SharperDingaan

Validation is essentially the same process as in any food processing plant - how do you actually know' that what is in the box, is what the label says it is? There is a validation process and you are trusting the validators/vendor selling it to you - a blockchain just gives greater transparency. The individual medical record is just stored on a genesis block, and called up as needed. Every procedure, prescription, etc. thereafter - just chained onto the block. Medics (anywhere in the world) simply access it via an injected dog tag referencing the genesis block - whether you're dead or alive. If you're found wandering, or dead in a ditch somewhere, you are identifiable and your family can retrieve you. SD

You don't - and that is the major limitation of blockchain. The blockchain is just an incomplete digital record 'purporting' to represent a real asset - it generally just tracks the 'box', not what is in the box. We get around the problem by issuing an assignable blockchain proof to accompany the physical product. A 1oz gold wafer produced entirely with 'ethical' gold, generates a 1oz proof. Thereafter, any 1oz gold wafer plus that 1oz proof, represents an ethically sourced 1oz wafer. Buy a gold ring for your significant other, and you buy both the ring and the certificate - otherwise accept that some of the ring is blood gold. SD

OBE is currently up 21%YTD net of the sell off down to CAD 6.29. Right now it's primarily o/g FOMO driving activity, but the change in attitude is just beginning .., As Gregmal says: Psychology is often predictable. And what’s interesting, is look at energy. Outside the US, most of the world is still hiding in their bunkers. Wait til they flip the lights back on. Crude futures still look highly attractive. As do many other commodities. "Lot of folks still see OBE as the old Penn West, and divide by the pre split 7:1. The attitude is 'come on .. this POS is < USD 1.00/share, it's a goddam penny stock!', and that isn't going to change. The flip side is that at USD 2.00/share pre-split 'PWE' is still very cheap to these folks - but it's a USD 14.00 OBE price for you and I, or CAD 17.75 after FX conversion; all largely because of changing perception." Should OBE make the CAD 17.75 by year end ..., the 2022 YTD return is 340% Covid easing, and the world waking up earlier - all bonus. SD

"This dramatically underplays the limitations of renewables, especially if when you talk about renewables you mean wind and solar. Also seems to dismiss or downplay the externalities of energy sources other than nuclear." It's just a different perception .... Over time, technical limitations get resolved. Batteries/storage get better/cheaper, generation/delivery efficiencies get better, cap cost/iKw declines as scale ramps up. Relative to most other power generation, decommissioned (& removed) green tech equipment is pretty benign. There IS a need for power stations to add resiliency, but the preference is clearly gas over coal, and they are for standby - not base load. Again, decommissioned (& removed) gas fueled power generation equipment is pretty benign ... coal not so much. Hence, if you can afford it, the standby fuel is gas, hydrogen, methane, methyl hydrates, etc.. There is also a need for nukes, and updated power grids to feed the rapidly growing base-load EV requirement. New designs, improved safety, lower cost/kw, etc. are handicapped by the legacy of large numbers of old plant/design. Decommissioning is expensive, and is that old site really safe 'forever' (what did you the waste buildings, handling equipment?), if 50-100 yrs out nobody is monitoring it any more? If there is no social license, those new nukes aren't going to be built. Hence the best nuke is a NEW high-capacity nuke, someplace where there AREN'T any others. Ultimately, local societies decide what they think works best for them, and different societies will have different solutions. SD

View of the ESG crowd. A toxic screw-up (melt-down, contamination, etc.) is still toxic - no matter how remote the probability. Hence the best nuke is the one that is never built, the best O/G is that left in the ground, 100% renewables is better than 50%. While it is understood that 100% renewables is not practical (when the sun don't shine, or the wind blow), the non-renewable still has to be minimally toxic. Safety/KW generated is meaningless, as every survivor who lived next to Fukushima or Chernobyl knows. It is just a population choosing to live and get its energy a different way. Alien by many NA standards, but a quite practical PoV to the many Europeans who live there, and their younger generations. SD

European solar is typically urban rooftop application; the European 'solar farm' just has people living under the solar panels. Power generated/used at source, offsetting line-loss from a central farm (US approach). Windmills in the rural areas are an increasingly common sight, and they often double as cell phone towers. Unit costs are dramatically falling as manufacturing scales up, & it is still early stages. In the ESG world, nukes are right up there with dirty oil. Oil harms when you process and burn it. Nukes harm when you dispose of the waste. In both cases if something goes wrong people die - but with nukes the pollution lives on for multiple lifetimes. Obviously, the more alternative clean energy you can generate (and the less oil/nuke) the better. SD

There are a great many cheaper and cleaner options than nuclear and coal. Windmill and solar backed up with battery, gas, hydrogen, methane/hydrates, is a far more practical choice. The clean tech is cheap/unit and can be put up most anywhere, fuel burn doesn't happen until you really need it and it is typically for weeks only - not months. Reprocessing methane from local garbage dumps is also a job generator, materially cheaper than nukes, much more benign, and far easier to staff. The Europeans aren't stupid, they just have a different approach. Europe/Russia are currently 'negotiating' Nord Stream 2. The Russians need the export money, and turn the screws to hear 'how much you love me'. Europe (Germany) refuses to take, and turns the screw on 'how much do you want to stay in power'. Lot of drama, but eventually there's a deal. Until then higher prices for gas (US/ME benefit). Clean tech crossed the tipping point (Gladwell) when ESG reporting came into widespread effect. Adoption is accelerating throughout the world whether we like it or not. The angry shouting is from the industries being gored. It is just industry disruption. Different process, but not that dissimilar to the disruption of fintech. SD

Viking, great job! We also both owe a big thanks to Dazel for highlighting the 2021 FFH opportunity, when nobody wanted to hear it. We were in FFH as a safe place to park repatriation capital - just wasn't expecting to make double digits on it! SD

Consolidated equity > 100%. Capital for repatriation > 65%. It has been a great year and should be the start of a consecutive string of them over the next 4-5 years. Key assumption being an annual material capital carve-out to remove excess capital. Wins across all our o/g stocks, crypto, etc. ; even on our capital carve-outs (FFH). Losses &/or overpayments on the equity positions being built for years 3-5 (as expected). Minimal reduction in share quantities, ensuring maximum dividends going forward. We were lucky, but a lot of it was strategic planning and expertise as well. Continuous carve-outs to keep reducing risk and keep us within our circle of competence. Seasonal roundtrips as opportunity presents. Crypto trading off of ongoing technical developments, via ETF’s. Over time, accumulating capital carve-outs will fund capital repatriation as an annual dividend; the corpus essentially being a private version of Norway’s Sovereign Wealth Fund. When we inevitably bust as commodity investors, our gains over the cycle will live on. As the bumper sticker says … “Please God, give me one more oil boom. I promise not to piss it all away next time.” SD

Happy New Year! .... with a little kickstart from the Great Big Sea. https://www.youtube.com/watch?v=f-oC-kNtPTs Fortune and glory to all! SD

Not factored in here are the severance savings in relocating the office. It used to be that if you acquired a company, resulting in staff having to travel > an additional 40km to get to work, you had constructively dismissed them. You had to give the acquired staff a severance (whether you wanted to or not), and the total amount could get very big, very quickly. If the acquired staff chose to move, you had to hire them as new employees as well as give them credit for their prior service in the acquired company. Today we don't have this issue, if you have a virtual office, or work from home 3 days or more per week. You are little different to the travelling salesperson responsible for a sales territory - as long as the 'new' office is primarily 'on the road' and your are still responsible for the same territory, there has not been enough change to warrant 'constructive dismissal'. Similarly, if you work from home 2 days/week ... as the office moved to you. If you're looking for savings, and have a large footprint .... WFH has a lot of advantages. If you want to sell me office space, I want a multiple of these severance savings off the rent, and I want them sooner vs later. I also want compensation for the spend of my returned employees in your food-court, from which you are charging local vendors a higher rent. On a new lease ... very low near term rents, subject to long-term rent escalators, and a minor termination penalty for early release. Not good for office REITs. SD

Not a investment solicitation, but look at the Purpose funds https://www.purposeinvest.com/funds/purpose-bitcoin-etf There are probably either similar things in Demark, or soon will be. Todays kids are going to grow up with this technology - as well as the climate change solutions. A decade from now you are going to look very far sighted, and your kids will be incorporating this approach as naturally as breathing. Even our nephews, are pressing the family 25% of all o/g gains/losses from Jan 01, 2022 onwards. SD

Just to expand on this ..... What if you were willing to go long on a dividend paying XYZ, at 50% margin? i.e. Two shares of XYZ, one share paid for in full, one share entirely on margin; dividends on the two shares owned > interest on the margin debt incurred. At a leverage ratio of 2:1, a double in 6 yrs only requires a ROE of 6% (72/doubling period/leverage ratio), and this is a great many dividend paying companies. FFH has a ROE > 6%. Closed at CAD 623 and a CAD/USD FX rate of 1.2705 yesterday. USD 10/yr dividend. Assume a margin cost of 4% Annual interest cost would be CAD 623 x 4%; CAD 24.92. Annual dividend would be 2 x USD 10 x 1.2705; CAD 25.41. Net positive carry. If you believe the current ROE (>6%) will continue for at least 6 yrs, and that FFH will trade at roughly 1.0X BV, you will more than double your money. Your margin of safety is also the current ((ROE-6%)/ROE x100%. If you think the historic CAGR holds up, and assumed 10%; the MOS is roughly 67%. And .... this is the baseline expectation. Higher dividends, trading round-trip gains/losses, better pricing metrics ... and the margin debt declines. Improving expectations. Obviously there is risk here, as FFH is not a Sched-A (DSIB) issued Guaranteed Investment Certificate (GIC) However. substitute FFH for any one of those Sched-A Banks, and would get multiple times the GIC return; on the same risk Happy New Year! SD

The best one can do is estimate how long a company will continue to perform at its current level, and whether that will be enough to double your money. If the current ROE is 12%, it will take roughly 6 years to double (72/12). If you think the company can maintain its current competitive advantage for another 6 years, maybe its a good investment. If you expect competitors to appear and screw up the party - maybe it's time to look elsewhere. If the company ends up growing faster .. you just get to a double sooner than expected. If you're not getting the 12% YoY growth? sell and invest the money elsewhere. No rocket science required. SD

Always a good song to play when counting up the money! SD

How much risk are you willing to take? O/G is an obvious choice, but there's quite some difference between 400-600% on the Canadian drillers, vs 10-40% on the tar-sand majors. It's not just owning XYZ, its also ability to keep your hands off and let it run What's the yr 2-3 plan? SNC is an obvious choice, but you would be rolling calls, and focused on the multi-year CAGR - not the 1 yr return. Cash from o/g gains and SNC margin, progressively funding a growing long position for a sale 3 years out Mitigated risk of SNC running on you, while you are executing. Reasonable probability of continuing solid gains in Yrs 1. 2 and 3. Different POV. SD

Merry Christmas! SD

In a previous life, my firm had a competitor using securitization; when it was still extremely new. We would use an ultra-low cost of funds, bid on a book of business, and consistently lose it to this competitor who would subsequently do an equity issue - at a progressively higher price. Along with some very devious folks, we had to figure out how they were doing it, and how to exploit it! Sadly for them we figured it out, deliberately bled them dry, kept buying into the equity raises, and selling covered calls. The other name for securitization is 'cocaine candy', and the competitor had been booking a deals entire multi-year profit, immediately upon signing. Inflated the ROE, inflated the multiple, inflated the share price - as long as consecutive bigger and bigger deals could be signed. Once bled dry, the competitor suffered a public accounting crises, and received an offer they couldn't refuse; self-funded from gains on puts The competitor was merely taking a more aggressive interpretation of the accounting standard of the time, we simply recognized that it had weaknesses! Thoroughly enjoyed my time at this firm, but I couldn't hold a candle to the skill of the devious folks! SD

So many contenders ..... so hard to choose! https://en.wikipedia.org/wiki/Bre-X "Financial crime seems horribly complicated but there are only so many ways you can con someone out of what's theirs. In fact, there are four. A veteran regulatory economist and market analyst, Dan Davies has years of experience picking the bones out of some of the most famous frauds of the modern age. Now he reveals the big picture that emerges from their labyrinths of deceit. Along the way you'll find out how to fake a gold mine with a wedding ring, a file and a shotgun. You'll learn how fraud has shaped the entire development of the modern world economy. And you'll discover whether you have what it takes to be a white-collar criminal mastermind, if that's what you want." SD

There is also the French approach .... as demonstrated with the Rainbow Warrior solution to Greenpeace protests Simply sink the ships in international waters, and rescue the crew - both the Seals and the Coast Guard could use the practice! And the fintech approach ... a stable coin with a cartel backed coin on one side, and a BTC on the other. Speculate on the operating abilities of your local syndicate, tax the trading gains, and enable an options market. Lots of ways by which to skin the cat! SD

If you have interstate commerce, all an enterprising lad need do is grow their weed cheap in South America/Mexico, fill up a cargo ship, and slowly cruise north and south just inside international waters on both the US East and West coasts. That dirt cheap international weed is going to land in any number of coastal states, in volume, move freely through the states, and immediately put local growers out of business. Back in the day it was whisky on the Canadian side, or rum on the French side of the De Miquelon. Sure, smugglers took the illegality risk, but nobody could really compete against the bribes/kickbacks/volume pricing, even the local moonshiners found it more profitable to 'transport' versus brew their own. There was consumer demand and booze was quasi-legal, little different to todays cannabis. SD

The moat is the black market. Decriminalization made the product legitimate and expanded demand, pain control via weed vs opiate addiction is a lot more benign, every state its own oligopoly fiefdom, rising inflation/cost drives users to the lower cost product. Bans on interstate trade virtually guaranteed, to prevent in-bound flights from a far cheaper South America. 'Brand' is the group controlling distribution - not the product packaging. The big beneficiary is the state, not the users, or legal sellers. Divert folks from opiate addiction and the health care 'system' saves enormous amounts of money. Opiate addicts cost a lot to treat, and take a while to croak. Weed addicts cost almost nothing when the weed is supplied via a 2% 'no hassle' fee on black market suppliers - little different from other agricultural supply managed products. SD

Companies bitch because inflation raises costs immediately, but a company can only respond after a time lag, and not in full. 4% inflation today on a constant sales volume, offset by a 3% increase 9-months from now. When inflation spikes, the higher cost typically impacts EPS today; and tomorrow, by reducing future sales volume (higher price = less volume). Hence, inflation sucks! Yet when inflation spikes down? and the headwind is now a tailwind ? nobody screams inflation rocks O/G companies announce planned capex well ahead of time, most investors just don't know how to use it. If no M&A and write downs are planned, the inflation impact is just (capex announced - depreciation - depletion)/(prior year depreciation + depletion). Invest in the O/G space and you have a pretty good idea as to what the number should be - anything above that is planned M&A, When inflation is rapid, you don't drill - you buy, especially when 2PNPV10 reserves are widely available at cents on the dollar, and majors are being forced into ESG related transactions There is a reason why the investment community isn't crazed about commodities businesses, and why operators love them. SD

Everybody wants capitalism .... until it's time to let the markets clear via 'creative destruction'. Then its bail me out, versus let me go under - 'cause if I go, I'll take everyone else with me. In the good 'ol days - it was kick the stool from under you, and charge for tickets to see the fall! Sure, it hurt at first, but it also removed the corruption, the control, and truly opened the space to new competition, based purely on merit (bent, or otherwise!). What we have today isn't capitalism, its just bad cronyism. The woke folks might be misguided, but they are also bang on in many places. Either do sustainable business, or croak - your choice. All yeast in a sugar solution eventually dies from its own toxic waste (alcohol) - large companies are no different. SD

Would you believe the numbers of a promoter? or would you discount them 20% as your 'grain of salt'?? If it doesn't work as advertised, what are the write-offs? Not mentioning them is just one more opinion - wishful thinking did NOT remove the possibility, it raised it! SD