Energy Sector

[Spekulatius]

On another note- I am quite sure that Hamas attacked Israel, because the talks about a 3 way deal between Israel, the Saudis and the US (as a guarantor) are very threatening to Hamas. That piece deal has an Energy side deal attached, as many here know. 

https://apnews.com/article/israel-palestinians-gaza-hamas-rockets-airstrikes-tel-aviv-11fb98655c256d54ecb5329284fc37d2

 

I think this is very obvious what Hamas is trying to do here and my guess is that it will be seen as such and the deal goes through.

Edited October 7, 2023 by Spekulatius

[sleepydragon]

17 minutes ago, Paarslaars said:

So how are we playing this, diamonds and precious metals? 

missiles?

[Castanza]

19 minutes ago, Paarslaars said:

So how are we playing this, diamonds and precious metals? 

Who makes ink cartridges for the US Treasury USD printers? 

[Spekulatius]

11 minutes ago, Castanza said:

Who makes ink cartridges for the US Treasury USD printers? 

https://en.wikipedia.org/wiki/SICPA

[rkbabang]

4 hours ago, Spekulatius said:

If you think the EV transition is going to take a long time, look at the Tesla sales prices. They are down by 33% this year. A Tesla car is already cheaper than a Camry, if you live in California or other states with subsidies for EV’s. Check out Lithium prices - they have collapsed since going up by 5x in 2022 and I think they are heading back to 2021 levels. We are starting to go into the steep S- curve part of EV adoption. I would not be surprised if 5 years from now 30%+ of the cars sold in the US are EV’s. It’s going to be higher in Europe and China for sure.

 

Things start slowly, but once you hit the 5% threshold, the adoption typically happens very quickly.

 

Of course ICE cars keep driving for more than a decade after the last one are sold.

 

On the repair side, we are looking at less frequent but very expensive repaid. The Teslas are already known to be hideously expensive to repair. Same with Rivians according to some news blips I have seen. There is probably going to be a great aftermarket business for replacement batteries, sensors, more business for tires (high torque of EV’s causes more tire wear) and a few other things like sensors.

This definitely isn’t good news for the children working the cobalt mines. But I fear you might be correct, political correctness doesn’t have to make sense, it just needs to be popular. If things needed to make sense the world would have been building out nuclear plants for the last 50 years, electricity would cost a fraction of what most people are paying and no one would ever have heard of the phrase “rolling blackouts”.

[Spekulatius]

@rkbabang Cobalt prices have come down too. Maybe the children working the mines in Congo are working for less now or new mines elsewhere  have started to produce.

 

 

I remember an old illustrated Sci Fi book in  70’s that tried to I ageine what the future looked like 50 years from then, which would be about the current time.

 

They were projecting a network of hundred of nuclear power complexes in shallow ocean water floating islands to supply power for the world, vertical agriculture (to save farmland space), a permanent and autonomous mar settlements, regrowing injured limbs with electric stimulation and hypersonic magnetically propelled trains (Maglev) crossing oceans in vacuum pumped  pipeline tubes (to reduce friction ) to replace airplanes and many other things.

 

It not all bad news, nobody predicted the internet or that everyone would have his own computer with a touchscreen in his pocket to scroll at other people pictures on something that would be called social media.

[TwoCitiesCapital]

7 hours ago, Spekulatius said:

If you think the EV transition is going to take a long time, look at the Tesla sales prices. They are down by 33% this year. A Tesla car is already cheaper than a Camry, if you live in California or other states with subsidies for EV’s. Check out Lithium prices - they have collapsed since going up by 5x in 2022 and I think they are heading back to 2021 levels. We are starting to go into the steep S- curve part of EV adoption. I would not be surprised if 5 years from now 30%+ of the cars sold in the US are EV’s. It’s going to be higher in Europe and China for sure.

 

Things start slowly, but once you hit the 5% threshold, the adoption typically happens very quickly.

 

Of course ICE cars keep driving for more than a decade after the last one are sold.

 

On the repair side, we are looking at less frequent but very expensive repaid. The Teslas are already known to be hideously expensive to repair. Same with Rivians according to some news blips I have seen. There is probably going to be a great aftermarket business for replacement batteries, sensors, more business for tires (high torque of EV’s causes more tire wear) and a few other things like sensors.

 

I don't think the S-curve is quite as valid here given the constraints on supplies and the need for infrastructure investment. 

 

In a vacuum, demand for EV might follow the S-curve. In reality? Probably going to run into supply chain issues with shortages of key components OR problems at the utility level as they run into issues producing the power necessary to charge vehicles day/night. 

 

As far as Tesla prices coming down? Sure - some of that is probably economies of scale and reductions in commodity costs. The other piece to that is competition. Pre-2020, basically nobody in the Western world was competing with them. Now you have Rivian and Lucid with EV-only platforms (Rivian's truck looks 1000x better than the cybertruck btw). Porsche has a high end Taycan that's getting rave reviews. All the major manufacturers of Ford, GM, Chrysler, VW, etc are developing EV product lines.

 

Tesla is becoming a commodity product - the price changes reflect that loss of market share.  

Edited October 7, 2023 by TwoCitiesCapital

[Gamecock-YT]

12 hours ago, Paarslaars said:

So how are we playing this, diamonds and precious metals? 

pork barrel lobbyists for the next fund Israel bill

[SharperDingaan]

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

[Viking]

I am surprised by the complacency in financial markets to what is going to be happening shortly in the middle east. Israel is going to hammer on those responsible for atrocities committed. I was listening to the Israeli ambassador yesterday on Bloomberg Surveillance… frightening was is likely coming.
 

The issue for financial markets are tail risks. How big does this war become? Of course, today we do not know (it is unknowable today). My read is this has the potential to get very messy very fast. 

 

What to do as an investor? Holding some exposure to oil makes sense to me. As well as having a little cash to be able to be opportunistic depending on how things play out. 

[Sweet]

Israel will not be doing anything without Western approval IMO.  They are hot right now, but I expected more measured revenge later, rather than a spillover war.

[Dinar]

@Viking, why do you think it will become a wider war and who do you think gets involved? Also, why would that impact world economy? @Sweet, what makes you think that Israel will let hundreds of murdered civilians go unavenged?  Moreover, there is an argument to be made that past policies did not work and either some drastic has to be done, or the massacre that we saw on Saturday will recur.  

[Sweet]

2 minutes ago, Dinar said:

@Viking, why do you think it will become a wider war and who do you think gets involved? Also, why would that impact world economy? @Sweet, what makes you think that Israel will let hundreds of murdered civilians go unavenged?  Moreover, there is an argument to be made that past policies did not work and either some drastic has to be done, or the massacre that we saw on Saturday will recur.  

I didn’t say they would let it go unavenged.  In fact I said they would seek revenge.

[Dinar]

Just now, Sweet said:

I didn’t say they would let it go unavenged.  In fact I said they would seek revenge.

You are right, but why do you think Israel will take "measured" revenge?  Given that in the past "measured" revenge was taken and did not work, why would it work this time?   Something has to change, otherwise what happened on Saturday will keep recurring.  

[Sweet]

My thinking is this.  Israel will need Western arms and support if there is a large scale war in the Middle East.  I don’t think they take any action without running it by their Western partners.

 

Example - if they strike against Iran they will make sure that the Americans at the very least are in their corner and willing to go to war with Iran too.

 

Edited October 10, 2023 by Sweet

[Malmqky]

4 minutes ago, Sweet said:

My thinking is this.  Israel will need Western arms and support if there is a large scale war in the Middle East.  I don’t think they take any action without running it by their Western partners.

 

Example - if they strike against Iran they will make sure that the Americans at the very least are in their corner and willing to go to war with Iran too.

 

Do you feel war with Iran is realistic?

 

Israel is probably going to flatten the Gaza Strip…then what?

 

I imagine Iran supported Hamas to delay normalization of relations between Saudi Arabia and Israel…but Israel has already stated there’s no proof of that (despite Hamas claims). So that kind of signals they don’t want to escalate directly with Iran?

[Sweet]

I’ve no idea @Malmqky I just don’t see a major war as the most likely outcome.

[Viking]

1 hour ago, Dinar said:

@Viking, why do you think it will become a wider war and who do you think gets involved? Also, why would that impact world economy? @Sweet, what makes you think that Israel will let hundreds of murdered civilians go unavenged?  Moreover, there is an argument to be made that past policies did not work and either some drastic has to be done, or the massacre that we saw on Saturday will recur.  

Dinar, i have no idea how it will play out. You can’t model the unknowable. It just looks pretty obvious/clear to me that the risks are at a level we have not seen in a long, long time. Maybe it is a nothing-burger. 
 

Key risk? I think the price of oil matters. If anything happens that causes oil to spike over $100 a barrel or higher… i think financial markets would start to pay a little more attention. If oil went even higher (over $110) … well, i think financial markets would then be paying a lot of attention. Again, this is not a prediction or a forecast. Just something a risk manager might want to think about. Of course, the price of oil is only one of many risks…

[Viking]

1 hour ago, Sweet said:

My thinking is this.  Israel will need Western arms and support if there is a large scale war in the Middle East.  I don’t think they take any action without running it by their Western partners.

 

Example - if they strike against Iran they will make sure that the Americans at the very least are in their corner and willing to go to war with Iran too.

 

@Sweet My read is Israel is going to do whatever they think they need to do to crush Hamas once and for all… with or without the support of the West. 

[Sweet]

19 minutes ago, Viking said:

@Sweet My read is Israel is going to do whatever they think they need to do to crush Hamas once and for all… with or without the support of the West. 

I find it unlikely that Israel will strike out in any way which risks its survival as a state.  Going solo against Iran without Western support is an enormous risk.  We will see.

[Dinar]

4 minutes ago, Sweet said:

I find it unlikely that Israel will strike out in any way which risks its survival as a state.  Going solo against Iran without Western support is an enormous risk.  We will see.

In my opinion, either Israel or Iran or both are preparing for war and trying to lull the other into thinking that they are not by saying that Iran was not involved, or either Iran or Israel or both don't want escalation, hence denials from Iran and no accusations from Israel.

 

[Dinar]

47 minutes ago, Viking said:

@Sweet My read is Israel is going to do whatever they think they need to do to crush Hamas once and for all… with or without the support of the West. 

Yes, with things like this, you are 100% right.  https://nypost.com/2023/10/10/hamas-kills-40-babies-and-children-beheading-some-of-them-at-israeli-kibbutz-report/

[rkbabang]

9 minutes ago, Dinar said:

Yes, with things like this, you are 100% right.  https://nypost.com/2023/10/10/hamas-kills-40-babies-and-children-beheading-some-of-them-at-israeli-kibbutz-report/

 

 

As far as I can tell this reporter Nicole Zedek is the only source for the 40 babies beheaded claim and there is no photo or video evidence of it.  Remember that war time propaganda can get extreme on both sides and isn't always factual.

 

[SharperDingaan]

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

 

Edited October 10, 2023 by SharperDingaan

[Spekulatius]

There is likely no large war between Iran and Israel. I can see some air strikes in Syria or Lebanon against the Hamas or Hezbollah proxys. That has happened before and Iran has a history to do nothing in those cases - they tend to leave their puppets hanging if they get into trouble.

 

As for the Energy markets- if Iran oil get sanctioned beyond the current measures, there will likely be a spike towards much higher prices, but it won't last. I think Saudis will crank up the oil spigot in this case.

 

I think even the Israel Saudi piece deal has a good chance to happen eventually. Likely after the dust settles after the Gaza is bombed to smithereens. The Saudi's don't care, it's just business for them.

Edited October 10, 2023 by Spekulatius