Books Read - Q2 2021

Previously: Q1 2021 book reviews, 2020 Book Review Compendium, 2019 book compendium and 2018 book compendium.

• Intoxication: The Universal Drive for Mind-Altering Substances (2/5) This was one of the books in our bibliography for Timber, Tobacco, Alcohol, Pipelines, and Utilities. Thesis: "History shows that we have always used drugs. In every age, in every part of this planet, people have pursued intoxication with plant drugs, alcohol, and other mind-altering substances. Surprisingly, we're not the only ones to do this. As you will see in the following pages, almost every species of animal has engaged in the natural pursuit of intoxicants. This behavior has so much force and persistence that it functions like a drive, just like our drives of hunger, thirst, and sex. This 'fourth drive' is a natural part of our biology, creating the irrepressible demand for drugs. In a sense, the war on drugs is a war against ourselves, a denial of our very nature." Author Ronald K. Siegel was a professor at UCLA. Interesting: "Tobacco shamanism is a relatively old pattern of drug use for our species, dating back eight thousand years." "[T]he gods of many American Indians, like those of the Mayans before them, were thought to smoke tobacco cigars, like corporate chieftans of an ancient world." Siegel's mentions that baboons were more interested in consuming drugs when they were captive: "the difference between the wild and captive baboon was the mental state of depression and suffering brought on by confinement. In this state the captive baboon expressed a 'powerful psychological predisposition' to the use of an intoxicant such as tobacco, which promised to relieve the depression by producing a state of mental exhilaration... the captive baboon reached out for escape to tobaccoland." A similar results with rats and alcohol: "A king rat developed in each of the colonies and each king was an extreme nonconsumer of alcohol. [Gaylord] Ellison speculated that 'the stress of being at the bottom of a dominance hierarchy, and failing at competition for food, leads some animals to develop extreme alcohol consumption habits.'"
• A Generation of Sociopaths (2/5) Author Bruce Gibney went to Stanford and his roommate was a co-founder of PayPal, which he bought into. He later worked for Peter Thiel and Founders Fund. He is GenX, which makes sense: they hate boomers the most. I have often casually blamed boomers for things, so I thought it would be interesting to read an thorough indictment of them. But after reading, I am less convinced that boomers should bear the blame for our collapse. If I had to defend the boomers at their trial, like John Adams and the soldiers in Boston, the key to their defense would be that the oldest boomers were only in their 20s when the economic collapse of the middle class in the U.S. began. (It's important to get our collapses straight, because we live in a fractal of increasing collapses within collapses.) Take a look at the website WTF Happened In 1971? as well as the related twitter account. The year 1971 is when middle class compensation in the U.S. decoupled from its productivity, and all gains from increased productivity went exclusively to oligarchs, making the distribution of wealth much more unequal. Other disquieting trends started at the same time: increasing age at first marriage, the obesity epidemic, falling beef consumption per capita. What happened in 1971 was that it was the date of the second of the U.S.'s three big dollar devaluations so far. (The first was in 1933, and the third is happening right now.) The year 1970 was also the nadir of foreign-born in the U.S. labor force, which went from 5% in 1970 to (at least) 17% today. Boomers simply cannot have been responsible for this - they were too young. I think what we can say in fairness to the boomers is that they did behave selfishly because by the time they were adults, their nation had been repealed and replaced with a free-for-all economic zone. Smashing the middle class (via central banking and imported serfs) and making their neighborhoods no-go zones was not something the boomers did, it was something they responded to by adopting a code of "every man for himself." So of course boomers fled to the suburbs and committed architectural atrocities. People (including boomers) build cheap disposable houses because the U.S. middle class is a stateless people whose neighborhoods can be targeted for destruction at any time. (Twitter account @wrathofgnon feigns ignorance about the real reasons for our pathetic suburbs.) 
• Into a Desert Place: A 3000 Mile Walk around the Coast of Baja California (2/5) I have discovered a recurring theme with these adventurers books: doing something just for the sake of doing it is not all that rewarding. We saw this with the Man Who Walked Through Time, Paul Theroux's books, and Jim Rogers' books. There's no reason to walk around the perimeter of the Baja peninsula, and the story becomes monotonous and self-similar in the same way that the peninsula itself is a fractal. In contrast, a book like Fishing With John is more interesting because fishing is a purposeful economic activity. John Steinbeck wrote of Baja California: "If it were lush and rich, one could understand the pull, but it is fierce and hostile and sullen. The stone mountains pile up to the sky and there is little fresh water." Macintosh quotes John Selby: "it would have been better for everyone concerned if, after the Mexican war, the United States had seized the whole couuntry." Highlights: "Meat was a precious commodity in the fisherman's paradise of Baja California." "On hot deserts it is a big temptation to take off a shirt and wear only shorts... this will do nothing but make you dehydrate faster. Clothing helps you ration your sweat by not letting it evaporate so fast that you get only part of its cooling effect." Walking along a mountainous peninsula, he has the same issue that Colin Fletcher had in the Grand Canyon: "At the first hint of light, I was up and out to assess the situation. Cutting inland was no easy option: I'd have to backtrack a mile or more to find a relatively safe place to climb, and wandering into the mountains with just over a gallon of water wasn't a particularly attractive proposition." He says, "If I could give one piece of advice to anyone believing the world to be dull, it would be this - if you have the ability to set goals and value your word, then you'll never be bored. When you're absolutely determined to accomplish something you've committed yourself to, life suddenly becomes exciting and exhilarating."
  
• The Making of a Chef: Mastering Heat at the Culinary Institute of America (5/5) Like Bill Buford (author of the previously-reviewed Heat and Dirt), author Michal Ruhlman is a writer who became a cook. In the mid-90s, he attended the Culinary Institute of America (CIA) in New York. "Stock is the foundation for all classical French cooking," and he learns to make it, and downstream preparations like espagnole and demi-glace, first. There is something about good writers writing about food. I'd like to read more of Ruhlman's books, plus maybe James Beard, MFK Fischer, and Julia Child. What makes the book is that the CIA instructors are such interesting characters. "Somebody asked if it was necessary to peel carrots at all if they were going into the stock. Pardus stopped peeling and said, 'Do you peel a carrot? Some people don't. I like my stock to taste as clean and fresh as possible. My way is not the only way to do things, but I've found that people who don't peel carrots don't do it because they're lazy. Put peels on their salad if they like peels so much.'" Harold McGee's On Food and Cooking is "standard issue at the CIA;" "everyone should read this book straight through-twice-before graduating." Driving to CIA in a snowstorm: "In earlier years, a little drive like that would have been more fun than anything else. But this sort of fun ended when I became a parent. Kids change the way you behave; new instincts engage. One of them is self-preservation. A friend of mine who lives in Manhattan, for instance, remembers he began walking closer to the insides of the sidewalk, farther away from the curb, once he became a father. When I spun out on Route 9, floating backward into who knows what, I didn't think of myself but rather of my daughter's face." "Saute is a rapid, a la minute cooking technique. It has no tenderizing effect, so the product has to be tender. You cannot saute a lamb shank. The cooking is fast. That's why it's so much fun. Bing bang boom, it goes out the door. In a small amount of oil. Over high heat." How the CIA's cooking Skills class changed him: "Efficiency: no wasted movement. This idea, this will, bore not only on one's actions in the kitchen; it extended to one's life outside that kitchen. It changed how I packed for a trip - I tried to diminish the number of times I moved from closet to bureau to suitcase just as I learned to minimize my trips to the pot room or dry storage. I didn't make two trip to the hardware store because I forgot something or failed to have forseen a potential problem. I didn't go from the bedroom to the living room, stop before I got there, and go back to the bedroom because I forgot something. And if I did, it made me mad. I solved problems differently. When we awoke one morning with no electricity and therefor no way to run the coffee machine, for instance, I thought immediately to put a pot of water on the grill on the deck out back for coffee. I am certain this wouldn't have occurred to me before skills... With efficiency of action, one also wanted speed, efficiency's ultimate goal. I tried to do everything faster. The faster you worked - in the kitchen, in life - the more you could do. Whoever did the most the best, won - no matter who you were or what you were doing, even if you were just playing against yourself." "Do the job that can be done fastest, first." "The physical world grew more friendly because we were learning to harness and manipulate it. Look what we could do with heat and water and a steel surface. This created a sense of strength that I had not felt before. Control over properties - hot, cold, wet, dry - became a metaphor for control over oneself, one's actions and thoughts." A meat thermometer is only as accurate as you are. "You try to get to the coolest part of the meat there is. That will be the center of the thickest part of the roast. How do you know you've got the center? If you push it farther in, the temperature should rise." Mirepoix is chopped onions, carrots, and delery. "Asian mirepoix" is garlic, ginger, and scallions. Knowing how to cook or bake things - a loaf of bread, a sausage - is sometimes just about ratios. "Cooking is a mad dash. Baking is different. Baking is regimented. It is disciplined." Regarding cooks themselves: "I was continually surprised to discover that the age of this or that chef was not fity-six but rather thirty-nine." "All that work over grills, fire, hot metal, boiling water, heads in the oven, day after day, year after year. They literally cooked themselves. [...] It seemed completely possible that aging might have less to do with chronological time than with how much living and working you did in your life. Cooks got more done than most people by working faster longer. Cooks put in more hours of life in less time and therefore got older faster than most people. The solution for the question of age, combined with the physical fact that they baked their flesh daily in 120-degree heat, gradually carmelizing it, made sense to me."
• Denison's Ice Road: Opening an Arctic Truck Route Farther Into the Wild North Than Other Men Dared (2/5) I didn't find Edith Iglauer's first book nearly as interesting as her second, the previously reviewed Fishing With John. Perhaps it's because the Northwest Territories of Canada (only 40,000 people living in a land area the size of South Africa, with half the territory too cold for trees to grow) are a less interesting place than coastal British Columbia and the Inside Passage. Still, a theme on this blog is the recognition of the early European-American settlers, pioneers, and frontiersmen: the people who actually built the country. As exhibited by previously reviewed books like Norman Maclean's "A River Runs Through It," McCullough's "The Pioneers: The Heroic Story of the Settlers Who Brought the American Ideal West," "On The Wings Of The World" (about John Audubon), and the biographies of the great 19th (and early 20th) century industrialists. Before "Ice Road Truckers," a man named Denison was building a seasonal, winter ice road from Yellowknife to a uranium mine on the Great Bear Lake, about 300 miles away. (GBL is the fourth largest lake in North America.) Building ice roads and shipping loads across them is the type of business where the "profit is sitting in the yard". Denison said, "When we were a small outfit tryin' to get along we didn't have the money to buy new trucks so we had junk to start with an not too much money in equipment, and that's how we made money." One of the hazards of ice roads, and especially ice road trucking with heavy loads, is dropping through the ice. Luckily nobody in Denison's operation had ever perished, but they had sent a number of vehicles to the bottom of lakes. However: they got most of them back! Set up an A-frame with a winch over a hole in the ice, and drop a line down. Denison said of one vehicle that was waiting to be recovered from underwater: "It's the only one we've lost but I don't think of it as really lost, just in cold storage."
• The Patch (4/5) Rereading some McPhee. Some great ones in here - collecting used golf balls that he sees while biking and canoeing. Visiting the golf course at St Andrews and watching an Open. Collegiate lacrosse. (Among his talents, McPhee is a great sportswriter.) Very short pieces from his early writing, doing profiles for Time magazine. Why chocolate bars are partly made of granite.
  
• Draft No. 4 (5/5) McPhee's writing process, and anecdotes from his writing career. In the Solstice Links there is some discussion of the dictionary/thesaurus that McPhee is using to pick the right words on his final revision - his fourth draft of a piece. Maybe with this book we're getting a taste of what his Princeton creative writing class would be like? The eight essays in the book are Progression, Structure, Editors & Publisher, Elicitation, Frame of Reference, Checkpoints, Draft No. 4, and Omission - all published in the New Yorker between 2009 and 2015.
  

Overshoot Bibliography

• Energy and Human Ambitions on a Finite Planet
• Overshoot: The Ecological Basis of Revolutionary Change
• Bottleneck: Humanity's Impending Impasse   
• Drilling Down: The Gulf Oil Debacle and Our Energy Dilemma
  
• Energy: A Human History 
• The Rare Metals War: The Dark Side of Clean Energy and Digital Technologies
• Technological Slavery
• Scarcity: Humanity's Final Chapter
  
• Blip: Humanity's 300 year self-terminating experiment with industrialism
• Immoderate Greatness: Why Civilizations Fail
• Nutrition and Physical Degeneration 
• Living in the Long Emergency: Global Crisis, the Failure of the Futurists, and the Early Adapters Who Are Showing Us the Way Forward
• The Archdruid Report: The Coming of Peak Oil: Collected Essays, Volume I, 2006-2007
• The Archdruid Report: Facing A Hard Future: Collected Essays, Volume VIII, 2014
• Finding Oil: The Nature of Petroleum Geology, 1859-1920
• Peeking at Peak Oil
• Paradise Destroyed: The Destruction of Rural Living by the Wind Energy Scam
• World Made by Hand: A Novel
  

This is the central argument Tainter makes: the energy economy always subsidizes the product economy and service economy, and any intermediates such as commodity markets. Without looking at energy costs at every trophic level, and the transfer between, which appears to be decreasing as more technology is applied, there is simply no way to discover what is and is not "efficient".

"With subsidies of inexpensive fossil fuels, for a long time many consequences of industrialism effectively did not matter. Industrial societies could afford them. When energy costs are met easily and painlessly, benefit/cost ratio to social investments can be substantially ignored (as it has been in contemporary industrial agriculture). Fossil fuels made industrialism, and all that flowed from it (such as science, transportation, medicine, employment, consumerism, high-technology war, and contemporary political organization), a system of problem solving that was sustainable for several generations."

"Energy has always been the basis of cultural complexity and it always will be."

Tainter concludes that considerable hardship will be required to adjust to an economy that is (a) smaller (b) reliant more on individuals to carry out their own primary production, say in gardens and farms (c) not investing in problem solving to a greater extent than is warranted by the actual savings in energy that result out the other end.

Solstice Links

• In a life that increasingly requires planning, reservations, and permission to do so many things, wandering through the forest and stopping as the spirit moves me, releases pent up energy and frees the spirit from the constraints of quotidian life. There is no sense of time out there, not necessarily even a destination, just freedom. [terrapintales]
• Every waterman needs (at least) two boats.  One that you can throw on the roof of a car for a quick dunk and another for hauling out friends or going on an expedition.  So far, I’ve kept my fleet to that rule. Boat one is Terrapin, an Adirondack guideboat. For sailing and taking a crew there’s Row Bird, an Arctic Tern, sail and oar boat designed by Iain Oughtred. [terrapintales]
• One of the reasons I love small boats is because they are so well suited for cruising in shallow water, for skating the edge where the best of land and sea come together. That edge is where fascinating marine creatures thrive: feathery sea anemones, purple starfish, darting oystercatchers. Waves and tide make dramatic shifts here, changing from hour to hour, and the deep greens of salal bushes along with the cedar trees’ bronze bark contrasting elegantly with the blues and silvers of the water. For me, open water far from shore has limited appeal—its just water. Breathtaking in its immensity and attractive in its lack of human encroachment, the open water always causes a foreboding deep in my gut. Making a crossing in a small, motorless boat always takes resolve. Even if I can see where I’m going, once I’m a few hundred feet off shore, I might as well be miles away; if I run into trouble, I’m on my own. Nobody is looking for, nor expecting, a small boat in a big body of water. [Bruce Bateau]
• Andorra's mountainous, 120 km border with France and Spain was fixed in a feudal charter signed on 8 September 1278, making it the oldest remaining border in the world. [visualcapitalist]
• I published my first long article laying out the substantial evidence that the global Covid outbreak might have been due to an American biowarfare attack against China (and Iran), and that article got very strong early traffic, with more Facebook Likes in the first few days than anything I had previously published. But about ten days after it ran, our website was suddenly banned by Facebook. A few days later, our entire website was deranked by Google, so that all our web pages would appear near the very bottom of Google searches and almost no one would see them. [Unz]
• The man and the machine have become inseparable to me. My father has always been a man who owned and drove a BMW 5-series. Muscular straight-sixes. Grunty V-8s. Always rear-wheel-drive. Never an M-car, but always something a bit special. He read a review somewhere and a term stuck with him. “It's the boulevard strafer,” he'd always joke. [RaT]
• Walker estimated the inner ring of the family – which includes his brother and several other extended members of the Walker tribe – was worth approximately $150 million. That family worth once stood at $200 million nearly three decades ago, but Marcus Walker, the great grandson of founder C.J. Walker, challenged the management of the bank to split the stock, increase dividend payouts and purchase his shares. In 2008 – right as the Great Recession began – the bank settled a lawsuit with Marcus Walker in Orange County Superior Court by purchasing his 5,827 shares at $7,300 each. The payout was part of a larger settlement for $42.5 million with the Donald P. Walker family. Other investors who piggybacked in the suit and owned 14,720 shares, were paid $107.5 million for their shares, Dan Walker explained. Marcus Walker was Dan Walker’s first cousin and son of his uncle, Donald Walker, who was his father’s brother. “It is sort of comical that the whole thing took place,” said Dan Walker. “They got their distribution, paid capital gains and taxes, and put it into the market, which then collapsed. I don’t know if they were better off or not.” [link]
• The two realities that are fundamental to understanding the headlines of 2021 are that, on average, blacks and (to a lesser extent) Hispanics are more crime-prone and less smart than whites (much less Asians). Lately, though, these facts seem inconceivable to most conformist Americans. Still, lying is bad for the soul. So is losing because you are too cowardly to tell the truth. In his section on IQ trends since The Bell Curve 27 years ago, Murray briefly notes the decline of the once-dominant centrists who assumed that any gaps between whites and blacks could be eliminated with whatever their favorite one weird trick was. [Sailer]
• A book where you can enter “sport” and end up with “a diversion of the field” — this is in fact the opposite of what I’d known a dictionary to be. This is a book that transmutes plain words into language that’s finer and more vivid and sometimes more rare. No wonder McPhee wrote with it by his side. No wonder he looked up words he knew, versus words he didn’t, in a ratio of “at least ninety-nine to one.” Unfortunately, he never comes out and says exactly which dictionary he’s getting all this juice out of. But I was desperate to find it. What was this secret book, this dictionary so rich and alive that one of my favorite writers was using it to make heroic improvements to his writing? I did a little sleuthing. It wasn’t so hard with the examples McPhee gives, and Google. He says, for instance, that in three years of research for a book about Alaska he’d forgotten to look up the word Arctic. He said that his dictionary gave him this: “Pertaining to, or situated under, the northern constellation called the Bear.” And that turned out to be enough to find it. [James Somers]
• James Somers thinks you should switch to the Websters 1913 dictionary, and he cites John McPhee's composition method of looking up synonyms for problematic words as the key to his peerless prose style. Somers makes a great case for the romance of historical dictionaries, but for my money (literally — I spent a fortune on this one), the hands-down best reference for synonyms and historical language reference is the Historical Thesaurus of the Oxford English Dictionary, whose magnificence cannot be overstated. [link]
• The beauty of a typewriter is that it propels you through a piece of writing. You can’t tinker with phrases, so you get used to laying down paragraphs. Your mind, relieved from the micromechanics of language, applies itself to structure, to the building of sections and scenes and arguments. When you’re done you end up with something whole, even if it’s imperfect: a draft that reads from start to finish and that you can hold in your hands. [James Somers]
• He also created video games and the long-running TV show ER. In 1995 he achieved a breathtaking pop-cultural moment when he had the nation’s No. 1 best-selling book (The Lost World), the No. 1 movie (Congo), and the No. 1 TV show (ER), a trifecta he repeated in 1996 with Airframe, Twister, and ER. No one has topped that—not Stephen King, not John Grisham, not J. K. Rowling. At the height of his career, Crichton was reportedly earning $100 million a year. His cultural ubiquity was such that a New Yorker cartoon showed a woman in a bookstore asking, “What can you recommend that’s not by Michael Crichton?” [Vanity Fair]
• Good books are almost fractally deep: you find whole worlds wherever you look, and no matter how far in you zoom. Breaking a book into multiple meetings makes the most of this fact. It gives you space to dwell — on a page, even on a single word — without feeling like you’re wasting anyone’s time. No: that’s what a book club is for, not to sum up what you’ve read but to live inside it. I don’t know why more people don’t run book clubs this way. I think part of it is that they’ve never tried; the very concept of a book club seems to imply a one-book-per-meeting structure. Others hear the idea of meeting weekly and think who has the time? [James Somers]
  

Tuesday Night Links

• For years, Big Tech crushed the competition with relative impunity, squeezing every dollar from would-be rivals to reach unprecedented valuations. And while their anti-competitive practices may well continue, there are now five draft bills circulating in the House of Representatives that represent the biggest threat ever to their standard method of doing business. The draft bills, which Big Technology obtained in full, contain just about everything Big Tech’s detractors have hoped for on the antitrust front. They take direct aim at Amazon, Apple, Facebook, Google, and Microsoft’s self-dealing, outline new speed bumps for anti-competitive mergers, and empower feeble federal regulators to bulk up and throw some punches. [bigtechnology]
• There’s a small cottage industry in central America in scamming gullible libertarians with colonialist inclinations. In the Honduras charter city scheme, a few libertarians thought they could come into a country, take over an area, and run it as an enclave with private laws. The rich got richer, the local poor were screwed over, the charter city scheme was eventually ruled unconstitutional, and the investors’ money went up in smoke. [link]
• The main reason I went down the renewable rabbit hole is to try and punch holes in my oil, nat gas, and uranium theses. As if projections like Bloomberg’s New Energy Outlook are even half right the impact will be substantial. As you’ve probably guessed I’m not the least bit concerned. The uranium bull thesis works currently even if none of the planned or proposed reactors are ever built. The needs of the current fleet and size of supply deficit mean we will get a price reaction before the end of next year due to utility needing to start contracting. As for the oil/gas market, I actually think renewables are helping set the stage for a huge energy bull market. The reason being the longer renewable projections are deemed credible the less will be spent by fossil fuel on CAPEX which results in less supply and a higher incentive price required to correct the imbalance. [Trader Ferg]
  
• Any institution with an ESG mandate can’t go near them regardless of the performance. This results in high barriers to entry since no competitors can get financed or get acceptably priced capital from the markets. Grant a permit for a new coal plant? Forget it. Even if you do get the permits you can easily get tied up in courts by a bunch of teenagers with public opinion behind them. So, incumbents simply tighten their belts cut CAPEX, and pay down debt. If coal prices continue to rise they will generate large free cash flow, yet institutions restricted by ESG mandates won’t jump in to bid them up. Meaning they will end up paying big dividends and buying back shares. A similar situation occurred with Tobacco stocks. The industry was thought to be in trouble with huge lawsuits, regulation on top of regulation, and a public understanding of the health impacts of smoking. [Trader Ferg]
  
• The problem is the bearings. If we make the bearings bigger, the bearings last longer, but making the bearings larger increases friction, which kills turbine efficiency. But we can’t keep using the current bearings – replacing them is sending us broke. What we need is a quantum leap in bearing technology – bearing materials which are at least ten times tougher than current materials. [Watts Up With That?]
• I would like to provide a little more color on our distribution restrictions. The indenture governing our bond restricts us from paying more than one half of the quarterly distribution on our preferred units in cash or to redeem any outstanding paid-in-kind preferred units if our consolidated leverage ratio exceeds 3.75x. And as of March 31, 2021, our consolidated leverage ratio was 4.5x. We expect our leverage ratio to continue to rise through the second quarter of this year and then begin a sustained long-term decline as we continue to pay down debt. In addition, under the terms of our partnership agreement, if our consolidated leverage ratio remains above 3.75x into 2022 and we are unable to redeem all outstanding paid-in-kind preferred units, we would be required to temporarily suspend distributions on our common units until the leverage ratio drops below 3.75x and the outstanding paid-in-kind preferred units are redeemed. [Natural Resource Partners]
• In my opinion, the essence of genuine and effective contrarianism lies in a deeply-rooted belief/understanding that the world is not black and white, but instead shades of grey, and is filled with infinite nuance and complexity, and as a result, future outcomes will routinely surprise mainstream popular opinion informed by overly-simplistic generalisations and thinking in absolutes. We see the same sort of simplistic, binary thinking manifesting in the investment world all the time, and it is generally characterised by the excessive use of generalisations and absolutes. Examples include 'bricks and mortar retail is dead'; 'EVs are displacing ICEs'; 'ride hailing will put an end to private vehicle ownership'; 'Millennials don't buy stuff anymore, they buy experiences'; 'coal is dead'; 'Europe's banks are all insolvent'; 'banks are all black boxes and are hence uninvestable'; 'Greece is bankrupt'; 'China is nothing more than a giant leveraged bubble that will explode'; 'Russia is bad'; 'Africa is the hopeless continent'; 'Trump is stupid and everything he says is by definition wrong'; 'free trade is always best in all circumstances'; 'you're either for immigration or against immigration'; 'China is evil'; 'shopping mall REITs are all going broke', or 'malls in tier 1 cities will be immune from online threats; malls in tier 2 cities will go bankrupt', etc. What all of these types of claims have in common is that they are all absolute, black and white assertions, and are hence easy beliefs to not only hold and act upon, but also communicate/sell (which results in the memes spreading far and wide and self-replicating into consensus opinion - the water in which investors swim). But they are also all generalisations that lack any sort of nuance, or leave any room for complexity or uncertainty. As a contrarian, one should be instinctively skeptical of overly generalized claims such as these, because the world is almost never as simple and clear cut as these statements proclaim. Even if they are right in direction, they are seldom right to such an extreme degree, or with such a high degree of certitude about future outcomes (EVs might in fact eventually displace ICEs, but as I have discussed in past blog entries, people are likely too confident this is inevitable). [LT 3000]
• The choice of federal over state court will always be an attractive one for close corporation shareholders seeking judicial dissolution, assuming they can establish subject matter jurisdiction based on diversity of citizenship or the inclusion of other claims arising under federal law. As things stand currently, a federal forum for dissolution petitioners is not available in the seven states within the Second and Sixth Circuits, is available in the three states within the Eleventh Circuit, and may or may not be available in the remaining forty states (and District of Columbia) in the nine other Circuits that have not yet addressed the issue of Burford abstention in dissolution cases. I discount heavily the likelihood that the U.S. Supreme Court, as the ultimate arbiter of conflicting rulings among the Circuit Courts, will decide the issue any time soon, if ever. It would have to be one hell of a case, with stakes the magnitude of which is not typical of dissolution cases involving closely held corporations and a timeline that avoids mootness, to justify a petition for certiorari to the Supreme Court. [New York Business Divorce] 
  
• The Covid-19 virus infected people in five U.S. states in December 2019 and early 2020 before those states reported their first cases, according to a large new government study, providing new insights into the first, unseen weeks of the nation’s deadly epidemic. Scientists analyzing blood samples taken for a National Institutes of Health research program identified seven people in states from Mississippi to Wisconsin to Pennsylvania who were infected with the new virus days or weeks before the first cases were confirmed in their areas. At least a couple had mild symptoms. [WSJ]
• If you are incompetent at manufacturing and have to scrap a lot of parts, you can prevent or delay any financial statement impact of this by keeping the parts on the books as inventory even if you have already thrown them away. It is very simple, comically so, and it makes your gross margin and profit figures look better. The only problem is it is a crime! So, if you were a Silicon Valley company doing this, you would need to provide illegal sex and drugs to accounting firm employees, SEC employees, and journalists. One good time to do this and get them on tape for blackmail would be an "anything goes" festival in the desert, where you could have "boom boom tents". It might also help to learn that trade from a master. [CBS]
  

Friday Night Links

• Homes are not built by people intending to live in them. Instead, they are built by builders, who mostly want to flash-form 60 “units” overnight out of sticks and drywall. Everything from sun positioning to doorknobs becomes not just an afterthought, but a no-thought. The major architectural decision is how to maximize square-footage, over all else, in order to maximize sale price, because at some point in the past consumers wanted more space, and space (considered as square-footage) was an easily legible metric to aim for. [Simon Sarris]
• I mentioned in Part 1 that the level of honesty you put into your design is important. If you wish to build a cottage it should be simple in cottage ways and complex in cottage ways. It should aim to be cozy and not pretend to be a palace. If you build a palace it should not look folksy, or have disorganized landscaping, or plastic towel rings. You should try to think hard about what feels appropriate, and if you are trying to save money, the compromises you make should be different for different designs. The materials you use should match what you are working with, and where you hope to build. There is nothing wrong with inexpensive materials themselves, and sometimes the cheaper option is the more suitable one. [Simon Sarris]
• One reason I stay in New Hampshire: An ideal to me is to live outside the city when young, try to have a home, a workshop, possessions. You can have the space to accumulate raw materials and tools and knowledge, learn through the works of your hands. Have a place to make babies and give them the materials they need to create, too. Instead of chasing night life, use your time to learn what it is you really like to build. You can visit the city often, of course! Just not live inside it. Then, when you are older and your kids are grown, you part with your possessions easily, perhaps giving your kids a hand starting their own homes in the process. By then it is onerous to maintain things, and you should want to be more focused (ten hobbies instead of one hundred). Perhaps then you could easily move into a small pad in the city. [Simon Sarris]
• What you should be recording are not the destination events of life so much as the much more mundane things: rainy mornings, making cookies, the process of building a shed or starting a garden, or your child trying to learn to brush his teeth. When sorting through hundreds of shoebox photos (maybe other families are different, but my family keeps their physical photos mostly in old shoe boxes) and using them to evoke stories, my grandparents would always seize on the commonplace. They would seize on the people, too: In pictures from a road trip to the Yosemite valley, pictures of the Yosemite vistas were not the most interesting interesting. What was interesting was seeing my uncle and mother as children, and how they got on in their RV. This has always stuck with me, and for years I tried to not take any photos unless a person was in frame. [Simon Sarris]
• Q: You are of Croatian stock like I am.  Tall, violent, Balkan maniacs with a romantic sensibility.  Your Croatian grandfather left Royalist Yugoslavia, and like many, chose to settle in the Chicago area.  You paid homage to him by travelling to Croatia and getting in touch with your roots.  How much of Gorilla Mindset comes down to having the blood of genocidal fanatics coursing through your veins?  We punch well above our weight when it comes to sports, drywall taping, and annoying the fuck out of everyone on the internet with our incessant, jingoistic expressions of patriotism.  Why are we so powerful, particularly sexually? A: I did a 23AndMe years and years ago before I realized they would be able to bioengineer a weapon to “suicide” me from my results. [niccolo]
• How aware are people that we narrowly skirted a third world-style coup here in the US just two weeks ago? You may recall that in the first week of June, the Antifa-Soros Media Industrial Complex was calling for a million “protesters” (aka rioters) to converge on Washington DC where the President was bunkered at the White House. In the run up to that June 6th weekend, the (Dem) DC mayor stood down law enforcement and National Guard, and the Joint Chiefs of Staff(!) started issuing strange public memoranda implying that they were on the side of rioters rather than the President (no reference to chain of command, “cannot abide divisiveness and hate”, etc.) This is the classic Deep State color revolution checkmate: the imported mob storms the presidential palace while converged insiders preemptively scupper any official reaction. Whether the President flees or is sacked, he is discredited, and a new figure takes the helm “because of the unprecedented conditions of these turbulent times”. AG Barr, head of the Depatment of Justice and one of the smarter and more perceptive guys in the White House, was sufficiently alarmed by the situation that he replaced the Federal troops around the White House (loyal to the JCS) with Department of Justice troops whose loyalty he could be more assured of. You know that moment in foreign wire service dispatches or Tom Clancy novels where different military cadres loyal to different government factions maneuver around the Capital to determine who will be in power next week? That happened here two weeks ago and almost no one noticed. [link]
• MMP's 30 year debt yields 3.8% with 9.6% dividend yield. It is strikingly similar to the equity risk premium at Altria, whose 30 year debt yields 4% with 7.7% dividend yield on the stock. See how low Magellan's dividend yield got at the peak of the midstream boom in 2014-2015. It was yielding under 3% - yet their debt was yielding closer to 5%. Wow: if you had followed the equity risk premium as a signal to chose between owning the stock or the bonds, you would have been in their debt instead of their stock given the -200 bps spread. Now with a +580 bps spread it seems to make more sense to own the stock. [CBS]
• I think the inflection point is here, it does not have to be for value to be a great trade with a cheap hedge. I don't have to call the inflection point or bubble top. I can buy the bottom decile cheap stuff and hedge it with long term put options on the top percentile expensive stuff. The reason I think that works is that with record valuation dispersion between value and growth, the top percentile is overvalued by 10-100x. The puts are "expensive" on IV but these represent trillions of dollars of market cap that may vanish in 24 months. Examples: TSLA, ZM, SPCE, NKLA, LI, XPEV, CVNA. Then there are garden variety expensive stocks like CMG, but the IVs on those are cheaper so they could work too. Meanwhile, the cheap part of the market looks like tobacco (1,2), hydrocarbons, land/timber, pipelines, certain Oddballs, and small banks. All real assets except the banks, but I like the banks as a reopening trade. I think the cheap stuff earns more than enough to pay for the hedge, and I think there's a chance that both legs of the trade perform, where value rallies as the growth bubble pops. [CBS]
• The home-seeking wanderer hopes to find a spot which unites the advantages of all the most delightful places he knows, while excluding the disadvantages of each. Vain endeavor! The attractions of different localities are often mutually exclusive. We cannot have the salubrious atmosphere of the mountains along with the deeper and richer soil of the lowlands, a score of miles away. We cannot [have] a good road and proximity to shops and a post office along with unspoiled wilderness. We cannot have magnificent rain forests along with a dry climate. And everywhere there are plagues and annoyances, whether from the government, neighbors, rodents, snakes, insects, fungous parasites, or the weather. [CBS]
  

Monday Night Links

• Being short the ARKs hedges you against a lot of different things that I currently think make sense to be hedged against. Short super high multiple, covid pumped tech. Short semi concentrated, illiquid positions. Short things that will get clocked if rates rise. Short things with excessive SBC. Short their "scale" problem. Short retail euphoria. I think with ARKG you've got all of that, plus some. Its an "exciting" idea/concept, but whereas a year or two ago no one(but maybe me) gave two hoots about most of these genetic themed investments, now everyone and their mother have bid them up and the companies are in ATM mode. A few years back when I started the CRISPR thread, you could have bought CRSP, EDIT, NTLA combined for under $5B. The EV was maybe half that. You could've added BEAM for just another $1B. Didnt make sense. So theres a lot of that kind of stuff in there. When I short/hedge I try to look for things that give me as many different ways to win as possible and these check so many different boxes. [CoBF]
• All things considered, the data suggests the NFT bubble lasted just four months — and it popped about this time in May. [link]
• After a busy start to the week here in Talkeetna, we have taken some time to reflect upon some troubling trends that we have seen both from 2021 incidents and after speaking with climbers in the range. It has been two years since we’ve had large numbers of climbers in the range and on the West Buttress, and while we are just as excited as our fellow climbers to have a somewhat normal season, there are a few things we’d like visitors to keep in mind. We have seen a disturbing amount of overconfidence paired with inexperience in the Alaska Range. While climbers may have a good deal of experience at elevations up to 14,000 feet in the Lower 48, the remoteness and extreme weather we get in the Alaska Range make the experience here more challenging and dangerous. Please do not underestimate conditions, take the time to acclimatize and do not ascend too quickly. We have already had several SAR events related to HAPE this year. [NPS]
• So here are the new hunting grounds: Financials: Many banks remain off 30%-50% from levels that weren’t that expensive to begin with. Yes, financials were “ground zero” in the last crisis (2009), but it’s hard to fathom a world where the economy (read: software companies) does well and financials do extremely poorly. Yield curve flattening is certainly an issue, but it’s not like it was a great rate environment even before this crisis and banks were earning decent ROEs. Industrials: This industry is a mess due to weakness in adjacent businesses (oil and aerospace). Historically, industrials are full of small niche businesses (as detailed in this book about “hidden champions”), which makes for a good sector to deploy a small/microcap strategy. High upside/downside plays: There exist bonds, preferreds, and other less vanilla securities where the prices don’t make much sense relative to equities. Bond prices should not trade like equities for the most part, unless the borrower is in severe distress. Most of the juiciest bits are related to travel, although I’m reverting to looking for asset protection or defensive cash flows in these areas. Energy: I distinctly remember sitting in an Ivy League classroom back in 2011 listening to a guest speaker talk about how we’ve reached peak oil. I wonder where the poor soul is today. Probably giving lectures in classrooms of other Ivy League institutions telling students how we’ll never see oil prices go up again. [lightbluevalue]
• The emperor Augustus once caught sight of some wealthy foreigners in Rome, who were carrying about young monkeys and puppies in their arms and caressing them with a great show of affection. We are told that he then asked whether the women in those countries did not bear children, thus rebuking in truly imperial fashion those who squander upon animals that capacity for love and affection which in the natural order of things should be reserved for our fellow men.
  [Plutarch]
• I don’t ever want to see Donald Trump again. He had these people’s number, in a way, but he did little or nothing effective to stop them. I want to vote for a presidential candidate who will move against these dirtbags and their institutions without mercy. Enough is enough. I’m not sure what can be done, but if we keep tolerating this, there is going to be violence, one way or another.  I am not willing to sit here and listen to these aristocrats like Dr. Khilanani, and malignant institutions like Yale, turn people against me, my children, and my neighbors, because we are white. [TAC]
• We have an entire category of Credit Bubble Stocks posts about the principal agent problem at companies. One major principal-agent problem that occurs is when managements decide to grow through acquisitions. The problem is that managers of larger enterprises get paid more - in fact, management pay is in some sense a function of asset size or of equity size. (Also, status is a function of size.) So, management can buy themselves a larger company by making an acquisition. Unless the managers are significant shareholders, the increased compensation they can expect will outweigh any effects on them from overpaying for another company. [CBS]
• Embark on a journey to France with a visit to Domaine Drouhin, another renowned Willamette Valley winery that took inspiration from The Eyrie Vineyards. The Oregon estate was established in the late 1980s but the Drouhin family’s winemaking roots were planted in Burgundy a century earlier, when Joseph Drouhin moved from Chablis to Beaune and in 1880, founded Maison Joseph Drouhin. In 1957, third-generation winemaker Robert Drouhin first visited Oregon in 1961 and tasted Oregon wines in Paris and Burgundy in 1979 and 1980. It was then that he recognized that Oregon had the soil and climate to unlock the complexities and potential of pinot noir and Chardonnay in the United States. Today, the winery operates under the motto “French soul, Oregon soil” as they are employing methods to create a darker and earthier style of pinot noir than you will find elsewhere in the state. In fact, Domaine Drouhin is considered the closest you can get to French wine in Oregon! [link]
• Owners of $100 options—now the most widely owned WTI call contracts on the New York Mercantile Exchange—are making a leveraged bet that oil prices will hurtle higher after already surging more than 40% this year. The roaring rally, goosed by thawing coronavirus restrictions, has lifted WTI prices to their highest level since 2018 at almost $70 a barrel and average U.S. gasoline prices above $3 a gallon, according to GasBuddy. The popularity of $100 options is another example of traders converging on seemingly outlandish wagers they consider to be almost guaranteed ways of making money. [WSJ]
• In a remarkable lawsuit filed on Memorial Day, West Virginia Gov. Jim Justice — the former coal-mining billionaire — has accused his family’s longtime lender Carter Bank & Trust of orchestrating a “tortious scheme” that has thrown the solvency and future of his business empire into jeopardy. What does Justice, his family, and companies allege? That Carter Bank, over nearly 20 years, loaned them more than $700 million, then had the gall to expect to be paid back on time. According to Justice’s complaint, bank executives acting in bad faith purposefully “induced” his companies to default on loans (rather than continue to extend-and-pretend). In what’s potentially the most dramatic development, Justice accuses Carter Bank of attempting to “scuttle” his attempts at renegotiating terms on millions of dollars of loans owed by his Greenbrier Hotel, which came due June 1. That’s just one day after he filed the lawsuit. Unless Justice managed to line up emergency funding on Memorial Day, it’s plausible that the Greenbrier — once West Virginia’s grandest resort, with more than 500 rooms — could now be in default to Carter Bank. All told, Justice says in his complaint that he still owes Carter Bank $368 million. [Forbes]
  

Wednesday Links

• I want to draw your attention to the chart above. As we know, the front end of the WTI curve is screaming, but the market remains convinced that there is plentiful supply out a few years. Remember how easy it was for shale guys to ramp up production last time? My hunch is that the ramp up will go slower this time around, meanwhile many years of underinvestment around the world will begin to take their toll on supply. What if XOM is just the first of many ETF hijackings? What if the attack on XOM changes how CEOs run their energy companies—if they want to keep their cushy jobs, they may need to stop drilling. What if the guys running the largest ETFs believe that they can accelerate the transition to “green” energy by dramatically increasing oil prices and making “green” products more cost competitive? It sure seems easier than lobbying governments for “green” subsidies while increasing taxes on fossil fuels—especially in emerging markets that are less focused on the environment. If increasing the price of oil is their “green” transition plan, the current oil price uptick won’t be a short-term thing. Maybe the heat of the move is still coming and it is in the deferred contracts? [Kuppy]
• We can’t escape fossil fuels without significantly higher prices. Higher prices will level the playing field for alternative technologies by making them more competitive. Higher prices will spur significant investment in new energy R&D. Higher prices will also be the only way to motivate society to cut fossil fuel use. Said another way, fossil fuels are so useful for humankind that they will never be substituted unless prices skyrocket. Higher prices it shall be. The only way out is through. There are at least four forces aligning as huge tail winds for fossil fuel prices. First, and most important, the ESG/progressive crowd has utterly and totally won the narrative war and they will press the consequence of their undeniable victory to the maximum by attacking supply at every opportunity. Second, the fossil fuel industry is coming off a period of extended underinvestment in capital projects already, which was exacerbated by the fallout from the COVID-19 crisis. Third, massive monetary and fiscal stimulus is stoking demand for commodities globally, and fossil fuels will not be exempt (on the contrary, since fossil fuels are critical to the production of other commodities, they will feel an amplified effect of this phenomenon). Finally, and related to the third force, fiat currencies are being debased at an unprecedented rate. [Doomberg]
• With prices rising, one might expect to pay a premium for inflation protection, but resource equities provide protection at a steep discount while also providing impressive diversification, the ability to capitalize on an inefficient sector of the market, and exposure to an asset class that has outperformed over the long-term. [GMO]
• Beyond a tale of principal-agent problem and mental inversion as a tool to have in the toolbox, these oil shale capital expenditure stories may say something about the future price of oil. Investors in shale E&P companies - not just buyers of shares but the lenders - have subsidized oil production over the past five years. (You can sort of see this in a chart of XOP or a natural resources mutual fund.) [CBS]
• Like tobacco, there is the mistaken perception that the oil business is dying. And some fraction of investors even think it is morally questionable to invest in producing the energy that our civilization runs on. Notice how much more consistent the net income of a pipeline company (MMP) or a royalty company (DMLP) is than an E&P company (DVN) or a refiner (VLO). Pipelines and royalties seem like the superior part of the hydrocarbon value chain. They are more consistently profitable over time, have less reinvestment requirement, and so more consistently send cash to shareholders. [CBS]
• The most important investing theme in the world today is the potential reversion to long term trend of value vs growth (VvG). The covid case numbers are crashing and it appears as though herd immunity (through a combination of vaccines and previous infection) has been reached. The catalyst for the VvG inflection will be the economy reopening combined with shortages stemming from a year of lockdown socialism and the printing of $3.4 trillion in a year. The pent up demand for many types of goods and services is so high that we could see a one-time price spike, almost like a currency devaluation, that benefits old-economy goods producing companies and ends the bubble in the Robinhood fad stocks. [CBS]
  
• If the main consideration is public health, taxation of nicotine products could be counterproductive as there is consensus about the benefits of smokers substitutes for non-combustible nicotine or tobacco products. However, if lawmakers decide to tax these products, they should design a principled excise regime. Legislators should focus on raising revenue in a simple, neutral, transparent, and stable manner. Levying taxes based on these principles limits the adverse effects on the economy and the individual. A specific excise tax at a low rate is the most efficient way to design a tax on nicotine products as it allows smokers to substitute less harmful products for cigarettes. Lawmakers should keep spillover effects in mind, because taxes on nicotine products reduces the effectiveness of excise taxes on traditional cigarettes. Taxing nicotine products with similar qualities at similar rates regardless of design is another important consideration. Volume and weight-based tax design makes this easier as well as more transparent for consumers and businesses. Finally, the tax collections should be worthwhile relative to the burdens placed on consumers and businesses. With both state and federal legislatures poised to introduce new taxes and bans, access to harm-reducing products is in the balance for adult smokers. Policymakers would do well to consider the potential of these products in combating smoking of combustible tobacco products before supporting punitive taxes or bans. [Tax Foundation]
• It started during a February vacation to Mexico City, when we did a mad dash of apartment viewing in La Condesa, a Greenwich Village-like neighborhood bursting with restaurants and shops. Hours before flying back to New York we found a great match—a bright, three-bedroom, three-bathroom apartment of 1,500 square feet facing the lush and lively Parque México—my favorite park in my favorite neighborhood of Mexico’s colorful and chaotic capital. By the time we finally closed on the apartment in June we reaped a bonus: The 8.1 million-peso price, which had originally converted into about $430,000, was by then worth only about $360,000 after the peso’s value had crumbled during the economic fallout from the pandemic. [WSJ]
• I bought a used 2006 BMW M5 SMG (V10) with about 30k on the clock and sold it at 90k. While it was an amazing experience and a really, REALLY fun car, it was also the biggest financial mistake of my life. The SMG was the key factor, here. Almost immediately I had problems with it, starting with the input shaft sensor, which led to all sorts of complicated problems and physical damage to the clutch, flywheel, gears, etc. There were clutch issues, sensor issues, hydraulic issues, easily $3k+ per repair. Eventually, I was hesitant to even drive it, fearing I would be stranded or be in for an expensive repair. The car also showed a lot of signs of REALLY pre-mature wear, the leather dash was cracking, the seats faded, plastics not working, leaks developing. No matter how I took care of it, I couldn’t keep up, it really was a cheaply built car (for a car that retailed for $100k in 2006). The only saving grace was it’s V10 engine and physics-bending handling/grip. I’d repair the car, get addicted, something breaks, can’t sell a broken M5. There was ALWAYS an error, there was ALWAYS something not working, and ALWAYS expensive maintenance. Doing the Oil MYSELF cost me about $150+ for 10L of oil and a filter. Decent tires were $1000 a pair (2), with the rears being replaced about every year (thanks to my driving). I tried to post it everywhere for sale, but I had trouble finding a buyer who could scrap together the money for such an expensive BMW...plus the guilt of sticking someone with this nightmare. It took about 3-4 years of trying to sell, driving it intermittently, before I gave up and sold it to ‘webuyanycar.’ Not to promote anybody, but I was happy with what I got and amazed they so eagerly took it...as a company, they have my blessing. Me any my wife celebrated when the check was deposited. The guy who scanned the codes read 71 errors on the CANbus. I’m pretty sure one of my LED Halo lamps went out the day I sold it, just to spite me. [Jalopnik]
• Hi, It has been many days since I tried to withdraw some of my investments from Coinbase amounting to around $7000. The transactions didn't go through and the money did not come to my PayPal account. I got the email from CoinBase saying that they have cancelled my transaction but did not say where the money is because I did not get and it and it doesn't reflect in my Coinbase account. I did report to coinable through an email, I received a reply saying that the case has been sent to a senior specialist but I never heard back from them. I have sent a follow-up email but no response. I am disappointed to see such a lack of customer service from an international company. $7000 is a lot for me and I want this is be resolved so that I can have my money. Please advise on this. Thanks. [r/CoinBase]
• Instead of noting that the hundreds of black inner-city riots last year have helped drive this year’s housing boom in suburbs and small towns, the prestige press has decided to obsess over the Tulsa riot of 100 years ago (which was started by blacks but ended by whites) as the reason blacks aren’t rich today. [Sailer]
• The Wall Street Journal reported Tuesday that SEC officials wrote Tesla twice, in 2019 and 2020, arguing that some of Mr. Musk’s tweets should have undergone the required oversight. Tesla disagreed, telling the SEC that his messages weren’t within the scope of the agreement. There was no precedent for the communications-oversight policy in financial enforcement, although regulators often prod companies to improve compliance in the wake of scandals or missteps. Restraining how a brash CEO communicates with the public and investors has only led to more feuds with Mr. Musk and Tesla, who seem to understand the leverage they have. [WSJ]