SharperDingaan

It is much more likely to be collections of 2-4 height limited very modern towers, replacing 1 in every 3 malls in suburbia; the limitation primarily being adequate water and sewer for the higher density. Biggest units aimed at boomers loosing mobility, needing everything on one floor, and someone else to do the maintenance. Everything else aimed at first time buyers, inclusive of a low cost BoC mortgage and a family tested, time limited (10 year) rental subsidy. Canada needs babies, and acts to help them along. Not yet a popular sell in the development communities, but it's coming. There are only so many quarters of poor results they can tolerate, before they have to do something. SD

I think there will be a lot of bitching and skull-cracking, but it is pretty much inevitable. All across Canada, the young/retired, widows/widowers are becoming forcibly acquainted with either finding roommates or moving to a cheaper community. It's generating a lot of intense and multi-generational anger, the young/old are demanding change, and they have the numbers/energy to force it. Politicians either get with the program, or get replaced; not a bad thing. A great many cities have dead malls, with good transport links. Demolish the malls, upgrade water/sewer, and replace with single floor towers of new 2-3 BR affordable housing. Same thing for the new towers of tiny 1-2 BR, and the great many C class buildings well past their useful lives. The towers themselves built under trades apprenticeship programs, financed under BoC 25-year low interest non-transferable mortgages, using domestic/imported labour willing to settle/learn. Get out of the way, or get replaced; your choice. You can still have the suburban/rural spacious SFH .. but it's largely something already existing, and sold by a downsizing boomer moving into a downtown tower of single floor 2-3 BR's. Boomers age in place, the 2nd/3rd BR's for the kids visits and live-in at the end of your time. Quite a bit different to what many expect today .... SD

That USD 53 billion share issue also ranks up there on the top 25 list of the largest in history, Petrobas leading the pack at 70 billion. https://www.irmagazine.com/reporting/worlds-biggest-share-issue SD

I was utter sh1te when I first began investing, and blew myself up least three times! Simply because you cannot 'do' investing until you have had 'real' money at risk, have learnt how to manage the greed/fear, and have had big enough losses to make you get your act together. Some people play poker and use their winnings to pay for school; I invested my student loan money in junior o/g and mining companies One of the smartest things you can do is get yourself a summer job in an industry you like; I spent a summer as a rig pig, and winter breaks relieving crew members in hostile places, over Christmas holidays. There ain't nothing graceful on a rig, crews are rough and direct, there's a lot of hazing and bullying, and you're that clump of sh1te on the bottom of everyone's shoe! But survive/thrive .... and as long as you listen, you will go very far indeed .... and learn! At < 25, your best investment is in you; grabbing life by the cohones and squeezing - hard! When you're eventually done having fun, you will be a lot more mature, know what you want, and be ready to start investing. For most people; learning the technical (CFA, MBA, etc) while staying in the juniors honing your risk management skills. You've 'graduated' when you trust your judgement/experience enough to toss out the 'CFA way'. Just don't expect to work on the sell side of the street Thereafter its just evolution, thinking for yourself, and doing your own thing. Good luck! SD

Keep in mind that housing is local, and price paid is the 'market cap' PLUS a premium (location, scarcity, utility, etc.). You own a boat on the market tide, and premiums change. We hold our London (UK) RE primarily as a luxury good; the better the 1% do, the more our neighbourhood gentrifies, and the better we do. The economic/political solution to millennial's deferring house purchases, are fiscal programs financing post WWII quantities (after servicemen returned) of affordable new builds for the masses. Today's mansions become tough sells at current prices, when buyers have viable alternatives. Millennial's are also increasingly viewing housing as just shelter, NOT an investment. Buy just what you need (house poor vs house rich), stay in it for some time, and buy it to live in. Sell/move only as your needs change (work, more/older kids, etc.). Not that a dissimilar view to those who lived through the 1930's depression. SD

The US hasn't had 'normal' since the 2007 GFC (16 years ago); relevant interest rate history is anything prior to 2007, and for much of it, 5% was a pretty good number. It seems 'unimaginable' simply because anyone who entered the industry within the last 16 years has had no experience with it; therefore it doesn't exist. Multigenerational mania. US financial manias are common. In the run-up to the 2007 GFC, US finance was 'positive' that securitization (as it was done then) was the future; then along came Lehman Brothers along with the collapse of how many other major I-banks within how many weeks? Dramatic/undesirable social change is routine, and a great many would take great delight in the over privileged getting their comeuppances. Toronto/Vancouver is full of people who borrowed as much as they could when rates were ultra-low, when the 'new normal' was endless QE and helicopter drops of free money (covid period). Greed and FOMO drove the gullible towards buying houses they couldn't afford, the purchase of multiple properties to airBnb, and made RE unaffordable for most local people to live in. Today, cities are banning airBnb in certain areas, forcing negative carry investment properties back onto the market, and using the supply overhang to lower prices/improve affordability. Everyone else's fault but theirs; moral hazard is a bastard, and bankruptcy sucks, but it's part of life. Make poor decisions, you wear the consequences. When 'hell' arrives (and it will), the population will need someone to blame, and it'll be the central bank. Even Canada's official opposition party wants to both fire the head of the BoC, and make the BoC subject to the whims of parliament; were there an election tomorrow, they would be in power. Diminish confidence in the central bank, and hard assets are a better choice than financial ones; infrastructure, hospitals, premier RE, pawned watches (tech bros), etc. All are quality luxury goods. We just have great faith in the ability of disaster to concentrate the mind; pretty sure the end result is better, but how we get there remains a mystery! SD

'great podcast with an overview on energy from a rational viewpoint' Notable is that the executable takeaway is to generally oppose the news headline. Factoids presented out of context, let the reporter/presenter off the ethical/fact-check hook, and are exploitable. It also gets increasingly reliable as the demands of the 24/7 news cycle drive content towards factoid + filler (cheap), presented by the least experienced (cost saving). Also notable is that a supposedly high-risk position (per the head-line), is nowhere near the risk perceived; the adverse press release will drive the price of the item below what it should be, and keep it there until either the sentiment/story-line changes. When the carrot says something stupid enough to generate a one day 2,000 point drop in the index, doing a buy later in the day - is not the risk it is perceived to be. The only question is how long until the story-line changes ... It is not hard to maintain a solid ongoing understanding of an industry (context), or recognise over-reaction. It simply requires that the investor invests some time in developing WEB's circles of competence. Not a big ask. SD

Permian producers have been able to achieve 40% more production at 20% less cost; once they consolidated and went into manufacturing mode; Exxon-Pioneer is just the latest consolidation. What isn't mentioned is that 13M boe/d of US production depleting at an average 10%/year (conservative guess) is a loss of 1.3M boe/d (13M x .10). Consolidation in the Permian needs to deliver spectacular results in < 1 year, just for daily US production to remain flat. Governments don't run pipelines, operators do. Most of the time the sale will be to an operating P3 using public sector accounting, and most of the P3 will be owned by domestic special interests, pension and infrastructure funds, etc. No loss recognition upon sale as it will be recovered via a legislated rate-regulated charge to users. SD

DCF valuation is an industry practice, and not going away. The investor simply chooses whether to use it ($50 price per report 'X'), do their own quick and dirty DCF valuation, or do a comparatives valuation and re-engineer the DCF valuation backward; pros and cons to each approach. Realising the how/what DCF valuation does matters; the number itself is just a product of the assumptions that went into it. Every company's future looks brilliant 4 years out; but discount it at 25%/yr for the risk involved, and that future dollar is only worth 41 cents (1/(1.25)^4). The DCF value-add is understanding that if that future dollar can be pulled forward by one year it is worth 51 cents (1/(1.25)^3), or the same as a 25% increase in that 4-year dollar (1.25/(1.25)^4). To reliably make that happen most companies would be looking to acquisitions, the resultant growth rate would contribute to higher DCF valuations, and the industry would be publishing reports with ever rising price targets At times, you might also bet against the implied growth assumption, and benefit from the inevitable 'corrections'. Comparatives assume norms, and don't work well on outliers; the valuation itself is typically just a multiple of forecast one year cash flow, that can be readily dis-aggregated into product volume x price deck (o/g, mining, commodities, etc.). Plug actual prices into the price deck, apply the multiple to find out what the outlier is really worth, and buy/sell accordingly Then keep in mind that if there is zero future cash flow, the DCF is zero, and the asset is worth zero. After which along comes Bitcoin with zero future cash flow and a current valuation of USD 26,800 .... rubbing industry's face in the fact that DCF as a valuation tool is utter sh1te SD

I hear you .... but do a quick sniff test. The US rig count has been slowly falling for quite some time (1y, 3y chart), and most of the remaining rock is no longer top tier. How exactly, does more production arise when there have long been fewer rigs drilling? It can only occur if new rigs are drilling very prolific longer laterals, more bores from the same pad (manufacturing), and old bores are being used for water flood injection in top tier prospects (fewer rigs on site for longer). This is of course occurring; but it's real questionable whether that 'super production' from the relatively few monsters, is enough to more than compensate for the decline in all the US fields together, and whether it is sustainable when much of the best rock has already been drilled. Hopefully we're wrong, but .... https://oilprice.com/rig-count Agreed the EIA numbers should be credible, and sh1te happens. Thing is that when modelling errors go unfixed for some time, and reports don't tie against comparative independent reports (API), people will fill in the blanks - rightly or wrongly. Fail to correct the misinterpretation, the inference is that it is not wrong, and the entity reaps what it sows. US production is probably going higher, but whether there's another 10-15% of sustainable production over the next 1-2 years ??? EIA may well be 'right' ... problem is it's the EIA reporting them! SD

EIA thing. The EIA has had such screwed up weekly numbers, for so long (years of high/volatile weekly 'adjustment factor'), that many just don't see the EIA as credible. The weekly report still moves markets, but the organisation is increasingly seen as 'captive' to the desires of the US administration; OPEC+ is a lot more blunt about it. The source quoted knows his stuff, particularly developments in the NA small/medium o/g producers. The only way US production rises is if there is 1) new off-shore production, or 2) the major shale fields enter 'manufacturing' mode. Agreed, the majors are consolidating in the fields, and scaling up to improve production efficiencies; but higher net production is going to take a lot longer to achieve than 1 year, simply 'cause it's hard to grow against 20%+ annual depletion. Our own view is that it is 1) EIA is treating some of Canada's TMP expansion as US; 590,000 bpd x 36% US ownership (by share weighting) = 210,000 bpd incremental production. WTI. It seems pretty clear that OPEC+ has a USD 90 minimum in mind, is acting to enforce it, and doesn't want the price to go over some upper target (100?); hence the Saudi/US/Israel deal. Tighter sanctions enforcement (Russia/Iran) reducing illegal supply, that offsets declining Chinese/Asian demand. The west gets to demonstrate that sanctions are working; Russia/Iran earn enough from the higher price on existing supply to offset foregone income. Everybody wins. All the WCSB producers do very well under USD 90 oil, lower differentials, and tight supply of heavy. Today's supreme court ruling is also a game changer, that will mitigate against the possibility of windfall taxes. We would also suggest that CO2 release from the globes wild fires, and methane release from melting permafrost, were not part of the Kyoto climate models; and as the model predictions are materially wrong, the Kyoto agreements are mute. Almost certainly, not what the environmentalists had in mind. https://www.cbc.ca/news/canada/calgary/supreme-court-richard-wagner-impact-assessment-act-1.6993720 Again ... it's pretty hard to see a better place than the WCSB for the next few months. SD

The EIA is blowing smoke. Courtesy of blondeBond and coolreit https://www.investorvillage.com/groups.asp?mb=19168&mn=526030&pt=msg&mid=24427626 SD

Most of those in Gaza are not Hamas or Hezbollah, they are Palestinian, and have little to do with it; they are simply seeking a land of their own, just as Israel is. Sealing the exits, deliberately cutting off supplies to starve them out, and vowing to 'end it once and for all' (via invasion/disease) is attempted genocide. Something that Jewish people have been very familiar with, for centuries. Israel cannot expect everyone else to act rationally, when it doesn't do the same. When the US had 9/11, the result was the hunt for and eradication of Osama Bin Laden, not the elimination of the various populations that he was hiding in. Were Israel similarly rational, it would take a similar approach, as it has in past Nazi hunts. Mossad is very good at what it does. Bar fights happen, but if someone insists on getting into a gun fight, there is little their friends can do. Best solution is knock out their friend as rapidly as possible (saving their life), after that its just try to minimise the body count. Israel is that hot-head insisting on a gun fight. O/G price escalation is a bet on Israel doing something stupid. Hopefully cooler heads prevail. SD

Nobody knows how this will go, but most would expect variations of the below; Gaza/Egyptian border opened, managed by Egypt/UN; water/fuel/food/medicine in, people out, and held in camps on the Egyptian side. 2M people live in Gaza, they have nowhere to go, they cannot get out, and per the UN charter; collective punishment is illegal. The people living in Gaza are not animals. Israel is too far in to avoid a mass invasion of Gaza. Record body counts and atrocities on both sides quickly sour support, and create future generations of armed conflict. Israeli coalition government collapses, Hamas and Hezbollah disrupted, but continue to exist. The US cannot support both Israel, Ukraine, stay under its spending cap, and keep all the balls in the air without a new house leader, and quickly. Hot wars burn through munitions at an incredible rate, and US disruption fears are inevitable. US/Saudi/Iran/Israel deals collapse. Oil prices rise, and there is no longer a cap (Saudi supply flood) on how high prices can go. Somebody hits Iranian facilities, they hit Saudi facilities, and oil prices are .... Most would expect an overall downward market bias, and a strong upward bias on the price of o/g companies. Add a significant push for windfall taxes on the o/g majors (Exxon, etc), and the weapons suppliers; as they will be seen as war profiteering. Less of a push in Canada as an on-time completion of the TMP expansion is 'salvation'. Sh1tty way of making a buck, but pretty hard to find a better place than the WCSB. May we all do well. SD

Oil prices should go up a good USD 5-10 over the next little while. Little mentioned in the press are the current US/Iran USD Billion 6 prisoner swap, and 'permitted' increase in Iranian sanctions free oil supply. It's pretty clear that in pulling their strikes off, Hamas had to have logistics/co-ordination/intelligence help from a 3rd party; and that if escalation is to going to be contained, blood lust for Iran is going to have to be 'appeased'. Restructured prisoner swaps, no money, and all Iranian oil under sanction, etc. https://www.theguardian.com/world/2023/sep/18/us-iran-prisoner-swap-deal https://www.bloomberg.com/news/articles/2023-08-25/for-global-oil-markets-a-us-iran-deal-is-already-happening Total supply doesn't change, but Iran receives less for it (net of sanction breaking costs), and the western world temporarily pays a little more for sanctions free oil. The escape valves being Saudi agreement to reduce cutbacks, and additional Canadian supply on-line in late Q1 2024. More supply still if the number/length of Canada/US oil trains are also stepped up through Fall and Winter. All good for the WCSB. SD

Drug thing: Junkies routinely overdose on toxic drugs. BC averages 207 deaths/month (1455/7); in some places, so many at a time that it even overwhelms a city's ambulance capacity. Nobody plans on being a junkie, and nobody wants to use a questionable supply, but when needs must the dice are thrown. https://www.cbc.ca/news/canada/british-columbia/toxic-drug-deaths-july-2023-1.6950922 No matter the drug, some people are going to abuse it, it isn't going to go well, and there will be deaths; it doesn't mean we shouldn't use the drug as prescribed. However if we don't hear negative media, or see the bodies, we perceive everything to be fine. Manipulate social media to suddenly make patients aware, via a viral campaign and graphic imaging, and there will be a negative impact on the makers share price; that is exploitable. The financial industry has long been a haven for sociopaths and psychopaths, there will inevitably be attacks from time to time. https://www.ft.com/content/97fc800a-31e2-11e4-a19b-00144feabdc0 Economics thing: With only $X to spend on groceries, when inflation prevails you either buy less of the same (smaller packages), or substitute (house vs brand name). However if you can both eat less (Ozempic abuse) and divert the net savings into something more fun; the food industry sees immediate & growing permanent demand destruction. Furthermore that big earnings decline 'n' years out, discounted back to today, only appears as a gentle headwind and not as a hurricane. Exploitable opportunity. SD

Like anything, use Ozempic as prescribed for the type-2 diabetes it was designed for & it's a wonder drug. Abuse it to do something else entirely (weight loss), then repeatedly do it again by upping the dosage (overdosing), and it's a very different thing. Anorexics already suffer a disturbed perception of body weight and image, abusing Ozempic to keep the weight off is little different to a druggie craving a fix. Lot of people also used to think that Oxycontin was OK, until they got addicted. SD

Not enough. The reality is that Chinese demand continues to fall (relative to expectations), and to avoid an inventory build OPEC+ will need to apply matching cuts. Most of it will be from monthly OPEC+ run-rate depletion/disruption, plus the odd surprise. Russia cutting diesel exports while China sells off some of its excess is instructive. The mystery is India. Does it temporarily play nice with the international community, swap some of its Russian supply for Iranian, and continue to pay in other than USD? SD

Break down the ending stocks by type, and compare it to the minimum SPR requirement for that grade. Total stocks are approaching low levels, and a very high proportion of it is light. The heavy oil SPR is much lower than it should be, and the level of storage at Cushing has been flashing for some time. There is a reason why everyone is pushing for completion of the TCP expansion asap; almost everything going through it will be WCS (heavy), and it will be flowing an additional 500,000+ bpd. https://www.theglobeandmail.com/business/article-canadian-oil-output-to-hit-new-heights-within-two-years-report-says/ SD

Been shopping as well ... Keep in mind that the more EV takes over the world, the more valuable heavy oil gets; as it cracks into the feed-stock for asphalt, etc. Cars still need to run on roads, the roads need asphalt, and we get asphalt feed-stock from the bottom-middle layers of the heavy oil crack. If you want the benefits .... you have to crack heavy oil, and the more heavy fractions you want the more you will displace light oil (primarily shale). Today; heavy oil is typically despised; publicly seen as highly polluting to get out (oil sands mining/refining), and as 'dirty oil' when burnt (higher carbon release). Yet it is also routinely extracted in quantity; with minimal pollution via cold flow, water flood, and C02 sequester techniques, often at depletion rates < 10%/yr. Market miss pricing is a wonderful thing SD

It's click bait folks; designed to sell Ozempic. As body's 'starve' they initially extract more nutrient from less food; keep starving them and they try to conserve energy wherever possible, and feed on muscle. The rest of us get to put up with fashionable whining anorexics, and the well-know images of starving babies. Identical to the junkie selling highs (beauty); to keep the weight loss going, the dieter has to increase dosage, and toxicity rapidly rises on the ever declining quantities of dillutent(food). Ozempic does great until the bodies pile up, and the starvation images upload to social media. Exploit accordingly. SD

A lot of the consumption is simply boredom and availability; rich mans disease. Reduce the money that people have, and providers will just reduce the package size while charging the same. The population gradually gets healthier as it eats less, but no change to total revenue. SD

The reality is that all Utopia's are time limited; as the price to live in Utopia is accelerating irrelevance as time moves on, whether you're a Mennonite, a Mormon, or a Toronto Islander. Not mentioned in the article is that the Islands flood as/when Lake Ontario rises too high, and if you have a heart attack in winter ... you need to live long enough until a helicopter can arrive to airlift you to hospital (no ferry). https://en.wikipedia.org/wiki/Mennonites Its a great concept; but to maintain a healthy environment it really needs a much higher urban density, with open healthcare/groceries/road access, condominium style maintenance arrangements, all the houses designed for concurrent multi-generational living, and a location close to a source of employment. The 'old town' of a historic European/Medieval city, with the facades of old buildings kept, & the interiors gutted & modernised; great for an Old Montreal or Quebec City .... not so much for a Toronto Islands! Similar versions exist in Canadian former 'company towns' where the company has moved on, but left the infrastructure. The former 'ghost town' becomes a retirement community; the main income is pensions/tourism, and the more dense the population becomes, the more efficiently health care can be delivered. Housing/property tax is dirt cheap, commutes non existent, built-in health care and restaurant/tourism industry need for workers, and the outdoors literally next door. It often spawns a local green power & urban farming industry as well (vertical growing in warehouses). Not for everyone, but a very cost effective alternative for those wiling to think 'differently'. The downside is that without the scale, it can be very 'small townish' and NIMBY in the extreme. Many would tell you that the best thing between the Toronto Islands and Toronto itself .... is the lake! SD

I hear you, but a few practical issues. No matter how it is done, every forecast has a widening cone of possible outcomes; & the further out in time the forecast is, the wider the cone becomes (standard deviation). Beyond 2-3 years the +/- standard deviation becomes large enough to essentially render the predicted outcome useless. As soon as you use history, you have assumed that the future will either repeat or rhyme; not a bad assumption in 'normal' times, but we haven't had 'normal' for 17 yrs (2007 Great Financial Crisis & beyond). OK, if you think the future will be as least as volatile as the past, but otherwise? At the granular level, the use of history is the same as data mining; applying a data-set correlation > .85 outside of the data set; & hoping that it is still going to be reasonably predictive. It may be OK for the 3-4 month predictive life of a 'bot, but beyond that? Like to like, for a BBB equity; do you have confidence in your prediction that the share price of the common will fall by more than the price of the 7yr duration bond (duration of the bond fund) of the same entity - if rates rise 250 bp within the next 12-18 months? You are confident, in your prediction that the equity index will be 15-25% lower at some point over the next 18 months? i.e: If the bond was bought at par, the 250bp rise in market yield will reduce the price by $175 [ (0.025*7*1000/1000)], or 17.5% [175/1000]. If that rise in market yield causes the share price to drop by > 17.5% (a recession) the bonds are better. For most people it's going to be a guess, & little more than a 'gut feel' based on whatever they have seen/heard over the last little while; hence the emotion, & influence from the daily media feed. The reality of course is that nobody knows; it's all just 'informed opinion', at varying degrees of confidence. SD

The whole bonds vs equities thing requires the investor to have confidence in their own forecast of future interest rates, over some period of time (economic cycle). Cognisant as to where you are in the current cycle today, forecasting whether future yields go higher/lower from here, & trading the bonds vs holding to maturity; however it's not really executable unless you're trading minimum lots of 100K. Historic bond performance just isn't relevant, & most people are confined to a bond fund, paying fees, with some kind of a medium term duration at best. For most people to outperform equities via a medium term bond fund, interest rates need to fall by quite a bit (fed intervention to prevent a global/great depression). Most would argue that we are now past this (all CB's are raising rates, & all at the same time), & that going forward - it will just be return to routine business. If you think that going forward; stocks fall significantly as the various liquidity supports are withdrawn, bonds might be the better option; simply 'cause after inflation, they lose less. The reality is that if you expect global inflation to average 3%/yr at best, market yields are not going to go down by much. 70/30, 60/40 doesn't mean 40% in bonds; it just means 40% in fixed income, which could easily be dividend paying utilities/banks, preferred shares, rental housing etc. Depending on risk tolerance, a lot of these are a lot better alternatives to bonds. Different strokes. SD