SharperDingaan

Last yeat Facebook was trying to bring 'Libra' to the world - a digital token that could be used for payment between any two Facebook accounts, at near zero cost. Technically not s big reach, it was 'pressured' out of existence by central monetary autorities - 'cause it both bypassed 'jurisdictions', bypassed existing rails, and facilitated money laundering. To someone protecting themselves against raging domestic inflation (Argentina, etc), Libra would have worked just as well as BTC (or better), and Wells Fargo would have lost a good chunk of its more profitable business. Remittances are huge business, and Libra would have been a prefered choice for ALL migrant labour ALL OVER the world. Migrant labour within North and South America, the Middle East, much of Europe, and some of Asia. There were very good reasons for the clamp down, but it's a temporary solution at best. The solution is the joint CB equivalent of a FANG, offering its own token for payment between any two wallets. Coming to you soon ... SD

There is little doubt that BTC is under co-ordinated assult, by significant CB's. El Salvador threatened the Chinese monetary regime, and the globes 'failed state' citizenry, had to be taught a lesson - don't use BTC as an inflation hedge, 'cause the volatiity could wipe you out. Sure it can ..... just like monthly currency devaluation in the teens! Yet despite best efforts, it has not been possible to drive BTC < USD 29K/BTC? Worse still. it has pretty much established USD 29K/BTC as the 'real' value - which was NOT the plan! Sh1te!! El Salvador was a problem for 'everyone', because BTC gave the citizenry an alternative beyond 'dollarization'. Now you just need enough USD to buy food - ONLY when you need to (bank account = BTC walllet). Less transactional demand for USD, less wealth to steal (cans of food), and harder to steal, period!. Hacking the wallet doesn't help, if you don't ALSO know the private key. Something must be done! China maintains two currencies for a reason - and that requires bullet proof capital controls. Before BTC, smugglers routinely swam with the fishes as a warning to others, and 'leakage' was 'containable' to a select few. BTC screws up the gig - and is as much appreciated as a pig in a synagogue. Something must be done! Yin/Yang remain alive and well - the CME thanks you for your hedging business And the more corrupt the environment, the better BTC works. SD

Hate to tell you this, but there is nowhere near the overhang that you might think. Lot of existing DUCs will not get into production, as there has been too much ingress, and no majors are going to front the cash to restart a written down oil field. The oil is there, but it is 'shut-in' - and wil remain so for a very long time. New money is going into EV's, national grids, and charging stations. Transport fleets are switching over from gasoline to electric, at an accelerating rate, as mass production further lowers prices. The majors have maybe 10 years to extract as much wealth as possible, with production coming from the cheapest wells first. Producers, and producing nations, will be trying to asset strip as much as practicable, and at as high an average oil price as possible. A price kept there by NOT 'reinvesting' in new production, and running down existing production as rapidly as profitably possible. Blowdown mode, at profit maximization. Big oil, like big tobacco, doesn't go away - it just gets smaller, and looks different. SD

Little different approach ... We simply download the monthly power points and save them as we would any other other file. Similarly, SEC .pdf docs are downloaded, highlighted as needed, and similarly saved. Word docs for 1 page earnings, peer metrics, risk mangement write-ups, etc. Excel for data extracters, and the heavy lift inclusive of VBA, macro's, etc. All pdf docs are searchable, and write-ups express the view/outlook at the time. Anything we do after that is just analytics. Open what we need, as we need it, with very little 'remembering' required. Lot of 'housekeeping', so it forces portfolio concentration. If we're working too much, we have too many stocks in the portfolio. SD

The scenarios assume CB's can maintain inflation within the scenario range - when we still have a world with negative interest rates that have never happened before. CB's have no precedents to refer to, no playbook, and have to do this by the 'seat of their pants'. Very, very fragile. The advantage with the commodity approach, and ongoing hedge reassessment, is that its ALSO antifragile. Somebody screws up, you make a killing. If they get it right, you still do well - just slower. SD

The only people who want 30 yr bonds are the issuers paying todays interest rate, and speculators trying to short them. The buyers are either insitutions dynamically delta hedging, or life insurers - unable to CF match and avoid inflation hedging altogether. SD

We had a recent discussion with our employees as to their preference around new hires - do we go with maximum hours possible and overtime, or add a new person? Almost universally, the preference is to delay new hires as long as we possibly can - so that staff can put as much in the bank as possible. As soon as we start paying overtime, we will begin feeding cost push inflation. SD

This is the whole reason you buy the maximum house you can afford (even at an inflated price), finance it with a fixed rate long-term mortgage, and simply live in it. The house price rises with inflation, while the mortgage either stays the same or gets smaller. Sell upon the refinancing date, and the inflation difference is monetized into cash. SD

Oil as the inflation hedge makes a great deal of sense over the short-medium term. All else equal, as inflation devalues the USD, the USD denominated oil price rises. You also have the strong likelihood of incremental demand outstripping incremental supply for at least 12-18 months. 18 months out - simply change the hedge instrument to something more appropriate, if inflation is even still a problem. SD

Much more sophisticated burn barrel ... and partly a version of this https://www.wish.com/product/5ddcca1ed691bc1d59935c1f?from_ad=goog_shopping&_display_country_code=CA&_force_currency_code=CAD&pid=googleadwords_int&c={campaignId}&ad_cid=5ddcca1ed691bc1d59935c1f&ad_cc=CA&ad_lang=EN&ad_curr=CAD&ad_price=29.00&campaign_id=6493229759&exclude_install=true&gclid=EAIaIQobChMIlILgosGh8QIVx8DICh3CXgeyEAQYAiABEgLHQPD_BwE&hide_login_modal=true&share=web Thermal difference creates an electric current. Within the tower, constantly blow air over the flame (in the same direction), and you will also get a rotating rising air mass (tornado) that can drive turbines. Recirculate some of the hot exhaust air over the flame, and you get both wind speed acceleration, a much cleaner burn, and high volumes of super hot dry air for downstream use. Build out of concrete, inject the hot exhaust air deep underground, minimal net CO2 production. Very, very usefull for SAGD oil extraction. Burn garbage vs gas for heat, inject super hot air + steam down hole, generate enough electricity to power your complex, lower your carbon footprint, and get paid for safe garbage incineration. Concrete silos are cheap to build, the tech is off the shelf, and 24/7 reliable production. SD

Almost never talked about is the performance of solar panels as it gets hotter (rapid decline). The metric should be cost/Kw versus cost/solar panel - 'cause to double production from an EXISTING facility, it is often merely a matter of periodically misting the panels - to both cool them down and remove the dust. Never mentioned in the wind bucket are the 'tornado's in a silo' which are continuous power generation and more reliable. Contained in a concrete silo, garbage burned at the bottom, hot water produced at the top, and power generation in the middle. Hotter the burn, the better it works, and they can be put in the city itself (dressed up to look like office buldings). Paid for the garbage, paid for the incineration, paid for the hot water, quick to ramp power generation up/down. SD

Re gold miners. Prettty much any one of these https://www.fool.com/investing/the-10-biggest-gold-mining-stocks.aspx Freeport has the advantage of also being a dominant copper producer, and strength on the unsavoury side of the third-world mining business. Our commodity preference is o/g, simply because it is well within our circle of competence. NA deflation very likely is the case - long term, and for many of the reasons posted. But 'transitory' inflation will be high, and for at least 1-3 years. Global (China) trade artifically lowered prices in NA, and environmental costs were never part of the end price paid. Security of supply is now back on the table, and it is going to cost more for just about everything. As we are currently seeing. Todays $100 grocery bill is $200 in 9 months, $250 in 18 months. Sure, the inflation rate is mathamatically declining over time (deflation), but to main street - groceries cost 2.5x more than they used to (inflation). To continue eating, you must charge more for your labor - cost push inflation, and opportunities. SD

The great thing with Inflation are the pair trades. Gold miners print money. Fixed costs remain largely unchanged, whereas contribution margin rockets upwards as the gold price increases. The more 'fear of inflation', the higher the margin goes, and the higher the share price. Whereas the value of financial assets drop like a brick, as the rising yield lowers PV (price of the asset). Long commodities, short long term bonds. Ideally on the SAME company, to net out the credit risk Main street reacts to TODAY's inflation, CB's react to TOMORROW's inflation. Hence, the pair trade is really a play on the horizon differences, and the difference in 'views'. The specific vehicle chosen is largely secondary (it just needs to be a commodity company). Re Joe/Jane investor? sell the bond fund/ETF, buy the commodity fund/EFT. Everyone selling their bond fund/ETF, forces the portfolio to sell, flooding the market with incremental supply. All else equal, price drops and yields rise - pushing the 'inflation' line, pushing the price of the gold miner still higher. Bond losses avoided, commodities gains made, and no day-to-day investment 'upkeep' required! SD

Very smart thing to do ..... A number of companies will be desperate for re-financing, should market interest rates turn up quickly, &/or in a material way. Last time around, even the great GS had to come knocking on BRKs door - offering a very attractive convertible. Electic cars, and US energy infrastructure very much in need of a serious upgrade - where do you think people are hoping that the incremental equity, supporting the incremental debt, is going to come from SD

Amount, time horizon, thesis, effort required. How many $, for 1-2 quarters only?, a company or industry bet?, better done via an ETF? Most solutions are either going to be an industry specific ETF, or a LEAP/long-dated warrant. Which, depends on the effort you're willing to devote to it. Objective. If just to make a buck, largely a non issue. If for something life-changing, more effort required, and a direct holding. You have a life, and live it; this is just something shoved into the sock-drawer, and looked at once/quarter - at best. My 'edge'. Do I have one, what is it, am I using it ? No direct holdings, if you bring nothing to the table. For most people, an ETF will be the better option. SD

One of our nephews is considering the RE game in the UK. We have deep circles of competence on the construction and financial sides, the rest of it … still to be determined. As there are posters on this board with hands on experience flipping real estate - a couple of questions for you … Do you also hold/maintain a real estate licence? and are you always acting on one side of your buy/sell transaction? If not – why are you paying commission to someone else, and how do you keep ‘a finger on the pulse’ of your local market. Do you also hold the trades certifications? Master electrician, plumber, etc.? If not – why not, and how do you keep ‘a finger on the pulse’ of the changing codes in your local market. Do you routinely contract others, rent equipment, and/or contract yourself out to do jobs? How/where did you learn the people skills? Is some equipment rented more often? What software would you recommend? Visualization, project management, accounting, etc. Do you do the sales side yourself, or outsource it to specialists? Is this a projects thing in addition to the day job, or the day job itself? How did you get into it? is there a minimum level of activity that you aim for. Would you have done this again, or even earlier - had the opportunity presented itself? We have in mind using RE as a hedge against extended unemployment, over a working lifetime. School to get the trades papers, software exposure, and RE licence. Industry and projects experience to make some money. Wealth accumulation in your own home, and/or purchase of the equipment rented. Would love to hear your various thoughts. SD

A negative T-Bill rate means the investor pays the fed (negative rate) to issue them a T-Bill. Treasurers would instead, just buy foreign instruments that defease debt denominated in foreign currency. Get paid for your deposit, as well as reduce your FX translation risk. If/when negative rates arrive, it Implies a higher US stock market, USD devaluation, and more domestic employment as supply chains re-balance. Burger flippers becoming factory workers at something > minimum wage. All a political plus, therefore likely to happen. A lot of major o/g 'entities' are itching to demonstrate their point, re recent ESG actions. Many are forecasting USD 70-80 WTI as the global covid recovery picks up speed. However, there is now an opportunity to both push WTI higher (USD devaluation), and ALSO crack the whip in some places. SD

Keep in mind there are 'many' China's, there are lots of unhappy folks, and the birth rate is now falling. The economic talent of both HK and Taiwan also vote with their feet every day, and freedom is just a 'plane ride away. Do the seizure thing and you get crumbs - everybody ELSE gets your talent. SD

The investor has to accept that their initial investment (1000) is locked in until they sell - thereafter, it helps with RESIDUAL position sizing. If you sold 50 shares at 20, you would only have 50 shares left to benefit from future appreciation. But if you can hold off until the share price is > 50 .... you can essentially retain the original 100 indefinitely. So what? Imagine this was 4000 shares at 0.25 (still $1000) - you buy 100,000 for 25K. As/when it gets to 1.25 (5x, 125K value), it also becomes a company with far better prospects (ie: o/g 'fallen angel' at the bottom of a change in the commodity cycle), and still further appreciation. You still have your full 100,000 shares, and continue to benefit from the risk taken when you bought it at .25 The gods bless you, the price goes to 10, you walk away with 1M ... but you need a unicorn, and have to remain exposed. As they don't show up too often, you want as many shares exposed as possible SD

As long as there is more demand than supply, the price of the share will rise. There is probably quite the market for short-term 'rentals', that are leveragable, and one-month either side of an earnings release. It also allows insiders not to violate black-outs - the trades do not need to be disclosed, or even reported on. If you sold the beneficial interest, but are obliged to buy it back, you haven't actually sold. You've simply lent the interest out, same as you would had this been a plain vanilla sale and repurchase agreement. SD

Simplify. Assume 100 shares purchased with 100% cash. Assets = 1000 (shares), Equity = 1000. Sell at 50, and you will receive 4000 after tax. Expressed at the gross level as Asset =5000, Liability = 1000, Equity = 4000. What happened in substance? Your 1000 of equity at inception, got replaced with 1000 of deferred tax liability, leaving you with the 4000 of equity as expected. You have the tax liability because it is money that you will owe when you sell – but until then it is an interest free loan. Your initial equity financing was ‘re-financed’ with the money you will owe in taxes when you sell. Very WEB, and something only an accountant could love SD

Deferred tax thing ... In Canada, an individual currently pays tax on 50% of their gain; to simplify, assume a 50% tax rate. If you bought XYZ at CAD 10/share and sold for CAD 50/share, you would owe CAD 10/share in tax [(50-10)*.5*.5). Invert this - and you quickly realise that the CAD 10/share tax saved by NOT selling, is now financing your CAD 10 purchase at an interest rate of 0%. God bless our tax system! However, you need a 5 bagger+. Sh1te coys, that were ideally just fallen 'angels' covered in mud! SD

The expectation that FFH must sell its underlying positions in a sh1te coy (BB, RFP, etc), is a little ridiculous. Nothing prevents FFH from using derivatives to lend out/repo the beneficial interest from time to time - it is really no different to writing a covered call. However, in the garbage collection business, there is a lot to be said for ALSO owning enough of sh!te co to warrant a voice at the table. The end game is always consolidation into a small piece of a much larger and more robust pie. Buy the sh1te at cents, roll it into the bigger entity at dollars, and if it takes forever - it really doesn't matter. The sh1te just has to NOT bankrupt, while you temporarily carry it at a net zero cashflow, and progessively refinance with growing amounts of interest free defered tax (the tax saved until there is eventually a sale). No different to an individual buying enough shares of a sh1te coy - that ultimately pay for a mansion, if/when the turd turns into diamonds Same approach, different application. FFH just dances to a different drummer. Great for diversification purposes, but for trading ... not so much. SD

Like it or not ESG is here to to stay, it is becoming more instutionalized, and it is being applied to EVERYTHING - not just oil/gas. Even the accounting profession is moving from double entry to triple entry accounting, to accommodate ESG reporting - and it will apply to external reporting in all industries. Might take a while to fully integrate with both USGAAP, and IFRS, but it is here. It is also arriving with concurrent global agreement on the standardized measurement of carbon credits - with other pollution measurements to follow. Today's XOM shareholders are whining, but tomorrows will be clapping as XOM uses sale proceeds to both retire debt and buy in shares. Lots and lots of nice cheap shares - net of the stranded asset write-off announcements! Ultimately we are all going to pay a lot more for what we use, the price is going to include the cost of pollution, and the new 'industrial revolution' will be in clean-up/green industry. Enormous opportunities for all, but most of the existing o/g managements will need to be replaced. The majors cant just sell assets to get their footprint down - they need to fundamentally change how they operate. For the most part we have the technologies, it is the mindsets that need to change; fire/retire, and let the younger folks do their thing. Different POV. SD