Thursday Night Links

• When you go to the grocery store, its aisles bursting with plastic and boxes of ready made food items, you are there to buy time; time you will not spend transforming basic ingredients into components for your recipes and meals. What you buy in time, you lose in freshness, taste and nutrition. More than that, you lose the essence of what a good meal is: time well spent on yourself in your kitchen, communing with the elements that nourish your body. [link]
• I have this pet theory that you can tell how free a city is by how irregular its street pattern is. Grids are great for managing traffic, and nothing else really. A town with an irregular street pattern is far more charming. If you think of a town as a home, the streets in a gridded town are corridors, not useful for much anything, but in a town with an irregular street pattern they become rooms, or real places. If you have a grand building, let it stop a street (in urbanism this is sometimes called a “terminating view” or a “focused street”). If you have several beautiful elevations in a row, curve the street to properly show them to the pedestrian (it can be hard to take in a building if you are next to it on a straight street or lot line). Consider also if streets are always necessary. Sometimes it can be better to divide buildings and blocks be series of interconnecting pocket squares or little plazas. [wrathofgnon]
• Based on our estimates of 2021 FFO, we have CVE currently trading at 4.58x. But because CVE is deploying all of its free cash flow into paying down debt this year, the multiple compresses for 2022. [link]
• A rapid rise in the price of Canadian crude is putting investors in an unusual position, prompting them to weigh environmental concerns against the copious cash flows that oil sands producers are now churning out. Since the start of year, the price of Western Canadian Select, which is heavy Canadian crude, has soared more than 75 per cent to around US$60 a barrel, returning to levels set in the fall of 2014 before energy prices collapsed worldwide. The recent rise tops the gains made by the North American benchmark, West Texas Intermediate, which is up around 50 per cent this year. With crude prices soaring, analysts expect Canadian oil sands producers to churn out substantial free cash flow in 2021. Canadian Natural Resources Ltd. alone is expected to produce nearly $8-billion in 2021, according to a May estimate from RBC Dominion Securities – and that’s after paying $2.2-billion worth of dividends. Suncor Energy Ltd., meanwhile, is expected to produce $6.4-billion after paying its own dividends. Investors are starting to notice, and share prices have risen this year. But a number of Canadian oil sands producers are still trading far below their pre-COVID levels. [The Globe and Mail]
• Bitumen is what a desperate civilization mines after it’s depleted its cheap oil. It’s a bottom-of-the-barrel resource, a signal that business as usual in the oil patch has ended. To use a drug analogy, bitumen is the equivalent of scoring heroin cut with sugar, starch, powdered milk, quinine, and strychnine. Calling the world’s dirtiest hydrocarbon “oil” grossly diminishes the resource’s huge environmental footprint. It also distracts North Americans from two stark realities: we are running out of cheap oil, and seventeen million North Americans run their cars on an upgraded version of the smelly adhesive used by Babylonians to cement the Tower of Babel. That ancient megaproject did not end well. Without a disciplined plan for them, the tar sands won’t either. [Energy Skeptic]
• It’s a fantastic color, if a little loud for a practical family crossover. In a world where Acura was still beloved, it would make perfect sense. Here, in the world where Acura still has some rebuilding to do, it gives me pause. I struggle to imagine who among us is pining for an Acura compact crossover in a supercar shade of bright orange. [RaT]
• For the past 150 years, economics has been treated as a social science in which economies are modeled as a circular flow of income between producers and consumers. In this “perpetual motion” of interactions between firms that produce and households that consume, little or no accounting is given of the flow of energy and materials from the environment and back again. In the standard economic model, energy and matter are completely recycled in these transactions, and economic activity is seemingly exempt from the Second Law of Thermodynamics. [Energy and the Wealth of Nations]
• On the index of neophyte national park day-tripper, a garbled place-name pronunciation is a strong indication of greenhorn status, but, from a public safety standpoint, it’s far from the most serious red flag that Dahlstrom will encounter today. [link]
• One of my unpaid side jobs is managing a tiny family cemetery maintenance fund. It has a small amount of money that was collected over the years through family member donations to maintain the family cemetery. There was just enough CD Interest generated until recently to get it mowed a few times over the summer months. Now, thanks to the Federal Reserve, the account only generates $10 interest annually. I am being forced to move out the risk curve from CDs to some sort of stock fund, and I’d been considering XLU. Of course I didn’t fall off the turnip truck yesterday, so I’ll only move about 1/10 of the fund annually into the market. That way I don’t risk the market dropping 50% right after I move it. [Illusion of Prosperity]
• The publication of the Federal Reserve Bank of Dallas’s Energy Survey has made for some interesting reading, detailing how ESG regulation is limiting the capacity to attract any capital in the oil and gas industry. The most eye-catching vignette was how a firm – which had relationships with 400 institutional investors, of which 100 were close – could find only one willing to give new capital to oil and gas investment. This trend was evident before the coronavirus pandemic: the resource replacement ratio, which indicates that new discoveries were only replacing 1-in-7 barrels of oil being consumed in 2019, compared with 1-in-3 in 2013; in other words, by 2019, there was a serious lack of new exploration. There is little sign of appetite for new capital expenditure, as estimates for total capital expenditure for the MSCI ACWI Oil & Gas industry have only modestly stabilised after the collapse during the pandemic, and the long decline from 2014, when the Saudis drove the price down in a bid for market share (Figure 4). The unwillingness to embrace capital expenditure is despite the sharp recovery in industry free cash flow (Figure 5), and speaks to anxiety about risks to price in the context of OPEC spare capacity, and ESG-induced risks of stranded assets. In addition to the potential supply constraints, oil consumption is trending back up. Driving conditions, which represent 26% of oil demand globally, are now above pre-pandemic levels. And while aviation is still below average, the trend is up. [link]
• Today, most people in industrial societies don’t need to know much about the natural world in order to survive. What do you really need to know in order to get by as a computer engineer, an insurance agent, a history teacher or a factory worker? You need to know a lot about your own tiny field of expertise, but for the vast majority of life’s necessities you rely blindly on the help of other experts, whose own knowledge is also limited to a tiny field of expertise. The human collective knows far more today than did the ancient bands. But at the individual level, ancient foragers were the most knowledgeable and skilful people in history. There is some evidence that the size of the average Sapiens brain has actually decreased since the age of foraging. Survival in that era required superb mental abilities from everyone. When agriculture and industry came along people could increasingly rely on the skills of others for survival, and new ‘niches for imbeciles’ were opened up. You could survive and pass your unremarkable genes to the next generation by working as a water carrier or an assembly-line worker. [philg]
• Obligations define my schedule and reflect my priorities at this stage of life. Most mornings start just after 6 AM. I either hear footsteps coming up the stairs as our 8-year-old comes to ask for breakfast or the rhythm of our 20-month-old banging against the crib as he tries to soothe himself back to sleep. I feel the cold kitchen floor on my feet while making my daughter breakfast. An egg-in-a-hole or pancakes is the most frequent request. The 20-month-old almost always starts his day gnawing through a banana. I drink coffee while staring at my phone as the kids eat. Most nights, my wife and I watch TV silently on the couch while one of us reads our phone after the kids are in bed. Over the last year, I’ve continued the gradual elimination of vices from my life that started after our first child was born. Coffee is often decaf. Late nights are beyond a rare occurrence. I gave up smoking pot years ago. In many ways, I’m a more polished version of myself. Smoother, but also less interesting. Occasionally I will find myself enrobed in melancholy brought on by the relentless responsibilities of adulthood and the exhaustion of being a parent with two young children. An emotional greyness creeps in. The accumulated stresses of life made visible through negative emotion. Gratitude is usually a balm to these feelings. [link]