Friday, May 13, 2022

Friday Night Links

  • Mr. Smil wants to correct what he sees as two increasingly common bad ideas. One is environmentalism of the kind that promotes what the author argues are “unrealistic” decarbonization goals without a serious appreciation of current global dependence on fossil energy. Arbitrary, long-range targets to be achieved in years that end in “5” or “0” are his bĂȘte noire. Fossil energy, he makes clear, remains the hidden basis not just of transportation but also heavy industry, construction and agriculture. In a few stunning pages, Mr. Smil walks you through a stomach-turning calculation of how much diesel-fuel equivalent of fossil energy goes into every chicken, loaf of bread, and tomato you eat. The other foil for Mr. Smil is a breathless techno-optimism—the promise that apps, AI or terraforming Mars can rescue us from our greatest civilizational challenges. Mr. Smil has a strong preference for physical technologies over digital ones. He is a poet of the cement kiln, the steel forge, PVC and the diesel engine. He lacks the same regard for nifty smartphones or disembodied software. [WSJ]
  • You can think of a variety of reasons why the market would discount these equities. Maybe the market doesn’t believe the PV-10 for an individual company or there are company specific issues (like with AMPY / Beta). That’s fine…. but this discounting is happening sector wide. The two most likely reasons for the sector wide discount are: The market is worried management teams are going to look at current prices and plow all of their cash flow into M&A and drilling new, high cost wells….. and then the companies will blow up when the cycle turns (this is what I like to call “going wildcatter”). The market flat doesn’t believe the commodity curve. But #1 is solvable with shareholder oversight, and #2 is solvable with financial engineering. Which brings me to the question I’ve been thinking about recently (and the purpose of this article): when are we going to see activist funds and private equity step into the energy space? [Andrew Walker]
  • The crucial part of any political campaign is media coverage, and the media won’t cover what isn’t “new”. So I vaguely dropped a note to Steve Hsu saying that I’d come up with a very clever political/media strategy to finally fix the Asian Quota problem, but wouldn’t be able to get around to working on it until the end of the year. And for the next eight months I kept my planned project entirely to myself while I was busy with my software work and various other things. People in the political world tend to gossip an enormous amount and if I mentioned it to anyone at all, such a simple and exciting idea would surely have spread like wildfire. [Ron Unz]
  • I think the opportunity is to buy anti-bubble, value stocks (energy, tobacco, banks, coal, and timber are some cheap sectors) while simultaneously betting against the Robinhood bubble. I think that most of the 19 stocks that I posted above are worthless and a handful are maybe worth 0.1x the valuations they currently trade. That makes it a $1.5 trillion short opportunity, as big as the housing bubble shorts (including the mortgages) were when I started this blog. We know that we can't short them, because criminals and the innumerate can squeeze them to arbitrarily high levels before they collapse. The logical conclusion would be the same one that we came to in 2007-2008: long term put options. I have started to play with the risk/reward numbers on the Robinhood Bubble 19. It is actually hard to beat Tesla as a put option candidate - with NKLA for example, you have a more certain downside but more expensive options. [CBS]

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