SharperDingaan

73 Reds - build yourself a simple model, then change the variables to see what happens ... Assume: $1M bond portfolio; 250K of T-Bill earning 3.5% before tax, and 750K of Bonds earning 6.0% before tax. 42% tax on interest income, 3% inflation. The weighted after-tax return on this fixed income portfolio is 3.12% [.25*3.5*(1-.42) + .75*6.0*(1-.42)]. On this $1M portfolio, the after-tax, real return after inflation is 0.12% [3.12-3.00] - or about $1,200; that's it! Margin against the portfolio, invest in your best idea, and earn an after-tax, real return of 3.12%; how much margin do you need? Assume $X of margin at a cost of 8.5% before tax, and $X of investment in a BTC-ETF that will earn 50% before tax. Same $1M of portfolio, 26% tax on the BTC-ETF gains, solve for $X using goal seek. 'X' is $93,623, and the weighted after-tax return on this fixed income portfolio is now 6.12% [.094*50*(1-.26) + .25*3.5*(1-.42) + .75*6.0*(1-.42) - .094*8.5*(1-.42)]. On this leveraged $1M portfolio, the after-tax, real return after inflation is now 3.12% [6.12-3.00] - you have recovered the loss to inflation. Everyone's 'best idea' will be different; many view BTC/BTC-ETF as a cash equivalent, and would suggest that at current levels a 50% one-year return is conservative . $93,623 on $1,000,000 of fixed income collateral is < 10% margin, $93,623 on $250,000 of T-Bills is 37%, or < 50% of the available T-Bill margin. Not a lot of risk for the NET additional after-tax $30,000 recovering the loss to inflation. It isn't for everyone; but so long as you have the risk tolerance and expertise, it is foolish to ignore. It could also be programmed into an algorithm, or even a robotic DAO (Decentralised Autonomous Organisation) ... if you truly wanted to be ambitious! SD

Quite agree. We just make the point that all debt has to be repaid when it's due; it is the collection processes that vary, and in all cases, the investor controls his/her risk - whether collection be via a margin call or a foreclosure. That decision to take on too much margin/mortgage relative to the price volatility and market value of the supporting collateral, was entirely on the investor. Risk tolerance. Every investor assumes, EVERY DAY; they he/she will make money by investing - i.e. a positive ROE. If your typical investment holding period extends over many years; a positive CAGR. Every good financial textbook demonstrates in great detail; that when used moderately, the return on a leveraged portfolio will exceed that of the identical unleveraged portfolio - and that the incremental leveraged return can be forecast. Of course; it means work! After-tax gains and dividends/interest on the additional purchases > after-tax cost of the interest. Always maintaining enough ongoing liquidity to cover ongoing withdrawals, a 50% draw down on these additional purchases, AND a doubling of the original investment at its lows. Yet always keeping enough in reserve (multiple mortgage free houses), so that if you're wrong - you still have other assets to live on. Risk management. You can go nuts with leverage, choose to use options vs debt; or simply just leverage very modestly. Risk tolerance. Covering our annual loss to inflation is as far as we go. SD

Real Estate just looks different; property foreclosure is a form of margin call. Buy a blue-chip, and maybe you'll tolerate up to 50% margin as the share price could also go down. Buy a house and maybe you'll tolerate a mortgage at 80% of value as you don't expect difficulty keeping up on the payments. However, the more margin you have in the investment/portfolio, the higher your ROE will be ... so if you can tolerate the risk that comes with margin, it's worth considering. In this case; borrow against T-Bills to leverage up the entire portfolio, and match inflation. Invest the borrow in higher quantities of the current vintage (today's best ideas). Opportunistic sales throughout the year to recover costs and repay margin. Repeat on new vintages next year. SD

The basic approach is to 1) calculate your after-tax return on bonds, equities (dividends), equities (cap gains), etc., 2) multiply each after-tax return by the weighting in the portfolio to get the 'long' position, 3) calculate the after-tax margin cost , 4) calculate the long/short (ie: 130/30) portfolio after-tax return, under different short % weightings (data table), 5) plot after-tax return against short %, 6) optimum short % is where the plot line peaks. 30% tax rate on tax deferred accounts (RRSP withdrawal tax), 0% on TFSA's, all else as per your local tax-code. In practice .... utterly useless. The reality is that you have to 'feel' your way, everyone will be different, and your approach will change over time. We prefer to margin by vintage with the newest vintages carrying the highest margin; as it forces a focus on risk, and staying alive as/when you f*** **! However, we ONLY borrow against T-Bills vs the vintages; hence we're not going to see a margin call if the vintages collapse 50% tomorrow. At the portfolio level, we just try to offset our annual inflation drag against the boost from margin, and leave it at that. I.E; If the no-margin return was 10%, and we earned 13% on the margined portfolio, we have 3% of 'margin' to offset 3% of inflation. If we really wanted margin, we'd just buy a rental property and mortgage against it. Different strokes. SD

One of the hardest things to get over, is the source of the cash in your bank account. Cash makes no judgement; and looks the same, whether it's borrowed/earned, smart/dumb, easy/hard to get, clean/dirty, or crypto/fiat. All that matters, is that on the day; you have enough of it on hand, to do whatever you want. That's it. In the corporate world, finance folks routinely use tax deductible debt to minimise WACC; all projects earning more that the WACC are potential investments. As investors we should be doing the same, with every investment using an optimal amount of margin. Borrowed and smart money. At $1M of AUM; a 10% before-tax return is largely inevitable, and 100K is a good salary for many people. If you are also drawing state/company pensions, even if you f*** ** and only earn 6-7% ... you will still very likely earn more than 100K. Start at age 65, keep your paws off the AUM, and at a 14.5% annual return, it's 2M in 5 years. Or aged 70, and 200K of income before State/Company Pension. Earned, dumb and easy money. Whether dumb as a brick but the recipient of a $1M trust fund, married into it, or made it the hard way - the outcome is the same. You're not a unicorn, simply 'cause of the size of your bank account. The differentiator is attitude, and for the most part ... the more that you can relate to the less fortunate, the better; a lot harder to do than one might think. Of course, if you're also good at what you do, and are adept at playing rough hockey, there's also a lot more opportunity! SD

They have a habit of getting 'pirated' on the high seas, their cargo shifted via by ship-to-ship transfer, and scuttled. These are smaller ships, the west can refine Russian crude as well, and when the price is right A VLCC at 2M bbl/load is the modern day equivalent of a fully laden Spanish Galleon returning to Spain from the Americas You can produce all you want; but if your pipes keep 'breaking', and your transport keeps getting nicked, your production is mostly staying in the ground. You take my infrastructure, I take yours ... an eye for an eye. SD

FU money means different things to different people; everything from the buying something stupid and doing the victory lap if it works out ... through to random acts of kindness, such as leaving the waitress a $1,000 cash tip over the Xmas season; or offering a single mom the use of your timeshare in XYZ, 'cause she and her kids could really use a vacation. If that $1,000 tip came out of stupid gains (ie: BTC trades ), or you got the timeshare out of a bankruptcy at cents on the dollar, it's a minimal cost. Back in the day, FU money was what you used to pay for your wintering (at the best hotels) in Egypt, or your 'Grand Tour' of Europe over Summer/Fall; one basically enjoyed oneself seeing the world. We try to take a similar approach, but with modern day twists. Wealth doesn't call the shots, you do. SD

Merry Christmas, the best of the season, and may the gains remain 'safe' through the rest of the year! SD

Quite agree with most of this; but Joe is also very much a momentum trader, and when BTC is at 94K it's cheap! and going past 106K next!! That volatility is systematically creating lower entry points, and multiple rounds of bragging as short term holds are profitably sold off at higher prices. I made 6K last week, what a hero! It's a great side hustle, all legal, and even pays better than dealing drugs !! Friends pile into the ETF 'cause if even this idiot can do it, I should be a lot better! The rising price is incidental. Jill six-pack is a lot more cautious; make enough to fund the down payment on a house, then focus on protecting the gain and actually buying the house. Money temporarily moving to the dividend paying ETF and blue-chip, then later into the housing market. If Joe wants to settle down at some point, Jill six-pack ultimately prevails. Like most others we're pretty sure BTC has some ways to run, but it'll be a bumpy ride, and the more bumps the more likely Jill's view prevails. It's just not the message in today's circulating cool-aid. SD

BTC is sold to retail based on its volatility .. the more volatility, the lower the entry price, and the more units the better. For average Joe Six-Pack the affordable vehicle of choice is the ETF; for the more sophisticated Joe it is options on MSTR. But when the BTC-ETF gets too expensive, Joe goes for volume and tends to switch quickly to cheaper crypto ETF's &/or shite coin, as we have seen with BTC around USD 100K. The volume effect works, so long as BTC continues to bring in the tide, and the cheaper crypto can float on that rising tide. Today's world. The obvious solution once the price of a BTC-ETF starts to materially affect it, is to spin off a less volatile dividend paying BTC-ETF (competing against blue-chip stock), that also materially reduces the price of the volatile BTC-ETF. Adoption improves, and we are temporarily back to the 70%+ prices rises. Second wave, etc. Thing is; that if the BTC-ETF is trading at around 5000: 1 (5000 units at $20 per 100K BTC), when BTC is at 200K, the BTC-ETF is $40, and at that price the dividend paying blue-chip is competitive. Retail money inflow into crypto both slows down and diverts into cheaper alternates, significantly reducing demand for BTC, and dragging on its price. Our point is that the game is changing; buy and hold 'forever' is unlikely to continue performing as it has. SD

It's worth keeping in mind that at USD 100K, BTC has to rise to USD 150K just to make 50%; and the higher BTC goes, the harder it becomes to get these returns. Then keep in mind that most of retail holds BTC via a BTC-ETF; when the price of the BTC-ETF approximates the price of blue-chip bank stock, and that blue-chip bank stock also pays a dividend .... a lot of wind spills out of the sail. SD

OBE, plus most of the CDN oil/gas patch. Combination of tax selling, fed/provincial/tariff threat response, and industry hate. The reality of course is that net of lower differentials, cost reduction via higher throughput, and a lower FX rate ... many of the despised are actually doing very well SD

Every aspiring CPA has to become proficient in their local tax code, and the expectation is 'The CPA Way'; hence the top 1-2 in a tax course is almost always offered an internship in tax at a prominent accounting firm. The other approach is to treat tax as theft, the year-end tax filing as your opportunity to redress the balance, winner takes all, and may the better thief win! Sadly, while this 2nd approach will ALSO get you into the top 1-2 of a tax course, there is no way you're going to offered an internship 'The CPA Way' sells tax as just another cost of doing business; tax avoidance perfectly acceptable, tax evasion ... not so much. However, an enterprising lad quickly recognises ..... that when your tax rate is > 50%; the taxman is now your majority partner!, and the higher the tax rate the better Take the premium to take stupid risk, spend the money enjoying yourself as much as possible, and when the losses occur - pass the vast bulk of them onto your majority partner Long a favourite of 'Smiling Jack', who has sadly now passed. https://www.cbc.ca/news/canada/oil-pioneer-gallagher-dies-1.165394 SD

Lower production costs = higher margins at current prices, and shorter payback periods. At payback periods < 1 year; maintenance capex is self-funding, as current spend has been recovered by year-end; thereafter the well produces at marginal cost, and lowers average production cost across the reservoir (ie: USD 35/bbl). Reduce the depletion rate, find a home for the rising gas/water cut, and that marginal cost production will also continue for quite some time. Drill baby drill, DOES mean more drilling, but NOT more NET production. Tier 2 inventory is not as prolific as Tier 1, typically depletes faster, and has a higher gas/water cut. To simply maintain an existing production level, the hamster wheel has to speed up, which means more drilling. Drilling technology advancements can slow it down for a time, but it has limitations. The self-fund thing ??? If the payback period is 1 yr, 2024 maintenance capex is 400M, and 2025 maintenance capex is 440M ... the actual 2025 new cash requirement is only 40M (425-400), and that cash saving can go into debt reduction, buy-back, M&A, dividends, etc. SD

Quite agree! but if you have the risk tolerance look at ACX.TO (Cathedral Energy Services, pre reverse split) Lovely low share count, much better shareholder base, and more presence in the US fields; reduced our PD and ESI to fund a larger position. If Trump does his thing, and she runs as expected ..... SD

Pig in a synagogue ... but look at Obsidian Energy (OBE) Dec-31-2023: 77.59M shares, 2175M capital, BV/Share of 28.03 (2175/77.6) Oct-31-2024: YTD buyback of 3.65M shares for 35M, or 9.59/share (35/3.65) YTD gain on share buyback and cancellation? 67.3M ...... 3.65*(28.03-9.59) ... and another 650K shares in November; another 13.9M gain on share buyback and cancellation. A small o/g company in an utterly sh1te sector, in the hades of Alberta oil sands, in a declining price environment, reducing its share count by 6% YTD ???, and booking a gain on cancellation approaching 81M ???? WTF!!!! And to add insult to industry ..... growing net production by > 10%/yr as well, year over year. Who the f*** do they think they are !!! Closed at CAD 9.09 Dec-31-2023, down 18% 2024 YTD as at close Dec-06-2024; gotta love the haters . But no .... this is a terrible sector .... lost 18% this year, and getting worse! ... carbon tax, Trump, Trudeau (blah, blah, blah). And no ... it's not a badly run company. Merry Christmas SD

Just keep in mind that investing in energy, commodities, or a BTC; is very different to investing in a BRK. With energy, you are a price taker, and attempting to forecast the rise and fall of economic tides. If you suck at forecasting (timing &/or price), your results will also suck; whether you invested in an ocean liner, or a row boat. Time horizon and risk management are your friends. Short horizons work against you, as does greed and the sizing of a position beyond your comfort zone. As the expectation is a hold over years ... if the potential reward isn't life changing, you need to walk away. Not what most want to hear, or are prepared to tolerate; hence it often ends in tears. Ideally, the company does not hedge prices beyond the protection of a committed drilling program. It is left to investors to adjust the size of their position to changing price environments, via swing trades or otherwise. Again, not what most want to hear, or are prepared to tolerate. However, do it right ..... and it can work out very well; as a great many hospital fund raising campaigns can attest to. Different PoV. SD

Pretty hard to beat any of the SU, CVE, MEG, etc. CAD/USD exchange rate is low and going lower, revenue is in USD, costs are in CAD, and there is a major hate on anything 'dirty oil'. Trump does his thing, politicians change, pendulums swing, and all the girls clean up very well. Over a 3-4 yr investment horizon, most should should be 2-3 baggers before dividends, and after buybacks. If you have the risk tolerance look at the smaller players, as M&A consolidation is inevitable; enjoy the ride, but don't fall in love. The model assumes any one position big enough, so that an eventual takeout proceed (net of tax) and reinvested in a BCE, will throw off a dividend for life > 1/3 of salary. Swing trade as you please, but keep the eye on the prize. To put up with the drama, you need to get paid well! SD

Sure China is a 7.2M boe/d consumer (consumes 11.3 and produces 4.1 M boe/d); and same as the US, is both an exporter and importer of different grades. The reality is that OPEC+ is pushing for higher prices, and has agreed to hold back 3.65M boe/d for 12 months. It doesn't really matter whether one actually believes the number; even 60% of it, is still a big number. At the same time, Exxon is stressing that 'drill baby drill' ain't going to dramatically ramp up US production; as without new inventory, it's primarily just going to reduce the cost base while replacing existing depletion ... at a material increase in gas production. For most wells, during the first 1-2 years of capex recovery, break-even is around US 65/bbl; thereafter the well produces at just the marginal cash cost. OPEC+ floods the market ... price drops, drilling stops, there are layoffs, production blows-down, and capex/margin go into buybacks/M&A/dividends; bring it on! Whereas if OPEC+ maintains price at around US 65-75/bbl, or higher ... everybody lives peaceably. https://www.theglobeandmail.com/business/industry-news/energy-and-resources/article-opec-delays-oil-output-hike-until-april-extends-cuts-into-2026-sources/ https://oilprice.com/Energy/Energy-General/Exxon-Dont-Expect-Drill-Baby-Drill-Under-Trump.html Tariffs will both reduce Chinese exports and net energy consumption; same again if the Chinese power grid can actually support all the EV charging. Hence, most would argue that with the continuing OPEC+ overhang, and diminishing future Chinese demand; it's far smarter to simply put production into blow-down. Cut maintenance capex and put it into buybacks and dividends; the Exxon argument. If you think producers have found religion, o/g is a promising investment; whereas if you think that isn't the case ... well, we have a market for that SD

EV can't charge when the grid goes down... https://www.scmp.com/news/china/science/article/3289629/xinjiang-power-swing-threatened-chinas-nationwide-electricity-supply-august https://www.reuters.com/markets/commodities/chinas-rapid-renewables-rollout-hits-grid-limits-2024-07-04/ Sure ... its fixable. But until then EV is going to remain a hard sell, sold on ever deepening price cuts. There is a reason why EV battery makers are steadily going to the wall. SD

You might want to do some actual research. https://www.ceicdata.com/en/indicator/china/crude-oil-production China is currently the 7th larger producer in the world at 4.1M boe/d ...... AHEAD OF Brazil, Iran, Kuwait, Mexico, Norway. SD

Trimmed our obe and drilling positions with proceeds going into the more junior o/g dividend payers @ > 1O% cash yields. BTC now a core position of X units that we're swing trading around. UBS remains untouched. Now just a dividend collector and swing trader reinvesting proceeds in TBills & capital repatriation. Get the more exotic bucket list stuff in while we can, as the possibilities are closing in. SD

BTC is just a different form of money. At this point most people who know anything about it recognise that. UBS is cash equivalent, little different to a TBill. Store of value and unitization but not a means of payment. The difference vs other blue chips is the degree of CB willingness to intervene with market support on the upside. Same as all the other GSIBs, USB is guaranteed by ALL the Basel CBs, but this one also has the benefit of a recent severe f*** ** in Switzerland that damaged a lot of reputations. The Swiss central bank needs to demonstrate a 'Swiss Finish', and heaven and earth will be moved to make it happen. 18 months out they will have done that, after which it becomes just another GSIB, and the money status drops away. Arguably a blue-chip equity marginable at 70%, or provincial bonds marginable at 85% are also a cash equivalent. We just don't think of them that way as it is not accounting convention (asset sale in a liquid market, versus borrow against asset collateral) Thereafter cash is basically fiat (USD), held as a cheap way of paying for things. Portable, and most everyone accepts it, everywhere in the world. SD

It is Germany, the labour force reduction will be achieved via a buyout. Some cash now, the rest via a full pension deferred until age 66, all of it guaranteed by the Bundesbank so that there is no risk of not getting paid. Those young enough take the buyout, and work for someone else ... 'double-dipping' all along the way. SD

Too early for us at this point, as we would fund from a sale of our UBS position 18 mo's out. Preference is for the chemicals, bullets, artillery shells, drone, and rocket consumables ... the cheaper and lower tech the products, the better. Between now and then, a lot of NATO 'Airbus' type standardisation and industry restructuring, and the set-up of production on multiple continents. Big brothers doing most of the hardware and guidance, multiple little brothers doing most of the consumables. SD