Books - Q2 2025

Second quarter: read ten books, down from 11 in Q1 2025. 

• The Price of Time: The Real Story of Interest (3/5) See The Tom File review last year. I read it because it is by Edward Chancellor, who edited Capital Returns: Investing Through the Capital Cycle, which is a CBS 5/5 book (see review). He says he wrote it out of a "Bastiat-like conviction that ultra-low interest rates were contributing to many of our current woes." I used to be a big believer in this, but after doing cornucopian studies, I am no longer as convinced. The first part of his book is a defense of the morality of charging interest on loans. "Interest has always been with us because resources have always been scarce and must be rationed somehow." There were always lots of workarounds to the "usury" prohibitions. "The Scholastic denunciation of usury was suited to a self-sufficient agrarian society, in which loans were primarily for consumption purposes." Something funny by William Gladstone in 1854: "the superstition which formerly prevailed [on the subject of usury] was partly Judaical and partly Mohammedan." Swedish economist Knut Wicksell is the one who concluded that a discrepancy between market interest rates and the "natural" interest rate would be revealed by changes in the price level (i.e. deflation or inflation). John Law mistakenly believed that the Dutch had lower borrowing costs because they had a greater quantity of money in circulation and not because they were thrifty and has a greater stock of capital. Bagehot quote: "John Bull can stand many things, but he cannot stand two per cent." His book Lombard Street discusses ideas for central bank intervention during market panics. ("It is no coincidence that the chief proselytizers for central bank accommodation came from banking families." "In his memoirs, The Courage to Act, Ben Bernanke mentions Bagehot more frequently than any other economist.") We have not read Bernanke's book, but he thinks that the Great Depression was caused by "monetary policy [which] tried overzealously to stop the rise in stock prices." It may be one that we need to read for our "Bailout Studies" program. (He also has a book of Essays on the Great Depression.) Other highlights: "Piketty assumed that wealth compounds with time, whereas in reality the rich divide their fortunes and most savings are spent in retirement." "Between 1945 and 1980, interest rates in the United States and the United Kingdom averaged in real terms minus 3.5 per cent. Negative real rates provided an annual subsidy to the U.S. government equivalent to a fifth of tax revenues. Thanks to financial repression, America's national debt (relative to GDP) declined by nearly three-quarters."
• Civil War America: 1850-1870 (5/5) This is an excerpt of Paul Johnson's A History of the American People, dealing with the Civil War era. Something that we have come to appreciate is that the Southerners' vision for the Americas was horrific. As Paul Johnson puts it, "the South's dream of an all-American, all-slave Caribbean." "[T]he Civil War hastened the development of the West because, by removing the Southern-Democratic majority in both houses of Congress, it ended a legislative logjam which had held up certain measures for decades and impeded economic and constitutional progress." Some highlights: "The Mexican war was the great proving ground for future American bigshots, both political and military." Johnson thinks that Jefferson Davis (1808-1889) "tended to take the progressive line on everything except slavery." "From 1840 to 1860 this megalopolis [stretching from Wilmington to New York] was the most rapidly growing large industrial area in the world - and it was this complex which made inevitable, in military-economic terms, the South's ruin." "What finally happened to the South in the 1950s, Davis was urging in the 1850s. But slavery repelled capital and white skilled labor alike, and Southerners themselves did not want industrialization for many different reasons, most of all because they felt instinctively that it would mean the end of slavery and plantation culture." "By seceding from the Democratic Party, the Southern states threw away their greatest single asset, the presidency. Then, by seceding from the Union, they lost everything, slavery first and foremost." "No railway trunk lines bound the rebellious states together. The South had no infrastructure. Its railroad system was designed solely to get cotton to sea for export. There was virtually no interstate trade in the South, and so no lines to carry it." "By opposing slavery and by insisting on the integrity of the Union, Lincoln identified himself and his cause with the two most powerful impulses of the entire 19th century - liberalism and nationalism." General Jackson: "He certainly preferred a fight on Sunday to a sermon but failing to manage a fight, he loved next best a long, Presbyterian sermon, Calvinist to the core." Lincoln talking about the Bible: "Take all of this book upon reason that you can, and the balance on faith, and you will live and die a happier and better man." Woodrow Wilson (1856-1924) was the last president born before the Civil War.
• The Fundamental Index: A Better Way to Invest (5/5) Written in 2008 by Rob Arnott (and coauthors) of Research Affiliates (RAFI). Something that I never realized - the S&P 500 index was created to measure how the stock market was doing, and not as a strategy. After it was a measurement it became a benchmark, and then from a benchmark it became a strategy. The problem with the capitalization-weighted index is that "we're going to wind up putting most of our money in overvalued stocks because the scale of our investment is explicitly linked to the stock's price, hence to the error in that price." "Price weighting ensures investors have maximum exposure to a bubble's darlings right before they fall off a cliff." S&P 500 investors lost a bunch of money in Cisco in 2000 when it had a 4.3% weight and then fell 90%. I would imagine something similar will happen with Tesla in the coming years. (The top five in the S&P today are AAPL, MSFT, NVDA, AMZN, and META.) One alternative to the market cap weighted index (SPY) is to equal weight (RSP). But another alternative is to fundamentally weight. You could own every company in proportion to its revenue (RWL) as a share of the total, for example, or another fundamental attribute like book value or cash flow.. But the most interesting approach is to use a composite of these fundamental attributes (PRF). The particulars turn out not to be hugely important: "all of these Fundamental Index portfolios performed similarly - while capitalization weighting did not - because each one broke the link between portfolio weight and pricing error." Something interesting they find is that the more inefficient the market, the more the fundamental weight strategy outperforms the market cap weighting. So it does better with small cap stocks and foreign stocks. ("Cap-weighting performance drag relative to its opportunity set is proportional to the square of the errors in price.") They also find that five-year smoothing of the fundamental variables does better than weighting on the most recent data. Basically the key here is that market cap weighting is trying to own companies in proportion to their size, but the fundamental variables are a better measure of size than the market capitalizations. "Changes in the size of a company on one fundamental measure may be offset by changes in another size metric. For example, U.S. automakers recently experienced a large increase in sales accompanied by a reduction in cash flow. This netting effect in the [fundamental composite] indexes can leave the overall fundamental size of the company and the need to rebalance unaltered." Which is good because, "one of the indexing world's dirty secrets is that their trading costs are a disaster, only alleviated by the very low annual turnover." Periods of time when market cap weight index outperforms the fundamental are "growth-dominated markets" - essentially there is an out of control positive feedback loop. If I had to do passive investing, I would for sure use a fundamental index and not a market capitalization one.
  
• Skunk Works: A Personal Memoir of My Years at Lockheed (3/5) The author Ben Rich (1925-1995) worked for the "Skunk Works" of Lockheed building stealthy aircraft. The big accomplishments were the U-2 (late 1950s), the SR-71 Blackbird (1962) and the F-117 Nighthawk stealth fighter (1978). Some highlights: "Our designers spent at least a third of their day right on the ship floor; at the same time, there were usually two or three shop workers up in the design room conferring on a particular problem. That was how we kept everybody involved and integrated on a project." "A future commander resented having only a four-man crew to boss around on a ship that was so secret that the Navy could not even admit it existed. Our stealth ship might be able to blast out of the sky a sizable Soviet attack force, but in terms of an officer's future status and promotion prospects, it was about as glamorous as commanding a tugboat. At the highest levels, the Navy brass was equally unenthusiastic about the small number of stealth ships they would need to defend carrier task forces. Too few to do anyone's career much good in terms of power or prestige. The carrier task force people didn't like the stealth ship because it reminded everyone how vulnerable their hulking ships really were."
• Romney: A Reckoning (2/5) A case study of a principled loser. "Watching Trump complete his conquest of the GOP was even more devastating to Romney than losing his own election in 2012." Even though Romney was right about Trump, he's an unbearable goody-two-shoes. Has there ever been anyone in American history more sanctimonious than Mitt Romney? Romney's dream in life was to make sure the Empire's books are balanced by canceling Social Security before it collapses. This was funny though: "It's a challenge to justify borrowing 33 billion from China so we can give it to Israel, particularly when I am under the impression that Israel is sufficiently well financed to provide the funds itself." "A devout institutionalist, Romney had harbored a certain subconscious notion that somewhere in the U.S. government, serious people were sitting in rooms drawing up cohesive plans to address America's long term challenges. But if those rooms existed, they did not appear to be in the United States Senate."
• On the Hunt for Great Companies: An Investor's Guide to Evaluating Business Quality and Durability (3/5) Topics: economies of scale, switching costs, network effects, brand. Highlights: "there are rare examples of the phenomenon where market-leading firms actively downplay their market positions in investor communication due to fear of antitrust intervention. In these instances, they define their markets as a union of several large markets to disguise their monopolistic market positions. Most companies, on the contrary, exaggerate their distinction by defining their market as the intersection of various smaller markets, making them appear more dominant than they are.""Occasionally, businesses are 'undermonetized,' where they intentionally or unintentionally do not extract as much value from customers and/or suppliers as they could." Businesses that are over-earning "may appear statistically cheap to some investors who are overly focused on valuation-multiples." Analyzing companies that aren't yet profitable: "Typically, the time of the largest absolute losses isn't that far from the [per unit] break-even point. At that point in time, when the business suffered its largest absolute loses, two investors - one focusing on per-unit profitability and another focusing solely on absolute profitability - would come to opposite conclusions about the company's direction. The one only focusing on absolute profitability will see that the business seems to lose more and more money. The one focusing on per-unit profitability will see that the business is rapidly approaching breakeven." Geographical repeatability: "focusing only on consolidated profits leads the investor to conclude that the entire group is not operating with a proven business model, while in fact some parts of the business are profitable, and the remaining part is following the same delayed unit economics trajectory as the mature ones..." An investor who focuses on the "group" profitability is implicitly capitalizing the newer markets/stores as liabilities! Businesses that acquire customers with a high lifetime value can have a high customer acquisition cost, and those can look unprofitable to the untrained eye while actually having solid underlying economics.
• A History of the American People (3/5) Paul Johnson's history of America, from which the Civil War book (above) was excerpted. His view of America: it was "founded primarily for religious purposes." “The Revolution could not have taken place without this religious background. The essential difference between the American Revolution and the French Revolution is that the American Revolution, in its origins, was a religious event, whereas the French Revolution was an anti-religious event. That fact was to shape the American Revolution from start to finish and determine the nature of the independent state it brought into being.” “The Second Awakening, with its huge intensification of religious passion, sounded the death-knell of American slavery just as the First Awakening had sounded the death-knell of British colonialism.” More highlights: "If the antinomians had their way, it was argued, religion and government would cease to be based on reasoned argument, and learning, and the laws of evidence, and would come to rest entirely on heightened emotion - a form of continuous revivalism with everyone claiming to be inspired by the Holy Spirit." "The basic economic fact about the New World was that land was plentiful: it was labor and skills that were in short supply." "Modern politics was invented in the England of the 1640s..." which was right when the English began settling in America. "In 1700 the American mainland's output was only 5 percent of Britain's; by 1775 it was two-fifths." So, the revolution was economically determined. "Colonial American was the least taxed country in recorded history. Government was extremely small, limited in its powers, and cheap." Washington: "the next best thing to owning a lot of land was to become a land surveyor." The founders: "They were the Enlightenment made flesh, but an Enlightenment shorn of its vitiating French intellectual weaknesses of dogmatism, anticlericalism, moral chaos, and an excessive trust in logic, and buttressed by the English virtues of pragmatism, fair-mindedness, and honorable loyalty to each other." Both the Southerners and, before them, the English crown were blocking Manifest  Destiny. A royal proclamation in 1763 "forbade Americans to settle in any lands beyond the heads or sources of any of the rivers which fall into the Atlantic Ocean from the West or Northwest." Franklin: "Though sad about the break with Britain, he was confident that America's huge economic and demographic strength - he was one of the few people on either side who appreciated its magnitude - would make it a certain victor." "No member of the [British] government ever thought of crossing the Atlantic on a fact-finding mission." "Franklin was planning with the French Ministry of Marine a series of attacks on the English coasts, with John Paul Jones in charge of the naval forces and Lafayette of an invasion army. British resources were stretched thin all over the world." George III called the revolution "a Presbyterian rebellion." "The English church and state lost the political and military battle because they had already lost the religious battle." The anti-Federalists: "their objections varied and they appeared unable to agree on an alternative to what they rejected." The Constitution "by a historical accident [was] actually drawn up at the high tide of 18-th century secularism, which was as yet unpolluted by the fanatical atheism and the bloody excesses of its culminating story, the French Revolution." "The farmers and planters of the South hated Philadelphia and its rich Quakers, they hated New York and its rich lawyers, and, most of all, they hated Boston and its rich merchants and shipowners." Paul Johnson is good on economics: "Taylor's theory was an early version of what was to become known as the physical fallacy, a belief that only those who worked with their hands and brains to raise food or make goods were creating 'real' wealth and that all other forms of economic activity were essentially parasitical. It was commonly held in the early 19th century, and Marx and all his followers fell victim to it. Indeed plenty of people hold it in one form or another today, and whenever its adherent acquire power, or seize it, and put their beliefs into practice, by oppressing the 'parasitical middleman,' poverty invariably follows." "Next to Burke, [John] Marshall revered Adam Smith's Wealth of Nations. He was closer to its spirit than Hamilton, believing the state should be chary of interfering in the natural process of the economy." Great quote: "Some of the older churches, especially the Episcopalians, sniffed at camp-meetings, saying 'more souls are begot than saved there'... it was the uninhibited Methodists who profited most from revivalism... by 1844 they were the biggest church in the United States." "The esoterical reinterpretation of the scriptures produced in thirty-eight huge volumes by the 18th century philosopher Emanuel Swedenborg became an immense quarry into which American sect founders buried industriously for decades." "Even the most bizarre of these sects founded schools, training colleges for teachers and evangelists, and even universities." "By opposing slavery and by insisting on the integrity of the Union, Lincoln identified himself and his cause with the two most powerful impulses of the entire 19th century - liberalism and nationalism." On T.R.: "There was something petty in this kind of populism, coming from a man whose family had inherited, and always lived off, wealth accumulated in distant times by methods which would not bear close examination." We never think about how T.R. entered the race in 1912, splitting the vote with Taft, and allowing the horrible Wilson into office.
• U.S. Bank Deregulation in Historical Perspective (3/5) Another one by Charles Calomiris, author of Fragile by Design (note) and also the "Fiscal Dominance" paper from two years ago. This short review by Cato is a good summary of the book. His academic career was essentially pushing for bank deregulation, and this book is a collection of some of his papers. One of his main ideas was that unit banking - prohibiting banks from having branches, which was the law in most states for a long time - made the U.S. financial system less robust and contributed to the many financial panics and episodes of bank failure. ("The United States experienced banking panics in a period when they were a historical curiosity in other countries..." "likely association between the unique init banking system in the United States and its unique propensity for panics.") Other countries with similar banking systems (fractional reserve, which Austrian economics people blame) such as Canada were able to avoid having so many episodes of systemic bank failure. "The evidence shows that unit banks were less diversified, more vulnerable to failure, less able to grow in the aftermath of diverse shocks, less efficient in their use of scarce bank capital and reserves, less able to provide credit at low cost during times of peak demand, less able to provide services in remote areas, less competitive in local markets, less able to transfer capital across regions, and less able to finance interregional commodities trade. It is no wonder that the unit banking system was so uncommon in the international history of banking. The main puzzle is why it persisted so long, despite its disadvantages, in the American banking system." Another thought: "Restrictions on branching served the interest of wealthy farmers at the expense of poorer farmers and industrialists." Why is the government tolerating stablecoins? "Another interesting possibility is that technological change and global market competition will force the full deregulation of the banking industry, whether Congress acts to do so or not. The key to such a dramatic change could be the privatization of the payment system, made possible through the development of new wholesale and retail clearing arrangements via the internet. If financial institutions can develop networks to clear claims among their customers without the use of checking accounts and Fed-controlled payment networks, then there would be little need for them to maintain bank charters (which currently provide unique access to the payment system)." It is interesting to think about the economic function that banks serve. Theories: "repositories of scarce information capital about borrowers." Farmers liked unit banking because location-specific bank capital tied the banks fortunes to their own. Senator Carter Glass had a strange fixation with separating commercial banking from investment banking. That separation lasted until the Gramm–Leach–Bliley Act (GLBA) aka the Financial Services Modernization Act of 1999. Maybe big banks should have made more of the fact that Carter Glass was a segregationist who supported poll taxes and literacy tests for voting? Also, Senator Phil Gramm who wrote the deregulation legislation is the father of Jeff Gramm, activist investor who wrote Dear Chairman.
• Original Sin: President Biden's Decline, Its Cover-Up, and His Disastrous Choice to Run Again (2/5) The purpose of this book is to assign blame for the 2024 election loss to Biden and his inner circle of advisors (politburo) for hiding his cognitive decline. It also whitewashes Biden's other scandals, such as his bribery racket, by focusing attention on Hunter's drug addiction and not his role as a bag man. Even though it is a whitewash and a rush job, there are some fascinating admissions. One thing we realize is that common knowledge in D.C. does not circulate very far, even on Twitter. Regarding Biden's cognitive decline: "We weren't going to change that he was running, and no one wanted to be on the outside in case he did win. So no one said anything." Even more surprising, in September 2023 at an event that included Chris Christie and Jeb Bush, Ari Emanuel shouted at Ron Klain across a room, "Joe Biden cannot run for reelection! He needs to drop out! He can't win!" How did we not hear about that at the time? Another thing insiders know is that the polls are fake. The public is being told that Biden or Harris are five points ahead while everyone in D.C. knows that they are going down in flames. But we never hear about that either. For example: "Biden needs to stay in, one black congresswoman argued before the entire caucus. If he gets out, this is going to fall on the shoulders of a black woman. And Kamala Harris is going to lose, and everyone is going to blame black people. There was a real sense from black members that a Harris candidacy - and a devastating loss that many seemed to anticipate as a foregone conclusion - would be horrible for people of color. And yet that argument often came with the caveat that the party could not pick any replacement nominee other than Harris." 
• Dealings: A Political and Financial Life (2/5) We remember reading about Felix Rohatyn in Barbarians at the Gate, because he represented the special committee of RJR Nabisco in the leveraged buyout auction. Classic silent generation: he "flunked out" of physics at Middlebury, but had some sort of distant connection to André Meyer and was able to get a low-level job at Lazard. Never reveals how he got Meyer's attention. He does say that he knew Samuel Bronfman's daughter and that Bronfman told him, at breakfast one Sunday, to ask to transfer from foreign exchange trading to working on mergers. Also puzzling how he was able to get into (and pay for) Middlebury as a refugee from Europe in 1942. As an investment banker, Rohatyn would go to the Allen & Company conference in Sun Valley, Idaho since he was involved in media deals. That is an interesting multi-generational financial firm, with CEOs Charles R. Allen, Jr., Herbert A. Allen, Jr., and now Herbert A. Allen III.

Abundance Links

• When someone picks up low-hanging fruit, someone else will come along and ask: if it was so obvious, why wasn’t anyone already doing it? The answer to this is not always that actions are only obvious in hindsight, because often enough, people genuinely do see what to do long before it’s actually done. The history of the discovery of various drugs is a testament to this: so many advances, from RNA vaccines to GLP-1s, languished in obscurity for a long time. Sometimes drugs were dismissed on the basis of poor negative evidence, and other times, the possibilities for various drugs weren’t ever going to be reached with a given indication, but another one was sitting there waiting to be used. (The Roivant business model is all about that.) There really is a lot of low-hanging fruit. [Cremieux Recueil] 
• As I write in the book, one of the great wonders of the modern world is that the more time we spend making things, the better we get at it - this is Wright’s Law. So batteries and solar panels get cheaper and cheaper - even as they get better and better. But sometimes the definition of what that “better” is can change. Once upon a time the main standard against which computer chips - or superconducting magnets - were measured was their power. But today “better” can just as easily mean something else: lower power or helium consumption. I think examples like this are rather handy to have in the back of your mind when pondering the world today. When economists fret about a sudden collapse in productivity, it’s quite possible that the metric we’re all focused on is simply the one we used to be fixated with. If you judged the performance of the superconducting magnet sector based purely on how many Teslas each unit could pump out, the chances are you would look at the sector in the coming years and despair. It might look like it’s going backwards! In actual fact, enormous progress is being made here - as it is elsewhere throughout the Material World. [Ed Conway]
• The quest for a useful alternative for GDP has been going on pretty much since GDP was invented, and will continue long into the future. But may I mention one very useful comparative statistics which Sarah doesn’t - and which isn’t, as far as I know, mentioned in any of the mainstream dashboards of development and progress. That metric is steel per capita. My contention - and yes to some extent I’m talking my book here but hear me out - is that looking at the amount of steel that exists in a given society gives you just as good (in some cases even better) an insight into that country’s level of progress. And happily, using this metric is far more intuitive (and less prone to things like purchasing power parity adjustments) than things like GDP per head. [Ed Conway]
• MAGA folk reassure themselves that the stock market plunge doesn’t matter and the “real” economy is doing just fine, undisturbed by the looming trade war. Then when some new gloomy data on the “real” economy is released, they double down and explain we need to accept short-term pain for long-term gain. Trump actually used that ominous phrase. Both propositions are dangerous nonsense. The stock market is the heart of the real economy. More than a barometer of economic health, it is an essential mechanism for economic growth. [Richard Vigilante]
• Federal tax revenue has historically hovered within 1 or 2 percentage points of 17.4 percent of GDP since World War II, no matter what the tax rates have been and what is taxed.... nothing the government has tried over the past eight decades has ever been able to change that. It is possible to increase tax revenues over the long term only by increasing the tax base. The only way to expand the nation’s tax base is through economic growth. Below is the crucial graph, from the St. Louis Federal Reserve. Income tax rates varied wildly over these 80+ years, but receipts never get much past that magic line of 17.4% of GDP. [Richard Vigilante]
• I have been making my living as a writer ever since (barely) escaping college in 1978. Since 1980 every word I have written has been bespoke. When, a few years ago, I decided I wanted engage topics beyond money and technology—my bread and butter for decades—I realized I had not pitched an article to an editor since 1979. I had forgotten how. Irresistibly tempting, then, was a forum from which I could publish without needing any other person’s consent. I could write about anything and say whatever, whenever and not be denied. Fool! A writer has no better ally than a skeptical editor on a tight budget. How else is he to know whether his latest thought should be unleashed on the world. [Richard Vigilante]
• Every year the IEA predicts that coal consumption will plateau or drop. And each year it turns out to be wrong. In fact, China burns ever more coal. This is a big deal, a really big deal - and yet it’s often glossed over by policymakers. Since every year the IEA can predict that coal output will soon peak, politicians can continue to claim that the transition is happening - that coal is being consigned to history. Yet while some countries, most notably the UK, are ending their reliance on coal for power, those changes are little more than a rounding error in the face of the global picture - that coal is still powering much of the world. [Ed Conway]
• Perhaps if there’s a bit of wisdom to be extracted from this whole wild goose chase it’s that while we like to tell ourselves humankind has exhausted this or that resource, we are much better at talking about it than actually, well, exhausting said resource. Perhaps I ought to have known this sooner. After all, I gave over quite a large chunk of the copper section of Material World to documenting why, contrary to a lot of doom-laden articles and analyses at various points in history, we never actually ran out of copper. We didn’t even do all that much substitution (we use aluminium a fair bit for things like high voltage power lines, but in part that’s because aluminium is light). We mostly just got a lot better at mining copper. [Ed Conway]
• What’s exciting about these new batteries (and actually it turns out the ones you find in smartphones are only the tip of the iceberg) is that the anode is made not just of graphite (which is to say, carbon) but of a composite of graphite and silicon. That matters when you think about what the anode is there to do - to provide a place for those lithium ions to nest when the battery is charged. The more hospitable you can make that nest, the better the battery will work. And silicon has properties that make it particularly attractive. For one thing, silicon is much better at accommodating lithium ions than carbon. While it takes six carbon atoms to hold one lithium ion, a single silicon atom can hold four lithium ions. [Ed Conway]
• For decades, I bought into the software-first dream—the idea that code could solve anything, that problems existed in abstraction, that real progress came from elegant algorithms and clever cloud architectures. My peers and I were sold the fantasy of a world that didn’t need factories, turbines, or steel foundries—just cloud computing, VC-backed disruption, and ever-expanding digital platforms. The Instagram Nirvana. But when I looked around, I saw that the infrastructure holding everything together was crumbling. If you’ve ever driven the freeways winding their way through the heart of the Los Angeles Megalopolis, you’ve felt it. [Terraform Industries]
• I study the overstatement of GDP growth in autocratic regimes by comparing the self-reported GDP figures to the night time lights (NTL) recorded by satellites from outer space. I show that the NTL elasticity of GDP is systematically larger in more authoritarian regimes. This autocracy gradient in the elasticity is robust to multiple changes in data sources, econometric specification or sample composition and is not explained by potential differences in a large set of country characteristics. The gradient is larger when the incentive to exaggerate economic growth is stronger or when the constraints on such exaggeration are weaker. The results suggest that autocracies overstate yearly GDP growth by as much as 35%. Adjusting the GDP data for the manipulation taking place in autocracies leads to a more nuanced view on the economic success of non-democracies in recent decades and affects our understanding of the effect of changes to foreign aid inflows on income per capita. [Luis R. Martinez]
• First, in nearly all places and for nearly all load types, solar+batteries are cheaper than any other potential power source, replacing the concept of an expensive, undesirable “green premium” with a “green dividend,” a rare win-win for using advanced new power technologies. We have always believed that the revealed preference of the market is that less polluting technology is enthusiastically adopted, if and only if it also saves the customer money! The second is that power costs do increase as we drive to a large number of “9s” of reliability towards the right edge of the graph, but even for loads as expensive as AI training centers, the optimal utilization is probably closer to 99.9% in terms of weights updated per dollar spent. In practice, rather than the datacenter going dark for 8 hours a year, 99.9% utilization means some partial throttling in winter over longer time periods. Third, there is a clear bifurcation between battery supported loads over $2000/kW that run at utilization greater than 75%, and diurnal, battery-free solar loads under $400/kW that run at utilizations below 30%. [Terraform Industries]

Thursday Night Links

• Those older men who are fitness enthusiasts, like George Gilder, who still runs miles per day in his 80s, can remain productive far beyond the typical midcentury elderly, who, as the first to live in a post-scarcity world, lacked knowledge of the compensating necessity of exercise and nutritional restraint, and lacked great alternatives to cigarettes for delivery of the world’s greatest nootropic. And since retirement is particularly bad for men, who generally base their self-worth on their productive capacities rather than family relationships, who are we to demand that talented people stop using their talents because of age? [The Tom File]
• You might be thinking: what’s so special about a square? What about triangle theory, or pentagon theory? (Or rectangle theory? Or rhombus theory? Okay, side lengths and angles don’t matter here.) Well, it’s true that there’s something compelling about any loop-closing property, regardless of side count—a story that comes full circle is still satisfying no matter how many points it hits in between, and it’s still neat to discover a triangle of people who coincidentally know each other. But here’s what I think makes squares special: a square is the simplest polygon that has non-adjacent sides. In a triangle, each side is adjacent to the other two sides. But in a square, opposite sides have no points in common, which makes any connection between them feel surprising, like a coincidence. In pentagons and beyond, this still holds, but the extra sides add complexity that make them feel slightly less elegant. Nevertheless, other shapes can be interesting too, but I see them as the exception, not the rule. [Adam Aaronson]
• These guys don't understand each other. Elon Musk is too guileless. He says exactly what he thinks is true with little regard for how others will react. He alienates allies by airing disputes in public instead of settling them behind closed doors. Because he is a sperg engineer who leads companies of sperg engineers, and to do this, you must be 100% truthful and transparent. Donald Trump is too guileful. He says exactly what will advance his plans with little regard for telling people what he actually thinks. He alienates allies by expecting their unconditional support without sharing any aspect of his strategic plans with them. Because he is a New York real estate developer, who thrives on winning negotiations and gaining advantage from unshared knowledge, and to do this, you must be 100% calculating and opaque. [Devon Eriksen]
• Populists and tech titans were in the same boat and it was really picking up speed. It was a credible coalition capable of winning trust and confidence, a grand bargain to go make a mutually desired agenda happen. Then came tariffs. The trade war waged with powers grasped in cavalier and questionable fashion blew this to newfound confluence to flinders. It lost all the initiative and gave the game away. It not only fractured the alliance, but it brought “bad trump” back into the foreground as he stormed the spotlight needing every news cycle to be about him and his antics. The economic harm will be very real as for the second time in 2 presidencies, he breaks global supply chains and is now rapidly losing control of the negotiations and having them go sideways. But worse is all the allies alienated. No one wants to deal with him because no one trusts him. and that’s because trump will always need to be the center of attention, places no value in his word, and always stabs his friends and business partners in the back. [el gato malo]
• Just as throughout earlier stages of life, social functions and social status revolve around children and family, and anyone without them will be incomplete as a person, something of an inevitable outsider to the joys of life. The best insurance against a lonely and uncomfortable old age is a large family, among which there are certain to be sufficient resources to care for you. Many elderly Amish people die with well over a hundred grandchildren and great-grandchildren, and spend their later years constantly surrounded by children and young people who deeply appreciate and respect them. [Follow the Money]
• Across thousands of distinct cultural groups around the world, only a handful have rejected the dominant post-Enlightenment status hierarchy in favor of large families and traditional values. I’m not aware of any that managed it without significant insulation from the dominant culture. That tells me that the short-term incentive structure of modern society is more powerful than any historical cultural norms, and there is no passive solution that doesn’t involve collapse of that incentive structure and the civilization it rests on. [Follow the Money]
• Demeny voting (also called parental voting or family voting) is a type of proxy voting where the provision of a political voice for children by allowing parents or guardians to vote on their behalf. The term is named after demographer Paul Demeny, though the concept predates him. [Demeny voting]
• Good habits are formed by high standards readily enforced. As a product of Catholic schools, it long ago occurred to me how brilliant it was of the sisters to so diligently enforce rules against minor misbehaviors. This served two purposes. By defining deviance up, we could be rebels—which kids need to be—by chewing gum or rolling up our shirt sleeves. But it also kept the guardrails against really bad behavior high and tight. [Richard Vigilante]
• Over the past two seasons, uptake of the annual Covid-19 booster has been poor, according to the Centers for Disease Control and Prevention (CDC). Less than 25% of Americans received boosters each year, ranging from less than 10% of children younger than 12 years of age in the 2024–2025 season to 50% of adults over 75 years old. Even health care workers remain hesitant, with less than one third participating in the 2023–2024 fall booster program. There may even be a ripple effect: public trust in vaccination in general has declined, resulting in a reluctance to vaccinate that is affecting even vital immunization programs such as that for measles–mumps–rubella (MMR) vaccination, which has been clearly established as safe and highly effective. In recent years, reduced MMR vaccination rates have been a growing concern and have contributed to serious illness and deaths from measles. Against this context, the Food and Drug Administration (FDA) seeks to provide guidance and foster evidence generation. Moving forward, the FDA will adopt the following Covid-19 vaccination regulatory framework: On the basis of immunogenicity — proof that a vaccine can generate antibody titers in people — the FDA anticipates that it will be able to make favorable benefit–risk findings for adults over the age of 65 years and for all persons above the age of 6 months with one or more risk factors that put them at high risk for severe Covid-19 outcomes, as described by the CDC . For all healthy persons — those with no risk factors for severe Covid-19 — between the ages of 6 months and 64 years, the FDA anticipates the need for randomized, controlled trial data evaluating clinical outcomes before Biologics License Applications can be granted. [Vinay Prasad]

Monday Night Links

• The court holds for the foregoing reasons that IEEPA does not authorize any of the Worldwide, Retaliatory, or Trafficking Tariff Orders. The Worldwide and Retaliatory Tariff Orders exceed any authority granted to the President by IEEPA to regulate importation by means of tariffs. The Trafficking Tariffs fail because they do not deal with the threats set forth in those orders. This conclusion entitles Plaintiffs to judgment as a matter of law; as the court further finds no genuine dispute as to any material fact, summary judgment will enter against the United States. The challenged Tariff Orders will be vacated and their operation permanently enjoined. [United States Court of International Trade]
• The combination of ultra-conservative Christians and left-leaning university types living in close proximity has turned Moscow into an on-the-nose symbol of life in a divided America: On the five-block stretch of shops that makes up Moscow’s downtown, a slew of kirker-owned businesses stand side-by-side with organic food co-ops and coffee shops displaying Pride flags and Black Lives Matter signs in their windows. On the Sunday morning of my visit, the kirker who offered to drive me to church gently ribbed me after I asked him to pick me up at one of the liberal-aligned coffee shops downtown. I had no choice, I protested. All the kirker-owned ones were closed for the sabbath. [Politico]
• “I’m as French as you are” is the phrase that provokes this reflection. Indeed, on more than one occasion Camus says he has heard an immigrant claim to be “more French” than him. But, as he says, “If this lady is right, being French is nothing: it’s a pure mockery, a failed joke turned sour, a stamp on an administrative document.” While Camus can be blunt, his thinking can also be subtle—certainly nuanced. He concedes things that no outright racist or sectarian ever would. He allows, for instance, that a person can join a people because he cares for their language, literature, way of life, and more. But he contends that on the collective level, “Peoples who remain peoples cannot join other peoples. They can only conquer.” [The New Criterion]
• Ron Chernow’s new biography of Mark Twain is enormous, bland and remote — it squats over Twain’s career like a McMansion. Chernow, who has previously written lives of financial titans, war heroes and founding fathers, misses the man William Faulkner called “the father of American literature” almost entirely. He demonstrates little feeling for the deeper and least domesticated regions of Twain’s art, or for the literary context of his era. His book is an endurance test, one that skimps on the things that formed Twain and made him the most lucid, profound, unpredictable and irascibly witty American of his time. Hardy will be the souls who tour this air-conditioned edifice all the way through and glimpse the exit sign. [NY Times]
• The central model here is the gravity model of trade which in simplest terms predicts the amount of trade between two places as proportional to the economic “mass” of the two places (e.g their population or GDP) and inversely proportional to the distance between them, echoing Newtonian gravity. Usually, the gravity equation takes the distances and masses of countries or cities as an input and outputs a prediction of trade between them. The authors of this paper flip this around. They have some data on the amount of trade between cities, as well as the location of some known cities, and they use this to back out what the size and location of all the other cities is likely to be. They take two steps to estimate the locations of lost cities using their model. First, they use the trade between cities with known locations to estimate the distance elasticity of trade, i.e how much does trade decrease as the distance between two cities increases. Then, they try to fit the model’s predictions over the shares of trades between each city pair in the network to the observed data by choosing different latitudes, longitudes, and productivities for each city. [Maxwell Tabarrok]
• Vitamin K2, specifically MK-7, activates special proteins, allowing the body to properly utilize calcium. Two of these proteins are osteocalcin (OC) and MGP. The former attracts calcium to where it is needed most, namely into bones and teeth; the latter keeps calcium away from where it is not needed, namely soft tissues. [NattoPharma ASA]
• None of that has lifted the price of timber, which never recovered from the 2007 housing bust. Logs for softwood lumber averaged $22.50 a ton across the South last summer, the least since 1992, according to TimberMart-South, a pricing service affiliated with the University of Georgia’s forestry school. “If you put inflation on it, it’s really sad,” said Mr. Hopkins, the Georgia timber grower. Adjusted for inflation, prices for the logs used to make lumber are at their lowest in more than 50 years. [WSJ]
• In my last post a couple of days ago (May 28), I was critical of the blizzard of injunctions issued by the courts against seemingly every policy change that President Trump seeks to implement.  I went so far as to call this the “opposite of democracy.”  But I also noted that there are instances where judicial restraints on the executive are legitimate, most notably where the statute on which the President relies to implement a sweeping policy does not in fact grant him the authority he claims.  Thus, on finding a lack of grant of authority in the statutes cited, the Supreme Court had reined in President Biden when he sought to implement policies forgiving student loans and banning fossil fuel power plants. I ended that article by asking whether President Trump’s actions with regard to imposition of tariffs may fall into the same category of overreach as Biden’s student loan and power plant gambits. [Francis Menton]

Thursday Night Links

• The Treasury Department will stop putting new pennies into circulation by early next year. Afterward, there won’t be enough pennies to use in everyday cash transactions, and businesses will need to start rounding up or down to the nearest 5 cents, the Treasury said in a statement. [WSJ]
• While the load-carrying capacity of a theoretical airship increases linearly with its length in calm air, once an airship grows to span bodies of air moving in different directions, the thickness of the airframe required to withstand discrete gusts grows at the 10/9 power. That suggests that above a certain size, the load-carrying capacity of an airship no longer increases but rather decreases with scale, since the airship structure has to be made heavier to survive the wind loads it will encounter. [Orca Sciences]
  
• In a net-zero world, we’ll lose the lowest-cost sulfuric acid we use to produce phosphate fertilizer. But other sulfur sources will pick up the slack long before other acids are used or a direct approaches to sulfur recycling become economical. [Orca Sciences]
• Given that all contrails represent ~2% of global warming, this indicates that ~1% of global warming is addressable today at under $1/tCO2eq. I don't know of any other climate intervention with such a low upfront cost and such a high probability of success. So why aren’t all airlines doing this yet? You’d think convincing airlines to avoid contrails would be easy. It’d cost them about $5 per flight to cut their climate roughly in half, vastly cheaper than any low-carbon fuel. But no airline has yet committed to it. A pessimistic take is that contrails are a ‘sincerity test’ for the world’s willingness to engage in the most cost-effective climate action, and the world is flunking so far. [Orca Sciences]
• Over a 30- to 40-year life, the energy a typical transformer dissipates as heat can cost close to five times its purchase price. Upgrading to a higher-grade core alloy—or simply right-sizing the unit—would save customers billions of dollars per year. Yet many U.S. utilities still order the cheapest devices that meet federal minimum standards, and virtually none adopt the higher-performing devices common in other countries. Why? Because ratemaking rules let them pass those losses straight through to customers and penalize them for spending that doesn’t add capacity directly. [Orca Sciences]
• Crushed rock down to a few millimeters costs $2-$3 per raw ton of rock. Course grinding down to 30 microns with ball mills costs $7-$11 per raw ton of rock. Fine grinding to ~10 microns with a stirred mill or similar technology is $12-$15/raw ton. [Orca Sciences]
• Because liquid fuels are pricey on an energy basis, synthetic fuels using dirt-cheap solar or wind could be economical. $60 per barrel of oil equates to ~$35/MWh. New solar is under $30/MWh today. Assuming a conversion efficiency of around 33%, the breakeven to make fuels would be ~$12/MWh. [Austin Vernon]
• Decentralized energy generation through solar panels paired with battery storage limits how high rates can go. Customers can defect if going off-grid or adding solar becomes cheaper. In places like California, where households pay ~$0.25/kWh, many can save money by adding a solar plus storage system. The cheaper solar and batteries get, the more competition utilities face. [Austin Vernon]
• Some processes need a lot of heat at very high temperatures (1000+ Celcius). They might be less sensitive about maintaining a specific temperature or be so large that thermal mass moderates any swings. In these cases building a furnace directly into the process makes sense. Blast furnaces in integrated steel plants and kilns in cement manufacturing are classic cases. Coal has the dominant market share in these applications. [Austin Vernon]
• Many environmental groups have already begun to protest solar and wind farms. Ground-mount solar is the industrialization of the solar PV ecosystem. Solar was OK when it was expensive because it would decrease energy usage. Technology that paves the ground and makes $10/MWh electricity attainable, driving demand up, is not what Greenpeace had in mind. [Austin Vernon]
• Modern chemical facilities usually have continuous processes, meaning each plant produces a constant amount of product rather than lumpy batches. The benefits are very similar to the Toyota Production System (they are independent discoveries of the same principles). There is no inventory accumulation within the process, equipment is optimally sized, product velocity through the equipment is high, steady-state conditions reduce variation in product quality, and there is a relentless focus on reliability because any single failure can trip the plant offline. The move to continuous processes happened naturally because many reactions will not go to completion in a batch reactor. Continuously fed reactors allow for the separation of the product and recycling of the reactant. Chemical engineering doesn't have the same dogma as Toyota because these other benefits were an accident. It is left as "continuous is better" in school. So you'll see a plant with perfect one-piece flow and incredible quality sending its product to giant tank farms or warehouses where there might be months worth of inventory! [Austin Vernon]
• Consider the light metals in the top right quadrant in the electrochemistry figure. Al and Mg both have far higher strength/weight ratios than steel; they resist corrosion much better; their production is already electrified; and their ores are arguably easier to find– Al is the most common metal in the earth’s crust, Mg is extractable directly from seawater. Both metals are more expensive than Fe today, primarily because they take much more energy to produce. But in a world with cheaper clean electricity – the world we need if we want to decarbonize steel production anyway—in the future we want, we should expect more use of Al and Mg, and much less use of steel. [Orca Sciences]
• There’s a big push out there to make steel electrically (molten oxide electrolysis, aqueous electrolysis, H2 direct reduction etc). But here Sam shows that at the renewable energy $/kWhr price that makes electro-steel work economically, the world might start switching to aluminum as a structural material. Aluminum is electrified already, comes from a more plentiful ore, has a better strength/weight ratio, and suffers from less corrosion (corrosion of steel costs us >1% of global GDP!). Currently, Al production emissions are nearly five times those of steel. But if you grant the conditions that would make electro-steel viable (i.e. near-free renewable electrons) and believe Alcoa’s claims regarding the near-term viability of carbon-free anodes, then Al prices (currently ~$2000/t, 2/3 of which is electricity for the carbon-free process) will sink towards the steel price (currently ~$1000/t, mostly ore and process cost). [Orca Sciences] 
• The same transformation has happened in almost every corner of our material lives. It has been happening for thousands of years and in every material category. Over time people have switched from mud to brick to cement, from wood to plastics to fiberglass to carbon fiber, from copper to bronze to steel to titanium, from leather to cotton to nylon, from smallholder to factory farms, from heaps of coal to thin wafers of solar PV, from vacuum tubes to specks of semiconductor, from highways to runways to Zoom. Energy intensity increases, materials get stronger and lighter, machines pack more power into smaller spaces. A signature element of modernity is how we’ve moved from materially-centered ways of doing things to energy-centered ways of doing things. Some people call this trend ‘dematerialization’. But that’s misleading. The world today may be made relatively less of stuff, but for various growth and demographic and Jevons reasons overall there’s way more stuff than ever. So I think it’s best to think of it as our world being made more and more out of energy. [Orca Sciences]

Monday Night Links

• Arbitrageurs implicitly assume that the world is full of people who are rational, but imperfectly so, and that the big money is in keeping the expressions of their views that take place through financial markets roughly in line with one another—taken too seriously, it's a form of nihilistic optimism that every important problem will be figured out by somebody else, but that they won't perfect the last few details of their approach before moving on to the next thing. Startups often assume that the world is missing a critically important big idea, and that only they can bring it to fruition. It's a form of realist pessimism holding that nobody else will pick whatever the low-hanging fruit happens to be. At the same time, believing that there are secrets left in the world and low-hanging fruit left to pick is a form of optimism in itself. [The Diff]
• I really hate to be "that guy" (i.e., the jerk that goes around correcting people on spelling and grammar and word usage and such) and I do apologize but... Please note that "Episcopalian" is not an adjective, it is a noun. It always only refers to a person who is a member of that denomination. The adjective is "Episcopal." Some examples: "John and Mary are both lifelong Episcopalians, so their wedding took place in the Episcopal church on the town green." "The Episcopal prayer book is called 'The Book of Common Prayer.' Many Episcopalians turn to it for solace in times of sorrow." "I went to an Episcopal school, where Episcopal chapel services were held on a weekly basis. Most, but certainly not all, of the students there were Episcopalians." [Salt Water New England]
• The film has become a cult classic for its crisp dialogue, lucid fatalism, and fine detail. It bubbles back up in moments of market stress, and the past few weeks have provided a steady supply of oxygen. It hit TikTok during the 2023 collapse of Silicon Valley Bank, boosted by an explainer on the All In Pod. Close to a million people have watched it in unlicensed 30-second installments. There is, of course, an Irons meme generator. And it is invariably how a certain breed of Wall Streeter — just young enough not to have had their careers tarnished by 2008, but to feel like they had missed out on a great war — answers when asked what their favorite movie is. (Nos. 2 and 3 are Michael Clayton, which stars George Clooney as a corporate fixer, and, for reasons passing understanding, Master and Commander, Russell Crowe’s Napoleon-era high seas drama.) [Semafor]
• Fundamental to our approach to energy markets at RBN is a view that natural gas, crude oil and NGLs have become much more interdependent than in the days before shale. What happens in gas impacts NGLs, which influences crude oil, which loops back to the natural gas market. There was a time when you could live out your career in the gas business, or the NGL business, or the crude business and get by with knowing very little about the other hydrocarbon markets. Those days are gone forever. For example, today’s gas prices make no sense unless you understand the economics associated with NGLs and associated gas production. Production of condensates from crude wells directly compete with natural gasoline, the highest margin NGL for gas processors. Natural gasoline prices are being boosted by its use as a diluent for Canadian bitumen crude oil. Low prices for ethane result in rejection of ethane molecules back into the natural gas tailgate stream of gas processing plants. These examples and many more typify today’s highly integrated liquids and gas hydrocarbons markets. [RBN Energy]
• The strong physical trading liquidity at Cushing attracted paper traders, allowing market participants to hedge their physical business and bet on the market via the WTI Light Sweet Crude Oil futures contract (contract symbol: CL) on the New York Mercantile Exchange (NYMEX). This contract, which launched more than 40 years ago, became important in the domestic market and internationally. In 2008, NYMEX was acquired by the Chicago Mercantile Exchange (CME), which currently manages the CL contract. CL remains the world’s most liquid crude oil contract. While this contract was initially supplied with WTI directly from West Texas, it did not exclude crude oil that originated elsewhere but met the contract standards. [NYMEX Leads the Way on WTI Futures Contracts, But There's Room for More]
• As in our report on midstream M&A in 2022-23, many of the midstream deals announced in 2024 and early 2025 involved the acquisition of companies with extensive holdings in the Permian, which is by far the U.S.’s top crude oil production area and also a major supplier of natural gas and NGLs. Rising Permian production over the past few years spurred a massive buildout of midstream infrastructure — including gathering systems (for crude, associated gas and produced water), gas processing plants, takeaway pipelines (for crude, natural gas and NGLs), storage facilities, fractionators, and export terminals. While a significant portion of that midstream development was undertaken by large publicly held companies or master limited partnerships (MLPs), many other vital projects were developed by privately held midstream companies backed by private equity. In the post-COVID era, with many publicly held companies looking to gain further scale and scope — and many private-equity-backed midstream companies looking to cash in on their well-timed, well-planned developments — it could be argued that conditions for large-scale midstream M&A have never been better. [Combination of the Two - A New Drill Down Report on Consolidation in the Midstream Sector]
• In a Drill Down Report in late 2023, we described the NGL networks owned and operated by the four large midstream companies (Enterprise Products Partners, Energy Transfer, Targa Resources and Phillips 66) that currently provide wellhead-to-water services — everything from gas processing plants in the Permian and other plays to long-haul NGL pipelines to the Gulf Coast to fractionation plants (almost all of them in Mont Belvieu) and export terminals for purity NGL products. As we said then, “That start-to-finish management of the NGL stream provides a number of important benefits — chief among them, the ability to operate with extraordinary efficiency, collect fees from shippers each step of the way, and feed pipelines, fractionators, storage and export terminals along the network’s value chain.” [At Last - New NGL Pipes, Fracs and LPG Export Terminal Give MPLX, ONEOK What They've Wanted]
• Give me the money that's been spent in wars and I will clear up every acre of land in the world that ought to be cleared, drain every marsh, subdue every desert, fertilize every mountain and hill, and convert the whole earth into a continuous series of fruitful fields, verdant meadows, beautiful villas, hamlets, towns, cities, standing along smooth and comfortable highways and canals, or in the midst of luxuriant and fruitful orchards, vineyards, and gardens, full of fruits and flowers, redolent with all that pleases the eye and regales the senses of man. [CBS]

Suncor Energy Inc. (SU) - Q1 2025

The recent Suncor earnings calls have been a delight to read. (Lesson: always invest in companies with CEOs named Rich?) Here are some highlights from the latest quarter (Q1 2025) earnings call:

• In 1954, a gentleman named Roger Bannister, the world’s first four-minute milers and records are meant to be broken, and that is exactly what Suncor teams continue to do break records. Total cost, OS&G $3.3 billion, down $143 million or 4.2% in absolute dollars versus the first quarter of last year despite higher production and throughput across the board. 3% to 4% higher absolute volumes, 4% lower absolute costs operating leverage achieved with a culture and a mindset that every barrel and every dollar matter.
• The mine is supported by a fleet of 70 to 75 Caterpillar 797 400-ton haul trucks. Historically, we’ve loaded each truck to 93% of capacity or 370 tons per truck. Alex’s team has increased its load factor to over 100% now, a full 10% increase, 30 to 40 more tons of productive ore on each and every truck, achieved through shovel operator best practices and load sensing technology, the impact, lower unit costs, higher productivity equal to 73 400-ton trucks.
• I personally pulled out my stop watch on my phone and time loading operations, four scoops, 404 tons in one and a half minutes, folks, that’s fast
• I think it’s worth noting that when comparing quarter-over-quarter Q1 2025 to Q1 24 despite a 7% decline in WTI an average 24% decline in New York Harbor and Chicago 211 cracks, you see that our AFFO per share is the same and our free fund flow per share is actually 6% higher.
• Winners always want the ball when the game is on the line.
• The only thing I unconditionally love are my kids and my grandkids. Everybody else has to earn their seat at the table.

The current market capitalization of SU (at a $34.31 share price) is $42 billion and its enterprise value is $50 billion. (Net debt of $5.4 billion plus other liabilities.) Suncor returned approximately $1.08 billion of value to shareholders in the quarter with $540 million in share repurchases and $508 million in dividends, for a shareholder yield of 10.3% on the current market capitalization. 

The number of shares outstanding is down 4.2% year-over-year. They bought back 5 million shares in April. They were doing 4.5 million/mo in Q1.

Suncor's adjusted cash from operations, excluding change in non-cash working capital, was $2.19 billion, compared with $2.28 billion a year earlier. Capital expenditure was $824 million compared with $944 million. The resulting free cash flow for the quarter was $1.37 billion (compared with $1.34 billion), which is an 11% yield (annualized) on the enterprise value.

Capital expenditure was down 13% while upstream production was up 2%, year-over-year. 

This was in an environment of $71.40/bbl WTI vs $76.95 a year earlier. Luckily, the differential between WCS and WTI fell from $19.35/bbl a year ago to $12.65 in the first quarter. 

It is obviously not good that WTI has dropped to $60/bbl. Suncor produces about ~310 million barrels of oil a year so a ~$10/bbl hit to crude costs us $3 billion annually assuming that differentials and refining margins remain the same. (Crack spreads are currently higher than last quarter.) That's a huge chunk of our cash flow. It amounts to $2.44 per Suncor share. Trump's trade war is costing us real money!