Thursday Night Links

• Today, the situation looks very much like it did just over 20 years ago. The technology sector’s terrific run has attracted another massive inflow of money that has pushed up valuations and has been invested into greatly expanding the availability and breadth of tech products and services. At the same time, commodity sectors have been starved of capital, resulting in deeply discounted valuations and a severe restriction of investment in supplies. If history is a guide, the coming years should see terrific returns in commodity sectors once again and terrible returns for the tech sector. That’s just the natural result of the trends in the flow of capital in recent years. Investors will eventually come around to this way of thinking. But, by the time they do, it will likely be time to go the other way yet again. [Felder]
  
• When steroids took over bodybuilding in the early 1960’s, the muscle magazines had a problem. A huge problem. They had made money selling weightlifting equipment before then. But they quickly learned that instead of selling iron and bench sets for x dollars, they could make 100x dollars if they sold bogus protein powder and ‘muscle milk’ etc. and showed the bodybuilders drinking it as if they gained their size from a product sold from the magazine. This form of outright fraud dominated the magazines and, to this day, still does. But it also meant, and means, that every single lifter who wanted to make the magazines and make a living off their lifting had to make the choice: am I going to lie for a living or not? Some who chose to lie for a living responded with, “But who cares how I got this way? What I am, is a catalyst for change!   Don’t read the fine print!” In other words, the muscles are a metaphor and the Big Picture still stands. But there are other lifters who, upon getting to the point of being sought after for the magazines, understood that they couldn’t live with themselves if they prostituted themselves and sold out to such a degree, so they passed on fame (or at least fame in the bodybuilding world). This culture of corruption is so accepted now, given its half-Century precedent in bodybuilding, that no one even bats an eye when every single world-class bodybuilder is, in fact, a felon for taking illicit drugs. [Sam Fussell]
• Russia’s business leaders had plenty of incentives to make profits, but none to invest them. Executives could sell state assets to themselves or their partners at artificially low, state-fixed prices, and then sell them on to third parties at the market price. Zubok, like Kotkin, uses the word “cannibalization” to describe the process. Kotkin notes that exporters “accumulated fortunes that were hidden abroad by using mechanisms that the KGB had developed to pay for industrial espionage.” That stands to reason, for in the early stages, who but the KGB knew how to set up a shell company in a tax haven? Who knew how to buy a mansion through a trust? Once the system was up and running, of course, Western investors graciously agreed to fill this advisory role. The looting of Russian state enter­prises and national resources is commonly associated with the administration of Boris Yeltsin after 1991. But the mechanism for that looting was put in place by Mikhail Gorbachev. In our time, oceanographers’ videos posted online have allowed many people to watch an eight-hundred-pound octopus escape from a ship’s cargo hold through a hole the size of a quarter. The Law on Socialist Enterprises was like that quarter-sized hole. Through it, the octopus of the Soviet Union’s GNP escaped into Swiss bank accounts, American hedge funds, and London townhouses. Zubok suggests that the looters, well-placed members of the so-called nomenklatura, may have understood this transfer as a kickback for not defending the Soviet state by means of a violent crackdown. “They demand from the democratic camp a tacit social contract,” wrote one brave Russian newspaper columnist in 1990. “You will allow us to retreat safely and with full pockets, and we will . . . not jail you and shoot at you.” [American Affairs]
• “A helium supply crunch may be growing more critical with each passing day… The world is quickly coming to grips with one of the biggest supply squeezes of our times.” Helium gas prices have risen dramatically since 2019, when the US government sold at a rate of $280 per million cubic feet (Mcf). Now that figure has more than doubled, selling for up to $600/Mcf. [Chartered Institute of Procurement & Supply]
• Consistent with our correspondence in August 2021, the Office of the Attorney General (OAG) has now confirmed in the enclosed opinion that a number of so-called “sex change” procedures constitute child abuse under existing Texas law. Because the Texas Department of Family and Protective Services (DFPS) is responsible for protecting children from abuse, I hereby direct your agency to conduct a prompt and thorough investigation of any reported instances of these abusive procedures in the State of Texas. As OAG Opinion No. KP-0401 makes clear, it is already against the law to subject Texas children to a wide variety of elective procedures for gender transitioning, including reassignment surgeries that can cause sterilization, mastectomies, removals of otherwise healthy body parts, and administration of puberty-blocking drugs or supraphysiologic doses of testosterone or estrogen. See TEX. FAM. CODE § 261.001(1)(A)–(D) (defining “abuse”). Texas law imposes reporting requirements upon all licensed professionals who have direct contact with children who may be subject to such abuse, including doctors, nurses, and teachers, and provides criminal penalties for failure to report such child abuse. See id. §§ 261.101(b), 261.109(a-1). There are similar reporting requirements and criminal penalties for members of the general public. See id. §§ 261.101(a), 261.109(a). Texas law also imposes a duty on DFPS to investigate the parents of a child who is subjected to these abusive gender-transitioning procedures, and on other state agencies to investigate licensed facilities where such procedures may occur. [Greg Abbott]
• According to data from Kastle Systems, which tracks building access across the country, office attendance is at just 33 percent of its pre-pandemic average. That’s lower than in-person attendance in just about any other industry for which we have good data. Even movie theaters—a business sometimes written off as “doomed”—have recovered almost twice as much. [The Atlantic]
• Supplementation with l-citrulline has shown promise as a blood pressure lowering intervention (both resting and stress-induced) in adults with pre-/hypertension, with pre-clinical (animal) evidence for atherogenic-endothelial protection. Preliminary evidence is also available for l-citrulline-induced benefits to muscle and metabolic health (via vascular and non-vascular pathways) in susceptible/older populations. Reduced arterial stiffness and aortic systolic blood pressure was observed in obese post-menopausal women with hypertension after 6-week supplementation with watermelon extract (6 g/day citrulline). Collectively, the current evidence supports l-citrulline and watermelon extract as viable nutritional supplements to improve resting aortic hemodynamics in individuals with prehypertension and hypertension. [NLM]
• Reflecting more on $TPB CC comments on dealmaking - I appreciate the new CEO's frame of mind and experience with large, unique, and successful deal structures. My takeaway is this is a strategy an astute dealmaker should start to talk about and execute on once they have delivered operationally in spades and the stock is at $75. You can't walk into a robust existing business with a demonstrably cheap stock and a relatively enthusiastic shareholder base and talk about doing deals larger than the company itself for purposes of diversification into unspecified areas and expect it to go well. And if you want to get a lot of blind faith based on prior dealmaking like Charter and F1, you probably shouldn't ever use the word "diversification" when talking about reasons for M&A. If you decide to mention long-term plans for a new ERP system in the same call, you need a crash course in investor messaging. [@hackcelerity]
• The test of whether you are an electric vehicle “disrupter” is: how many manufacturers are licensing your battery? If you’d actually invented a better electric battery or other EV technology (battery is the only technology that matters though), you could license them and have a 10x book business. Tesla not only did not do a battery licensing model, but they effectively did the opposite. Consider the parts of the vehicle industry that they have decided to in-source versus the ones they have decided to outsource. As we know, they decided to in-source and compete head-to-head on manufacturing. The results have shown that they are worse than their more experienced competition. They decided to in-source the automotive retail, which had not been done before and was not legal in most states. (And still is not legal in eight states). This had been a huge distraction from the manufacturing side and has resulted in abysmal customer service. But of all things to outsource, they outsourced the battery production to a joint venture with Panasonic. What should be the entire premise of an electric vehicle company is not even enough of a competitive advantage to do in house. [CBS]
• Since Covid hit the headlines the running gag among myself and a couple online friends has been that everything on my vitamin and supplement shelf is eventually shown to treat Covid. The first OTC Covid recommendation was vitamin D and zinc as immune boosters, and NAC to keep the lungs clear. I thought to myself, “Wow, didn't know that about zinc or NAC. Cool!” I was taking them based on what I'd read in P.D. Mangan's “Best Supplements for Men.” It was a pleasant surprise that they would be associated with improved immune function. As time went on, more and more of my “stack” got mentions as Covid prophylaxes: selenium, berberine, citrulline, iodine. While it's a little bit funny, it shouldn't be too surprising. Everything's correlated. It stands to reason that the supplements that lead to strong, vigorous health are going to benefit the immune system. [CBS]
• My therapeutic philosophy was very similar to the therapeutic approach developed for AIDS. Both HIV and cancer involve biological entities that change at a high rate, so unless a treatment is almost instantaneously effective, the dynamics of evolution will create new forms resistant to any treatment. However, if several treatments are used simultaneously (rather than sequentially as is usually the case), each mutation has a lower probability of being successful. [Ben Williams]
• If we accept the BLM premise that racial solidarity among whites equals racism, then it is difficult to explain how lockstep racial solidarity for BLM, most pronounced among blacks (82 percent approval), is not itself racist. So, we are back to the paradigm of citing white racism even when whites vote less predictably along tribal lines than do blacks. In 2008, for example, the white vote was higher (by three points) for the presidential candidate Barack Obama than it had been four years earlier for the Democratic nominee, John Kerry, while the black vote increased even more dramatically (by seven points) for Obama. [The New Criterion]
• Consider, for example, the Morgan Library & Museum, one of the most exquisite jewels in the diadem of high culture. Despite being marred by some unfortunate architectural renovation in recent decades, the Morgan, like the Frick Collection, is a monument to aesthetic achievement of the most exalted kind. Its collection is superb. Its temporary exhibitions are almost always of the highest quality. Indeed, as we write, the Morgan is host to a superlative exhibition of paintings, prints, and drawings by the Augsburg-born artist Hans Holbein the Younger (ca.1497–1543). The Morgan’s current director, Colin B. Bailey, is a brilliant scholar of eighteenth- and nineteenth-century French painting. What does it mean, then, that Bailey should send on January 19 a groveling, self-flagellating letter to members of the “Morgan community” announcing the institution’s abject capitulation to the entire woke agenda of race-obsessed political correctness? [The New Criterion]
• A couple of examples are useful to demonstrate this point. We know from our research that the Trust’s sizeable core Permian assets includes a tract of approximately 1,590 net mineral acres in Reagan County, TX. We have digitally mapped this tract and monitored as 70 horizontal wells were drilled on Trust acreage, observed the public production reports and watched the impact to the Trust’s production and distributable cash. These wells have produced approximately 463,555 barrels (BBL) of oil and 2.27 billion cubic feet (BCF) of gas net to the Trust royalty interest. At commodity prices of $80.00/BBL and $4.00/one thousand cubic feet (MCF) this would equate to approximately $46 million of gross revenue to the Trust, before severance taxes and other deductions. We wonder whether the royalties are being paid properly – is the Trust’s interest being calculated properly, are the marketing provisions being followed, are there any improper deductions, etc. These are important questions given the magnitude of these producing wells – and their impact on distributable revenues to the unitholders. This particular property has room for a substantial number of additional development wells to be drilled targeting multiple producing horizons. [Sabine Royalty Trust]
• In the 1940s, the NSA had a top-secret program called Venona which intercepted (and much later decoded) messages between Moscow and its American agents. The recent publication of a batch of Venona transcripts gives evidence that the Roosevelt and Truman administrations were rife with communist spies and political operatives who reported, directly or indirectly, to the Soviet government, much as their anti-communist opponents charged. The Age of McCarthyism, it turns out, was not the simple witch hunt of the innocent by the malevolent as two generations of high school and college students have been taught. The sum and substance of this growing body of material is that: Ethel and Julius Rosenberg, executed in June 1953 for atomic espionage, were guilty; Alger Hiss, a darling of the establishment was guilty; and that dozens of lesser known persons such as Victor Perlo, Judith Coplon and Harry Gold, whose innocence of the accusations made against them had been a tenet of leftist faith for decades, were traitors or, at the least, the ideological vassals of a foreign power. [Washington Post]
• Dorchester Minerals, LP, is the lessor under six substantially identical oil and gas leases in which Chesapeake Exploration, LLC, is the lessee. Dorchester alleges that Chesapeake has failed to make gas royalty payments in accordance with the terms of the lease and in accordance with Chesapeake's implied covenant to market gas at the best price reasonably obtainable. Dorchester seeks repayment of royalties as well as statutory penalties for the nonpayment of royalties. Chesapeake has filed a motion for summary judgment on all of Dorchester's claims. The motion is granted in part and denied in part. [Dorchester Minerals, LP v. Chesapeake Exploration, LLC]