Books - Q1 2025

Read 11 books this quarter. Pretty good, considering everything else going on. See also our Compendium of Credit Bubble Stocks 5/5 Books (as of January 2025) and our Q4 2024 reviews.

• Climbing the Vines in Burgundy: How an American Came to Own a Legendary Vineyard in France (4/5) Written by Alex Gambal, an American who moved to Beaune with his family and ended up in the Burgundy business. (He was the first non-Frenchman to own a Grand Cru vineyard in Montrachet.) In this interview he gives a great description, better than he does in the book: "It was a small but complicated business, an asset-heavy, balance-sheet-weak, complex business." He was quicker to be accepted by the French (brokers brought deals to him) because he worked for a Burgundy importer first and went to a wine school in Burgundy (where he met 2nd+ generation winemakers), but also because his kids were in the Beaune schools. So he was taking his kids on playdates and making friends with the local winemakers. He was in business from 1995-2022 (Maison Alex Gambal) when he sold out to a larger French competitor. His second wife had died, he was in his early 60s, his children did not want the business, and he wanted to work less hard. (The wine business may have led to a divorce from his first wife.) He got into the business at a time when most vignerons sold their grapes to négociants, who bottled and sold the wine under their own labels. That allowed him to go into business, and establish a brand, with just his name (label) and no land. As the supply of bulk grapes and wine was drying up (farmers vertically integrating into wine production), he was able to buy some parcels himself. (As he describes: "By 2004-2005, it was harder to source the grapes since small growers were starting to bottle more and more of their wine. At the beginning, the bigger négociants, like Girardin, Latour, Boisset and Jadot, left plenty of crumbs on the table; they didn’t care about the little ants. Eventually, however, there were fewer crumbs and more ants.") It is interesting that Burgundy vignerons were more successful than Scheid Vineyards at the vertical integration... maybe because they had much better product to offer? Gambal laments the rising prices of Burgundy wine, but it is a naturally expected outcome of the Cornucopian thesis! Most land in Burgundy is owned privately, although LVMH owns, via its Moët Hennessy subsidiary, the Domaine Chandon (acquired 1985) and the Domaine des Lambrays (acquired 2014) and Pernod Ricard owns Château de Chassagne-Montrachet and the Domaine de la Garde. These assets are too small to be meaningful for companies of that size, but if you could own Burgundy land, there is a question of whether "climate change" will hurt the productivity or quality of Burgundy wine. Warmer temperatures have maybe been good so far, with hot, dry - good - vintages happening more often than in the past: "grape ripening has improved everywhere, from the humblest regional Bourgogne appellation to village-level, premier cru and grand cru designations." Also: "Red wines need a little more sunshine and heat to ripen than white wines so red Burgundy is currently thriving. Burgundy is the most northerly of Europe's major regions for fine red wines. In the 1950s and 1960s, harvests took place at the end of September and often in October so many never ripened properly. Even in the 1970s and 1980s, the success rate was three or four vintages in a decade. This decade, 2012, 2015, 2016, 2017, 2018 and possibly 2019 have all been lovely. 2015, 2016 and 2018 are potentially great vintages.")
• What Is ChatGPT Doing ... and Why Does It Work? (3/5) This is by Stephen Wolfram who is impressed with LLM models but does not think that they will get all the way to AGI. The most interesting part was the beginning where he describes, more thoroughly than I have read before, how LLMs work. Highlight: "the reason a neural net can be successful in writing an essay is because writing an essay turns out to be a 'computationally shallower' problem than we thought." Better tell Paul Graham?
• Economic Laws and Economic History (3/5) By the economist Charles Kindleberger (1910-2003), who is much better known for his 1978 book Manias, Panics, and Crashes. The thesis: "Too many economists discover a relationship or a uniformity in economic behavior, develop a model, and use it to explain more than it is capable of, including on occasion all economic behavior. [a] powerful case against the idea that any one model or law could be used to unlock the basic secrets of economic history." As he says: "eclecticism rather than an all-encompassing system of interpretation is the wiser attitude to bring to the study of the economic past." He lectured about four laws: Engel's Law, the Iron Law of Wages, Gresham's Law, and the Law of One Price. Engel's: as income grows, the consumption of food per capital grows less than proportionately. Ownership of good land is prized in a poor country. One result: agriculture is over-represented in parliamentary governments. "One of the last acts of the farm sector when its power in state legislatures was slipping in the 19th century, was to transfer the capital of the state from the major urban centre to a modest city on the fall line." It would be interesting to read more Kindleberger work. He had the idea that the economic chaos between World War I and World War II that led to the Great Depression was partly attributable to the lack of a world leader with a dominant economy ("hegemonic stability theory"), which he wrote about in The World in Depression 1929-1939. He also wrote A Financial History of Western Europe, World Economic Primacy: 1500-1990, another collection of essays, and an autobiography. 
• The Vanished Landscape : A 1930s Childhood in the Potteries (5/5) As mentioned last quarter, we like British historian Paul Johnson (1928-2023). Our favorite so far is his biography of Napoleon (notes). This book is an autobiography of his childhood in Stoke-on-Trent, a town in central England known for pottery making thanks to a local abundance of both coal and clay. (Like how steel mills started in places where you could find coal and iron ore.) Johnson's father was the headmaster of the local art school. Johnson was the youngest with a brother and two older sisters who were very fond of him. What made this book so enjoyable to read was that Johnson had a very happy childhood. Also, he grew up in a high trust, homogeneous society where he had room to roam. "Crime played no part in our lives. No door was ever locked except when we went on holiday. I never was told of any theft. If you dropped something in the street the person who found it would go to considerable trouble to find out where you lived and return it. Poverty was everywhere but so were the Ten Commandments." We ordered a couple more memoirs of childhoods as a mini reading program.
• Rocket Boys: A Memoir (5/5) Just as enjoyable as Johnson's childhood memoir, this one by Homer Hickam was made into the movie October Sky (1999) starring Jake Gyllenhaal. Hickam (born 1943) grew up in a coal mining town in West Virginia called Coalwood. When Sputnik was launched (1957), he got caught up in the space race and started building rockets, with the help of machinists working for his father at the coal mine. Like Johnson, he also grew up in a high trust, homogeneous society. Key passage: "'Ike built your rockets,' Doc said resolutely, 'because he wanted the best for you, the same as if you were his own son. You and all the children in Coalwood belong to all the people. It's an unwritten law, but that's the way everybody feels.'" Even though 1950s West Virginia was desperately poor by modern standards, there was little of the social pathology that is blamed on poverty today.
  
• Gay as a Grig: Memories of a North Texas Girlhood (3/5) Written by a woman who grew up in Weatherford, TX, this is more of a family history with some memories sprinkled in than a memoir like the two above. The author Ellen Morland Holland (1894-1974) wrote this in 1963 at age 70. Some highlights: "At this time [1900] the world was almost incredibly sound and stable. A man was able to work out his future financial needs. He could tidily pit his annual income against his annual expenses and be able to neatly rely upon  his findings. Father could see that his future was safely grounded and so he decided to stop work in time to freely enjoy life." Her father told her: "You think you have no responsibilities, but you have. You must begin now to take care of a little old lady and that little old lady is you." "I have thought of him every day of my life since losing him, and always with a smile or with a feeling of gratefulness, that I was given so rich an experience in my life with him."
• The Quest for God: A Personal Pilgrimage (4/5) Also by Paul Johnson. It is about why (and how) he is Catholic. He keeps in his study "a large 18th-century crucifix, finely carved in wood and painted, which once stood on the refectory wall of a Spanish convent of nuns. It was looted in the Spanish Civil War and found its way to England, and I bought it some years ago for a modest price in London. It is immensely realistic as to Christ’s sufferings: some would say gruesome. But that is the Spanish manner and I think it right to be reminded forcibly of the sufferings Christ underwent for our sakes. So I was very pleased to buy it and originally intended to hang it in the hall of our London house, to gratify Catholic visitors, and administer a salutary shock to Protestant ones and agnostics." Great idea. Other highlights: "In contrast to architects, painters, and composers, writers have a mixed record in God's service." "As we are leaseholders [of the Earth], we must not diminish God's freehold needlessly and without warrant." "The early environmentalists, being mostly enthusiastic Christians, were never anti-human. But the movement has always had a tendency to slip into extremism and to attract fanatics, and in the last generation it has not only de-Christianized and paganized, but rendered irrational and destructive of the legitimate interests of the human race." "Certainly in English there is no beating the words with which the Anglican Church solemnizes a marriage or buries the dead. These services might have been scripted by Shakespeare." Johnson wrote three books about religion: History of Christianity, A History of the Jews, and Jesus: A Biography from a Believer.
• Creators: From Chaucer and Durer to Picasso and Disney (4/5) Another Paul Johnson. Of the creator he mentions, I like Durer, Bach, Jane Austen, Pugin, and Twain the best. Does anyone care about Victor Hugo or T.S. Eliot anymore?? (Although he quotes Eliot directly as saying, "There is nothing in this world quite so stimulating as a strong dry martini cocktail.") Highlights: "We live in a vale of tears, which begins with the crying of a babe and does not become any less doleful as we age." "The pull of the warm south, always strong among creative Germans..." "...German thoroughness usually lacking in Italian counterparts." He admits that Beowulf is dull and that the full Hamlet play is too long at five hours. Calls Bach "fervently philoprogenitive". "Whenever he could, Bach (like Durer) traveled to meet masters, such as Buxtehude..." Points out Bach's ecumenicism: "He could and did compose settings for the Latin liturgy and hymns. That, indeed, is how his Mass in B Minor began, with a setting for the Kyrie and Gloria, gradually expanding over the years into a complete Latin mass of astounding power and complexity, which could be, was, and still is - today more than ever - performed with equal devotion by Catholics and Protestants. His great St. Matthew Passion, which together with the mass marks the summit of his artistic achievement, is set in German, the vernacular regarded as suspect for services by south German Catholics. But, again, it is regarded with reverence by many Christians today as the most faithful and exalted musical presentation of Christ's suffering and death." Jane Austen: "plainness fostering genius" "I calculate that her social position, both in its strengths and its precariousness, was exactly such as to give her the best and most extensive materials for novels of gentile social satire." On writing fiction: "personal experiences are a novelist's capital, to be hoarded, and spent only with prudent avarice, because they are irreplaceable." "For the novelist, books cannot make up for the absence of direct knowledge and feeling." On Augustus Welby Northmore Pugin (1812-1852): "His close study and reproduction on paper of actual medieval creations were the key to designing his own, and helped him to enter the minds of medieval builders and decorators: they formed, as it were, his apprenticeship under experts who had lived hundreds of years before him..." "He dismissed the classical revival - which was powerful, even dominant in the England of his childhood and youth - as an anomaly, an inappropriate input from the Mediterranean, suitable only for blue skies and hot sun. To him 'Gothic north' was tautological: the north was Gothic, and Gothic stood for the north." Interesting about Picasso: "He believed, like many other people at that time, that the Communists would take over France." "He also took care that his various country houses and chateaus in France were always in areas where the party controlled the local government, just in case he fell afoul of the law (e.g. by seducing a minor)."
• The Essential Galbraith (2/5) No wonder economist J.K. Galbraith has been forgotten. He cranked out four dozen books that seem to have no insight to offer. He was 6'9" and worked in four Democrat presidential administration, pushing wealth redistribution. ("As society becomes relatively more affluent, private business must create consumer demand through advertising, and while this generates artificial affluence through the production of commercial goods and services, the public sector becomes neglected.") Here is something very embarrassing that he wrote for The New Yorker in 1984: "Partly, the Russian system succeeds because, in contrast with the Western industrial economies, it makes full use of its manpower." On Keynesian economics: "It did not overthrow the system but saved it." "[S]upplementing private expenditure with public expenditure [should] be the policy wherever intentions to save [exceed] intentions to invest." Good comment: "I understand that [Galbraith] had good solutions to the problems of the 30s and 40s (government stimulating the economy in recessions, government economic management during World War II). But by the time I began paying attention to economics, he was embarrassingly out of touch, repeating his old solutions (higher taxes, more government power) for the new problems of the 70s and 80s (stagflation caused by too much government, inept government management of the economy, and too few markets)." I do think his theory of the firm is interesting, though. He thought that the purpose of the largest firms (which would include the S&P 500 that generate more than half of all private sector profits) was not profit maximization (as neoclassical economics suggests) but both survival and growth so as to benefit the managers via employment security and financial rewards. Highlights: "No one in those bleak years of the Great Depression could reasonably be for the current system." "While there may be other deserving candidates, only two books by American economists of the nineteenth century are still read. One of these is Henry George's Progress and Poverty; the other is Veblen's The Theory of the Leisure Class. Neither of these books, it is interesting to note, came from the sophisticated and derivative world of the eastern seaboard. Both were the candid, clear-headed, untimid reactions of the frontiersman - in the case of Henry George to speculative alienation of land, in the case of Veblen to the pompous social ordinances of the affluent."
• Class: A Guide Through the American Status System (5/5) Reread of the timeless classic by Paul Fussell. Highlights: "The best places socially would probably be found to be those longest under occupation by financially prudent Anglo-Saxons, like Newport, Rhode Island; Haddam, Connecticut; and Bar Harbor, Maine. Los Angeles would rank low less because it's ugly and banal than because it was owned by the Spanish for so long." "Today one would probably wank to rank well up there a place that has experienced no dramatic increase in population since Mencken's time." "The degree of [workplace supervision] is often a more eloquent class indicator than mere income, which suggest that the whole class system is more a recognition of the value of freedom than a proclamation of the value of sheer cash. The degree to which your work is overseen by a superior suggest your real class more accurately than the amount you take home from it." "Classy people never deal with the future. That's for vulgarians like traffic engineers, planners, and inventors." "The understatement canon determines that the higher your class, the slower you drive." "To a startling degree, prole America is about sweet... you could probably draw a trustworthy class line based wholly on the amount of sugar consumed by a family." "Bold effects and vivid contrasts are always to be avoided." "The two top classes, as we've seen, have very few ideas. One of the few is that capital must never be 'invaded,' as it likes to put it." Regarding Ronald Reagan: "One hesitates even to speculate about the polyester levels of his outfits." Fussell predicted J.D. Vance: "Will the President soon proceed to eye shadow and liner?" Social class problems of engineers: "uncertain always where they fit, whether with boss or worker, management or labor." How things changed from Veblen's day: "the difference now is that it's less the upper than the lower orders who, to fulfill their fantasies, are moved to exhibit their purchasing power."
• Doing Battle: The Making of a Skeptic (4/5) This is Paul Fussell's autobiography: "the making of a skeptic" - that was how he defined himself, late in life. He was the son of a successful lawyer in Pasadena, born in in 1924, the same year as Charlie Munger, Jimmy Carter, Marlon Brando, and George H.W. Bush. (Of course, they were all two years younger than Herman Kahn. You know we believe in birth-year determinism.) Fussell said that Pasadena was a "moral oasis" in Southern California, "profoundly un-European in its self-satisfied Puritanism." His family summered on Balboa Island. Fussell went to Pomona and had the misfortune of being sent to Europe in 1943 becoming a 2nd LT in the infantry. He had made the mistake of signing up for an "Enlisted Reserve Corps" in college and had difficulty even making it into OCS. He was lucky to have survived the war and was seriously injured by an artillery shell explosion that killed the other two men with him. ("Shell fragments in a meaningless little forest in a trivial little battle in a war already won.") Some highlights: "The platoon leader's main function seemed to be that of an emblem, a visible testimony that officers shared the hardships of the men..." "All planning was not just likely to recoil ironically: it was almost certain to do so." "If you're any good, you understand that everything that happens to you is your own damn fault and you embrace that knowledge and go on from there." Fussell voted for Stevenson and did not like Nixon or Reagan. I'll bet he voted for Clinton, Gore, and Obama too. (He lived until 2012.) It turns out he is basically a liberal snob, afraid of being mistaken for a low status white prole. After the war, he got a PhD English at Harvard and then became an English professor, first at Connecticut College (for women) then at Rutgers. ("Because Harvard was not Nebraska State, most of the graduate students, it proved, had been in the navy, and a few had been admirals' aides." "The whole PhD program in English seemed based on the plausible assumption that there would always be significant demand for explicators of Shakespeare...") As a professor, he got to spend not only summers but sabbatical years in Europe! ("Inaugurated for me a serious European period... involving careful attention to wine and food, productive cynicism, sexual freedom, sun and water, the fun of languages, and enthusiasm for beneficent socialism...") Fussell and his wife divorced in 1981 and, though they had two children, seem not to have ever had any grandchildren. His academic writing is terribly, terribly boring literary criticism. As with Mencken, a life of too much criticism. Fussell was really not nearly as interesting as his fellow Paul (and contemporary) Paul Johnson, a much better and more learned man.

Thursday Night Links

• The key word to describe 2025 so far is “uncertainty” and as a public company, our investors hate uncertainty. This has led to a marked increase in the implied cost of capital of our business, with public energy stocks down significantly more than oil prices over the last two months. This uncertainty is being caused by the conflicting messages coming from the new administration. There cannot be "U.S. energy dominance" and $50 per barrel oil; those two statements are contradictory. At $50-per-barrel oil, we will see U.S. oil production start to decline immediately and likely significantly (1 million barrels per day plus within a couple quarters). This is not “energy dominance.” The U.S. oil cost curve is in a different place than it was five years ago; $70 per barrel is the new $50 per barrel. [Federal Reserve Bank of Dallas]
• As an Australian, it amuses me that the time taken for physically plausible journeys to and from Mars on a chemically-propelled monster rocket like Starship is similar to the time taken for my ancestors to sail from Great Britain to the colonies about 150 years ago. Unlike them, though, voyagers in Starship will not have to endure hunger, disease, infant mortality, and navigational errors. While landing on Mars has yet to occur, landing back on Earth will not be a problem, as demonstrated recently by the incredible “chopstick” maneuvers of Starship test flights 5 and 7. [Casey Handmer]
  
• The uniquely dangerous side effects of the Covid vaccine were due to its having the body manufacture the most toxic, likely bioengineered portion of its anatomy, the spike protein, to produce an immune response. Significant questions remain about the mRNA vaccines, including the unexpected persistence of spike protein at six months after vaccination. This mechanism is unlike that of any standard childhood vaccines, which protect against natural rather than bioengineered pathogens and feature direct introduction of weakened virus or virus parts instead of hijacking cells to manufacture them. While perhaps not technically possible, an mRNA vaccine that targeted a less toxic portion of Covid’s anatomy might have been effective without significant side effects. [The Tom File]
• More important than the fact that a technological innovation solved Pittsburgh’s smog where political coordination failed is the following point: Even if the social coordination had worked perfectly the technological solution would still be more important. The socially optimal tradeoff between coal energy and clean air available to Pittsburgh in 1905 still leaves them in a bad situation. They had to accept either dirty air or energy poverty; they had no way to solve both problems at once. The technological solution pushes the production possibilities frontier between energy and air quality far beyond what was the optimal point when only coal was available. [Maxwell Tabarrok]
• The more uncertain we are about birth subsidies — and I agree that’s the correct view — doesn’t that mean we should all the more commit to some kind of revival of cultural conservatism on matters of family? That there’s an asymmetric pairing. Families should be expected to have three or four children, and that’s the alternative. Yes, we should try subsidies, but the more uncertain we are, we’ve just got to go the Ross Douthat route. I think he has five kids now. Good for him. [Tyler Cowen]
• For the money, nothing comes close. Is it reasonable for consumers to deny themselves Teslas’ performance, efficiency and safety just because Elon is a putz? And what about the greater good of buying a modest, zero-emission vehicle? The Model 3 is still the right thing to do, no matter how many stiff-armed salutes Musk throws around. [WSJ]
• When I say the Nicene Creed, I mean it. I am open to hidden complexities and unexpected syntheses, but in the end I think that God has acted in history through Jesus of Nazareth in a way that differs from every other tradition and experience and revelation, and the Gospels should therefore exert a kind of general interpretative control over how we read all the other religious data. I think the New Testament is just clearly different from other religious texts in a way that stands out and demands attention, that the figure of Jesus likewise stands out among religious founders, that together the sources and the story and the Nazarene Himself all seem God-touched to a degree unmatched by any of their rivals. So where there is uncertainty, tension, a wager to be made, I make my bet on Jesus. [Ross Douthat]

Thursday Night Links

• He was at this point the leftist New Statesman correspondent in Paris, in which capacity his finest hour was to commit the almost unprecedented impudence of interrupting General de Gaulle at one of his carefully prepared press conferences. When de Gaulle proclaimed his support of a Europe of fatherlands (“Europe des patries”), he said that he wanted to build the Europe of Dante, Goethe, and Châteaubriand. The young English representative of the New Statesman, under a mighty profusion of unkempt red hair spoke up: “Et de Shakespeare, mon general”—more an assertion than a question. As Paul recalled, the majestic founder of the Free French and of the Fifth Republic, little accustomed to being interrupted, or to being addressed in such comradely terms by the disheveled representative of a leftist British intellectual magazine, said with an epic Gallic shrug, “Oui, aurons Shakespeare” (“Yes, we will have Shakespeare”). Even the most opinionated journalists on the French Left never presumed to interrupt de Gaulle, and Paul was lionized by the Paris press corps. [Conrad Black]
  
• Trump’s movement has been around for a decade now, and in all that time it has built absolutely nothing. There is no Trump Youth League. There are no Trump community centers or neighborhood Trump associations or Trump business clubs. Nor are Trump supporters flocking to traditional religion; Christianity has stopped declining since the pandemic, but both Christian affiliation and church attendance remain well below their levels at the turn of the century. Republicans still have more children than Democrats, but births in red states have fallen too. [Noah Smith]
• Trump’s disapproval ratings are creeping up and economic expectations are headed down, as more and more Americans realize they got a bum deal. But in general, the idea that short-term pain is necessary for long-term economic gain is not always inconceivable. For example, when Paul Volcker raised interest rates and causes two recessions in the early 80s, the resulting conquest of inflation probably paved the way for decades of good economic performance. Trump and his true believers probably really do think that cutting America off from the global economy will cause a bunch of new businesses to sprout up from the ground like mushrooms after a rainstorm, creating mass employment and economic equality and everything good that they dimly remember America having back in the 19th century. But when I say that that possibility can’t be ruled out, I mean it in only the most technical sense. [Noah Smith]
  
• Because again I think when you think about our business with kind of 6% free cash flow yield plus or minus and then 6%-plus growth rates and some of these high IRR acquisitions were kind of a mid-teens returning business. So, it's hard to find asset acquisitions that measure up against what our business is doing right now. So, again that's probably more of what we'll see over the next year. [PrairieSky Royalty Ltd.]
• Trump’s political strategy has never made much sense relative to his stated priorities. From the beginning, his best potential political allies in Congress were the members who leaned libertarian—not because libertarians agree with him on everything (we certainly don’t) but because libertarians are more willing than anyone to support the boldest measures to reshape and reduce government. But from the beginning he made libertarians, including me, his top targets for disparagement and harassment. He tried to blow up the initially libertarian-leaning House Freedom Caucus. His first major effort to oust someone from Congress was Mark Sanford, one of the most libertarian members. We libertarians are the ones who could have helped him slash federal spending, stop the endless wars, and defeat the surveillance state. Even though his actions suggest otherwise, I’m taking him at his word here that these are things he wants to do. Trump’s advocates insist they are, so it’s fair to assess him accordingly. Instead of siding with those who could have helped him, Trump has repeatedly backed, promoted, and endorsed big-government, establishment stooges who privately detest him but playact as admirers. These people keep giving us more spending, more wars, and more unconstitutional surveillance. Now, he’s trying to oust one of the best members of Congress ever, Thomas Massie. Why? Massie has an actual strategy to advance significant parts of Trump’s stated agenda. What has Trump gotten from allying himself with Lindsey Graham & Co. other than more of the status quo? He doesn’t gain by making enemies of libertarians; it only undermines his administration. In these big battles, Trump should instead be putting pressure on members—like those in congressional leadership—who have a long history of enabling waste, fraud, and abuse in government. I hope, for the health and well-being of America, that he rethinks the strategy he’s employed up to now. I know it’s a long shot, but it’s important to say. So much is at stake. [Justin Amash]

Thursday Night Links

• Rather than compelling Canadians to seek annexation, the tariff stirred “love for Queen, flag, and country,” according to George T. Denison, president of the British Empire League in Canada. The majority of Canadians saw the McKinley tariff as part of “a conspiracy” to “betray this country into annexation.” They were having none of it. Their cultural and political ties with the British Empire, as well as their anger over the attempted coercion, proved stronger. Canada’s Conservative Prime Minister John Macdonald wanted to react forcefully to send a message to the U.S. He proposed retaliating with high tariffs on American goods, as well as increased trade with Britain. He also recognized a political weapon when he was handed one. He adroitly turned the 1891 Canadian elections into a broader referendum concerning Canadian-American relations. He portrayed the Liberal opposition as being in bed with the Republican annexationists. According to him, they were involved in “a deliberate conspiracy, by force, by fraud, or by both, to force Canada into the American union.” [Time]
  
• In 2019, two experts at Carnegie Mellon, Paul Fischbeck and David Rode, analyzed 1,600 rate cases over 40 years, and noted the “balance between utility companies and their customers has been shifting over time, in favor of the utilities.” What investors were being paid to take risk in putting money into a utility in 1980 was about 3%, today it is nearly 7%. Interest rates have gone up a bit since these scholars made the calculation, but it hasn’t changed the dynamic. [BIG by Matt Stoller]
• One afternoon I found him in our hotel lobby holding his iPad close to his face, asking Chatgpt, “Where would Tyler Cowen recommend getting dinner near me?” A series of fried-chicken restaurants on the other side of the island appeared. He shrugged and made a disappointed noise; it hadn’t told him anything he didn’t already know. [The Economist]
• As I read ''The Education of a Speculator'' I often found myself asking, how can a man so self-deluded survive, much less prosper, in the market? Is it possible that traits disadvantageous to an autobiographer -- shallow self-assurance, unreflectiveness, bullheadedness -- offer an edge to the speculator? Four hundred forty-four pages later I still don't know. But I can guess. My guess is that they don't, and that the story the author tells of his life in the market is very different from his actual behavior in the market. For whatever reason he does not want to explain the reasons for his rise in the world. He doesn't really want us to know them, or wants us to believe that they are something different and more complicated than they are. [Michael Lewis]
• Metallurgical and thermal coal prices remained weak throughout 2024, primarily due to muted steel demand impacting metallurgical coal and mild weather, high inventory levels, and low natural gas prices impacting thermal coal. While NRP does not expect significant changes in these factors or to pricing in 2025, metallurgical and thermal coal pricing is still higher compared to long-term historical norms. It appears a new price floor has resulted from input cost inflation as well as ongoing labor shortages and operators' limited access to capital. [Natural Resource Partners L.P.] 
• “Does a single district-court judge who likely lacks jurisdiction have the unchecked power to compel the Government of the United States to pay out (and probably lose forever) 2 billion taxpayer dollars?” Justice Alito writes. “The answer to that question should be an emphatic ‘No,’ but a majority of this Court apparently thinks otherwise. I am stunned.” [WSJ]

Tuesday Night Links

• Enormous resource rents plus a tiny population plus having sovereignty guaranteed by the United States is an enviable position to be in. With merely adequate government, Canada could easily have the highest standard of living in the world, an Anglo-French North American Norway or Qatar. But instead of leaning into this, the grand strategy of the Canadian state has, like Britain, been to specialize in low-skill labor-intensive services, real estate, and degree mills while legally penalizing resource extraction. [Arctotherium]
• According to Activision founder Bobby Kotick, Berkshire Hathaway's Charlie Munger was at one point in time interested in buying Nintendo, or at least interested in exploring the idea of buying Nintendo. Kotick said on the Grit podcast that Munger was not a fan of video games, but saw an opportunity to potentially make a bid for Nintendo. Munger is said to have floated the idea of spending some of Berkshire's immense holdings on making moves in the video game space. One of Munger's ideas, apparently, was to buy Nintendo. "He goes, 'You know, I was looking at a couple other companies in your sector. I think if we bought yours, we should buy that company Nintendo, too,'" Kotick recalled. "He said, 'Have you guys looked at it? I was like, 'Yeah.' It was trading [at the time] at like 13 billion, with 7 billion in cash. He goes, 'You know, I don't think anything is gonna go really bad before I'm dead, and then if it goes bad after I'm dead, they'll just chalk it up to the folly of an 82-year-old, so you don't have to be so concerned about disappointing me." [link]
• I think people started talking about the paperless workplace in the late 90s. From my experience, it took about 20 years for most workplaces to actually go (mostly) paperless. New technology takes a while to implement for several reasons. First, most decision-makers in most workplaces are on the older side and are inherently conservative. They don't really understand new technology and what it is capable of and don't feel the urgency of change. They won't change until all of the companies they watch and get their ideas from change first. [Marginal Revolution]
• To protect the savings of United States investors and channel them into American growth and prosperity, my Administration will also: (i) determine if adequate financial auditing standards are upheld for companies covered by the Holding Foreign Companies Accountable Act; (ii) review the variable interest entity and subsidiary structures used by foreign-adversary companies to trade on United States exchanges, which limit the ownership rights and protections for United States investors, as well as allegations of fraudulent behavior by these companies; and (iii) restore the highest fiduciary standards as required by the Employee Retirement Security Act of 1974, seeking to ensure that foreign adversary companies are ineligible for pension plan contributions. [The White House]
• In the quarter, depreciation and amortization expense increased $164.9 million growing over 230%. This was primarily due to a revision in the cost estimate included in calculation of the company's asset retirement obligations, ARO. ARO accounts for Lamar's obligation to dismantle and remove over 71,000 billboard structures on leased land and restore the sites to original condition. We test our ARO estimate annually, and the cost to retire these assets has risen substantially, which led to an increase in our depreciation and amortization expense during the quarter. However, the expense is a non-cash item and does not impact the company's adjusted Ebert or AFFfo. [Lamar Advertising Co.]
• In Gas Distribution, we completed the $19 billion, once-in-a-generation, acquisition of three leading U.S. gas distribution companies. This transaction positions Enbridge as the owner of North America's largest natural gas utility franchise and complements our existing low-risk business model, and each of the utilities is well-positioned to serve growing natural gas demand in North America. [Enbridge Inc.]
• A spike in rents during the early years of the pandemic sparked a historic apartment construction boom in 2023 and 2024. That crush of new inventory, especially in hot Sunbelt markets like Austin and Phoenix, led to oversupply and caused rents to fall in much of the country. But more people now are renting longer, as mortgage rates stay high and the costs of homeownership remain unaffordable for many Americans. Landlords say that the new construction pipeline should be mostly drained by year-end, setting the stage for rents to rise nationwide later this year. “The relationship is going to very quickly flip from a renter-friendly environment to a landlord-friendly environment,” said Lee Everett, the head of research and strategy at multifamily giant Cortland. [WSJ]
• Over the coming weeks, all eligible Robinhood customers in the U.S. will have access to futures products across five major asset classes, including the four leading U.S. equity indices  – S&P 500, Nasdaq-100, Russell 2000 and Dow Jones Industrial Average – as well as bitcoin and ether, major FX currency pairs, key metals including gold, silver and copper, and additional commodities such as crude oil and natural gas. [CME Group]
  

Guest Review of “A Century of War: Anglo-American Oil Politics and the New World Order” by @pdxsag

[From our correspondent @PdxSag. His previous guest posts on CBS include What I've Learned the Past Decade and A "Wonderlic" Test for Agency.]

A Century of War: Anglo-American Oil Politics and the New World Order starts out with a deep-dive into the British model for financial hegemony beginning with its origins in the 19th century. It follows its growth through and including World War II, culminating with the passing of the baton from the U.K. to the U.S. after World War II. 

The subtitle "Anglo-American" references the deep ties and overlapping management between the U.K pre-WWII and the U.S. post-war. Following World War II, the U.S. takes a more active roll in shaping policy and outcomes, which the result of is easy enough to see: the US is a super-power now, and the UK is decidedly not. Century of War ends, in the updated 3rd edition of 2011 (original edition was published in 1992), covering the Iraq War, its aims and consequences.

First, what is the British model? Very simply, it is to position yourself at the nexus of trade in a critical resource and make your currency the reserve asset for international commerce. Then you can profit from seigniorage.

Since the industrial revolution, energy generally and petroleum specifically is the critical resource. However its scarcity has been greatly exaggerated. The common theme through the 20th century was elaborate machinations to keep petroleum a scarce resource, mainly by keeping competitors out of the oil market.

Not since I reviewed A Bottle of Lies for CBS has one of my reviews felt so eerily timely. Consider that last month, CBS wrote the long essay on Cornucopianism. Then last week, USAID's cover was blown by DOGE and Elon Musk, and last night I listened to a podcast between Grant Williams (Boomer) and Demetri Kofinas (Millennial) as Williams came to terms with his disillusionment in the American Experiment (my words, not his) owing to the Trump meme coin.

Kofinas worked through his disillusionment some time ago and firmly pin-points the failure of the American experiment on the Bush-Cheney invasion of Iraq which was done under fraudulent pretenses.

As a Gen X, well, we stopped harboring idealism in our teens (years before 9/11 was a thing) and are simply un-disillusionable. Nonetheless, I definitely felt sympathy for Grant and Demetri. I wanted to jump in there and say, guys, guys, guys... the Iraq war wasn't the beginning at all. You should read Century of War. It has the the receipts.

The wrinkle of the British model is two-fold: how do you keep a resource's supply critical (ie. in a shortage), and how do you keep yourself at the supply's nexus. The answer to those questions is... Statecraft.

A nasty business statecraft is. It is lies, deceit, wars of convenience, and lying to your own people as a matter of course. All while you purport to grand ideals of fairness, democracy, and the rights of man. It is quite literally the stuff disillusionment is made from. Pity on us all.

Century of War is the receipts on a century of Anglo-American statecraft. (Nb.: we are aware that Normies are propagandized into calling these "conspiracy theories." However, the last 5 years have shown, if nothing else, conspiracy theories are never more than one undauntable autist away from documenting them to be conspiracy fact. In this case, Engdahl is our undauntable autist. He has sourced citations and footnotes for all of these events. In full disclosure, we mostly skimmed the footnotes and didn't follow citations.)

Here are some of the biggest:

• Interference with German/Russian relationship after WWI – The Treaty of Versailles was the original IMF loan/student loan scam where no matter how hard Germany worked, they would never be able to earn enough hard currency to pay it off. The terms for late-payment were too onerous and the time between recessions too short to ever get it paid down. The Germans attempted to work-around the situation by, among a litany of maneuvers, setting up an oil barter program with the Russians. When the British got wind of the agreement they quickly scotched it and soon after came down on Germany harder by trumping up yet more onerous financial requirements.
• Interference with Italy after WWII – An Italian, Enrico Mattei, almost single-handedly developed a domestic oil industry and successfully reduced Italy's reliance on middle eastern oil and American finished oil products. He was credited more than anyone else for the Italian post-war economic miracle. In October 1962, at the height of his success, as he was preparing to meet with US President Kennedy to discuss a detente between Italy and US' oil companies, he died in an airplane accident under mysterious circumstances. President Kennedy, for his part, would die just 13 months later, November 1963, under no less suspicious circumstances.
• Club of Rome – A Kissinger op, the Tri-lateral Commission needed a plausible cover story for nations of the world to throttle their growth. Over-population and the world running out of natural resources, oil most of all, fit the bill. This helpfully reduced potential competition on resources with the West, while doing nothing to advance supply away from the existing establishment under US control.
• 1973 oil boycott – Kissinger deliberately mis-relayed intelligence and communications between Israel and Egypt which directly lead to the outbreak Yom Kippur War. He then directed the Shah of Iran to launch the oil boycott in 1973 in response to the US siding with Israel. This immediately repriced oil which helpfully made the newly developed oil fields in Alaska and the North Sea economically viable.
• 1978 oil boycott – British Petroleum took an extremely hard line negotiating a renewal of their oil lease with the Shah of Iran. At the same time, British and US intelligence services advanced the propaganda campaign of Islamist agitators, as well as being closely embedded with the Shah's secret police where they recommended increasingly brutal repression tactics which only served to fuel the Islamist propaganda. George Ball, a member of Bilderberg Group and the Tri-lateral commission and Under Secretary of State, recommended Khomeini over the Shah.
• Three Mile Island op – In 1979, the world smarting from two oil price shocks in 7 years, a nuclear reactor in Harrisburg, Pennsylvania, had an improbable sequence of events culminating in an atmospheric release of nuclear radiation fall-out. Additional improbabilities: the newly formed agency, FEMA, whose existence according to the executive order that created it did not begin until April 1, had actually started its operation 5 days early on March 27, the day before the accident on March 28, and thus able to swoop in and assert authority and take control of the situation, including, most of all, censoring all information from plant workers to the media, thereby creating an information vacuum in which sensational rumors could run unchecked amongst the public. Earlier in that same month of March, the movie “China Syndrome” was released pre-suading the American public on the worst-case scenario for a nuclear accident. Finally, in the ensuing investigation, while industrial espionage was listed as one of the six possible root-causes, it alone of the six was never actually investigated. The sum total of TMI was that nuclear energy was suddenly verboten in the West and most of the developing world.
• Saddam Hussein rug-pull – It's often told now that Saddam Hussein invaded Kuwait after an in-over-her-head diplomat intimitated to him that the US would not intervene in an Iraqi-Kuwaiti war. A proto-DEI hire accidentally kicking off a war certainly strokes the sensibilities of many on the popular right today. However in consideration of US petrodollar statecraft and Kissinger's m.o. leading to the Yom Kippur War, it is more believable she was directed to set-up Saddam by giving him the go-ahead so that a shocked, shocked I tell you! George H.W. Bush could invade Iraq and put their oil industry under the US thumb for a decade.
• Second Iraq War – At the peak of US power, with the peace dividend from the collapse of the Soviet Union reaching its full fruition and the US budget ever so briefly in surplus and the deficit going down for the first time in decades, in response to the WTC terrorist attacks, planned by a Saudi royal family member living in the mountains of Afghanistan, the US goes to war in Iraq over fraudulant charges of weapons of mass destruction. It takes Iraqi oil production all but offline, plus creates a host of other regional instability issues. Note, at the time a common charge among the always wrong left-wing crowd both in the US and abroad was that US wanted to “steal Iraqi oil.” On the contrary, we can see that stealing the oil would not help US statecraft in the least. They didn't need it stolen. They needed it stranded.

The common thread through these events is the need to keep petroleum as an artificially scarce resource. Additionally, is the need to keep Anglo-Americans at the nexus of the physical petroleum trade, which is to say oil moves on the ocean and is subject to the US Navy's good graces. This is known as the petrodollar.

A perennial theme that I left out of the above list is Eastern European pipelines that always fall-through due to extenuating geo-political circumstances. Pipelines running through non-aligned countries really make the elites unhappy. One example would be the Kosovo War, but the best is the recent Nordstream pipeline episode.

The not so obvious implication in all this is that it takes a lot of work to maintain the scarcity of oil and hence the supremacy of the dollar. My theory is that if the scarcity of oil breaks down, so will the dollar.

The world is not running out of oil. It is especially not running out of fossil fuels, more broadly. The genie of that realization is not going back into the bottle. And thus the petrodollar is nearing the end of its line.

To be sure, other people have been warning of this outcome too. As Cornucopists ourselves now, we hopefully will be better prepared than most to accept this new and, frankly, inconvenient fact.

Fun aside: Herman Kahn gets a name drop in Century of War. Additionally, Malthus is called out as a fraud (pages 177-178). Malthus' paper, 1798, was a flimsy plagiarization and adaptation of Venetian Giammaria Ortes paper some 20 years prior which itself was written as an attack on Benjamin Franklin's 1755 positive population theory.

It certainly has some unsettling implications for any investment theses predicated on a return of oil to inflation adjusted prices commensurate with the 1970's, or even the late 2000's. This is not to say oil is a bad investment. Rather, one must avoid the oil bugs bemoaning price manipulation. They without realizing it, must wait for an exogenous supply crunch for their investments to become profitable. Of course, over the full cycle, including the cost of capital, they never are. Most oil and gas producers are trading sardines. Instead, we choose to pay-up for the highest-quality, lowest-cost producers and royalty streams. Make money on volume and don't stress about the commodity price.

Next, I hypothesize that Latin America will stop self-sabotaging their countries with bone-headed politics. That had been the model, because CIA was in there funding left-wing agitators and a coup every time they got someone competent and pro-growth in charge. Instead, they will start growing organically and moving up the development index curve. They will start consuming resources more commensurate with their share of the population. For resource investors, that is a good thing.

Expect that U.S. statecraft is not going to disappear. It will by necessity pivot away from oil scarcity being the foundation of U.S. hegemony. However, seigniorage is heady stuff. No country gives that up laying down.

Personally, I expect crypto-fiat to be what comes next (if the last decade doesn't feel like a long-con pre-suasion op for digital money, I don't know what else to tell you). But I am humble enough to know I have no idea what the end-game really is or how we get there.

If forced to guess, I'd say a three tier system: legacy Bitcoin which will be preferred by those outside U.S. direct sphere of influence; a Greenback coin for people and companies within the U.S. sphere of influence, including close allies such as Western Europe, Japan, Singapore, the Urban Middle East; and a central bank clearing house coin for balance of payments between countries, much as gold functioned prior to 1971.

We have to assume that a repricing of gold does not fit with US seigniorage interests. Indeed, if it were that easy, it would have been done in 1971, if not earlier. Gold will likely be a part of the final solution, thousands of years of history see to that, but to expect it to solve the whole or even the majority of the reserve currency problem seems long odds against the experience of 92 years without it in a modern, post-scarcity economy.

Finally, if nothing comes next, that's bad for the U.S. dollar far more than it's bad for oil. And bad for the U.S. dollar could be good for U.S. citizens. Empires aren't cheap. As we are seeing with DOGE, they run through a process of shuffling lots of money around in a very opaque manner and those with connections skim a nice little vig for themselves. If they are forced to stop shuffling money and there's no vig being siphoned, that value in the economy doesn't disappear, it stays allocated to the creators of it. It makes for a rocky adjustment period, but after the adjustment there will be a bigger economic pie than there had been before.

Earnings Notes I (Q4 2024)

Exxon Mobil Corporation (XOM)
Exxon's free cash flow for the fourth quarter of 2024 was $8 billion, which was the same as a year earlier. For the full year, Exxon generated $34 billion of free cash flow versus $36 billion in 2023. (Note that Exxon acquired Pioneer Natural Resources in May 2024 for $60 billion, which added a large amount of production in the Permian.) The market capitalization of Exxon (at $108 per share) is $478 billion and the enterprise value is $500 billion, which puts the annualized FCF/EV yield at 6.4%.

Exxon's upstream earnings were $6.5 billion for the quarter (up 5.5% y/y), downstream earnings were $0.4 billion (down 70% y/y), chemical earnings were $120 million (down 87% y/y), and specialty products earnings were $746 million (down 6% y/y).

Imperial Oil Limited (IMO)
Imperial's free cash flow for the fourth quarter of 2024 was $3.5 million (USD), which was up 54% from a year earlier. For the full year, Imperial generated $2.9 billion of free cash flow versus $1.4 billion in 2023. The market capitalization of Imperial (at $66 per share) is $34 billion and the enterprise value is $36 billion, which puts the annualized FCF/EV yield at 10.8%.

The share count was down 5% year-over-year. They returned a total of $2.7 billion to shareholders in 2024, which is a shareholder yield of 8%. On the operations side, Imperial's cash cost per barrel in 2024 was $3 (USD) lower than in 2023. (Cornucopian.)

Suncor Energy Inc. (SU)
Suncor's free cash flow for the fourth quarter of 2024 was $2.5 billion (USD), which was up 27% from a year earlier. The market capitalization of Suncor (at $38.41 per share) is $49 billion and the enterprise value is $57 billion, which puts the annualized FCF/EV yield at 17.5%. They returned a total of $2.1 billion by way of share repurchases, dividends, and debt repayment in the fourth quarter, which is a yield on the market capitalization of 17%. Suncor has hit its net debt target and is now focused on buybacks and dividends. The oil sands segment produced 539k bbl/d in the fourth quarter with a cash operating cost of $18.59, which was down 14% ($3 per barrel) from the year earlier. 

Intercontinental Exchange Inc. (ICE)
For the full year 2024, ICE earned $3.9 billion of free cash flow on $9.3 billion of total revenue (less transaction-based expenses) for a royalty-like 42% free cash flow margin. Free cash flow for 2024 was up 26% from the prior year. The current market capitalization is $92 billion and the enterprise value is $113 billion, which makes the FCF/EV yield 3.5%.

Enterprise Products Partners L.P. (EPD)
The $0.74 earnings for the fourth quarter are a 9% annualized yield on the current unit price of $32.78. The quarterly distribution is only $0.535 because they are retaining earnings, so the current dividend yield is ~6.5%. The big question with Enterprise is whether all of the "growth" investments pay off by resulting in higher free cash flow generation? If so, cash from operations would increase and capital expenditures would (hopefully) decrease, resulting in a lot more cash available for distributions to unitholders.

General Motors Company (GM)
Was surprised to see that General Motors shares outstanding ended the year 17.53% lower. The market capitalization is $48 billion and in 2024 GM generated $20 billion of cash from operations, spent $11 billion on capital expenditures, and did $7 billion of share repurchases.