . The pricing mechanism between spot and future is well known, and works both ways. The option market is institutional, came into being after the famed USD 20,089 peak, and is (as a new market) abnormally lucrative ..... directionally push the futures price, to push the spot price? and widen your put gains? Lot of other, more subtle possibilities as well, but the point should be clear. With so many ways to die, and all of them swarming the industry, it is inevitable that some of them are going to hit. As as the hits mount... the decline accelerates. Creative destruction. Most would argue that a buy at 10,000, in anticipation of a sale at 50,000 in a few years, is not a big risk. ETH requires a gas fee to use it, BTC will increasingly require buyer/seller to split the mining fee - and pay in Satoshi. BTC trades at a much more stable 100M x the price of a Satoshi. Not a bad thing. SD

We don't often agree with Mr. Wonderful, but on crypto he is quite right .... “A much bigger player will need to collapse completely, so that it can lead to more volatility for crypto. This is a space that has never seen that kind of volatility yet, which means it’s also never seen maturation yet either.” https://www.theglobeandmail.com/business/article-kevin-oleary-sees-more-pain-ahead-for-the-crypto-industry-as-investors/ Think o/g companies. .... So utterly despised that not that long ago they often routinely traded at 6-10% of their peak valuation. Still despised today .... but now, they trade for a lot more than they used to We may dispute the merits of BTC, but same as the clap ... it is not going to go away. If you need an antidote to the zero privacy of CBDC there are few better functional alternatives. Hard to see how a patient, but enterprising lad,, doesn't make at least 3-5x on BTC over the next few years. SD

BTC has a lot further to fall ...... The current price is USD 22,175 - but gee whiz .. remember all that excitement back in 12/10/2017 when BTC 'peaked' at USD 20,089? However, today we have BTC options/futures!! and that USD 20,089 peak is less than 10% away. What do think happens if/when BTC crashes below USD 20,089 ..... I love the smell of napalm in the morning! SD

Lot higher than 3-4%. The mandate is a low target rate of inflation, not management of the economy; breaking the glassware is part of the creative destructive process. We would all be a lot better off with a hard and fast crash wiping out the exotics, and a fast entry into the new infra-structure build (grid, EV, etc.). Moral Suasion is such a bitch! SD

Temporarily closed out swing trades in ESI, PD, OBE, and WCP. 25% of gains to a crypto ETF at ridiculous prices. We're doing very well on what is supposed to be cash accumulation ahead of a RE purchase! and are pretty sure that we will be able to resell these shares at another gain in a few weeks. Got to love the Fed ... SD

It is a well known fact that 'consensus' forecasts are utter rubbish. To prove it, all one need do is simply compare any strip pricing curve against the subsequent actual prices. The reality is that 'consensus' forecasts are little more than baby food for the masses - feeding them into analysts models to spit out earnings and price targets just makes them look legitimate. However, when most are just buying ticker story and experience, and don't actually 'know' the company - magical things can happen !!. SD

If all you do is hold a bond through to maturity, you need a positive real yield. However, if it is part of a ALM, held for trading, or needed for the coupon interest (seniors) - it is not a requirement; a liquid market is. Hence periodic CB intervention when markets 'freeze'. It is quite obvious that high CPI will be with us for some time. Ongoing CPI calculation and target rate 'massaged' to meet the needs of the time, supply-chain inflation progressively embedding into the economy as time goes on. A great many union contracts are also entering arbitration, with rate increases in the 1%, 1%, 3-5% in yr 1, 2, 3 range. 12-18 months at most, to get inflation down? Obviously, there are lots of opportunities here! SD

The US MBS market went 'no bid' on Friday https://notoriousrob.com/2022/06/finally-no-bid-on-mbs/ "30 year fixed mortgage rates today are about 270bps over the benchmark 10 year Treasury as of this writing (5.85% vs. 3.165%). If we need to get to real bond yields before investors want to buy bonds, that implies a 10 year Treasury somewhere north of 8.6%. That in turn implies mortgage rates north of 11%. (All of that assumes you believe the 8.6% CPI print.) " Then of course .... if you can get the CPI to come down, and rapidly - you don't need 11% interest rates. Could be a very profitable week! SD

Just to add to this .... In the marketing (CPG ) world, a vendor sells a 'package' of product + experience + story. In the investment space: stock/mutual fund/ETF 'product' + MOMO/swing-trade/buy-hold 'experience' + creds in the cocktail circuit/locker room 'story'. Very few people have any idea as to whether they bought sh1te or not, and really don't care - all that matters is the 'experience', the 'story', and whether they can sell it higher a few days/weeks from now, and look 'expert' while they are holding it. Lots of manic depressive bunnies in the trap By some accounts, NA is currently undergoing the greatest inter-generational wealth transfer in history. We also know that globally, riches to rags in 3 generations is the long-standing historic norm, and that 'real wealth' is made primarily by building/running businesses - not by trading bits of paper. It is not looking good for the bunnies. However, you still need a place to live; and most would just prefer it not to be the gated community with security at the door - also known as the compound/ghetto. It is also not much fun being king, with several palaces, when everyone around you is suffering very badly - deservedly or otherwise. Be a hard ass - but find a way to give some of it back. SD

Were the fed not doing its next rate set next week, this conversation would not be happening. The expectation is a 50bp hike, the fear is that they do something higher. A more aggressive stance next week, the indexes drop like a brick, and Wall St takes a bath. Like the Fed, the BoC mandate is to manage inflation. That's it; not the housing market, not the economy, etc. They have repeatedly stated that they are going to raise rates back to historic norms, and the vehicle is repeated and aggressive hikes through to 2022 fiscal year end. We just don't like what that means for our stocks and bonds. The CB's managed us out of what would have been a global Covid led economic depression. The cost was negative/ultra-low interest rates, an ongoing 'put' on the market, asset bubbles maintaining collateral levels, and 'temporary' inflation. It allowed most people to maintain/improve their livelihoods; and a great many people borrowed cheaply, invested in either RE or the stock market. Without the CB actions we would all still be trying to claw our way out. Thing is - the 'put' has now been withdrawn, moral suasion is back on the table, and during the 'good times', people used the inflated house values as an ATM machine. Stock/bond values are now falling, and being sold to repay the borrow. Houses are being sold as borrowers can no longer pay the carry, and no longer have the equity to borrow against. And with the 'put' now gone - no more bailouts. The 'put' has been in continuous existence since the GR - 2 entire generations of analysts have no experience with anything but continuous bail-outs. Enforcing both moral suasion and letting the zombies collapse, kills multiple birds with one stone - reduces demand, releases employees into the labour pool, and reduces the magnitude of future interest rate hikes. However, very bad news if your returns depend upon Wall Street. Globally, CB's are unwinding their stimulus, and getting out of the economy - all good. As Gregmal point's out, stop digging, and let the economies reset themselves. Sure, there are some people that will get hurt, that's how economies work. It's called creative destruction. Coupon interest provides a great many seniors with the money to eat - raise it from 1.5% to 4.5% and those seniors eat a lot healthier. Nothing prevents anyone from simply swing trading the indexes, the market impact of rising interest rates is widely known. The DJIA is down 13.6% YTD and continuing to fall - 'do nothing' is not an option. We might hate cash, but in the short-term it holds its value. Viking simply recognizes that while the nominal value of stocks/bonds may fall materially, the nominal value of cash remains the same. We can debate cash alternatives, but if there is no cash to start with, there is no debate. The reality is that you have a once in a multi-generation series of events in front of you. If you cannot turn it into a very healthy profit in this extraordinary time, you really have only yourself to blame. Good luck! SD

There are multiple sets of rules, and always have been; they are simply what an enterprising lad exploits. Thing is - everyone has to live somewhere, and wherever they live, those are the rules they accept. If you have the means/ability to emigrate you get to choose between rules. Smuggling/sanctions breaking is one such exploitation. Our London RE will be leased by some friends, with whom we share a partial train load of Beluga Vodka in a western warehouse. Our gain, their loss .... SD

Check in with the local foodbanks in your area. In the Greater Toronto Area, visits are up materially, and rising rapidly. There are also a lot of new visitors, who would not normally be part of the population they serve. According to food bank managers, a lot of people are cutting back on food to pay their other bills - and supplementing from the food bank once/twice a month. Some of these users drive up in a F150 truck ....... Some of the additional demand is from newcomers still establishing themselves; wage earners working a taxi/Uber/food delivery gig and 2 minimum wage jobs, rest of the family supplementing their take-home from the food bank. What isn't talked about are the growing number of angry folks, whose standard of living would appear to have been permanently impaired - entitlement meeting poverty. Hard to imagine this is not also the case in the US. How it manifests in the smaller cities and more rural areas may be a little different though. SD

Nukes are subsidized because they don't pay the full cost of insurance. They are self insured against nuclear accident, waste disposal, decommissioning, etc. by you and I - so that the electricity they generate is affordable for general use. While the tech itself has both matured and miniaturized (sub/warship power plants, satellites, etc.) - in the public domain, the centralized power plant in a remote location remains the preferred option. It is extremely stupid to put nukes in the Alberta oil fields (Cenovus CEO) - no matter how safe they are. It simply creates a terrorist threat; as a single adverse black swan event now risks contaminating the worlds 3rd largest oil field. Nukes are a good choice - but located on Canadian Shield, and the electricity produced moved to the Alberta oil fields via dedicated power lines. Nukes + national grid upgrades = less CO2 emission in the oil fields + less CO2 emission as EV replaces IC vehicles. Canada meets its CO2 reduction targets quickly. We may hate the environmentalist, but without them we would not have carbon taxes, or the coming plastic taxes. Put a tax on pollution, and you can make the business case for investment in its removal. Green Tech as a sustainable, versus the current unsustainable extraction based business model. SD

The reality is the large numbers of over populated cities located in drought areas. Retire to the sun belt, golf/boat/play in the sun all day, enjoy the good life ... and pass the costs onto someone else - it's the American way!! Water, energy, food - it's rationed folks. Pay up at the supply/demand price, move some place else that you can afford, or croak - your choice. If you have the water and the labour, grow your own food; if you don't have it - import it at a lot less cost from a Mexico/South America. If you want domestic food/water security, pay the higher cost for the water desalination that it took to get it. You can still have whatever you want, but now you pay the full cost of producing it - including the carbon/plastics pollution that are part of the product. Back in the day Grandpa didn't care, 'cause simply having the product was the reward. But in 2022 Grandson's do, 'cause the cumulative toxic load is killing him and his kids. Grandpa will either be dead, or in a home within 10 years, and doesn't have to live with it. Full cost also includes the exploitation costs of globalization. If you want the supply-chain security of on-shoring more of your product, pay the US cost of producing it. Smaller quantities for the same price, or pay 2x more for same quantity - your choice. So what? Costs rise by BOTH the inflation rate, AND the costs of pollution, AND the cost of onshoring. The screaming is because millions of people are experiencing a permanent reduction in their social status. The middle class person sinking to lower middle class, unless they take on a 2nd job someplace else. The lower class persons status sinking to below that of a migrant - trying very hard to lift themselves up through their own efforts. When entitlement meets poverty it isn't pretty. SD

Bonds have a long way to fall yet. We are well below 'normal' interest rates. 10 yr Canada's currently trade at around 3.5%, the BoC has repeatedly stated they will raise rates 150-200bp by year end, and the resultant 'more normal' 5.5% is barely what we were at in 2005. By around year end we will just be back to normal. Of course, the times are not normal - we have aggressive inflation. At least two generations of the current crop of analysts have never seen inflation, yet suddenly they are all experts on it? Yet push them, and most will cite the 1970'-80's as the inflation example - 'cause history repeats! Charting substituting for experience, with little/zero adjustment for this being 30+ years ago. So hardly surprising, that when you talk to old geezers who were actually there at the time, they have a very different view (after they finish laughing). Higher interest rates = lower share valuations = recession pending! So if interest rates really rise, it must be a depression, and we're really f****d !!!! However, we know Mr. Market is a manic/depressive - so if we're pretty sure Mr. Manic will become depressive if rates really rise, isn't that the opportunity? SD

Bit out of date, but there are 5 refineries in Alberta; all of which are relatively young. Suncor (142,000 bpd), Imperial Oil (191,000 bpd), Shell (92,000 bpd), Cenovus (29,000 bpd) and Sturgeon (79,000 bpd). Upgrader capacity is additional, and almost 3x the daily refining bpd processing capacity. https://open.alberta.ca/dataset/98c15cad-c5d9-4d96-b39c-423210a3050c/resource/7367e817-4fea-4744-a80c-0a81ce5fc907/download/factsheet-upgraders-and-refineries.pdf There is also discussion on a NEW $5 billion Saudi sponsored refinery in Alberta. With Mr. Kenney's recent departure, and the political rhetoric dying down, prospects have markedly improved. https://www.theglobeandmail.com/business/article-saudi-company-eyes-alberta-for-petrochemical-facility-as-province/ New refineries are being built in NA; just not on the terms Chevron would prefer. They are collaborative endeavors with local governments, and with the government as a material partner. A good chunk of Alberta's Sturgeon refinery feedstock is PIK oil, paid in lieu of interest, that would otherwise not be available. Technically, 'refining', now ALSO includes CO2 sequester infrastructure. In the circular economy, crude refined into value add product on the way out - and refined back into inert disposal on the way back. Times are a changing. SD

The only people bitching about windfall tax are the trading community; short-term, anything that takes away cash from buybacks &/or dividends is bad, therefore this is a terrible idea!!!. Whereas long term, an investor really couldn't be happier. Cash going to windfall tax, reduces cash going to long cycle capex, and ensures that those expensive investments either stay in net depletion, or don't get expanded. Strangle long term supply and oil prices stay higher for longer. What's not to love? A dollar of tax now for less dollars of tax later, and if you want expansion of long cycle capex - many less dollars of tax later (Cenovus West White Rose?) Again, what's not to love? Government spending has been at war time levels for quite some time. Ultimately it will have to be financed by some kind of new tax - the new tax paying the carry on the modern day version of war bonds. Get tapped first, and you will not get tapped again until everyone else has also made their windfall tax contribution (Wall Street, Big Pharma, etc.). But if that first tap comes with benefits? it's pretty dumb not to take advantage. Maybe it's really Wall Street that doesn't want to pay? and the strategy is to stop it at the o/g sector? Do what we ask, and we'll help refinance you. Isn't agency great SD