Friday Night Links

• Dell sees a “path to relevance” for America’s beleaguered shale frackers if they would just act more like the tobacco giants did a decade ago: Accept life in a declining industry, slash costs and ramp up returns of capital to shareholders. His favorite example is Altria Group, owner of the Marlboro brand, which despite cigarette smoking’s global peak in 2012, returned 250%, double that of the S&P 500, between 2010 and 2017. Key to Altria’s stock performance during that period was the return of more than $50 billion to shareholders via dividends and buybacks—an amount that exceeded the company’s entire enterprise value in 2010. “It was not a high-growth strategy that drove the outperformance,” Dell says. “Rather, it was the dramatic return of capital that forced investors to pay attention.” [Forbes]
• Musk said last month that Tesla cars will be able to fully drive themselves without human intervention on public roads by late this year. He’s been making similar promises since 2016. No driverless car expert or auto industry leader outside Tesla has said they think that’s possible. [LA Times]
• People were uniformly impressed by the looks, and many wanted to drive it. Tesla’s vehicles, in our experience, don’t garner the same reaction any longer. Of course, Tesla Models S, X and 3 once did, but people have become used to their angular, futuristic appearance. Ford, based on our sample size, has managed to create some all-important buzz for the Mach-E. [Barron's]
• According to Audi head of design Marc Lichte, the 2022 e-tron GT is the best-looking vehicle he's ever designed. We tend to agree and would go so far as to say it's one of the best-looking EVs out there. It's a vehicle that, regardless of powertrain, would be welcome in the garage of the type of driver who wants to sit behind the wheel of something beautiful. One look and it's clearly an Audi. Except that underneath, it's also a Porsche. [Car and Driver]
• The mass market car business operates on the exact opposite dynamics, where consumers constantly shop around for the latest vehicle features and designs, delivered at the lowest cost. There are no meaningful competitive moats that prevent consumers from switching brands, or from competitors replicating the latest vehicle designs and technology. That's why, instead of the monopoly-like powers enjoyed by the big tech companies, the car business trends towards commoditization over time. We see evidence of this in the brutally low margins, and in the fact that no single car company owns more than 15% of global market share. Many of the bulls mistakenly view Tesla's "first mover" status in the EV market as some kind of fundamental competitive advantage, but that ignores the basic competitive dynamics of the car business. First mover advantage doesn't really exist in the commoditized world of auto manufacturing, and Tesla is already providing a perfect case study for those who car to look. In the world's largest EV market - Europe - Tesla's market share has collapsed from undisputed leader as recently as 2019 to third place today, thanks to a flood of new EV competition from legacy auto makers. [Seeking Alpha]
  
• It's fascinating that when the Chinese find something unintelligible, they assume it is a product of Heaven while everyone else (according to the graph) assumes that it is another human language they can't understand. [link]
• With both SARS-CoV-1 and MERS, the corona virus spent months and years jumping from the intermediate host into humans, not having all of the necessary mutations needed to be aggressive, grow, and then spread, but spending enough time in humans to cause an infection and leaving behind a corresponding immune response. The hallmark evidence of this ‘practice’ in abortive host jumping is in stored, archived human blood specimens taken from before the epidemic, where one can find evidence of pre-epidemic, usually sub-clinical, community spread from the antibodies to the eventual epidemic virus. For SARS-CoV-1 and MERS, about 0.6% of people in the region where the epidemic began showed signs of an infection in archived blood. With CoV-2, this seroconversion, as it is called, has never been observed, including in 540 specimens collected from ‘fever clinics’ in Wuhan between October 2019 and January 2020, reported by the WHO. Because this is such a potent signal of a zoonosis, and because I believe that China has over 100,000 stored specimens from Wuhan taken in the fall of 2019, the lack of reports of seroconversion, the silence from China on this evidence, speaks volumes. Another hallmark of a slow, natural zoonosis can be found in the virus. In SARS-CoV-1 and MERS, the coronavirus spent years in the intermediate host, passing back and forth among populations of hosts, the civets or camels, that were living in close proximity. During this time, they would accumulate a background of genetic mistakes, i.e., mutations- usually about one mistake every two weeks. When the final chip falls, and a mutation(s) happens allowing the jump into humans, the virus with that new mutation(s) also jumps around within the intermediate host population. The consequence of this latter behavior for a true zoonosis is that the genome sequences found in humans don’t all descend from a single jump into a single human but show jumps from viruses that are only cousins of each other, not direct lineal descendants. [link]  
• The semiconductor space is almost uniformly expensive, save for perhaps Intel. Financials like Visa, Mastercard, S&P, Moody’s are also way above average. Large cap Tech (MSFT, AAPL) and Industrials (HEI, TDY, DHR, DSV), particularly stocks that screen high on Quality and Organic Growth, are both pretty crazy right now. Tobacco is dirt cheap (I’ve written about that). Some retail stuff like EA, Autozone and Domino’s are not that inflated, which is surprising. EA and Domino’s seem to be COVID beneficiaries and yet valuations haven’t deviated much from the norms. Facebook and Alphabet, despite being part of FANMAG, are not materially expensive relative to their past valuation ranges. I think the presence of Facebook and Alphabet towards the bottom of this list is pretty intriguing. [Charioteer]
  
• I did not know about the world of jawmaxxing until 2020. My current girlfriend had no complaints, but one never knows. I had success in the ’10s with lifting and wardrobe changes and stumbled upon a world of men refining their looks to level up. It was so autistic that I wondered how many of these posters were using weighted blankets at night. I never considered my jawline weak, but there is always a way to improve, right? These posters introduced me to chios mastic gum and Falim chewing gum. [The American Sun]
• On February 4, 2021, Altria Group, Inc. (the “Company”) issued $1,750,000,000 aggregate principal amount of its 2.450% Notes due 2032 (the “2032 Notes”), $1,500,000,000 aggregate principal amount of its 3.400% Notes due 2041 (the “2041 Notes”), $1,250,000,000 aggregate principal amount of its 3.700% Notes due 2051 (the “2051 Notes”) and $1,000,000,000 aggregate principal amount of its 4.000% Notes due 2061 (the “2061 Notes” and, together with the 2032 Notes, the 2041 Notes and the 2051 Notes, the “Notes”). [MO]
• *PMI reaffirms its 2021 full-year reported diluted EPS forecast, provided on February 4th, to be in a range of $5.90 to $6.00, at the then prevailing exchange rates, representing a projected increase of approximately 14% to 16% versus reported diluted EPS of $5.16 in 2020.
  *If the 2021 outlook is confirmed over course of the year, the company intends to begin a three-year share repurchase program of $5 to $7 billion in the second half of 2021; and the company will maintain its progressive dividend policy while targeting a long-term dividend payout ratio of around 75% of adjusted diluted EPS. [EDGAR]    
• As part of the “Consolidated Appropriations Act, 2021,” in the most recent COVID-19 relief bill signed into law on December 27, 2020, Congress amended the Prevent All Cigarette Trafficking (“PACT”) Act to apply to e-cigarettes and all vaping products. Originally passed in 2009, the PACT Act amended the existing Jenkins Act of 1949, which required interstate shippers to report cigarette sales to state tobacco tax administrators in order to combat illicit sales and tax avoidance. When it became law 60 years later – the same year the Tobacco Control Act gave FDA authority over tobacco products – the PACT Act, among other things, prohibited the use of the U.S. Postal Service (“USPS”) to deliver cigarettes and smokeless tobacco products directly to consumers. [link]
  
• Instead I bought some USDC at Coinbase and tried to send them over. But along with the usual Ethereum gas fees, they have something called a relayer, which is supposed to collect my money and put it in my account. And it's apparently heavily backed up, and after two days my money is nowhere to be seen (though I believe them when they saythat they're trying their hardest and it will probably percolate through the Ethereum network someday). [Scott Alexander]
• The Scarcity Fallacy: 21 million Bitcoins vs 21 million Cryptos. There is no scarcity in cryptocurrencies. You can create a perception of scarcity by framing the discussion around “there are only 21 Million Bitcoins” (which is true) but it misses the point that “there are 21 Million different cryptos” (which could be created out of thin air). The Inflation Hedge Fallacy: Digital Assets vs Real Assets. The Scarcity Fallacy directly translates into the Inflation Hedge Fallacy, as Digital Assets are NOT Real Assets, they are Digital Assets. As discussed with Daniel Lacalle over Twitter on this point, we must differentiate between 1) Ability to Print, where it is clear you can NOT print physical assets such as gold or real estate, but you CAN print digital assets, and 2) Scarcity, where some physical assets will be more scarce than others (Gold vs Copper vs Iron) but digital assets are NEVER scarce. As a result, I believe Real Assets are much superior inflation hedges than Digital Assets, and strongly disagree with the narrative from Bitcoin Fundamentalists that argue “gold is useless old money”, as I discuss in detail during my recent newsletter “The Revenge of the Old Money”. [link]
• Although Bitcoin is limited in supply, digital currencies are not limited in supply because new ones have come along and will continue to come along to compete so the supply of Bitcoin-like assets should, and competition will, play a role in determining Bitcoin and other cryptocurrency prices. In fact I assume that better ones will come along and displace this one because that is the way the evolution of everything works—i.e, new ways of doing things and new things always have and always will replace old ways of doing things and old things. Since the way Bitcoin works is fixed, it won’t be able to evolve and I presume that a better alternative will be invented and pass it by. I see that as a risk. For those reasons the “limited supply” argument isn’t as true as it might appear—e.g., if Blackberries were in limited supply they still wouldn’t be worth much because they were replaced by competitors that were more advanced. [Ray Dalio]
  
• I no longer expect to see friction associated with the executive branch. One can imagine that an entire internal system has been developed to make certain that the usurpation of 2016 never again occurs. Time for some urgent agenda was lost over the past 4 years, as if a hill that was supposed to be taken by an elite infantry unit somehow held out against all odds and caused the military planners to wade through the dreaded “friction of war,” that develops when strength of opposition is not accurately predicted. The brief and tumultuous reign of Orange Usurper, in light of the looming global order, can be likened to a Polish cavalry trooper jamming the treads of a German tank with his body and mount as it is the first to thread its way through an AFV chokepoint. Do keep in mind, that for the global agenda, the focus of resistance being placed on that point of friction, though it slows and even halts a thrust of the advancing forces, also serves to focus the defender’s attention and efforts on holding that chokepoint while they are surrounded. The means that the more heroically the unexpected point of resistance is contested and reinforced by the defender, the more total the eventual victory of the colonizing force. [The American Sun]
• Then there is the matter of the lockdowns themselves. Having been one of the earliest to recognize the threat of COVID and the likelihood it would become a pandemic in the United States, I was not personally opposed to aggressive measures to counter-act its spread. Of course, none of the measures I would have implemented were actually used. What was required to mitigate the harm of the virus  was shutting down all international travel in January. We also required granular rules to protect the most at-risk and provide them with financial relief while the rest who were least at-risk could continue going about our lives, with the virus burning itself out on that portion of the population it posed the least risk to and exhausting vectors. The measures politicians imposed were as disastrous as possible while treading in that grey area of plausible deniability. The actual effect of the lockdowns were extremely harmful. [The American Sun]
• Big rocks must be turned into very small rocks in order to easily access the uranium in them with chemicals. Leaching solutions have a hard time getting inside big rocks. My method for turning big rocks into very small rocks is nothing fancy. I begin by placing big, brick-sized ore chunks on a very hard slab of other rock situated in the center of a shallow plastic bin out on the back porch, and I apply a crack hammer liberally, returning to attack any remnants larger than about the size of a pea. This is hard, manual labor. Anything passing through a 1/4″ chicken-wire mesh is done feeling the hammer, and anything passing a fine-screened kitchen sieve is considered leachable. The fraction passing the 1/4″ mesh but not the kitchen sieve is sent to be ball-milled. [Carl Willis]
  
• Ben came up with two big ideas to try to survive: using synergistic anti-tumor agents in parallel rather than in series (which ultimately results in a tumor cell population that is highly resistant to treatment), and doing his own research to find agents that were state of the art rather than just what his local MDs knew. He ended up driving to Tijuana to buy tamoxifen and Accutane as chemotherapy adjuvants. He also got one of his MDs to prescribe (off label) the calcium channel blocker verapamil, which is normally used for hypertension but is (still) thought to prevent tumor cells from using molecular pumps to remove chemotherapeutic agents. [CBS]