Wednesday, April 27, 2022

Wednesday Night Links

  • Fossil Future systematically analyzes the world’s energy, environmental, and climate choices from a human flourishing perspective—and concludes definitively that, as the subtitle of the book says: “Global human flourishing requires more, oil, coal, and natural gas—not less.” [Alex Epstein]
  • A&M seems to have a higher marriage rate than almost any schools outside of seminaries, small religious colleges, and those serving either the Mormon or Orthodox Jewish communities. I think the Mormon comparison is apt; the essence of the Aggie is earnestness, enthusiasm, and a lack of cynicism that outsiders can find a bit unnerving. That such a culture, like Mormons, produces marriages at a higher rate is not a surprise. And remember this is not tracking marriages right out of college, but rather the percentage of alumni married by age 34, which is probably fairly representative of lifetime marriage rates. [The Tom File]
  • Chart #4 compares the unemployment rate to federal spending as a percent of GDP. It should be pretty clear that spending is largely driven by the unemployment rate, which is another way of saying that Congress attempts to alleviate the pain of recessions by spending lavishly. In the case of our recent Covid-lockdown recession, Congress effectively went berserk and over-spent ridiculously. Spending is still in la-la land, and by an order of magnitude which goes a long way to explaining why we have so much inflation. Why? Because the surge in spending was largely financed by money printing, as I have documented repeatedly with my charts of M2 growth. The last thing this economy needs is more spending (affectionately referred to by politicians as "stimulus"). If there's a silver lining to the Biden/Harris incompetence cloud, it's that Congress is unlikely to be able to muster the votes to authorize yet another round of "stimulus." Long-time readers and supply-siders know that government spending never stimulates. It's just a headwind for the economy because government is commandeering the economy's resources and effectively wasting them. The government can never spend money as efficiently and as effectively as the private sector can. [Scott Grannis]
  • A collective groan could be heard on Monday when Philadelphia said it was reinstating the city’s mask mandate. It was a bad omen for Democrats. Leave aside whether it is necessary — most experts, including the Centers for Disease Control and Prevention, think it is not — liberals will pay a price for any restrictions, even essential ones. Voters were already furious about the school closures in the first year or more of the pandemic that in hindsight look like overkill. A return to enforced masking is just the kind of move that will boomerang. [FT]
  • Rivian Automotive Inc. Chief Executive RJ Scaringe is warning that the auto industry could soon face a looming shortage of battery supplies for electric vehicles -- a challenge that he says could surpass the current computer-chip shortage. Car companies are trying to lock up limited supplies of raw materials like cobalt, lithium and nickel that are key to battery making, and many are constructing their own battery plants to put more battery-powered models in showrooms. Mr. Scaringe said building enough batteries will be among the biggest hurdles for an industry trying to boost electric-vehicle sales from a few million today to tens of millions within the decade. The shortages will occur everywhere from the mining of raw materials, to processing them, to building the battery cells themselves, he said. "Put very simply, all the world's cell production combined represents well under 10% of what we will need in 10 years," Mr. Scaringe said last week, while giving reporters a tour of the company's plant in Normal, Ill. "Meaning, 90% to 95% of the supply chain does not exist," he added. The semiconductor shortage that is disrupting the auto industry was a relatively small supply-demand imbalance that then led to aggressive overbuying and stockpiling, putting the car sector in the difficult position it is in now, Mr. Scaringe said. With batteries, it is expected to be an order of magnitude worse, he added. "Semiconductors are a small appetizer to what we are about to feel on battery cells over the next two decades," Mr. Scaringe said. [Barron's]
  • Canadian oil majors, royalty owners, and hydrocarbon pipelines are all priced as though disruption - actual replacement by wind and solar and electric vehicles - is going to happen in the next five years or so. But simple back of envelope economic calculations based on physics and energy density tell us that replacing fossil fuels (again, 80% of current world energy consumption) with those energy sources, the so-called "energy transition," is impossible. That means that the world is seriously under-investing in hydrocarbon production and traditional energy infrastructure, and over-investing in electric vehicles (TSLA) and in wind and solar boondoggles that will collapse the way the previous iteration (e.g. Suntech Power, Evergreen Solar, A123 Systems) did a decade ago. [CBS]
  • The third, less-successful small city in Mallach’s typology is the “urban transfer payment city.” These places, like Youngtown, Ohio, subsist almost entirely off a variety of subsidies, including traditional welfare programs like food stamps, state and federal municipal aid, Medicare and Medicaid, student loans and Pell Grants, and other such programs. In these cities, even many residents holding what appear to be marketplace jobs with private health insurance—such as employees of hospitals or colleges—are indirectly supported by transfer payments. The future of such places is grim. [Aaron Renn]
  • Did you know that "telegraph" originally referred to a system of conveying information by means of visual signals, using towers with pivoting shutters, also known as a semaphore line, Napoleonic semaphore, or optical telegraph? It was invented in France in the 1790s and used throughout the world until the advent of the electrical telegraph. Telegraph Hill in San Francisco was where a semaphore tower was built in 1849 in order to signal the rest of the city what kind of ships were entering the Golden Gate, and therefore predict what kind of cargoes would be carried and what would happen to local prices for those goods. It was the high frequency trading of its day! Also, France banned unauthorized optical telegraphy in 1837 because a monopoly on the swift spread of information was a tool of state power. [CBS]
  • Shopkeeper Jonathan Faez has a word of advice to people around the world obsessing about inflation: Chill out. “I have friends in the United States and Spain and they’re telling me they’re going crazy with their annual inflation of 5% or 7%,” says Mr. Faez, owner of a lingerie store. “Here, we reach 4% almost every month!” Welcome to Argentina, where high, nearly uncontrollable inflation—now at an estimated 55.1% over the past year—is as natural as the country’s juicy sirloins and sensual tango shows. With the rest of the world experiencing higher inflation—byproduct of supply chain crunches, heavy stimulus spending and the war in Ukraine—Argentina offers something of a window to those who fret about just how high inflation will go and what it will mean to their everyday lives. They’ve had practice: In the late ’80s, runaway government spending sent inflation soaring above 3,000%, and after a period of relative stability the figure has been creeping up again, reaching 6.7% in March alone, the highest in 20 years. “Here 40% is normal,” says Mr. Faez. “And when we get past 50%, it doesn’t scare us, it simply bothers us.” [WSJ]
  • Flat prairies are underrated. I grew up on one. It has pros. Big skies, being able to see the northern lights, and the stars. Lots of sun. Nebraska is rates as having 223 sunny days per year, which is above average. It has an 8.7 "comfort index" in the summer. Flat places also have lazy meandering rivers which are nice for fishing and canoeing. Really you just have to adjust your expectations of what constitutes beauty - instead of tall peaks and views, you get expansive cloudscapes. Instead of water falls, lazy rivers. It's a little odd that everyone seems to think that the goal of a hike is to get to a tall peak so you can get a view. There's plenty of stuff to look at in flat places too. [Marginal Revolution]
  • Considering that Ivan Throne has already managed to get himself banned from the New and Improved Twitter (Musk edition), I am confident that all of Musk’s blatherings about FREE SPEECH are nothing more than empty rhetoric and advertising to bring all the basic conservatives and their gatekeepers back into the conservative sheepfold. As far as I’m concerned, literally nothing has changed. Furthermore, I note that the Enlightenment value of consequence-free freedoms of speech and expression is neither a Christian moral value nor a societal virtue. Societal virtue is determined by qualititative measures, not quantitative ones. A society or an institution that permits everything is better described as licentious, not free, while a society or an institution that bans blasphemy, obscenity, and vulgarity is fundamentally different than one that bans the existence of opinions about historical events, sexual behaviors, and certain nations. Musk’s faction is almost certainly more libertarian and licentious than the social justice faction, but it’s entirely possible that, given his predilection for dabbling with women enamored of spiritual darkness, that it is even more deeply wicked. [Vox Day]
  • Cenovus Energy Inc. is further increasing shareholder returns on the strength of its balance sheet and ongoing reliability of its operating performance. The company’s Board of Directors has approved tripling the base dividend starting with the second quarter of 2022, as well as a plan for additional increases to shareholder returns. Beyond the base dividend increase, Cenovus will target to return 50% of quarterly excess free funds flow to shareholders when reported net debt is less than $9 billion. The company will do this through share buybacks and/or variable dividends while also continuing to pay down the balance sheet. Cenovus has adopted an ultimate net debt target of $4 billion. When reported net debt is at the $4 billion floor, Cenovus will target to return 100% of that quarter's excess free funds flow to shareholders through share buybacks and/or variable dividends. [Cenovus Energy]
  • Although Spokane, at less than 100 miles from the Canadian border, is considerably north of Minneapolis, Spokane’s average January low is 16 degrees warmer, and its typical July humidity is 21 percentage points lower. (On the other hand, winters linger so long that at a restaurant on April 24, the warmest day of the year so far, the manager brought us a round of champagne for being her first customers of 2022 to eat out on the patio.) [Sailer]
  • For the first quarter, NewGen Products net sales decreased 37.1 percent to $23.5 million. The regulatory environment for the vape businesses continues to impact sales. For the quarter, the NewGen Products segment gross profit decreased 37.7 percent to $7.8 million. The segment gross margin contracted 40 basis points from the previous year to 33.0 percent. [Turning Point Brands]
  • The market for used general aviation airplanes is crazy. In the five decades I’ve been paying attention to such things, I’ve never seen anything like it. Other GA industry veterans I’ve spoken with all tell me the same thing. There’s an airplane buying spree going on, apparently driven by pent-up demand and historically low interest rates, and prices have been going through the roof. How crazy? Well, I’m looking at a listing for a very low-time 2021 Cirrus SR22 G6 GTS with an asking price of $1.25 million. Seriously? Cirrus’s 2021 factory price list shows a price of $886,800 for this airplane brand new, which strikes me as awfully pricey for a four-seat single-engine piston airplane. Why would anyone pay a $363,200 premium for a slightly used SR22? Perhaps because the slightly used one is available today and a new 2022 model from the factory has an eight-month wait time. Buyers have itchy trigger fingers at present, and they just don’t want to wait. [AOPA]
  • At the start of the month, the five largest components of the index (Microsoft, Amazon, Nvidia, Tesla and Apple, aka MANTA) traded at about 55-times their aggregate free-cash-flow (and nearly 70-times when you back out stock based compensation). Now that might not be totally obscene if it weren’t for the fact that free cash flow growth has recently turned negative. [Felder]
  • The decades preceding the pandemic were characterized by chronically weak demand and a seemingly limitless supply of capital, labor and raw materials, resulting in persistently low inflation and interest rates. Those conditions have since flipped. Demand is robust, especially in the U.S., where fiscal and monetary support have been especially generous. Advanced economies report shortages of labor, and Covid-19 continues to snarl supply chains, most recently in China. [WSJ]

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