SharperDingaan

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

The fed measures 'after the fact', but has to predict outcomes 'before the fact'. The predictions are based on (very good) models, and what cannot be explained - refered to as 'transitory effects'. Why transistory? 'cause it isn't showing up in the 12 month YOY comparatives (CPI methodology) yet, and if we're not picking it up in our metrics - it doesn't exist! A measurement problem, combining with a 'bias' problem. Used car prices are up, 'cause new ones cant be built - shortages of the microchips going into them. Yet despite microchips being high-value items (affordable to fly them to end-users), shortages have persisted for MONTHS, and are WORSENING. The chip shortages (end product) are just reflecting the shortages in their supply chain - and those shortgages are rapidly getting worse. A common issue, accross almost all supply chains, that is NOT going to correct quickly. We make beer, and we will raise prices to cover our higher costs - the same as everyone else. But if materials costs suddenly came down tommorrow? we (& the industry) would NOT roll back our prices. That extra margin would simply go to higher wages instead; either to make up for wages given up during Covid, or to keep our talent. Point? These price changes are permanent, and big (30%+ spread over 3+ price hikes of 10%+). NOT transitory. Most don't recognise that for commodity companies, inflation is your friend - it's only a problem for the fixed income securities. Anyone applying the Gordon model in their valuation is dividing FCF by k-g; in a commodity company k-g gets smaller SD

Talk to your wife, and ask her where everyone is buying their groceries from today, why, and how. The almost universal answer is that everyone has shifted 'down market' by a market grade (good store vs a whole foods), and 75%+ of the purchases are sale items. Pantry refilled as/when the sales occurr - and the entire purchase 'price driven'. Inflation. US fruits/veggies are typically grown where water availability is an issue. Most all growing areas are experiencing material water and/or labour shortfalls, transportation costs are also rising, and it is increasingly cheaper to simply import fruits/veggies, vs grow it domestically. Higher costs now, and going up further as the US starts bidding up the price of global supply. Next time you're in the grocery store, look at the 'source of origin' labels on those fruits/veggies. The offset is that the current 'mass distribution' model (US strawberries) typically prices out LOCAL fruits/veggies. As prices rise, LOCAL production becomes more prevalent, reducing the speed of further price increases. Local spending returning to the local economy doesn't hurt either. Point? A great many US prices are not just 'inflating' - they are ALSO returning to their more 'normal' price levels, after years of glabalization and artificially low price levels (ie: strawberries). Gasoline to electric cars within X years is not just about global warming - at 3x the current gas price, folks also cannot afford to keep them on the road. SD

Couple of diffierent takes ... For many people, the minimum wage job is just paid slavery. They don't want to be there, anymore than the slave does; but without their 'forced' labour we aren't in business. We got rid of human indenturement a long time ago, but if one looked at a fast-food franchise - one wouldn't know it. UBI just reduces the ability to 'force' labour, and many of the concurrent abuses. It's only the slave owners (losing their livelihoods) doing the bitching. Most people just want to be happy in the here and now - wealth is simply measured in other ways, not the size of the bank account. Could be just wanting to spend more time with your kids before they grow up, or more time with your folks before they croak. Could just be 'better treatment' while hanging out with your bums, that you otherwise would get were you working the minimum wage job - a common view amongst the poor. We get what we pay for. Of course, we will do a lot better if we do work - but minimum wage work isn't going to cut it. There's a reason why there are so many small businesses - for many it is far better to spend your labour flippimg burgers in your own business and not someone elses's; if you need more labour - just import it from the home country! As is the case everywhere, the cream will rise to the top - todays slave owners, just dont appreciate being displaced! There are also material distrubtion economies, and macro economic benefits. But it's a different discussion. SD

Ultimately the sand has to be heated up to get the oil out, and it is the CO2 from the fuel burnt. And all over and above the mining emmissions themselves. Nightmare. SU also has the optics problem of strip mining/dead wildlife everywhere, Shell's recent court order to reduce emmissions 40%, and the real possibility of stranded assets. With SAGD, maybe the ground rises 40ft when it heats up, melting the snow cover in winter. In the near term, SU either gets into carbon capture in a big way, buys a lot of carbon credits, or buys in a lot of conventional production. Shuts in some oil sand production and replaces with conventional production to average down the carbon footprint. Really means that the industry needs to fuel with hydogen vs gas, and quickly. SD

The marketing folks would like us to believe that ESG is a factor in a company's share price - perform well on the ESG front, and your shares should trade at a premium to your peers. Of course, as currently portrayed - it is utter rubbish! As many an oil sands CFO will gleefully tell you ..... Consider Suncor (SU) and Cenovus Energy (CVE) - top 3 Allberta oil sands producers. SU mines its deposits, whereas CVE uses SAGD with a materially much lower carbon footprint. The output receives the same price, whether it comes from SU or CVE. All else equal, if the cost/bbl for SU and CVE were the same, their profit/bbl would be identical. Point? Zero recognition for the lower carbon footprint, and zero incentive to reduce it. There is no value add until the producer has to pay for polluting. SU would have to buy carbon credits, reducing its net carbon footprint, and lowering its profit/bbl. CVE would sell carbon credits, raising its net carbon footprint, and raising its profit/bbl. Process stops when the 'carbon adjusted' cost/bbl of both companies is about the same, but the share price of SU falls and the share price of CVE rises. Point? Carbon tax is the investors friend, NOT his/her enemy. Look for places where carbon tax is both low, and being strongly resisted. In those places, look at those with low carbon production, and those with high carbon production likely to strand. It's hard to 'resist', when for most participants - the costs of paying for pollution, are lower than the costs of ongoing political lobbying You could do very well! SD

Wabufflo, Please keep posting! as your insight into monetary mechanics is very valuable. As we prefer to focus on main-street, and work our way up to the monetary (bottom-up approach), it's nice to have a directional view to compare against. On the timing side we just roll the dice - same as everyone else!! Monetary mechanics is very abstract, very macro, and sadly - something only an economist could love. Thankfully we also have an economics background in our toolbox, and it is nice to have the opportunity to keep it from getting overly blunt! Hopefully we're as good on the dark side (Bitcoin) as we are on the light! (Central Banking), and everything else is just Yin/Yang as the crypto token rolls Keep it up. SD

Throughout Covid, most people have been spending a lot less than they would otherwise have. Multiply the saving by 14 months+ and the cummulative total is enough to burn a hole through most pockets. Restrictions are being lifted, people just want to celebrate, and for now the cost matters little - until the savings are spent. The fed hopes that before that happens - the recovery either gets you a higher paying job, or you are working more hours. 'Cause as long as new cash inlow exceeds outflow, or deficts can be met from savings, there is no pain. Of course this isn't really sustainable beyond 5-6 quarters, or 2 years depreciation on the Lambo. Simply pick what you like, check out all the features, and wait for the toys to come back on the market. Upgrade the company car, and make it a business expense! SD

We see only what the Fed wants us to see, not the risks in the shadows. All this Covid spending must be either financed, or the money printed – and this relative spending it is at wartime levels. Yield curve crowding, on top of inflation, is a real bastard. The Fed is clearly hoping that the recovery triggers pent-up consumer spending. In theory, if the Fed takes as much liquidity out of the market (sell bonds to finance the Covid spend), as the pent-up consumer spend adds to it; the net change is zero - and no new inflation. Yet throughout Covid, with the liquidity tap wide open, there have been REPEATED credit market seize ups – temporarily spiking yields. As the fed starts tapering, market fragility rises, and with it - the debt opportunities. BBB’s trade on the market view of future yields. It is only a matter of time until risk-on returns, and prices fall. They really fall when we discover that moral hazard is ALSO back on. Post Covid as the world rebuilds for the robust - zombies get recapped. The GFC created thousands of house foreclosures/abandonments, everyone was convinced the market was sh1te, entire city blocks of housing derelict in Detroit. Yet where are they today? the houses were vacuumed up into trusts at cents on the dollar, and those trusts are doing very well today thankyou. They will do even better in the coming great recovery. Longer term, markets are routinely and repeatedly wrong. Retail trades the 1-2 quarter trend, long term institutional money trades the secular trends. Nothing wrong in either approach - but recognize the time difference. SD

The average investor is 'trading', is pretty ignorant, and looks out 1-2 quarters at best. Forget the monetary mechanics, just tell us if the yield curve is going up, and by how much! Then get out of my way!! Of course, the more 'evil' investors amongst us - recognize it as an opportunity. The 'BBB' rated get pushed closer to default, the debt trades at cents in the $, then ultimately swaps into equity, and goes through a RS. Resulting in a large FCF divided over a small share count, a market 're-rate', and turds resurected as diamonds! ... but way outside of the average investors circle of competence. SD

The reality is that for the most part, sh1te coin is a < $1 investment/coin. It's penny stock for techies, and techie wannabe's; the junior coders, tech bloggers, etc. Could just as easily have bought a VSE listed mining stock, weed stock, or a biotech promoted by a paid tout. To each, his/her own poison - some you win, some you do not. For the general public, BTC exposure is almost exclusively via an ETF. Those who hold their ETF as an actual 'investment' should do well, those who hold it primarily as a 'trading' vehicle ... not so much. Individuals who own their BTC directly are almost always very knowledgable about crypto. Those just owning Satoshi? ..... well - you get what you pay for. There is no right or wrong, merely help yourself to the pig out! SD

The outages are just the 'circuit breakers' kicking in. A NYSE would cease trading for 30 minutes, then resume. These exchanges just seize up instead, as they try to stay open while suddenly processing multiple times daily volume. Last time China cracked down, it took a mere 6 days to find a way around it. There will be a temporary demonstration of heads on stakes, then business back to normal. The 'hard of learning' just get 'dissapeared'. SD

Sounds a lot like Hamilton SD

Authorities/CB's have ALREADY tried to shut down BTC, over YEARS of attempts - and CONSISTENTLY failed. Like it or not, BTC, and its underlying protocol is here to stay. Populations either move with the times, or go the way of the Amish communities. Most opt for progress. Identical to drug use - populations can choose to either drive it underground, or keep it in the open. The drugs do not go away, they are still bought/sold, just for higher prices. BTC does not go away either, and it was DESIGNED FOR zero trust environments. So please ... drive it underground, prove its value-add still further, and raise the price!! Currency is just a medium of exchange, to average 'Joe' - can you use it buy a coffee? Sorry. you cannot use BTC to buy a coffee - by the time the transaction chains, your coffee is cold. But buying coffee isn't the market; it is for high value and discrete transactions, where a 1% commission is just another cost of doing business. Like it or not, 'pseudo-annonymous' - is still annonymous. Sure, you can track and trace to/from an account, but you have no idea who the public key is. For the name - you are relying on the applications KYC process to open a wallet. Finding an autonomous robot with minimal KYC requirements to open a wallet - is a talent, but not particularly difficult. The US is famous for the adage, 'Guns don't kill people, people do'. In the US, more people die from gun-shot every day than vehicle accidents; and around the world - there has been no cure. BTC is identical to the 'gun' - the issue is with how people use it. SD

The nice thing with the commodities approach is that it is entirely physical, whereas AI is entirely digital. Whatever your AI pick, wherever it is geographicallly located, and in whatever social fregime - it will consume resources (electricity), made from a commodity (oil, coal, minerals, etc). That you, hopefully, own. In any supply chain the BEST that AI can do -. is track the physical container and contents. What is actualy inside the container - always remains a mystery. The physical content (commodity) is essentially anti-fragile to AI shock; a very useful financial engineering property! And for an enterprising lad - lots of opportunity. SD

Fact is, Ireland's health care system screwed up in a very public way, and it brought down a good portion of Irelands health care services. The Irish powers that be, knew they were exposed and CHOSE to do nothing about it. Didn't think it would ever happen - now it is just a panic to keep ones head. The ransomers just rubbed their nose in it. 20M pounds is a ridiculously cheap ransom, relative to what the health care system spends EVERY DAY. https://arstechnica.com/information-technology/2021/05/irelands-healthcare-system-taken-down-after-ransomware-attack/ Blame everything, and everyone else - just not us! Sorry .. you 'eff up, you wear it, nobody else. Accountability is a bitch. SD

Just to stir the pot..... Even the criminals demonstrate that BTC is the currency of choice!!! Ever since the Silk Road debacle, competitors have tried to shut down BTC as the preferred payment currency - 'cause it interferes too much with the state black market arms, drug, and oil deals. Yet BTC is still with us today, and stronger than ever - just like venerial disease! BTC ransoms are NOT INTENDED TO BE SPENT. The ransomer TELLS YOU the wallet to pay into, and is well aware that every 'outgoing' transaction from that wallet will attract unwanted scrutiny. Hence, it is identical to losing your key to your wallet - the BTC in that wallet are permanently lost. There aren't many people good enough to do this, and it is a small community. Should investigation ever become truly theatening to BTC ownership, those people quickly sleep with the fishes. Game theory applied at multiple levels, remains alive and well. Most commercial targets get hacked because it is relatively bloodless, an insured cost of doing business, and their IT security is sh1te. Furthermore, nothing is really going to change while ransom costs exceed the insurance costs, Sure, it sucks for the user - but that is the choice your management has DELIBERATELY made. Either put heads on spikes, or vote with your feet. Obviously it is a profitable business, as is pirating - but a limited term engagement. Do too much of it, and the militaries shut you down - as it is a lot cheaper/safer to arrange for sleeping hackers, than it is to engage in a shooting match. Gaming can be such a bastard! SD

Congratulations! Ths is one of the main reasons why we keep repatriating capital. At the end of day, the investment proceeds have to be meaningfull enough to change 'real life' going forward, or it's just not worth it. The next bit is 'reinvention' - as playing golf every day is dead boring. SD

BTC ran up, primarily because it was ‘re-packaged’ into ETFs. Novices could buy the 50K BTC at a nominal cost/unit and get professional financial/IT management along with it. For the HODLer, as most of the market is, it is primarily about obtaining ‘safe’ experience in this new technology. As recovery occurs, most would expect BTC to go higher – mostly because BTC is NOT devaluing, whereas fiat is. Hence primarily FX gain, that pulls in additional retail funds, that pulls in additional institutional flow, that drives price still higher. The retail funds coming primarily from ordinary people, in countries experiencing rapid currency devaluation, converting fiat into BTC - as a way of protecting their wealth. The energy argument is just negotiation. The bulk of miners are in China, using coal-fired electricity, and it needs to be greener. Speed up both the hydro (3-gorges) and nuclear, upgrade the electric grid, and it is back to BTC. Tesla’s are electric and require a robust electricity grid if they are to sell in quantity within China. A BTC sale and repurchase is also easily executable on the CME. Doge is simply a penny token, touted the same way that most penny stocks are. Of course, not all sub $1 stocks warrant the ‘label’; but for a great many – it is richly deserved. And the more Doge screws the pooch, the higher BTC goes. Fool me once, shame on me. Fool me twice ….. SD