Books Read - Q1 2022

Read six books this quarter.

[Previously: Q1 2021, Q2 2021, Q3 2021, and Q4 2021 book reviews; our 2020 Book Review Compendium, 2019 book compendium, 2018 book compendium, and pre-2018 book compendium.]

• Higher Calling (3/5) This is about bicycle stage racing and climbing mountains on road bikes. When you ride a bike for exercise, climbing hills is what makes the workout. "One of the training techniques I've found effective - I mean ridiculously effective, more effective than anything else I can think of, even high-intensity hill reps - is stairwell run-ups holding your breath. [...] What you can do in a stairwell that you can't easily do anywhere else is you can measure very precisely what the elevation gain is, by measuring the steps and counting them. And when you train for it, when you hyperventilate and run up stairwells, you can get good at it." On the sovereign landlocked microstate principality in the Pyrenees: "There is not a single centimetre of flat road in Andorra, in the Pyrenees between Spain and France. I know because I checked. I went looking in 2015, on assignment for Strava to recce the course of that year's Vuelta a Espana Stage 11, and I didn't find one bit. The mountain principality is tiny, and is caught in a long steep valley between high rocks which, if you follow it from the capital, Andorra La Vella, at the Spanish end, takes you up over the highest road in the Pyrenees, the 2,408 metre Port d'Envalira, and down to another valley and the ski resort of Pas de la Casa." "Andorra is an awful lot of uphill even if you stick to the valleys; if you branch out, you pass green terraces of land, beautiful, well-kept houses and gardens, sunflowers lashed upside down to barns to dry out, and deep dark forests on beautiful, tortuous roads that rise and fall at sometimes eye-watering gradients. Branching out is all that Stage 11 of the Vuelta does." On the origin of these mountain roads: they "owe their development to a long history of paranoia, distrust, and violence. The first famous military crossing of the Alps is undoubtedly Hannibal's, but the mystery of which pass the Carthaginian warrior took on his march towards Rome in 218 BC has puzzled people since ancient times, with heavyweights like Napoleon Bonaparte (who was sometimes called the 'Modern Hannibal,' as well as 'the Horse Thief of Berlin,' 'the Nightmare of Europe,' and 'Old Puss in Boots' among many less flattering things) and Julius Caesar, both well practiced in taking armies over mountains, weighing in with opinions. There are enough clues in accounts contemporary or near contemporary to Hannibal's life to narrow down the selection" to the Montgenevre and the Mont Cenis passes. The Alps are full of defensive fortifications, including an Alpine Extension of the Maginot Line: "the last chapter in France's long history of recurrent paranoia, enmity, and conflict with Italy in these mountains". He says, "I discovered the bunkers over years of cycling the high roads of the southern Alps. The further I went, the more I realized how numerous they are and how they litter the landscape. They helped me realise, after stumbling across a few bunkers and then researching their history, just how much these mountains are a military conundrum as well as a sporting playground. Whereas a road wraps like a ribbon around the contours of a hill, the bunkers are arranged according to other principles. Looking for them means approaching the terrain more laterally, thinking of axes and channels, weak points and redoubts, and sightlines to the passes, and when you come across one it is like an ambush. You are cycling along enjoying the view or concentrating on the climb and then, suddenly, you glimpse an incongruous shape. Above you, always above, a series of soft, regular curves on the prow of a hill (the rounded corners were designed not to cast stark shadows for observers looking from afar). A presence betrayed. And then you realise you are under surveillance across time."
• Walk on Water: The Miracle of Saving Children's Lives (4.5/5) By Michael Ruhlman, author of previously reviewed The Making of a Chef (5/5), The Soul of a Chef (4/5), Wooden Boats (4/5), and House (3/5). This time, he wrote about pediatric heart surgeons (repairing congenital heart defects) at the Cleveland Clinic. "The clinic's chief surgeon, Roger Mee, has the world's best success rate for the arterial switch operation. While some centers report mortality rates as high as 50 percent for this operation, most manage to keep mortality to between 5 and 10 percent, or somewhat higher for complex varieties. The very best centers have a 1 to 3 percent mortality. But Dr. Mee's centers performed 270 arterial switches for simple transposition over the past seventeen years and have lost just one patient during that time; he is noted throughout the world for his acumen generally, and for his expertise in this procedure in particular." The theme that connects the chef, wooden boat, and surgery books is his fascination with people of exceptional skill."I wrote about people at work; work was important. But not just any work or anyone at work: I tried to concentrate on those few who were considered by their peers to be among the very best in their professions. I'd developed at cooking school a fascination with people who were exceptionally skilled at what they did, had discovered that people who pursue perfection, date-on-a-dime clarity, and impossible high standards are the most compelling human beings alive..." "Interventional cardiologists are the thinking man's surgeons, insist the interventional cardiologists, doing the same work as the surgeons with none of the mess or long healing time. The surgeons for their part, roll their eyes and look pityingly at the interventional cardiologists - wanna-be surgeons all, they intone. Interventional cardiology is elegant on the outside and ugly on the inside, Mee has often said. Surgery is ugly on the outside but elegant on the inside." "The heart-lung machine is the pediatric heart surgeon's primary tool." "Congenital heart disease is really well tolerated in utero. Prostaglandins keep the baby in that fetal state after it's begun to breathe oxygen." This caught my attention: as Dr. Mee changes into his operating uniform,  "he'll reach into his jacket pocket and retrieve another square of Nicorette, which he'll grind away at all morning long." Ruhlman didn't set out with this angle in mind, but what he ended up concluding was that some surgeons (and centers) are vastly better at repairing congenital heart defects than others, and that this difference is partly a function of the volume of procedures conducted. There is a conflict of interest problem between the parents and the cardiologists who initially see the babies. Surgery is lucrative, and "most cardiologists refer their patients within their systems regardless of those systems' results." So, Ruhlman is part of our stable of high performing writers like John McPhee, doctors trust nicotine as a cognitive enhancer when babies' lives are in the balance, and parents of babies with CHD need to be high agency and not passively take the first recommendation because the variance of outcome is enormous (~10^2).
• Grocery: The Buying and Selling of Food in America (3/5) Another by Michael Ruhlman; we read this because he wrote it, not out of any urgent interest in the grocery business. (Although Pocahontas thinks that food prices are rising because of collusion in the fractured, brutally competitive, almost perfectly competitive grocery business and not because of all the money that the regime has printed.) Grocery stores all have the same layout: "[T]he perimeter of a grocery store is composed primarily of things that go bad quickly. This is what you want. Foods that go bad quickly do so in part because they are rich in volatile nutrients and are not processed. What food companies began doing in the nineteenth century, but explosively so following World War II, was remove those nutritious elements from food that cause it to go bad, and also add preservatives, so that the food could sit on a room temperature shelf indefinitely." "Roller mills, which separated the germ from the rest of the grain as the miller crushed wheat into flour, came into widespread use toward the end of the nineteenth century. This resulted in flour that lacked the nutritious fatty acids in the germ and thus would not become rancid. Long before anyone understood the notion of vitamin deficiencies, this stripped-down form of wheat became a staple of the Western diet." Also: "[I]f it is a superlative organic, non-GMO product, [grocery store buyer] worries that they will get bought up by a multinational that will drive the quality down..." "We're still a nation of meat eaters, but our consumption of beef has dropped considerably. In the seventies, Heinen's was averaging forty-seven cattle per week per store. Today, they need about fifteen per week per store - a decline of more than two-thirds. There are sixty packers in the United States that slaughter cattle for our beef hunger, but four of them control 80 percent of the market: Tyson, Cargill, National, and JBS USA, a subsidiary of Brazil-based JBS, the biggest meat purveyor in the world." "[T]hey could buy five thousand acres in Idaho, two hundred miles west of Jackson Hole, for what it would cost to buy five acres near that tony city." "Continued growth of the hydroponic industry is all but assured as technology improves and demand for high-quality produce year-round increases. Hydroponic greenhouse growing has many advantages over traditional agriculture; I don't see how it can fail to expand. It's the most water-efficient method of growing, as the water can be recirculated." "[O]ur governmental health agencies make it difficult for chefs to practice many ancient preservation techniques because food safety requirements rely almost exclusively on keeping food really cold. At low temperatures, fermentation (the bacterial activity that preserves food and makes it so tasty) happens very slowly if at all."
• Boys Themselves: A Return to Single-Sex Education (3/5) This was Michael Ruhlman's first book. When he was about 30, he took a break from newspaper and magazine writing to write a book about his private, boys high school in Cleveland (University School) and its new headmaster, Richard Hawley. He's there when political correctness is just getting started, and it's a theme throughout the book, which makes it an interesting time capsule of the liberal pieties in the early 90s. The big deal then was "diversity," trying to find black students from Cleveland but especially trying (desperately) to find black teachers. This matches my experience at a private high school during the same era - far from there being "systemic racism," the people running these schools were liberal and would bend over backwards to make their environments less white. The book shows more concern about feminism and less concern about gays than today. (This was also a goofy time when people pretended that upper middle class kids needed to be worried about AIDS.) As Ruhlman describes the 90s, "Books and articles on gender problems accumulated. Gender, once a lowly grammatical term for nouns, had expanded into the realm of biology." Another hot topic was religion. The 1890 prospectus for the school had four principles: "to develop the greatest possible dexterity of mind and body. To impart as much useful knowledge to him as possible. To teach him healthful and manly habits. To aid him in forming an earnest and upright character." But a century later, the elite Cleveland families were not culturally similar enough (thanks to "diversity") to agree on a set of moral goals, let alone these goals. What about the handicapped, for whom physical and mental dexterity might be out of reach? What about the ones who can't learn good? What is a manly habit and who is to say the men should be manly? So the headmaster, who was culturally Christian, and the Religions and Ethics Chair, who was an Episcopal priest, run into a lot of resistance from the students (and faculty) of other faiths. The headmaster points out: "Not too long ago, there would have been great unease in the community if a school leader was thought not to be religious. This suspicion of religion is a late-twentieth-century phenomenon, a product of our age, and I don't think it represents progress." One other fun thing about reading this 25 year old book was looking up the students he mentions or profiles. Take Nick Caserio - "one of the best athletes in the school" - who only got 880 (combined) on the SAT. Even with the headmaster's pull they weren't able to get him into Middlebury, so he went to John Carroll University. Now he's the GM of the Texans football team.
• WASPS: The Splendors and Miseries of an American Aristocracy (2/5) We have been interested in the decline of the WASPS - why did northern Europeans lose the country to other ethnic group(s) between CW and WWI? It is an important question because the end of the WASPS meant the end of liberty in the United States, and the beginning of the replacement of a constitutional republic with communism. Unfortunately, this book does not shed any light. It is gossipy, which is not useful, because the 4th/5th/6th generation descendants of founders and fur trading fortunes being dissolute homosexuals was more likely to be a symptom than a cause of the decline. A proper accounting would look at: who displaced them and how they did it. I think the book "Supermob" gives a great account of the tail end of the process, but not the beginning. Similarly, Fussell's Class describes the symptoms of the tail end for the WASPs. I don't think he even realized this. The extortionate income/estate taxes combined with double digit %-inflation meant that the WASP fortunes were close to exhausted at the time of his writing. Rich people normally do own cultural artifacts for multiple generations, but for everything to be threadbare, and to pretend that this was a status statement, I think was a strategic arms limitation strategy among WASPs to control their spending status displays and stretch their fortunes out longer.
• Don't Sleep, There Are Snakes: Life and Language in the Amazonian Jungle (4/5) Our guest correspondent PdxSag noticed this one on Twitter: "An entire functioning society of autistics!" The Pirahã Indians of the Brazilian Amazon jungle speak a language with "no phatic communication whatsoever. No 'hello', no 'please' or 'thank you' or even 'I'm sorry'; only statements of fact, questions, or commands." Quote: "The Pirahã are supremely gifted in all the ways necessary to ensure their continued survival in the jungle: they know the usefulness and location of all important plants in their area; they understand the behavior of local animals and how to catch and avoid them; and they can walk into the jungle naked, with no tools or weapons, and walk out three days later with baskets of fruit, nuts, and small game." The author is a linguist who was a Christian missionary, sent to try to translate the Bible into Pirahán. Their language lacks words for abstract concepts, or generalizations detached from immediate experience. That means that it doesn't have words for numbers or colors. The Pirahã only speak of things they've seen, or have heard of from a first-hand witness, which meant that the attempt to convert them to Christianity was unsuccessful. Everett eventually concluded that Chomsky's ideas about universal grammar, and the universality of recursion in particular (at least understood in terms of self-embedded structures), are falsified by Pirahã.
  

Wednesday Night Links

• To save the planet, pastoralism is the intelligent solution. The brain is 60% fat, and omega-rich fat from grass-fed meat is excellent for mental health. The sine qua non of free thinking. Beef and liberty! More meat, less wheat! [link]
• "Historically, the battery price cost curve had been declining at a pace of 3% to 7% annually for so many years in a row it almost seemed inevitable. "But molecules don't play by the same rules as Moore's Law. The world has changed, and along with it is a new paradigm of input costs," [ZH]
  
• Slack is hard to precisely define, but I think this comes close: Definition: Slack. The absence of binding constraints on behavior. Poor is the person without Slack. Lack of Slack compounds and traps. Slack means margin for error. You can relax. Slack allows pursuing opportunities. You can explore. You can trade. Slack prevents desperation. You can avoid bad trades and wait for better spots. You can be efficient. Slack permits planning for the long term. You can invest. Slack enables doing things for your own amusement. You can play games. You can have fun. Slack enables doing the right thing. Stand by your friends. Reward the worthy. Punish the wicked. You can have a code. Slack presents things as they are without concern for how things look or what others think. You can be honest. You can do some of these things, and choose not to do others. Because you don’t have to. Only with slack can one be a righteous dude. Slack is life. [Zvi]
  
• As to the substance of Defendants' challenge, the Supreme Court long ago held: “Whenever a general rule as to property or personal rights, or injuries to either, is established by State legislation, its enforcement by a Federal court in a case between proper parties is a matter of course, and the jurisdiction of the court, in such case, is not subject to State limitation.” Chicago & N.W. Ry. Co. v. Whitton's Admin., 80 U.S. 270, 286 (1872). [Trondheim Capital Partners LP v. Life Ins. Co. of Ala.]
• Mr. Halstead had a theory that every image lingers like “photographic lint on the mind of the photographer,” as he put it, whether or not the image was published. When the scandal involving President Clinton and Ms. Lewinsky broke in early 1998, Mr. Halstead had a vague memory of having seen Ms. Lewinsky’s face before. He hired a researcher to go through thousands of images he had shot in the past few years, and he was rewarded: The researcher found a shot Mr. Halstead had taken in 1996 at a gathering at the Mayflower Hotel in Washington, with Mr. Clinton, his back to the camera, embracing the smiling Ms. Lewinsky. [NY Times]
• He wasn’t a big fan of Russia or Russians, which is as it should be for a diplomat serving in Russia. In fact he wasn’t a big fan of Americans either; Kennan was a consummate outsider. This sort of remove from normal society everywhere made him able to do the one thing a skilled diplomat should be able to do: analytically empathize with the people he was conducting diplomacy with. To the point he could get inside their heads and understand their motivations and emotional infrastructure. Because he was an outsider he could explain this to other people, rather than simply experiencing it. [Scott Locklin]
• The "military ranking" thing seems hard to figure now. There is one and only one country that can deliver an army complete with fuel, personal pan pizzas and air conditioning anywhere on earth. The purported "#2" can't reliably supply forces 50 miles from it's border. There are lots of countries that can provide a deterrence to invasion. But Russia can no more invade France than France can invade Russia. China could perhaps hurt the USA in it's own backyard, but zero ability to operate globally against the USA. In other words, most countries could repel an invasion by most other countries, but few/no countries could actually complete the invasion and conquest of any other nation. No other nation could even meet the US as a peer in an extra-territorial battlefield. I suppose you could put China as #2 now. Very little possibility that Russia could compete with China in a war in the Russian Far East, for example. If China wants it, I guess they can take it. Unlikely though. [Empty_America]
  
• These outdated competitions are all a complete waste of time, particularly since they stress outdated math that nobody uses to do real calculation anymore. It is quite telling that the last Putnam Fellow anyone ever heard of was 83 years ago. Here are last year’s problems from this Putnam archive site: anyone who actually knows some math and science/engineering want to make a case for having these kids learn to solve them? Given that nobody solves such analytic problems in science and engineering today, unlike when Feynman was doing science a century ago before computers, this is yet another antiquated way in which adult morons abuse children, like HS football or youth ballet. Not quite so bad as this may take some creativity, but still stupid that people are doing it. In any civilization in decline, old customs that once served a purpose ossify into worthless rituals over time, simply because external circumstances inevitably change but the internal culture doesn’t. That’s what we’re seeing with the Putnam, and we should feel sorry for these Asian kids being abused and pushed into this crap by their idiot Tiger moms. [Sailer]
• In the competitive U.S. higher education market, institutions differentiate themselves to attract both students and tuition dollars. One understudied example of this differentiation is the increasing trend of “colleges” becoming “universities” by changing their names. Between 2001 and 2016, 122 four-year colleges—nearly 25% of those called colleges in 2001—made such conversions. [link]
• Turning to the impact of higher oil, certainly in the short-term it is clear that the pent up demand for air travel is extremely strong, given two years of lockdowns around the world, coupled with high levels of household savings. If higher commodity prices persist, we will have to see what impact they have. But please bear in mind, the industry was able to cope with $100 oil between February 2011 and September 2014. Airlines in Europe benefit from higher average fuel hedging than their North American counterparts. And recent statements from the airlines suggest they are confident that they can pass through higher oil prices as yields remain strong. One recent example was that Delta has their highest ever day of sales, despite being at approximately 80% of 2019 capacity. So what we can clearly see on a global basis is that the propensity to travel has not diminished and that the industry has proven itself to a higher oil prices even following the financial crisis. We have every confidence that it will do so again this year. [AerCap Holdings N.V.]
• Chart #1 compares the slope of the Treasury yield (measured by the difference between 1-yr yields and 10-yr yields) to the level of real short-term interest rates. Note that two things reliably precede recessions: a flat or inverted yield curve (red line) and very high real interest rates (blue line). The yield curve inverts when the market senses that the Fed is so tight that the economy is at risk of collapsing, and that collapse would then prompt the Fed to ease. As many have noted, there are parts of the yield curve that today are inverted: 5-yr Treasury yields today closed at 2.50%, while 10-yr yields closed at 2.40%. But it would be premature to think that this materially increases the chances of a near-term recession. [Scott Grannis]
  

Goldman Sachs on Suncor and Cenovus

Suncor Energy Keeps Buy Rating at Goldman Sachs as it Expects Oil Sands Operations to Improve

Goldman Sachs on Wednesday kept its rating on Suncor Energy at buy with a US$38.00 target price as it sees concerns over the reliability of the oil producer and refiner's oil sands operations beginning to wane.

"While SU has substantially lagged over the past few years around management concerns and operational execution, we see room for an inflection in performance as the company progresses through its operational improvements, with SU most recently announcing a change in Mining/Upgrading leadership. While we highlight SU guided to lower volumes on the most recent earnings call, we still see SU trading at a 24% FCF Yield for the year, even with GS at the low-end of SU 2022 volume guidance. We also highlight the stock's peer leading dividend yield of 4.1%, and with SU offering a ~13% 2022 capital returns yield (Canada average of ~12%). Overall, we see 20% total return to SU."

Cenovus Energy Keeps Buy Rating From Goldman Sachs on Expected High Returns

Goldman Sachs on Wednesday reiterated its buy rating on the shares of Cenovus Energy ( CVE ) with a US$19.00 target price as it expects "noise" for the shares of the oil producer and refiner as ConocoPhillips' (COP) continues with plans to sell down its stake in the company,, which stood at around 100-million shares in January.

"We expect CVE performance to inflect, as technical overhangs roll off, including COP's sell-down, as well as CVE contingent payments to COP and noise around hedging/earnings execution," the investment bank noted. "We highlight COP is expected to exit their CVE ownership this quarter, per COP guidance, and also note CVE contingent payments to COP will end in 2Q22. While certain investors have also highlighted the company's hedging strategy as a potential headwind, we note CVE still exhibits a strong 2022 FCF yield of 29%, even after considering hedges. Additionally, we expect a positive rate of change in US Refining, with a more constructive macro setup and following heavy turnaround in 2021. Overall, we see 17% total return to CVE."

Thursday Night Links

• Recently I asked the question: what counties in the US were the most underbirded. I found that the Central and Southern United States were severely underbirded, and was surprised at the large discrepancy in effort across the United States. For example the #1 county by submissions, Los Angelos county, has an impressive 181,000 checklists submitted all time. This would rank #7 worldwide, just behind the United Kingdom if L.A. was considered it’s own country (luckily its not). Now compare this to Martin, Kentucky with only 12 checklists submitted EVER. Clearly data from these two counties are not similar. The reason this might matter is Los Angeles county ranks 2nd in total species seen with 534 while Martin county ranks 2nd TO LAST with 71. While Southern California certainly is more birdier than the Kentucky, it’s not that much birdier. We know that an increase in search effort increases bird diversity. More birders in an area inevitably find more birds, especially skilled birders, which certainly exist in LA but possibly not Martin county. Additionally, birding brings tourism and a groundswell of conservation for a region. Here in Texas countless tracks of important and birded lands are owned by private groups (Houston Audubon, The Nature Conservancy, Texas Ornithological Society), the state of Texas, and federal agencies (USFWS and FS). These sites remain regionally important and well managed partly because of the large interest by birders. These contrasting levels of effort can hamper research using eBird, particularly when researchers want to calculate species diversity of timings using presence data. [birderboone]
• I’ve said before, and people think I’m crazy, but options are the underlying. It is the full distribution of potential outcomes. Equity values, bond values, asset values are ultimately a summary of much more rich, probabilistic information that lies underneath the surface. And I think that acceptance and understanding are slowly happening not just to institutions, but to human beings. It doesn’t happen overnight. But in a world where we’ve created an ETF and ETN for every style, and every factor, the fact that we’re still betting on up and down, and live in two dimensions is nonsensical. So I very much believe that if you look 20 years in the future, the Option Chains are the underlying. [Kris Abdelmessih]
• Momentum is a divergent strategy while “value” is a mean-reverting strategy. Several years ago the research team at OSAM published edifying papers on how these approaches work. Value works by fading overreaction. Momentum is attributed to underreaction. In a name trending higher, the sellers are discounting the substance of new information too aggressively. In dork world, we call this anchoring. If you pay attention to “anomalies” you may recognize the concept of post-earnings drift as an acute example of anchoring. [Kris Abdelmessih]
• I’ve never had the shots and never will. In fact I suffered great personal losses to refuse them. That said, my refusal was not because I’m fearful of the side effects. From all I’ve observed the side effects appear to be real and quite a bit more common than any other “vaccination” that doctors give. Sure. But, also, on the whole, still pretty rare. Just like all the fear from the left side of the aisle about essentially the whole world dropping dead if little Timmy removed his mask at recess didn’t pan out, neither did all the fear from the right. The shots do not, apparently, sterilize people, or kill them. “Vaccine shedding” is not a threat at all, and frankly of even dubious validity. How would that even work? Yes, there does seem to be an uptick in myocarditis across the globe following the mass injection program, and that’s notable and concerning, but, on the whole, most people are okay. At the end of the day neither the Left’s fear of the virus nor the Right’s fear of the vaccine were justified. At least, mind you, on the grounds on which they tried to justified them. As I say, I refused the jabs for another reason which I feel is justified, but that’s neither here nor there for this post. But notice what happened. “The Reality”, or “The System”, or “The Notnilc”, whatever you want to call it, presented the world with two opposing views, each frightening and oh so terrible. On the left hand we had a potentially life ending, if not world ending scenario and on the right we had the same. On each hand the fear was the same, the only difference was what the fear was about. This my friends is the hallmark of black magic, of the work of wizards. For you see, the ancient art of deception is this: to present two lies, and get the people arguing viciously about which is true. [matsumoto]
  
• As a MLP unitholder, your proportionate share of the partnership’s depreciation expense is included in your share of the MLP’s taxable income. The amount of depreciation expense allocated to you is determined by a variety of factors, including your purchase price. Additional depreciation from new investments in infrastructure by the MLP also may be generated. The depreciation deduction essentially means that your overall tax bill may be deferred. The extent to which your MLP distribution is treated as deferred depends on your share of an MLP’s taxable income. Because many MLPs have little or no taxable income, cash distributions in excess of taxable income received from an MLP are tax-deferred. These tax-deferred distributions are considered to be a “return of capital” because they reduce your tax basis in the MLP. This tax-deferred characterization makes sense when you consider the assets that tend to be owned by an MLP. The underlying assets of an MLP (such as pipelines) are extremely long-lived, with lower obsolesce risk and low maintenance expenditure requirements. Properly maintained, pipelines have a multi-decade lifespan – with the value of their “right-of-ways” arguably having a lifespan exceeding that. However, for tax purposes, pipelines depreciate faster than they wear out (their economic usage). This resulting depreciation shield can provide an attractive tax deferral for an MLP investment, particularly in its early years. The mechanics behind the tax deferral can be rather complex. You may be familiar with MLP lore that 80% of an MLP’s distributions tend to be tax-deferred. This is an oversimplified assumption (and highly dependent on the timing of your investment in a particular MLP). In our experience, we have found the amount of tax deferral associated with an MLP investment to be variable, based on specific circumstances of each MLP, as well as the timing and price of the investment in an MLP. [Tortoise Ecofin]
• Anarcho-tryanny is better understood, or defined, as a method of oppression in which a political regime facilitates civil disorder, and uses social and state power to pathologize or criminalize any independent resistance to that disorder in order to terrorize its political enemies and to manipulate the rest into supporting the regime and its political goals. Stated simply, the Regime uses disorder (anarchy) to terrorize its opponents and uses state power to protect the anarchical element and to crush any resistance to disorder (tyranny). This oppression serves the regime’s political and social goals. Disorder, in other words, is a feature, not a bug, of the system. Since this method requires a disorderly element, there must be a group of people willing to be disorderly on their own initiative. Disorder itself cannot be the official policy of the Regime; for if it were, the anarchic element would be de jure state actors. Their disorderly conduct must be self-willed. The ruling class can then deny responsibility for the disorder, while at the same time maintaining the background conditions for it. The best anarchic element is an aggrieved minority. This allows the ruling class to frame the disorder with measured positivity and redirected blame. [Stephen Wolfe]
• It is very difficult (and rare) to work long hours and also work smart. The highest-ROI hour worked is one that was spent building a scalable system, to limit the time spent on an activity in the future. I've met very few people who can do that for 12+ hours per day; humans were just not built for it. The problem isn't the low-ROI hours that follow the high-ROI ones. The problem is that a founder's ability to recognize people is finite, and in rewarding long hours or the incremental win ("one more customer!"), they reduce the emphasis on high-ROI hours. This results in a team that doesn't create enough scalable systems and therefore is less likely to generate strong results in the future. [link]
• If you’re like me, losing your wallet is the worst thing in the world—not because of the $200 cash that was in the wallet, but because of all the time you have to spending replacing the wallet, the credit cards, and—fuck—getting a new driver’s license at the DMV. Who has time for that shit? Well, go to the DMV and see the types of people who are hanging out there. They have all the time in the world. [link]
• This idea is counterintuitive – that some stocks actually become worse buys as they are falling to lower prices, but the explanation is psychological, not financial. Stocks trading at excessive valuations require a fan base to sustain their share prices. That fan base is often a bandwagon-jumping melange of traders and investors who are attracted to recent gains. Yes, they’ll latch onto the fundamental story, but the fact that the stock has been and currently is going up is the main thing. When the stock breaks, so too does the fandom. And when the fan base moves on to greener pastures or runs out of money, a new fan base will not form for this stock with its chart in decline. Broken growth stocks become orphans. There is no natural place for them to find a home. Dan’s other point is equally important: There’s a lot of room between where a broken growth stock can fall from and where a more value-oriented buyer might be compelled to take a look. In the case of the Bubble 500, you could drive a truck through current valuation and an attractive entry point for fundamental investors, even after the recent plunge! [Josh Brown]
• Strong forms of the stakeholder model of corporate governance hold that, in making business decisions, directors should consider the interests of all corporate constituencies (employees, customers, suppliers, shareholders, etc.) in such a way that directors may sometimes decide to transfer value to a non-shareholder constituency even though doing so produces no net benefit for shareholders even in the long-term. This article makes four main points about the stakeholder model. First, although its advocates often speak as if the model placed all corporate constituencies on a par, in fact the model uniquely disadvantages shareholders: since the claims of other constituencies arise in contract or by law, directors have no power to invade these claims for the benefit of shareholders; hence, business decisions made under a stakeholder model will often transfer value from shareholders to other constituencies but never from other constituencies to shareholders. Second, although critics of the stakeholder model have long argued that the model provides no definite standard by which directors may decide what to do in particular cases, this greatly understates the point. In fact, the stakeholder model leaves business decisions radically indeterminate, for it includes no normative criteria by which any business decision could be judged to be any better or any worse than any other. Third, some normative criteria that can be added to the stakeholder model and might seem to solve this problem in fact fail to do so; this includes criteria based on Kaldor-Hicks efficiency, on hypothetical bargains among the corporate constituencies, or even on Delaware doctrines about allocating merger consideration among classes of shareholders. Finally, the article notes a surprising point of agreement between advocates of stakeholderism and its critics, viz., that decisions made under a stakeholder model would be essentially political in nature. That is, they will be based not on rational, normative considerations but on the varying abilities of different constituencies to pressure or lobby the directors—i.e., business decisions become essentially rent-seeking contests. [Stephen Bainbridge]
  

"Zoomer Conscripts" by Harold Watson

[Credit Bubble Stocks correspondent Harold Watson writes with his thoughts about the "Zoomer Conscripts" in the RUS-UKR war. Last year he gave us the report of his trip to Bentonville, AR.]

As one who is closely following the Russia-Ukraine War, I’m struck by the Russians’ deployment of poorly trained teenagers into the theater. Captured Russians burst into tears at the slightest show of warmth by Ukrainian civilians, who bring them tea and allow them to call their mothers back in Russia. Other reports show lines of Russian corpses along the highways following Ukrainian ambushes. Articles have portrayed the use of conscripts from poor Russian families and from Russia’s minority groups-Abkhazians, Khazaks and Chechens. Well-connected Russian youths have so far been exempted from mass conscription. Many of the captives are probably their families’ only sons, given Russia’s 2010 rate of 40 abortions per thousand women, the highest in the world. Owing to their poor diets and alcohol and drug abuse, these youths are among the unhealthiest in Europe.

It seems that Putin is reviving one of the ghastliest practices of Stalin’s Red Army in World War II; namely, the deployment of rear-guard echelons with orders to shoot any deserters. With already plummeting morale, compounded by hunger and frostbite, this decision by the high command is certain to lead to even greater panic among this young cohort. The old adage holds true in this case even more convincingly: wars are launched by old men and ravage the young.

Friday Night Links

• Manchin, the centrist Democrat who serves as chair of the Senate Committee on Energy and Natural Resources, said in a statement on Monday he would not support Raskin’s nomination to the Federal Reserve in light of her prior public statements on the role of climate risk in financial regulation. [American Banker] 
• First, oil sands require hefty investment upfront but output holds steady for decades with relatively modest maintenance capital expenditures. The opposite is true for shale deposits, which take less upfront spending but, due to quick decline rates, require continuous investment into drilling and well completion to keep oil flowing. Capital expenditures have stayed relatively consistent for Canadian oil producers over the years—through boom and bust cycles—compared with U.S. producers, whose spending has fluctuated wildly. Thomas Liles, analyst at Rystad Energy, notes that, given the maturity of the oil sands sector, reinvestment rates, or the percentage of cash from operations spent on capital expenditures, should be in the 20%-30% range this year and next. That frees up a lot of cash for dividends and repurchases. [WSJ]
• The amount of waste generated by the inability to farm out services is staggering and I've seen it everywhere I've worked. An example from another industry: when I worked at a small chip startup, we had in-house capability to do end-to-end chip processing (with the exception of having its own fabs), which is unusual for a small chip startup. When the first wafer of a new design came off of a fab, we'd have the wafer flown to us on a commercial flight, at which point someone would use a wafer saw to cut the wafer into individual chips so we could start testing ASAP. This was often considered absurd in the same way that it would be considered absurd for a small software startup to manage its own on-prem hardware. After all, the wafer saw and the expertise necessary to go from a wafer to a working chip will be idle over 99% of the time. Having full-time equipment and expertise that you use less than 1% of the time is a classic example of the kind of thing you should outsource, but if you price out having people competent to do this plus having the equipment available to do it, even at fairly low volumes, it's cheaper to do it in-house even if the equipment and expertise for it are idle 99% of the time. More importantly, you'll get much better service (faster turnaround) in house, letting you ship at a higher cadence. I've both worked at companies that have tried to contract this kind of thing out as well as talked with many people who've done that and you get slower, less reliable, service at a higher cost. [Dan Luu]
• This isn't to say that software isn't hard, it's just a different kind of hard: the sort of hard that can be attacked with genius and perseverance, even without experience. But, if you want to build a ship, and you "only" have a decade of experience with carpentry, milling, metalworking, etc., well, good luck. You're going to need it. With a large ship, “minor” fixes can take days or weeks, and a fundamental flaw means that your ship sinks and you've lost half a year of work and tens of millions of dollars. By the time you get to something with the complexity of a modern high-performance microprocessor, a minor bug discovered in production costs three months and five million dollars. A fundamental flaw in the architecture will cost you five years and hundreds of millions of dollars. Physical mistakes are costly. There's no undo and editing isn't simply a matter of pressing some keys; changes consume real, physical resources. You need enough wisdom and experience to avoid common mistakes entirely – especially the ones that can't be fixed. [Dan Luu]
• Among Putin's four military interventions in the former Soviet space, three targeted Christian and Orthodox countries. The direct aggression against Georgia was to the benefit of the Muslim Abkhazians. During the last conflict in Nagorno-Karabakh, the French far right and the Republicans (Les Républicains) called for Christian solidarity against the Turkish-Muslim threat. I had reminded them in an article (Le Monde, 18 November 2020) that the Russians were on Azerbaijan's side and not at all on the Armenians' side. They let the Azeris take over Karabakh and then pretended to intervene. In the wake of the war in Chechnya, Putin supported the Chechen leader Ramzan Kadyrov. The only place in geographical Europe where Sharia law is applied is in the Republic of Chechnya, in Russia. The attack on another Orthodox nation, Ukraine, will further accentuate the divisions in the Orthodox world but also in the Christian world in general (the Ukrainian Catholic Uniates are a bastion of Ukrainian patriotism). The only Ukrainian patriarch who still recognises the supremacy of Patriarch Cyril of Moscow, Onuphre, has just called on the faithful to defend the Ukrainian homeland. Putin has lost his claim to represent the Orthodox world. [link]
• The incomprehensible thing about this war is that Russia is not a belligerent young nation in need of expansion; it is not filled with frustrated young men hoping to assert themselves in conflict, as with Syria, Afghanistan or the world’s other conflict zones; it is already elderly, ageing quickly and in some parts heading for oblivion. Some 20,000 Russian villages have been completely abandoned in recent years, and 36,000 others have fewer than ten inhabitants left and will follow them soon. A third of land once farmed in the former USSR has now been abandoned. [Ed West]
• The shopkeeper is not motivated by an intention to communicate his enthusiasm for unity of the workers of the world. Nor was his superior seized by such desire. And the leaders of the authoritarian system in which the sign is displayed know that their power would not long survive unity of the workers of the world. In fact, it is unlikely that anyone who sees the sign gives attention to its substantive content. The real meaning is not conveyed by the printed words. The greengrocer’s intention is to signal conformity and avoid trouble. Havel translates the slogan as: “I am afraid and therefore unquestioningly obedient.” [FT]
• Just bought some hot shares in Alibaba? Actually, you didn’t. The entity listed on Nasdaq, with a market capitalization of $443 billion, is a Cayman Islands company with no hard assets or earnings. It is linked to the real Alibaba Group Holding, Jack Ma’s Hangzhou-based e-commerce juggernaut, by a web of contracts that could prove unenforceable in China. Alibaba (ticker: BABA) is not alone. More than 80 Chinese firms have issued shares on U.S. exchanges using a legal structure called a variable interest entity, according to the Council of Institutional Investors in Washington, D.C. Most of them are in the internet space. With 20 announced initial public offerings of VIEs, 2017 set a record. That prompted a CII report in December titled, “Buyer Beware,” which warns that “investors’ participation in China’s emerging companies is precarious and may ultimately prove illusory.” The root of this precariousness is Chinese law, which prohibits foreign ownership of internet companies. [Barron's]
• The news does not matter. It has little, if any real impact on your life besides what you allow it to have. Like a vampire, The news- whether mainstream, alternative, printed or screen-based- is a parasitic force that will drain you of your energy, happiness and rationality if you welcome it over your threshold and in to your life. The key is to simply never invite it in. [Thomas J Bevan]
• Russia as China’s Canada gives them control of the World Island and thus nullifies America’s sea power ability to blockade China. Anyway, Xi (whose father was a powerful general and then deft diplomat praised by Mao for pacifying rebels with generous policies) is rather obviously going to help Russia a little bit then broker a peace in Ukraine. China will then be the world-ordering settler of disputes, and Russia will be integrated into the Middle Kingdom. It is already happening with the Power of Siberia 2 pipeline and the $300 billion high speed Moscow to Beijing high speed rail link with profound implications for the supply chain, plans that are being finalised as I write. Aid to Russia now will never be forgotten by the Russians, and they will subtly lulled into thinking of China as benevolent forever after. Meanwhile, every other white country is calling Putin a fascist leading a country of baby killers while most of deaths in Ukraine are Russian soldiers being hunted like hares by Ukrainians armed with inexhaustible supplies of American, German, and Swedish technologically advanced weaponry, including long range anti aircraft weapons, and maybe swarms of deadly ‘switcblade’ drones. What an absolute disaster for the West. [Sailer]
• Cuisine in colonial America was cuisine for the wealthy, and, at its peak, the Carolina Rice Kitchen possessed ingredients that would thrill any chef today: local estate-grown olive oil (and oil from benne, peanut, chestnut, walnut, pecan, and sunflower); locally produced and imported wines; fresh and lagered ales and alembic spirits; fine herbs and spices; abundant vegetables and legumes; seasonal nuts, berries, mushrooms, seeds, and greens; wild game and fish; rice-fed beef, pork, lamb, and poultry; creole charcuterie; wheat, corn, rye, oats and barley—and, let us not forget, Carolina Gold rice. [Anson Mills]
  

Monday Night Links

• The truth is, the globalists at the WEF and their partners abroad FAILED in their efforts to institute medical tyranny, at least in the US and in certain parts of Europe. The agenda collapsed because the science was against them in every respect. They had nothing. With 99.7% of people safe from covid, it was impossible to engineer enough fear in enough of the population to get them to relinquish their freedoms. So, for those of us that have been tracking these events carefully, the alarm bells really started ringing when the WEF switched gears and suddenly shifted focus to a cyber-attack narrative. Was this Plan-B? [link]
• For some years now Russia has been trying to assert control over Belarus, while its president, Alexander Lukashenko, has been quite successful in maintaining Belarusian independence. He accomplished this by playing the EU and Russia off of each other, until events in 2020 derailed this strategy. What happened was a Western sponsored colour revolution broke out which threatened Lukashenko’s hold on power. Seeing a hostile West, Lukashenko naturally turned entirely to Russia. The colour revolution ultimately achieved nothing but to irrevocably push Lukashenko into Moscow’s sphere. What makes this all so incredibly ironic is that, if it had not been for this attempted colour revolution, it is very possible Belarus would have stayed largely neutral and would not be serving as a base of operations for Russia. Without Belarus, Russia’s offensive on Kiev would be impossible. Ultimately, the West’s hostile actions against Lukashenko made this offensive on Kiev possible. [Alexander's Cartographer]
• Your morning starts to go downhill quickly, however, when you realize that your SUV is almost out of gas. You pull the old clunker, with its antiquated combustion engine, into the nearest open station you can find – it looks pretty run-down – and roll up to the pump. A dull-eyed teenager in a facemask inserts a nozzle into your vehicle and waits for you to pre-pay. You wave your phone at the pump. Nothing happens. You try again. Your phone buzzes, and you look at it. There’s a message from the Fed: “You have already spent more than the $400 maximum weekly limit on fossil fuels specified in the FedWallet User Agreement. Your remaining account balance cannot be used to purchase non-renewable energy resources. Please make an alternative purchase. Have you considered a clean, affordable New Energy Vehicle? Thank you for doing your part to build a more just and sustainable world!” You have in fact considered purchasing a clean, affordable New Energy Vehicle. But they still aren’t very affordable for you, what with the supply chain shortages. Despite the instant credit the Fed would add to your balance when buying an electric car – plus the permanent ten percent general subsidy you automatically receive on every purchase as a BIPOC individual thanks to the Fed’s Reparations Alternatives for Comprehensive Equity (RACE) program – the down payment on a new car would still be more than you can afford, even with your new stimmie coins. [N.S. Lyons]
• The soviet system had two kinds of money. There was cash (nalichnye) that was the banknotes and coins, used for wages. Then there was non-cash (beznalichnye) which was a quasi-money that the government would distribute as subsidies to factories. There were extensive regulations on the use of each, and for a factory manager to convert non-cash into cash was prohibited. The purpose of a system like this, although the book does not explain this, would have been to reduce the inflationary impact that the subsidies would have on prices of goods in cash rubles. Using a combination of bribes and loopholes that are unclear to this day, Khodorkovsky apparently found a way to convert beznalichnye into nalichnye. They were nominally both rubles, but a beznalichnye could be had for something like a tenth of a nalichnye, and there were "arbitrages" because pricing of goods were not consistent in both.  Minus bribing and other expenses, you are talking about a corrupt Russian equivalent of the Buffett cocoa bean trade. [CBS]
  
• It turns out that the points in time where the dividend yield is high (when the prices of DMLP and/or oil are distressed) are very powerful in the compounding effect of distribution reinvestment. The reinvestment of the November 3, 2008 quarterly distribution grows your stake by 4.3%. The reinvestment on May 14, 2020 grows your stake by 4.7%. The result of the compounding is that one partnership unit purchased in January 2007 grows to 3.5 units with dividend reinvestment over the 15 year period. Those 3.5 shares are worth $83.34 now on a starting investment of $21.50. That is an IRR of 9.35%. This is particularly impressive since the valuation has fallen (the Dorchester distribution yield has increased) from 8.55% (annualized) at the start in 2007 to 10.8% (annualized) today. If the yield today matched what it was at the beginning of 2007, the price of a Dorchester unit would be $29.90 and the IRR would have been 11%. [CBS]
• He mentions that a fellow at his weight club died at age 45 from complications resulting from surgery on an ascending aortic aneurysm. (And a few years before that the same fellow had "completely ruptured" his patellar tendon!) Two books in a row with people who have far-out lifestyles that cause aneurysms. I do appreciate Coach Rip's high agency approach. He believes in personal responsibility and self improvement. But it seems like he is a "short life history" guy. Intellectual stimulation is more congruent with long life history than physical stimulation. [CBS]
• There are two big concerns with trying to pack on a lot of muscle through something like Rippetoe's program, joint/ligament health and also "powerlifter belly" / insulin resistance from the high calorie diets. Rippetoe (watch him make a protein shake) gets pretty heated when the subject of "six packs" (people with low bf%) comes up. Coach Rip's attitude about bf% and insulin resistance makes me wonder how careful he is about joints. [CBS]
• Conventional wisdom holds that global elites will pivot to climate change, now that Corona is ending. I’m starting to think that this might not happen and that we’ve misinterpreted the ideological significance of Corona. Perhaps Corona happened because climate change was not good enough – because, as a politically orienting ideological system, it had failed to mobilise institutions and populations in the right way, and had entered the first stages of decline. Perhaps, in the coming decades, there will be other hysterias, but no real ideological push on the climate front ever again. I’m not saying the climatologists, their institutions and associated grifts will disappear tomorrow. In any scenario, they’ll plug on for a long time. What I am imagining, though, is a future in which they’ll be steadily deprived of inertia, and ultimately fade into the background, like the war on terror. [eugyppius]
• The truth is, that the Ukrainians are the proxy of the Global American Empire, and that is the only reason that the media has called upon westerners to care about this conflict, rather than any others. Lockdowns weren’t a one-off; the vaccinators don’t just vaccinate. The enemies who have oppressed us these past two years are appendages of a much broader system. Climatism, anti-racism, transgender lunacy, Corona, and now the Ukraine: They are all of them expressions of the same malign force; they are all of them the same thing. [eugyppius]
  

Canadian Natural Resources Limited ($CNQ) - Q4 and FY 2021 Results

[Canadian Natural Resources is our third Canadian oil company in the basket with Cenovus and Suncor. See our previous post from November 2021.]

Canadian Natural Resources (CNRL) (NYSE: CNQ) is a bit different than Cenovus and Suncor. For one thing, they don't have any refining or retail businesses, although they do upgrade the bitumen produced by their oil sands. Also, while they are a Canadian oil sands producer, both by mining and in situ extraction, they also have assets in the UK North Sea and Africa offshore (Côte d'Ivoire), plus conventional oil and gas production in Canada, including much more natural gas production than the other two companies.

The current market capitalization of CNQ (at a $60 share price) is US$70 billion, and the enterprise value based on the December 31 balance sheet is about US$88 billion. In the fourth quarter of 2021, CNQ's production was a record 1,314 MBOE/d, including 1,004 Mbbl/d of liquids.

The average price of WTI crude in Q4 was US$77. Free cash flow in the fourth quarter was US$2.7 billion. (Which we define as net income plus depreciation, depreciation, and amortization, less capital expenditures excluding property acquisitions.) Annualized, that is US$10.7 billion, at $77 average oil price. So, that is a 15% pre-tax yield on the current market valuation based on Q4 earnings, which had a much lower oil price than today.

Let's think about this quarter (Q1 2022). Suppose that the price of oil averages US$90, or 17% higher. With 1 million barrels per day of production, back of the envelope, cash flow should increase by US$1.2 billion, or 44%, thanks to operating leverage. 

Proved plus probable (2P) reserves of liquids at the end of the year were 13.6 billion barrels, up from 11.4 billion at the end of 2020. The 2P reserves of liquids grew to 11.6 barrels per share at year end 2021 from 9.6 the year earlier. (So you are paying about US$5 per barrel of proved plus probable reserves of liquids at the current share price, plus an operating cost of about US$24 per barrel for production, royalties, and transportation expenses.)

Some highlights from the Q4 conference call:

• As evidence of Canadian Natural's long-life, low-decline asset base, 77% of total proved reserves are long-life, low-decline, resulting in our top-tier total proved reserve life index of 30 years and the total proved plus probable reserve life index of 40 years. The net present value of future net revenue before income taxes using a 10% discount rate and including the full company ARO is $120 billion for total proved reserves and $146 billion for total proved plus probable reserves. [Note: this PV-10 value, which implies a $82 share price, was calculated with an oil price strip of $73 per barrel in 2022, declining to $69 in 2026. The PV-10 value with $100+ oil would be far higher.]
  
• Returns to shareholders were also significant in the quarter, with approximately $1.4 billion returned through dividends and share repurchases. Per our previously disclosed free cash flow allocation policy, with net debt now below $15 billion, target free cash flow, as defined in the policy, will be allocated 50% to share repurchases and 50% to the balance sheet. This targets to deliver significant increases in shareholder returns as well as continued financial strength.
• [Y]ear-to-date, up to and including March 2, the company has returned approximately $680 million to shareholders through repurchase and cancellation of 10.5 million common shares and the Board of Directors has approved the renewal and increase of the company's normal course issuer bid. The approval states that during the 12-month period commencing March 11, 2022 and ending March 10, 2023, the company can repurchase for cancellation up to 10% of the public float, subject to TSX approval.
  

What we like about royalty trusts and long reserve life, slow decline Canadian oil companies is that they both avoid the principal-agent problem that afflicts other types of oil and gas producers with small amounts of reserves. Managements have to buy new reserves in order to keep their jobs, and they typically have the money to do this (whether through earnings or capital raises) when the industry is doing well and valuations are high. 

Hydrocarbon E&Ps with rapidly declining production (shale) have a poor track record of creating long term value for shareholders because of this incentive conflict. They need to buy assets to keep their companies from liquidating (and losing their jobs), but they only have the money to buy assets at the top of the cycle when properties are expensive. The companies that fracked for shale over the past decade managed to transfer almost all of their investors capital (both equity and debt!) to sellers of land and service providers.

Tuesday Night Links

• The biggest antitrust violation in history may be in plain sight. Wall Street banks and money managers are bragging about their coordinated efforts to choke off investment in energy. It’s nearly impossible to raise money to explore for oil and gas right now, and we may all be experiencing rising energy costs because of this market manipulation. Russian and Chinese aggression overseas also is exacerbating inflation. [Mark Brnovich]
  
• In regard to Russia's military invasion of Ukraine, it is beneficial to recall a certain context— Russia, and Putin, just spent the last two years in near-perfect lockstep with the rest of the global regime, pretending there was a deadly plague ravaging the world. [Schwab]
  
• When you fire a prince, you fire all those who staked their fortunes on his rise; among the opponents of MBS are foreign governments who had planned for the reign of King MBN, and Saudis whose wealth and influence flowed from him. MBN’s chief adviser, Saad al-Jabri, fled to Canada. He alleges that MBS sent a team there to kill him. MBS’s government alleges that al-Jabri stole a massive fortune and is bankrolling efforts to defame the crown prince. (Both parties deny the claims.) “MBN survived al-Qaeda,” al-Jabri’s son Khalid told me. “But he couldn’t survive his own cousin.” [Graeme Wood]
• If our project is to make American culture and life enviable again, then we are going to have to start by manifesting it in agricultural form. What I will lay out in this essay is one idea of how we might go about it — in the form of a recipe for protein-rich, post-workout health food ice cream made of only three ingredients. This idea could be exchanged for others, but its underlying principles are non-negotiable. These are, among others, that agriculture must be the art of stewardship, not the practice of extraction. That it should be motivated by a sense of national pride in the peerlessness of our soils and our products, rather than by profit-seeking. And that we should maximize and cherish the freely given gifts of God, namely sunshine and rainwater, rather than compensating for their wastage with artificial means, sold to us at inflated prices by entities that only value America and its people as a parasite value its host. [William Wheelwright]
• Framed photographs of assorted Kennedys, Thatchers, Reagans and Laffers look down upon me, surrounded by the four dogs (two Cane Corsos, a Great Dane and a Peek-A-Pom – that’s a Pekingese Pomeranian), who are now asleep. Several times, we are interrupted by calls from one of Laffer’s six children and 13 grandchildren. “Happy Turkey Day to you, my darling. I’m just sitting here with a reporter from the Financial Times. Can I call you back?” [FT Magazine]
• The Republicans have the federal government--for now. But we've got Seattle, Portland, San Francisco, Chicago, Los Angeles, San Diego, New York City (Bloomberg is a Republican in name only), and every college town in the country. We're everywhere any sane person wants to be. Let them have the shitholes, the Oklahomas, Wyomings, and Alabamas. We'll take Manhattan. [The Stranger]
• “But, innovation!” the green bulls reply, theorizing that future technological leaps will make up for the current shortcomings. In doing so they assume the physics of energy are governed by something akin to Moore’s law, leading to exponential efficiency gains over time. But the physics of energy is a slave to very different laws like the Shockley-Queisser and Betz Limits. These show current levels of converting photons into electrons and capturing kinetic energy from the wind are rapidly approaching the point of significantly diminishing returns. To illustrate this, let’s suppose the efficiency of a lithium-ion battery followed the exponential efficiency of Moore’s Law. In that case, after almost 50 years of development a lithium ion battery the size of a briefcase should be able to power a transcontinental jet flight.  Instead, if done today the required battery would be 8X heavier than the plane itself. [Robert Mullin]
• First a bloody military operation was waged against Belgrade, without the UN Security Council’s sanction but with combat aircraft and missiles used in the heart of Europe. The bombing of peaceful cities and vital infrastructure went on for several weeks. I have to recall these facts, because some Western colleagues prefer to forget them, and when we mentioned the event, they prefer to avoid speaking about international law, instead emphasizing the circumstances which they interpret as they think necessary. Then came the turn of Iraq, Libya and Syria. The illegal use of military power against Libya and the distortion of all the UN Security Council decisions on Libya ruined the state, created a huge seat of international terrorism, and pushed the country towards a humanitarian catastrophe, into the vortex of a civil war, which has continued there for years. The tragedy, which was created for hundreds of thousands and even millions of people not only in Libya but in the whole region, has led to a large-scale exodus from the Middle East and North Africa to Europe. A similar fate was also prepared for Syria. The combat operations conducted by the Western coalition in that country without the Syrian government’s approval or UN Security Council’s sanction can only be defined as aggression and intervention. But the example that stands apart from the above events is, of course, the invasion of Iraq without any legal grounds. They used the pretext of allegedly reliable information available in the United States about the presence of weapons of mass destruction in Iraq. To prove that allegation, the US Secretary of State held up a vial with white powder, publicly, for the whole world to see, assuring the international community that it was a chemical warfare agent created in Iraq. It later turned out that all of that was a fake and a sham, and that Iraq did not have any chemical weapons. Incredible and shocking but true. We witnessed lies made at the highest state level and voiced from the high UN rostrum. As a result we see a tremendous loss in human life, damage, destruction, and a colossal upsurge of terrorism. Overall, it appears that nearly everywhere, in many regions of the world where the United States brought its law and order, this created bloody, non-healing wounds and the curse of international terrorism and extremism. I have only mentioned the most glaring but far from only examples of disregard for international law. [Putin]
• For fully 55 years, Mr. North wrote, edited or published some 50 books and churned out countless articles — all the while exasperating more mainstream conservative, libertarian and free-market politicians and policymakers with his relentless, if quixotic, embrace of old-time religion under the umbrella of Christian Reconstructionism. In “Introduction to Christian Economics” (1973), he wrote, for instance, that in his envisioned society no form of government welfare payments “will escape the ethical limits” of the Apostle Paul’s dictum in II Thessalonians that “if any would not work, neither should he eat.” His economic agenda opposed inflation, high taxes and big government and favored a return to the gold standard because, he said, “God would prefer gold to paper money.” [NY Times]
  
• Murray Rothbard observed remorsefully after 1991 that nobody in the libertarian movement had ever sat down and devised a transition program for the Soviet Union, on the assumption that the Soviet economy would collapse, and there ought to be a program to make the transition to free-market capitalism. That had never been attempted. It was not implemented. And so the Russian economic system is basically a version of Keynesianism. The central bank dominates. Bureaucracy dominates. The markets are not free. The system is rigged. It is simply Western crony capitalism superimposed onto the old Soviet bureaucracy, which was what Lenin imposed on the old Czarist bureaucracy. Russia is still essentially a top-down bureaucratic economy, with productivity coming from the bottom. What is different today is this: with capitalism, there is greater productivity in Russia than there ever was in the Soviet Union or Czarist Russia. [Gary North]
• Broadly speaking, dose 3 seems to have been worse than dose 2, and dose 2 worse than dose 1. Many, many of the vaccinated among you caught Corona following vaccination. There are the preponderance of infections in the week following the first and third doses, which we already knew about, but these are but a fraction of post-vaccine infections overall. Probably a big thing that has stalled the political momentum driving mass vaccination, is the prevalence of bad booster reactions followed by breakthrough infection. Another point that emerged from your letters, is the generally high threshold for obtaining an exemption from further vaccination following an adverse reaction. It was disturbing to read several stories of people who were essentially vaccinated to death – dying after dose 3, following a rough reaction to dose 1 and a near-miss with dose 2. Finally, almost all of you were vaccinated under duress. Some of you accepted vaccination simply to end the medical surveillance or to win back some freedom of movement. That was surprisingly uncommon, though; those who gave in to the petty harassments of the vaccinators generally said they didn’t appreciate the risk of the vaccines, or the outrageousness of the legal regime surrounding them, until later. Most often, people gave in to keep their jobs or to appease insistent family members. Some parents accepted vaccination so that they could attend school events involving their children; other people wanted to see elderly relatives in hospital or care homes. [eugyppius]
• Since 2014, the Ukraine has been experiencing a quiet civil war, between the Ukrainian majority in the west, and a Russian minority concentrated in the east. The ethnic Ukrainian side in this conflict has been co-opted by the supranational global imperial monolith. This is the cadre of western elites that determines political, medical and cultural orthodoxy across the world. They control not only all major political parties in most western countries, but also global international consortia from the United Nations to the World Economic Forum to the European Union to the North Atlantic Treaty Organisation. Their goal is to further squeeze Russia by turning Ukraine – including the Russian-speaking eastern regions – into another political constituent of American globalism. To the Russians – many Russians – this is unacceptable. After the Soviet Union collapsed, the globalists descended upon Russia to rape and pillage. In the years after 2000, NATO expansion was used to hem in Russia along the Baltic. These were hard years, but Russia finally reasserted its sovereignty. Since then, the western globalists have considered unaligned Russia to be their enemy, and they have adopted Ukraine as a convenient proxy against her. Ukraine is useful for this purpose, because it has considerable strategic significance, whether as a gateway to Russia through the open Ukrainian plains, or as a staging ground for American missiles. [eugyppius]
• Once you follow someone, start tracking in the back of your mind whether seeing their posts is making your life better or worse. If it turns out you’ve made a mistake, you’ll want to quickly correct it, either demoting to a list or eliminating entirely. It’s mostly a lot easier to figure this out all at once before you start, so I try to focus on that, but that can give you the wrong idea. It’s also a good idea to periodically review your list of people you follow and remove those who you realize no longer belong or are not pulling their weight. As a rule of thumb, once you get above about 300 people, you should be very suspicious that you are following too many. [Zvi]
  

Weekend Links

• It's become clear to me that a lot of intelligent people have still been underestimating the extent to which Western institutions have been ideologically captured -- and merged. If JPMorgan says something or CBS says something, there is no difference. It's all Pravda-style BS. Same people, same schools. Same zip codes. Identical resumes and experiences. You might think that their training and their professional specialization would lead to divergent outlooks, that a specialist will still approach their own field with objectivity. You would be wrong. Every Western institution will chant the propaganda du jour in perfect unison. All analysis will be subordinated to toeing that line. No matter what field -- finance, military, law, medicine. We just saw it for two years. It's not different now that we've changed the subject. [Polúmētis]
• The essay below was solicited by the editorial page of a major US newspaper, and then rejected because it did not fit its prevailing narrative. Not only are major channels of discussion closed off to dissenting views in the United States, but major news sources are blocked by internet service providers. Interfax, the post-Communist independent news service, is inaccessible from Western IP addresses, but accessible through Hong Kong, for example. The West is fighting for democracy, but using the propaganda and press control methods of authoritarian regimes. [David P Goldman]
• I am a proud Oklahoman. Yesterday I saw that the Legislature of my state, in its infinite wisdom, rallied to issue a Joint Resolution condemning the Russian invasion of the Ukraine, as if the Great Powers of the world sit with bated breath waiting to see where the Okies come down on the issue. Last summer our Senator Warren Hamilton called for the Governor to issue a Special Session to end the Covid Mandates here and was rebuffed; The Powers That Be offer a faraway conflict though with an opportunity to swagger and talk tough (and maybe get some of that sweet defense pork for donors no doubt) and suddenly they’re full of piss-and-vinegar. From what I have heard, some here had been making strides along with those from other Red States to attack on fronts ranging from protections for people refusing the Covid “vaccines” to fighting CRT to strengthening what remains of election integrity, and yet, as soon as the very people who have brought these problems upon us beat the drums of war, all is forgotten and our glorious leaders stand ready to offer up their states’ sons on the altar of Mars. Nevermind that most of us would have a hard time finding Ukraine on a map. Someone even worked the Nazis and the Holocaust into the Resolution. Just in case the media hadn’t done enough to try to establish who the Heel is in this farce. [Samuel Finlay]
  
• AerCap, the largest lessor, said Monday that as of year-end 2021 “approximately 5% of AerCap’s fleet by net book value was on lease to Russian airlines.” Net book value is a little different than the number of planes, but it’s a good way to think about the risk to the aircraft lessor. AerCap owns about 930 jets. (There are roughly 27,000 commercial jets in service worldwide.) What’ s more, AerCap reports about $34 billion in equipment-related assets on its books. So 5% of that number is $1.7 billion. The stock has shed more than $3.5 billion in market capitalization so far in 2022. That gap might be an opportunity for investors, though they don’t seem to be looking for bargains in air leasing stocks these days. Back in the initial days of Covid, the average decline from early 2020 highs for the three aircraft lessor stocks amounted to 70%. The Russian-Ukraine conflict isn’t as bad as the pandemic — at least investors can hold on to that. Air leasing stocks recovered off pandemic lows, but they took about one year to eclipse highs of early 2020. When bad things happen in the air leasing industry, investors seem to have time to figure out what to do next. [Barron's] 
  
• Taxes in the United States are not actually high. I figure, for example, that my private share of the expense of maintaining the Hon. Mr. Harding in the White House this year will work out to less than 80 cents. Try to think of better sport for the money: in New York it has been estimated that it costs $8 to get comfortably tight, and $17.50, on an average, to pinch a girl's arm. The United States Senate will cost me perhaps $11 for the year, but against that expense set the subscription price of the Congressional Record, about $15, which, as a journalist, I receive for nothing. For $4 less than nothing I am thus entertained as Solomon never was by his hooch dancers. Col. George Brinton McClellan Harvey costs me but 25 cents a year; I get Nicholas Murray Butler free. Finally, there is young Teddy Roosevelt, the naval expert. Teddy costs me, as I work it out, about 11 cents a year, or less than a cent a month. More, he entertains me doubly for the money, first as a naval expert, and secondly as a walking attentat upon democracy, a devastating proof that there is nothing, after all, in that superstition. We Americans subscribe to the doctrine of human equality — and the Rooseveltii reduce it to an absurdity as brilliantly as the sons of Veit Bach. Where is your equal opportunity now? Here in this Eden of clowns, with the highest rewards of clowning theoretically open to every poor boy — here in the very citadel of democracy we found and cherish a clown dynasty! [H.L. Mencken]
• In the 20th century, economics consolidated as a profession; economists could afford to write exclusively for one another. At the same time, the field experienced a paradigm shift, gradually identifying itself as a theoretical approach of economization and giving up the real-world economy as its subject matter. Today, production is marginalized in economics, and the paradigmatic question is a rather static one of resource allocation. The tools used by economists to analyze business firms are too abstract and speculative to offer any guidance to entrepreneurs and managers in their constant struggle to bring novel products to consumers at low cost. This separation of economics from the working economy has severely damaged both the business community and the academic discipline. Since economics offers little in the way of practical insight, managers and entrepreneurs depend on their own business acumen, personal judgment, and rules of thumb in making decisions. In times of crisis, when business leaders lose their self-confidence, they often look to political power to fill the void. Government is increasingly seen as the ultimate solution to tough economic problems, from innovation to employment. Economics thus becomes a convenient instrument the state uses to manage the economy, rather than a tool the public turns to for enlightenment about how the economy operates. But because it is no longer firmly grounded in systematic empirical investigation of the working of the economy, it is hardly up to the task. [Ronald Coase]
• Coase is best known for two articles: "The Nature of the Firm" (1937), which introduces the concept of transaction costs to explain the nature and limits of firms; and "The Problem of Social Cost" (1960), which suggests that well-defined property rights could overcome the problems of externalities if it were not for transaction costs (see Coase theorem). [Wiki]
• Facebook is worse than useless, while Twitter is indispensable and informs how I live. On Twitter I see not Tweets but conversations, as people toss out and the refine ideas about how best to live. What’s remarkable about this is how the conversations trend toward affirmation of tradition. People are mutually concluding that perhaps, despite what we are endlessly told, having a family - even a large one - is a great idea. Or meat is healthful. Or fasting makes sense. Or religion is all that really matters, and is infinitely larger than ideology. Or sacrifice in the cause of excellence is better than ease in the cause of mediocrity. Or men and women are different and complementary and that’s good. I see more clearly now that these ideas came from honest conversation. [Brad C Lemley]
• It was Uber, according to Vasquez's defense team, that should have seen the crash coming. Morrison and Kratter argue in the motion that the California company, with help from Governor Doug Ducey and Tempe police, intentionally risked the safety of the public and its backup drivers to try and stay competitive in the global race to build self-driving cars. The motion relies heavily on a report from the NTSB, which provided numerous points on how Uber's lack of appropriate safety measures contributed to the crash. [New Times]
  

Thursday Links

• The world is underinvested in commodities, over-invested in technology, and the pattern of alternating decade-long cycles between the two is reasserting itself. In the 2010s, a popular tagline was that data is the new oil. Now we are beginning to hear about how “oil is the new data”. [FT]
  
• Since the pre-Covid days (February '20), the non-currency portion of M2 has increased by about $6 trillion, or 43%. Since early-summer '20, that same measure of the money supply has increased at about a 13-14% annual rate, a bit more than twice it's long-term average growth rate. [Scott Grannis]
• Faced with much-higher-than-expected inflation, the Fed is nevertheless taking great pains to assure markets that they will address the problem in a slow and gradual fashion, by taking 25 bps baby steps per month to raise the federal funds rate beginning next month. They seem to be aligning with a school of thought that says the economy these days is too weak to sustain a rapid increase in interest rates, so it's better to be slow and gradual than shock and awe. While this reinforces the point of my last post (i.e., the Fed poses no near-term threat to the economy), it will likely only make things worse in the long run. Why? Because by pre-announcing a gradualist approach they have given investors and the public a green light to take advantage of incredibly cheap financing costs, and that will only make inflation harder to control in the future. Why harder to control? Because increasing the incentive to borrow money to buy things (cars, houses, commodities, property, plant and equipment) is equivalent to decreasing the incentive to hold money.  Borrowing money means going short money: you win if the value of the dollar declines. Paying off debt means going long money: you win if the value of the dollar increases. With the supply of money (e.g., M2) obviously in over-supply, the Fed is incredibly trying to undermine the demand for holding that money. [Scott Grannis]
• In 2021, ROFO paid $1.50 per share in dividends, $2.5 in 2020, $0.75 in 2019, and $1 in 2018. With 7.25 million shares outstanding, that was a total of $41.7 million ($5.75 per share) in four years. Interestingly, it was trading for years on end at a dividend yield north of 10%. Dividend yield can be a very good indicator. Rockford had high free cash flow conversion on its earnings, greater than 100% of net income in 2016-2018 for example, and allocated this cash flow well. They simply returned it to shareholders. [Oddball Stocks]
• So how would an investor have done owning Dorchester units over the past fifteen years, starting at the beginning of 2007? One interesting calculation to make is to look at the outcome if an investor had reinvested the quarterly distributions in more units of the partnership. It turns out that the points in time where the dividend yield is high (when the prices of DMLP and/or oil are distressed) are very powerful in the compounding effect of distribution reinvestment. The reinvestment of the November 3, 2008 quarterly distribution grows your stake by 4.3%. The reinvestment on May 14, 2020 grows your stake by 4.7%. The result of the compounding is that one partnership unit purchased in January 2007 grows to 3.5 units with dividend reinvestment over the 15 year period. Those 3.5 shares are worth $83.34 now on a starting investment of $21.50. That is an IRR of 9.35%. This is particularly impressive since the valuation has fallen (the Dorchester distribution yield has increased) from 8.55% (annualized) at the start in 2007 to 10.8% (annualized) today. If the yield today matched what it was at the beginning of 2007, the price of a Dorchester unit would be $29.90 and the IRR would have been 11%. Note that the time periods when Dorchester is richly valued actually lower the IRR that an investor following the long-term distribution reinvestment strategy earns. As an example, the highest price that an investor would have paid during the fifteen year period for units was $34.16 in July 2014, which was only a 5.6% yield on that quarterly distribution (annualized). If the units had instead been trading at the same yield as today, the unit price would have been $18.15, and an investor would have been able to buy more units, and so the IRR would have increased slightly to 9.4%. [CBS]
• At a very big picture: averaging down when you are right is very sweet, averaging down when you are wrong is a disaster. At the first pick the question then is "when are you wrong?", but this is a silly question. If you knew you were wrong you would never have bought the position in the first place. So the question becomes is not "are you wrong". That is not going to add anything analytically. Instead the question is "under what circumstances are you wrong" and "how would you tell"? When you put it that way it becomes obvious that you must not average down (much) on highly levered business models. And looking at Buffett he is very good at that. He bought half a billion dollars worth of Irish Banks as they collapsed. They went approximately to zero. But he did not double down. He liked them down 90 percent, he did not like them more down 95 percent. By contrast these are the stocks that Bill Miller blew up on: American International Group, Wachovia, Washington Mutual, Freddie Mac, Countrywide Financial and Citigroup. They were all levered business models. By contrast you can probably safely average down on Coca Cola: indeed Buffett did. It is really hard to work out a realistic circumstance in which Coca Cola is a zero. And if it is still growing there is going to be a price at which you are right - so averaging down is going to go some way to obtaining an average cost near or below that price. [John Hempton]
  
• What “Seva” Mogilevich does, better than perhaps anyone who ever lived, is move around things that aren’t meant to be moved around: narcotics from Southeast Asia, arms to Iran, sex slaves from Eastern Europe, diamonds from Africa, nukes to God knows where—and money, vast sums of money, from Point A to Point B. Meyer Lansky may have written the book on money laundering, but it was Semion Mogilevich who turned it into a blockbuster motion picture. [Greg Olear]
• Atlantic City is in South Jersey, closer to Philadelphia than New York, so to build “his” casino, Trump needed to play ball with the Philly mob. That meant dealing with Nicodemo “Little Nicky” Scarfo, head of the most powerful mob family in Philadelphia. Land that Trump needed for his casino was owned by Salvie Testa and Frank Narducci, Jr.—hit men for Scarfo, collectively known around town as the Young Executioners (the nickname was not ironic). To help negotiate the deal, Trump hired Patrick McGahn, a Philly-based attorney known to have truck with the Scarfo family. (The last name should sound familiar; Don McGahn, the former White House Counsel, is Patrick McGahn’s nephew. And Don McGahn is not the only Trump Administration hire with ties to the Philly mob. Among Little Nicky’s associates was one Jimmy “The Brute” DiNatale, whose daughter, Denise Fitzpatrick, is the mother of none other than Kellyanne Conway. [Greg Olear]
• We get a stroke alert for a 76-year-old diabetic female who had a breast cancer lumpectomy one year ago. Her husband reports returning from grocery shopping to find that she was slurring words and unable to walk. He promptly called 911 so we’re probably seeing her about two hours after the onset. Her blood pressure is 215/100, too high for TPA, so she’s on a nicardipine drip in hopes of bringing it down. The neurologist calmly examines her with standard techniques (“follow my hand with your gaze”) and some of his own design (“close your eyes and tell me what you feel” as he hands her objects such as a key or lighter). She has a left facial droop, dysarthria (speech disorder due to muscle weakness), right gaze preference, and a left hemianopsia (blindness). Like most of our stroke admits, she gets a CT perfusion scan (five minutes and reimbursed at $12,000 by Medicare) to see if she is a candidate for endovascular intervention, i.e., clearing out a plumbing clog with a drain snake. Her scan is among the 10 percent that suggest endovascular intervention: proximal (closer to the heart) clot surrounded by potentially viable tissue. Her clog is in the middle cerebral artery (MCA, the main artery of the brain). She is carted off to the endovascular suite. I call Straight-Shooter Sally, who did not get to see an endovascular procedure on her week of stroke service. We meet up in the Interventional Radiology suite; endovascular procedures are split between interventional radiology and interventional neurology. We’re both excited, but the neurologist doesn’t say anything during the 45-minute procedure. [PhilG]
• Singer Vehicle Design is an American company that modifies Porsche 911s. It was founded by Rob Dickinson, former frontman of the English rock band Catherine Wheel. The company is based in Los Angeles, California. The name Singer Vehicle Design pays homage to noted Porsche engineer Norbert Singer as well as acknowledging Dickinson's previous career as a vocalist. The company's motto is "everything is important", a reference to their design philosophy in which no aspect of the car is overlooked and even the smallest details are enhanced. The company's main product is a "re-imagined" 911, which is a heavily modified coupe or Targa Porsche 964. Much of the bodywork is replaced with carbon fiber body panels and the engine is reworked by engine manufacturers such as Cosworth, Ed Pink Racing Engines and Williams to produce significantly more power. The long hood of the Porsche 911 classic replaces the shorter hood of the Porsche 964. Relocated fuel filler and oil filler caps are a nod to historic Porsche race cars. The tachometer is colored in Singer Orange and displays values up to 11, a reference to the up to 11 meme (though engine redline is 7,900 RPM). [wiki]
• One thing you didn’t predict, understandably, is the “Twitterization” of the conflict. Suppose that you set out in 2019 to predict how governments would respond to the next pandemic. How would you do this? Presumably you’d look at their responses to past pandemics, estimate the probable severity of a virus, follow the latest public health discussions and the latest vaccine technology, etc. Would that exercise lead you to predict what happened over the last two years? No, not even close. What happened was that people in early 2020 scrolled and tweeted their way into a frenzy. This deeply affected those in leadership roles, partly because they were responding to their constituents and partly because they themselves spend a lot of time scrolling and tweeting. As a result, the pandemic response was far more extreme and far different than someone in 2019 would have predicted. Just as COVID-19 is the first pandemic in the Age of Twitter, so the Ukraine invasion is, in some sense, the first war in the Age of Twitter. As it unfolds, we are seeing many disturbing parallels to the events of early 2020. People are rapidly normalizing once-fringe ideas like a NATO-enforced no-fly zone, direct US conflict with Russia, regime change in Moscow, and even, incredibly, the use of nuclear weapons. Just as with COVID, we’re seeing the rapid abandonment of longstanding Western policies. The overnight flips on German defense spending and SWIFT are like the overturning of conventional public health policies on masking, lockdowns, and so on. The emotionalism and recklessness we see in the Western professional class right now are producing an extremely dangerous situation. Let’s hope that it can be de-escalated before we get into a world war. And in making future predictions, we should acknowledge that the hyperconnected world brings with it new tail risks produced by rapid online escalation. [Richard Hanania]
• The implied market capitalization of LICOA at a $26 LINSA share price is $21 million, or 30x the reported net income of $690k for 2021. The net income was a paltry 2.1% return on statutory equity. However, the adjusted book value per share grew by much more than the paltry ROE suggests, because of the accretive repurchase as well as the investment portfolio gains that do not flow through the income statement. It is noteworthy that LICOA is profitable, overcapitalized, bought back 20% of its outstanding shares last year, is being sued by minority shareholders, but the nonvoting shares last traded for only 42% of adjusted book value per share. [Oddball Stocks] 
• I read the Strauss and Howe book Generations when if first came out in 1992. If I recall correctly, they thought Generation X (which they called the “Thirteenth Generation”) was going to have to fall on a grenade to restrain the Boomers so that the Millennials could inherit the earth. I’m no fan of their generational theory, but that does seem to be what awaits Generation X. Perhaps best and most extremely illustrated in the case of Julian Assange, now rotting in jail in England, Generation X critics are likely to pay a price, sometimes a steep one for defying the Boomers. Look at the pressure being brought to bear against Joe Rogan, for example, for his daring to entertain guests with ideas contrary to the party line. [Aaron Renn]
• Marathon Oil (MRO) caught the market a bit off guard today when it disclosed that it had bought back $724mm of its stock in 4Q21. Halfway through February, it further disclosed that the buyback is still running hot with ~$375mm repurchased year to date. Measured as a % of market cap, MRO’s repurchase activity is heads above the rest of energy, beating CNX who took advantage of 4Q price strength to step up its buybacks, and MPC who is in the midst of a laborious return of capital after selling its Speedway business for $21B last year. Even on an absolute basis, MRO’s 4Q activity stands out, falling behind only COP (7x market cap) and MPC (3x market cap, distributing asset sale proceeds). We learned a while ago to follow the capital, not the narrative. [viscosityredux]