SharperDingaan

Amazing how Russian officials have a penchant for 'accidents' Obviously it isn't going well, and the noose is tightening. Russian defence official dies after falling from St. Petersburg tower window. https://globalnews.ca/news/9494380/russian-defence-official-dies-fall-st-petersburg-marina-yankina/ SD

Oilsands production is almost all oil and no gas, has a higher crack spread, and a ESG footprint that is a work in progress. It's the 3rd largest oilfield in the world, now primarily just maintenance capex and consolidation, and over time both the differential and 'dirty-oil' discounts will fall materially as egress and C02 sequester improve. We aren't getting rid of the virgin chemicals produced any time soon, and it's hard to find a better 20-30 year asset. The Permian are primarily GAS fields that produce light oil in their early stages of production. The light oil depletes quickly and pays back the infrastructure costs, thereafter the paid-off pipe is repurposed to gas collection and distribution for the next 20-30 years. One of the biggest (and cheapest to produce) gas fields in the world, the transition fuel of the next 20-30 years, but a fuel with material quantities of substitute (methyl hydrate) around the globe. Different business models for different fuels. SD

Both WEB and Munger grew up in privilege and privileged times (in the US during WWII avoiding destruction, the 'go-go' years following WWII, and with little competition at their level). Nothing wrong in that, but his benchmark experience with humanity, hasn't moved on with the times; the 'average Joe' of today, is quite different than he was during WWII times. Scum don't change much! and his benchmark has served him well, but today's 'common sense' is a lot different that it was back in the day, and those differences have been magnified by tech. Today the same scams just look different, and as the experience is largely the same for a great many 75+, we have the annual 'geezerfest' to celebrate another year of breathing! Had crypto been around last century, when they were young and poor, they would be singing a different song. SD

We have always made directional bets over a 6 yr time (12% ROE, double in 6 yrs). We focus on commodities because we're smart enough to know that we can't predict direction with any reliable accuracy; but over a 6 yr period we will experience at least one full commodity cycle. As long as we are willing to average, or round-trip; even if we bought at the absolute top, we're probably going to do very well. The obvious instruments are LEAPS, convertibles, and long-term warrants. In the corporate world, DOL x DFL = ROE. In the investment world DOL is via the instrument, DFL is via the margin used. Risk manage accordingly. Because you need to wait, tax planning is an issue. Make 5x, vs 2x, and a poor choice will burn you. And 'cause we know we're dumb, we pay off debt with all capital > $X. Thereafter, it comes down to temperament, taste, risk tolerance, and expertise. Not for everyone. SD

You might want to keep in mind that energy is quite a bit different .... Anywhere in the world, any kind of economic activity requires energy to make it happen. The only question is the total quantity required, the energy 'mix' supplying it, and where those 'mix' components come from. 'Asia' is the 2nd largest economy in the world, and the energy mix has been rapidly changing to more renewables and nukes, versus coal and oil. Gas/LNG being the transition fuel to cover interim energy shortfalls. No different to anywhere else Asia would prefer to use oil over coal, but so long as coal is cheaper and there is no charge for pollution, use of coal will persist. However for the foreseeable future, discount Russian oil would be expected to lower Asian energy costs, and what Asia will in turn pay for coal net of transport costs. Asia is coming out of Covid, activity is rising, and so is energy demand - but net of renewables, the flood of Russian crude, continuation of coal, and Asia's own o/g supplies; incremental Asian demand for western o/g may well be more subdued that many hope for. OPEC+ is cutting supply for a reason. The mystery is the Ukraine. Shut down Russian loading/transportation facilities in any significant way, and China is aggressively forced into the paper market. Volatility. SD

Portfolio theory uses the variance-covariance between stocks in a portfolio, the expected return of each stock, and the risk-free rate to determine the optimum portfolio and the individual stock weightings within that portfolio. Traditionally, the variance-covariance matrix has been determined from a rolling history of the most recent 60 months of data. In the 16 years since the Great Recession of 2006, there has been so much ANNUAL fundamental and material change in the rolling history, that the approach has become useless. If you hadn't realized/adjusted for this, your 'optimized' portfolio has been anything but 'optimal' - and for quite some time. Crypto portfolios being a prime offender. Today, the variance-covariance matrix is determined from option volatility, and looks entirely forward; history is a very minor component. However the same portfolio, looks very different to what it used to look like, and the more change in the rolling 60 month history - the greater that difference. Post Beijing Olympics and the domestic rollout of e-CNY, a portfolio using the 60 month average, and a high weighting of BABA has underperformed - largely because it hadn't recognized the change that e-CNY created. The reality of course is that when the sh1te hits the fan, all correlations tend to 1.000. However, what is unstated; if that if you win big, you also end up having to take equity in the counter party which would otherwise fail. Minority ownership can be a bastard if you don't have scale. You still have to think. SD

Metcalfe speaks to JUST the network value, and it is very limited. Unstated, is that Metcalfe means the square of the number of users who can afford to pay .... and not the absolute number of users. Intrinsic value(s) are conveniently ignored, as well as the very different number of total users. The reality is that the far better valuation methods are not going to become public until BTC trades at well above the calculated values. There is a reason why trade secrets make you rich! SD

As we routinely ‘round-trip’ a portion of our holding across reporting dates, the fall has been beneficial. As we also stay JUST within the WCSB, our view may also be a little biased. PD has a dominant position but is not particularly well run; many others are better. Revenues are also about as high as they are going to go, as the industry wide 30% rise in average day rates is causing cutbacks. Lower WTI, and high differentials, are forcing many to cut back budgets and MAINTAIN production – NOT grow it. PD revenue vs EBITDA growth also leaves a lot to be desired. WCSB o/g servicing is bought in November and sold in May; the 6-month period typically capturing 70%+ of a year’s total activity. Buying now to flip in 3 months, is to really show up too late. The story changes late 2023 as/when the TMP expansion completes and begins line-fill. Permanently reduce differentials by USD 10+/bbl and capital budgets will materially increase; what doesn’t go into M&A goes into drilling instead. Drilling upticks, but many WCSB producers should uptick more. The servicing companies may be good for a fun spin around the dancefloor, but don’t fall in love with them. Disappointment is inevitable. SD

Shush SD

Crypto is no different than any other market. Market manipulation is part of the environment; it shouldn't exist but on any given day most would argue that it is present. It really comes down to degree, and whether the counter party is at least your equal in experience &/or expertise (a Goldman Sachs vs Morgan Stanley). The big difference is that the crypto market is new, and largely the sophisticated vs the not so much. Buying BTC cheap, and not buying when it's expensive is not manipulation. Neither is buying BTC cheap and selling a BTC covered call at a much higher strike, at the same time Before BTC we had the penny stock exchange, and with the same issues. Ya pays ya money, and ya takes ya chances! If this isn't you, go play on a better exchange. SD

De-globalization today is 'friends-shoring', AWAY from the Asian workshops. Of the more commodity type manufactured goods, maybe 50-60% from Asia ordered 8-10 weeks ahead, and the rest from 'friends'. Of the medical type consumables, maybe 50-60% from 'friends'. Of the weapons, munitions, electronics, etc., maybe 70-80%. 'Friends shore' for supply chain resilience, 'off shore' for the bulk lowest quality/cost commodity component of your inventory that turns over roughly every 4-8 months. To escape the commodity trap; either consume the commodity component yourself, or move into higher value manufacturing. China is well known for expanding third-world raw materials production via its 'Belt & Road' initiative, and reaping the benefit as the inflated supply floods the market - collapsing the commodity price. Replace 'minerals' with 'low cost labor', and you get the same result. You and I are going to pay more for our goods - and not notice. Goods prices will just continue to inflate at the current high rate of inflation, while the actual rate of inflation significantly declines. Packagers just package in smaller quantities, we toss less in the garbage, and social service payments automatically rise with inflation(subject to a 12-15 month delay). ESG is a significant driver (EV batteries). With the greater focus on sustainability via recycling and reuse, it is typically much cheaper to recycle at home than abroad (net of to/from shipping costs). Recycle (in bulk) a product with a lot of scarce resources in it (Lithium in EV batteries), and you break the supplier's (China) monopoly. And .... if friends are largely 'local' (EU) ... you also quickly get the scale to make it viable. SD

+1 SD

Utilities are very simple businesses. Revenue is regulated (rate/KwH), interest is a function of the quantity/type of debt, and profit (regulated) a function of the equity invested. Rising costs are recovered via rising rate adjustments, and the more equity you have at risk the more you earn. The more debt and the less equity employed, the less profit the regulator needs to recover through rate adjustment. Assume around a 2 yr lag between when a higher cost is incurred, and when it starts to be recovered through higher rates. Equity slowly rises via a dividend DRIP plus retained earnings, and there is little incentive to do a buyback. Not a lot of risk. AQN got burned using a ALM mismatch strategy. As ST debt refinanced at higher rates, cash flow fell, the share price fell by 50%, and the quarterly dividend had to be cut 40% to stay within AQN's 75% payout ratio. The better solution is a asset sale that both significantly reduces debt, and eliminates debt with interest rates > the regulated return on the asset being sold. Alternatively if the acquisition is successful, it is financed via a new long term debt issuance - large enough to also correct any residual ALM mismatch. Now hated by many, market sentiment is negatively biased, and any upside share appreciation will be very limited for the next year or so. However, by around the end of summer, both the outcome of the asset sale and the acquisition should be resolved, and the business back to 'normal'. Senior management changes at year end, and AQN is back to feeling shareholders love. If it takes 2 years from start to finish, you do very well. It can be swing traded, but the real value-add is in the two-year hold. Obviously the more house money, the lower the cost base on your equity at risk, and the better your CAGR will be. SD

Just a bump. Lot of errors of late, the most recent being the recent Q32022 earnings miss, getting burned on an interest rate mismatch, a forced 40% cut in the dividend, $1 billion+ of assets for sale, and an acquisition in trouble. It's entirely a rate regulated business; at the new dividend and the current price the dividend yield is 5.95%. Good long term prospects, but for the next six months there will be volatility. The acquisition (2nd attempt) has a April 30 deadline, most would expect the odds of success at 65/35 against, and the asset sale reliant upon a BAM stepping up to the plate (at the right price). We hold a significant stub (for retail) that is entirely house money funded from a round trip; likely repeated by mid-year. 3+ years out, AQN may well trade back at 'pre earnings miss levels' - but in the meantime ... volatility will create opportunities. CAGR + dividend yield > 25%. The sooner the return to 'normal', the higher the CAGR. SD

Lot more to it than this .... A o/g company has incentive to run its inventory down to roughly 7 years at current extraction. So long as EV displaces o/g as expected, annual extraction will progressively decline ... and the remaining inventory will seem to rise - and all with minimal/no ongoing capex - hail the new hero's! But if there is ever a temporary sustained spike in extraction ... the remaining years of inventory drop like a brick. To get inventory back up, the next least expensive mothballed field is re-activated; a very expensive solution (if it can even be done), that requires an additional spike in energy prices to fund it. Lots of blame, in a panic environment, raising the probability of nationalization. Nationalization that the inventory stub can be sold into at an inflated price Very smart, but it isn't going to end well. SD

Over the short-term (0-6 months), oil prices will move primarily according to the supply/demand forecast; inflation has a pretty small and indirect impact at best. More impactful is what happens as a result of oil being increasingly settled in either Yuan or USD. Petroyuan and petrodollars at parity, mean much closer linkage with China's interest rates. How that actually works out being something of a mystery. SD

Agreed, as the CVR currently stands, the value is essentially zero. While technically the CVR could be transferred into a trust, and rights to that trust sold - it is very unlikely. Similarly without a standing bid to make a market, it isn't going to qualify for a regulated account. SD

Think more along the lines of RFP shareholders dumping their CVRs immediately upon receipt, for whatever they can get, while they can get it; the CVR gets bought into the TFSA at close to zero. 9 months later the 'story' changes, and it is slowly bled out of the TFSA at 3-4x what was paid for it. TFSA capital rises, it doesn't fall. The underlying assumption is receipt of a single terminal payment at some unknown future date. Most would expect that it would actually just be Domtar paying back redirected duties (from use of the prepayment) - and only after Domtar has exhausted its own tax shields. 25% for the 'if/when' risk is conservative! Not for everyone. SD

The Chinese experience has been that it both raises the price of 'paper' bills in circulation (so that everyone can anonymously pay for their black market/drug purchases), and raises the local demand for BTC (so that you can keep the accumulated profit anonymous). You are allowed to continue, in return for a portion of that anonymous BTC being paid to one of the states many anonymous BTC accounts. Fail to pay, and you are 'disappeared', along with your operation being shut down (subject to 're-opening' fee, paid by the highest bidder). Everyday business in most of the world. SD

This is no different to a near bankrupt company selling its tax-loss carryforward via a reverse takeover; simply substitute lumber duty for tax loss. Best case immediate use; a tax-loss goes for no more than 12-15% of its nominal value, and discounts at 25%+. Add to that, an additional 40% liquidity discount if you try to exit in volume. The CVP is really a LEAP with a payoff profile very similar to a long dated zero coupon bond; big difference being that it's an equity, and there is no maturity date. Excellent trading sardine on the ongoing gyration of US/CDN lumber duties, and excellent for a TFSA wherein all trading gains will be tax free. But you're swing trading at 5-10% of value, and selling at 60-70%; maybe 2-3x every 3-4 years. Lots of volatility, lots of drama/story, but not for everyone. Quite a bit different to what the SA article would like you to believe. SD

Glad you're back SD

Sorry, but no, I am not going to hint at or publicize it. Do your own DD and back-testing to arrive at the confidence level. SD

Sadly the string ends in the old adages of the bad drives out the good, and never underestimate the power of stupid people in large numbers. Congratulations; we're all the worse off for it. Wachtwoord just expresses the libertarian view, and the ethos that goes all the way back to the creators of bitcoin protocol. To find out just how far out of touch you actually are, refer to the cypherpunk manifesto. "For privacy to be widespread it must be part of a social contract. People must come and together deploy these systems for the common good. Privacy only extends so far as the cooperation of one's fellows in society. We the Cypherpunks seek your questions and your concerns and hope we may engage you so that we do not deceive ourselves. We will not, however, be moved out of our course because some may disagree with our goals." https://www.activism.net/cypherpunk/manifesto.html Like it or not, real estate can be expropriated at any time, and that is part of the risk. If I own real estate in the US, I just don't think it will ever happen; however, if I own real estate in the 2nd/3rd world it happens everyday. What does expropriation actually mean? your signature, or your brains on the title deed; at the price I gave you - don't really care which. Seizure without negotiation, is just much easier with real estate than it is with BTC. https://dictionary.cambridge.org/dictionary/english/expropriated Like it or not, capital markets has had the tools to put a accurate price on BTC for quite some time. It just isn't widely publicized, and is worth a great deal more the more restricted the distribution. Derive it yourself, or take your chances; your choice. Like it or not, BTC and paper fiat currency co-exist as payment polar opposites, each serving different markets. Paper fiat currency is being progressively replaced with CBDC, and the USD as a reserve currency is being progressively replaced with the 3rd of the different types of CBDC. The US is not the center of the universe, and if you believe in privacy - you are very thankful that BTC exists as an alternative. To the short-term trading community, BTC is just another trading sardine. To the long-term orientated community, BTC holds great promise but we're not exactly sure what that is yet - or how it works out. To the Muppet Show peanut gallery it's just entertainment ... until I steal all your money In this thread we have members from all these communities. We take the long term view, and we know how to put an accurate price on BTC; we also aren't the only ones. The real value is the underlying blockchain technology, ability to automate most business processes via the use of smart contracts, and ability to automatically settle via a payment system (BTC) designed for a zero-trust environment. Replacing BTC with CBDC just speeds up global acceptance and adoption, at the price of privacy - a 'reasonable' compromise for the vast bulk of everyday transactions. To participate I either go the blockchain portfolio approach (ie: Overstock), the crypto as an asset class ETF (BTC, ETH, Stable Coin, NFT, etc.) approach, or both. If you didn't know that .... guess who the patsy is. SD

Stability/invoicing. Every international company bills in various foreign currencies and does not hedge its P&L exposure. It's a routine and accepted business risk, materially cheaper than hedging, and net FX exposures typically wash out over time. BTC is just another foreign currency. Liquidity is a function of asset quality. I hold T-Bills 'cause I know I can sell them easily, and with minimal haircut - even when there is almost no money in the monetary system. As I move down the quality scale, asset marketability declines and the haircut rises. You hold T-Bills, not BTC, if you want liquidity; if the liquidity wasn't there when you needed it, that was on you - you made a bad decision. Fiat currency is only portable if/when your goldilocks nation drops capital controls. Capital controls are enforced in most places, and BTC enables their circumvention. Portability. Security is on you; if one insists on being lax, or simply stupid; one deserves everything coming. Most would treat the inevitable hack publicity as buying opportunities. The reality is BTC enforces individual accountability, there are no regulations to protect you from your own stupidity; whether that be poor security choices, poor understandings, investment immaturity, or just plain laze. As most people just aren't comfortable with accountability, it creates opportunities. SD

Read the data from the public block (immutable) into the data base. Process within the database. Immutability and speed combine SD