SharperDingaan

We've done well by bonds, but in all cases it was a bet against the market - and we had to risk significant cash. The only time to buy a bond index, is when you expect the yield curve to decline over time. Today, in most places, we are looking at the yield curve rising 150-300 bp. Hence, anything with a straight future cash stream is going to discount to a lower PV, and the longer the duration the worse it is going to be. To get around this you either need the convexity of a high coupon (mostly junk bonds), or a convertible. We've bought distressed bonds that ultimately matured at par, and zero-coupon sovereigns at market yields > 14%. We did well, but ultimately it just wasn't worth the mental stress or the portfolio restrictions over extended periods. Dropping 50K on 1M+ of Greek zero-coupons attracts a great deal of ridicule, and a great deal of envy when you subsequently exit, a few months later. Obviously, there is a need for some FI investment - however, it is almost always better to hold it as T-Bills, and as part of a broader strategy. Walk away from your non-recourse mortgage (US) today, with little consequence, and your banker will hate you. But walk into his/her bank the next day. with 100K of T-Bills, and he/she will happily give you a margin loan against it, at great rates, while smiling nicely, and gritting his/her teeth. You're still scum, but the loan is secured against the federal reserve - and now your shit don't smell! FI is held primarily for security, and it's pretty hard to beat a US T-Bill. SD

Had a couple of games of chess recently with some Russian friends, all of whom had retired and escaped from Russia many years ago. Already good to start with, they have all have dramatically improved their 'game' over the last few months. Learnt all kinds of new ways of doing things. The Russian goods, vs currency, FX rate is dramatically different - and widening. Cross the border with a railcar of Beluga Vodka under a layer of coal, and in some places - it will buy you an entire house. SD

Agreed, it's simply different POV's. Putin cannot afford to lose, simply because he has too much on the table. He needs a victory in the east, a Ukraine annexation (before May 9 Victory Day), and can only continue doubling down. Should the new push fail, the remaining choices are biological or nuclear - both of which will provoke a GLOBAL response.. NATO, and UN participants, are NOT the same thing - the US supplying weapons via the UN does not trigger a NATO response. The Gulf Wars and Kuwait were coalition forces, the same as the GLOBAL escalation response would very likely be. NATO does not go to war. If you are going to escalate, you burn the boats (blow the pipelines). The objective is a decisive win as rapidly as possible, avoidance of a WWIII via an end to the escalation, and European (German) ongoing commitment. The world bears the temporary costs (higher gas prices), it does so because it is cheaper than escalation into WWIII, and it tries to minimize costs by getting to a practical political solution, as rapidly as possible All else equal, it will be brutal, but Russia should win the current push. But it is somewhat questionable if the Ukraine has access to unlimited supplies of western high-tech weaponry - hence the threats to cease supplying it. Of course - that is unlikely to happen. Russia is collapsing, and it is using its last reserves on Donbas. They fail to annex, the Iron Curtain comes down very quickly, and we get the political 'compromise'. Different POV. SD

Dropping a nuke WILL provoke a response. Most would expect it to be conventional precision weapons, targeting all high-value targets in the Ukraine theatre, including leadership, and the pipelines carrying Russian gas. US gives the weapons to the UN, and UN participants prosecute the strikes. The Russian calculus relies on the US not matching the ante (by supplying the required weaponry), for fear of nuclear retaliation. The reality of course is that MADD immediately ratchets up the ante for all - as soon as any one player goes nuclear. The weaponry has little choice but to flow. The Ukraine needs an interim political solution. Most would expect a return to a cold-war iron curtain that includes parts of the Ukraine, NATO missiles parked in nearby countries, and the Ukraine in the middle; growing food. Nobody 'likes' it, it simply freezes the situation; but its the Russia 'old-men' know. Do nothing further, and over the next 30 years, they will all be dead from old age. All things Russian, point back to Putin. The reality is that 'Putin in a box' pops the boil, and allows the sepsis to safely drain out; the mystery is what comes after, and who does the deed. The reluctance is that whatever precedent is set, it could in-turn, be used on you. Hence, the preference for internal resolution, and limited outside 'official' help. A nuke comes down, Russian forces in the Ukraine get annihilated, and the Iron Curtain comes down very rapidly. Obviously, not the optimum solution. SD

Drop any kind of nuke, anywhere, and you set off an unpredictable global chain of events; your odds of surviving it are very slim indeed. Nukes are simply a table stake, used when your current total ante is enough to ruin you - should you lose. Win/lose is irrelevant, the purpose is to intimidate, and make opponents back off. The reality is that 'spheres of influence' are simply an attempt to halt 'change' at a point favorable to you. However, history has long demonstrated that change is akin to a permanently flowing river; it can be damned up for a time behind the 'powers of the day', and 'controlled' via planned releases - but the damns eventually collapse. Old men, unable to change, striving for the 'old days', taking everyone else with them. Obviously, 'Putin in a box' is the best outcome for everybody; and at this point, it is now more just a matter of time. Something that Putin, as a former KGB spy master, will be well aware of. Hence .... keep scanning that daily copy of Pravda! SD

Russia also has the issue of getting paid for their crude.... In theory, the west pays OPEC USD for the 'blend', and OPEC passes the USD through to Russia. In practice, Russian tankers cannot use western port facilities, and Russia cannot receive USD on new crude purchases. However, there are no restrictions on loans , at an interest rate commensurate with both the smell and the risk. The west simply sets up a USD payable, secured against frozen Russian funds. Thereafter, OPEC is simply paid for each delivery of 'blend', with a portion of this USD payable, and OPEC/China relends USD to Russia at a premium rate Blended only 'on paper', the physical Russian portion is simply re-sold directly to China/India - where there are no off-loading/port restrictions. OPEC facilitates the trade by buying the Russian crude at a steep discount, charging a steep 'handling' fee for the 'processing', a steep spread on the loans, and keeps 2-3 months of float. The west facilitates the trade by netting against the frozen funds (free crude oil), earning interest on the frozen funds, and essentially never releasing them. Free oil continues to flow until the frozen assets are exhausted, bribes continue to get paid, Russia avoids a sovereign default, and everyone is happy. There are very few ways Russia can access large quantities of USD. One is this way, the other is the Chinese agreeing to swap crude oil Yuan proceeds against their US USD reserves. Both ways are very expensive, and yet here Russia is trying to cut a deal? An indication as to just how desperate the Russia Central Bank actually is ???? The LNG/NG issue will largely resolve itself over the summer, and Russian gas demand will be reduced in stages designed to inflict as much financial damage on Russia as possible. The longer the war drags on, the worse it gets Capitalism at work! We live in interesting times, SD

Russian crude is about to be 're-branded', as a 'blended' OPEC crude of 51% 'Other'/49% Russian ???. The Russian crude bought at a deep discount, 'blended' at various storage facilities, and the 'blend' sold at a discount to offset the recent SPR releases around the world? https://apnews.com/article/russia-ukraine-kyiv-business-europe-religion-9b10ce4f2cfe5bdeed5658fe45373e54 SD

Think of them as lend/lease. Lend as operation/maintenance by offshore independent contractors over Ukraine airspace, feeds tied to AI facial/body recognition. Lease of the weapons dropped under target lock. Different weapons for different targets. Bounty on the high-value target split between the Ukraine and the contractor, Ukraine portion paying the lend. No play, no pay. The more on the card deck, and the higher the bounty, the better - capitalism at its best, Dirty deeds, done dirt cheap???? AC/DC .... SD

Just to stir the pot ... New home buyers are just trying to get on the property ladder. They know squat, parrot phrases, and have inflated expectations. They just need a roof over their head, Rent until you can afford to buy, lower your expectations if you want to buy earlier - it's that simple. I DON'T WANNAH!!, vs I don't give a sh1t! If you went to a college/university you lived in a dorm or shared a house - you got your first job in a NY. Chicago, London, Paris, etc. and you did the same - for YEARS. You wanted to hook up with someone, you RENTED a house together. Then you decided on kids, and SUDDENLY renting became unacceptable ??? All that has really happened is that you have discovered how poor you are actually are. WTF! The reality is that if you can't afford a new build, you cant afford a house - period. Despite the builder doing everything he/should could to move that new product (condo or house) - if you still couldn't afford it, it's really on you. If builders thought there was more money in starter homes, they would build them. If they aren't building what you can afford, either come up with a bigger deposit, or look elsewhere. BWAAAH! So what? New build starter-home activity is driven primarily by speculation on how much mom/dad, gran/grandpa are going to contribute to the deposit/down payment. Interest rates go up in a big way, contributions can be higher - but until then new build starters don't get built. Downside possibilities around the shares of the more 'frothy' homebuilders SD

'I have been slowly adding to my BTC position.' For us, it's new investment via purely passive ETF's, set at 25% of all realized oil/gas net gains. Old BTC investments remaining both experimental, and as a side-car - to contain risk. We're doing a deep dive in/around NFT, and have a nephew looking to spend some time in Estonia. Early days yet, and we need the Ukraine thing to resolve itself first; but we see some real possibilities. Hopefully, he eventually gets to talk shop with some of the original crew.. SD

Sadly it still floats .... for now. Last month it was the the tank carrier Orsk, hit and set on fire in the Sea of Azov. And the chopper attack on an oil storage facility inside Russia https://www.reuters.com/world/europe/russia-says-flagship-black-sea-fleet-badly-damaged-by-blast-2022-04-14/ These were little missiles, and proofs of concept - sailors walked away. Much better ones are widely available, and they do kill ships in a single blow. Take the precision guided missiles off the table, or lose your fleet? SD

If you live in the former Russian republics, and have had the war experience; you have a very different POV. A Russian success in the Ukraine means you're next - and your best defense against a destroyed future, and your cities being turned into rubble 'AGAIN' - is to do whatever you can to foil Russia's Ukraine advance. You are also very aware that when good people don't act, when they can - the result is another Hitler. And that help ... can come in a great many different ways. Kids/moms/grandparents need to be got out, re-hosted, and de-traumatized somewhere safe. They are the Ukraine's future - and the return ticket 'home'. Thereafter, the focus shifts to slaughtering Russian troops - as ruthlessly, and brutally as possible. Every time something moves in a Russia, there is a record, and it is a very leaky boat. Everything from accumulation of evidence for war crime prosecution, through to the bank accounts, smuggling conduits, fuel and ammunition stores/locations, and all in near real-time volumes. 'Cause the more you have to pay the sanctions breaker, the less there is for you. Death by suffocation. Weapons, and intelligence inflows are an easy thing. Lend/lease a little more difficult, when its live time, and a drop from a high-tech drone with a target lock. Other vehicles are just proofs of concept. State craft is to states, and for very good reason. However most would think that the clock on Russia is rapidly ticking down. Keep scanning your daily copy of Pravda! https://english.pravda.ru/ SD

This is Russia. All that is certain, is that change, when it comes, will be both swift and brutal (as his 'supporters' will need to be rapidly terminated as well). The well-worn path by many a future dictator, is a supporter suddenly becoming an assassin, with bounty payments offered, to help the successor get up and running. Thing is; there can only be one successor, and 'president for life' has a different meaning. Game theory typically favors the 'next in line', and not the initiator; hence everything remains 'stable', until suddenly it isn't, and chaos prevails for a period as the old 'helper network', makes way for the new. Initiation, sets off a chain of events, that successors have to survive. Failure is a pine box. As the return has to be worth the risk, every existing dictator has a 'grace period'. Fail in the Ukraine, and Putin very likely enters it. Whether dead via 'regime change', or dead via 'war crime prosecution', the outcome is still 'dead' - but he lives longer if he focuses on the former. The man is very good at what he does, but everybody eventually get 'old'. Our own view is that China is the king-maker. Trigger being a threat to turn off access to the Chinese banking system; but until then, why work the orange when you are already getting its juice? SD

Think weapons and operators as free - a simple $ investment in the brand. Simple case: Cannon + supersonic ammunition on a tripod, supported by X rotors. Military grade vision/feeds, 60-90 minute battery life. Pops up, fires its burst, pops down; sound hits the target after the bullets do. Rearmed with new ammunition and battery packs, in the field. Recharge the batteries off solar. Simpler case: Drone swarm carrying magnetic limpid mines. A few attack, most settle amongst the dead tanks and switch off. A while later, switch back on, deposit the mine over live tank engines/magazines, fly home. Mines go off, drones rearm with new mines/battery packs in the field. Tanks, artillery, and choppers die. In large quantities, and for cheap. SD

It is s simple thing to link AI facial recognition to a digital feed from a drone. Thereafter, it's just whether execution is automatic or subject to a manual oversight. In the Ukraine? Maybe it's a drone swarm over a munitions/fuel convoy/dump. Alternatively, an airborne cannon that can quickly be rearmed in the field. It doesn't have to look pretty, it just needs to demonstrate proof of concept, and be able to work in the dark. SD

Denial works until the body bags show up. The grieving process is exploitable for a short time, then you lose control. Country Joe And The Fish: And you can be the first ones in your block. To have your boy come home in a box. And its one, two, three. What are we fighting for? Putin remains, only so long as he is useful to the regime, and the clock is ticking. Time at the top is a limited term engagement; no matter who you are, or where you are. Colonialists are widely unpopular today, but the fact is they knew their stuff, and were very good at the colonizing 'process'. Local 'strong men' were routinely installed for roughly 10 years, then 'turned over' in favor of the next generation. Long enough to dictate as they wished, but not long enough to accumulate enough power to threaten the colonizing regime. When costs > benefits, you simply granted 'independence'. SD

Remember the Falklands War? The sinking of the HMS Sheffield made the Exocet missile famous (and sold hundreds). Sink one of the larger Russian sea-borne cruise missile launchers, in a single strike, and you too will sell hundreds of these. Your existing inventory will also instantly double/triple in value on the back market - and the launch of that missile ..... could come from anywhere. https://www.theguardian.com/uk-news/2017/oct/15/revealed-full-story-behind-sinking-of-falklands-warship-hms-sheffield https://en.wikipedia.org/wiki/Exocet The updated version of the 'Warthog' is the 'Gunslinger', a remote controlled drone. One has to assume that there are at a least a few 'Beta' versions about, with similar weaponry, that need to 'prove concept' - on ideally, live targets. Tank killers, built for open land killing fields, beaming back simultaneous video? The more sophisticated versions hunting people? Doesn't look good for the conscripts. SD

There has been quite a bit of time to prepare for Donbas, and a lot of people have a commercial need to demonstrate the effectiveness of their advanced weaponry on live targets. Those open lands are killing fields, and a strategic sinking will do wonders for sales. As would predator drones successfully decapitating Russian leadership. Turning Donbas into rubble simply makes pro-Russian sentiment, very anti-Russian; as will the mass termination of large segments of population to maintain fear. Obviously, it doesn't go well for Russian conscripts, or their leadership. A failure, also demonstrates that the czar is weaker than thought, and raises opportunities ..... There is no point to live demonstration, without video proof. Lots of lovely images beaming into Russia. SD

There is a Canadian flip side to all this .. If, within the next 5-10 years, you were planning to convert a portion of a RRSP into a RRIF; you are probably going to see a 'guaranteed' interest rate of at least 2-3x what you are seeing today. Terrible thing, to pass on such an opportunity SD

BTC has many attractions, beyond just the functions of money. Similar to venereal disease (Impossible to kill), and the very robust de-facto counterpoint to capital controls and central bank digital currency. Both security and decentralization are king; all that is required is internet, and a local currency/BTC exchange rate. Forking, shards, lightning networks, etc. is simply batch processing. Process thousands of transactions/second, net them off, and buy/sell the BTC difference once every few minutes. No different to what most GSIB's and DSIB's already routinely do with settlements, multiple times a day. Security and Decentralization at the BTC level, Centralization and Scalability at the batch processing level. A work-around solution. The more batch processing the more net settlement demand for BTC, as crypto becomes more mainstream. The more global disruption, driving payment via BTC, the more transactional demand. And the higher the total transactional demand for BTC is, the sooner the 21M coin release is achieved. At which point BTC demand/supply settles on the price of the Satoshi needed to pay the miner, and a BTC trades at 100M x the price of a Satoshi. BTC inflation 'value' is predicated on a maximum 21M coin. That 1M+ of lost and/or 'frozen' coin along the miner distribution phase, remain lost 'forever' - really? Or is it much more likely that it is < 20M of BTC coin, and 1M+ of BTC naked derivatives? ('theoretically' supported by the coin in those lost and/or frozen wallets) Point? It is pretty hard to see how BTC doesn't move higher over time. You can choose to be road kill, or get with the program. SD

All else equal, rising interest rates and a drift down in inflation over time is reasonable (rising real return). Problem is, bigger and bigger rocks keep getting tossed into the global pond, and quicker - making the resultant inflation waves bigger, and compound upon each other. Most recognize that food prices around the globe are going to rise rapidly as Ukrainian crop production falters. But few recognize that global warming is also threatening the globes remaining growing areas with drought, and collapsed production. In most parts of the world, raise both food and cooking oil prices, and you get unstable regime change (Arab Spring). Compounding inflation further. Even if US rates rose 250bp, net of current inflation, bond holders would still have a negative real return. Theory suggests that higher interest rates should lower demand, and that bond holders should be moving to convertibles funding new P&E. That new investment pressuring limited resources and pushing inflation still higher. Our own view is that inflation is going a lot higher, and for a lot longer. Straight FI being a very dumb place to be, unless it is very short duration. SD

Re solar expansion. The issue isn't solar, it is the US approach being advocated. Build a massive green field farm in the middle of nowhere, ship the power out, and hope that nobody bitches. Bribes/lobbying will ensure that most of these will get built, but obviously, management is pretty clueless. In rural areas solar is more about the farmer putting panels on their land, selling the excess power to the grid, and taxpayers providing financing. Farmers save the cash cost of their monthly electric bill, plus get a little additional cash on top. The more organic, and the more take up, the more excess power there is. In urban areas it is more about roof top and glass curtain panels. Rooftop panels supplying the home, and excess power going to local grids. Condo/office blocks replacing portions of existing curtain wall, to supply most of the internal need. SD

A degree is just a union card, no different to a professional designation or a trade certification No card, no access to the magic kingdom, and no access to the prospective mates/spouse you might find within it. Competitive advantage has very little to do with it. This is also 2022, not 1992 - a great many young women routinely add trade certifications to their degrees. Traveling the world, in a gig economy, while adding a RN, and looking over prospective mates - is a common thing. Good on them! SD

Yet the median (dividing line) balance is 1/2 that of the average loan balance. IE: There are a lot of whining people with 50-60K balances, dragging the average up, looking for a bail out. The median $19,281 is no big deal over a working lifetime. It is just the $ investment you made in yourself; everybody around you also made $ investments in you, and have no problem with your expected future ability to pay it back. So .. either the student has no confidence in his/her future self (school was a free party!), or is just trying it on. Mommy/daddy might have given the student the money, but they've chosen not to pay the loan off - either because they're tapped out, or they are sending a message. Either way, a brush with the most unwashed debt collector possible, is a good outcome! The students good start in life is NOT GRADUATING DEBT FREE. It is the degree in his/her head, that results in better than a minimum wage job. You consistently make bad choices, you wear them - welcome to life! SD

The war crime thing enables possibilities When Putin doesn't show It generates an international arrest warrant. It also generates a UN prosecution, and humanitarian possibilities, that can be enforced by UN members and not NATO. Everything from an extraction of Putin himself, through to 'enforced' evacuation routes; by land, air, and sea. Blue helmets shepherding people out under protection of the participating UN armed forces; fire on them, and you lose your artillery &/or missile launch sites. SD