Thursday Night Links

• ESG, then, represents an attempt at self-justification by turning virtues into sins to atone for sins now considered virtues. It is an alternative religious order. Those who reject this moral system in favor of traditional views will have an advantage in investing and won’t have to bear any “emotional cost” for doing so. Even if we accept the premises behind their weather models, reducing carbon emissions enough to move the needle on climate change would result in the impoverishment if not starvation of billions of people over several decades. Whatever climate effects might occur from higher CO2 concentrations are small compared to the geopolitical risks involved in reducing them. I don’t think meaningful reduction is politically possible, which means ESG is not an evil genius conspiracy theory but rather a pathetic act of religious devotion to a false god, i.e. a status display. Thus, investment in essential commodities, especially fossil fuels, should continue to produce outsize returns, without guilt, to those who can see the world clearly. My many friends in the petroleum industry do noble work, partnering with Providence in liberating humanity from its entire previous history of poverty and privation. Petroleum almost alone is the basis of our modern prosperity, a divine gift for mankind, the only creatures who could make use of it. [The Tom File]
• The reality from the fundamental supply and demand of things is that the oil market deficit we are seeing won't end just because the Fed raised interest rates. We are talking about physical commodities here, so without proper capital investments, you won't get the needed supply. What the Fed may induce in the short-run by jacking up interest rates is by lowering oil demand. But over time, consumers adapt, growth resumes, and oil demand picks back up. As we've said many times over the past few weeks, if high oil prices are the result of the recent demand slowdown, then low oil prices will just push oil demand back up. The end result is a yo-yo market going back and forth. For a while, the market may believe that the Fed is effective in fending off inflation. Commodity prices drop, but then because of the price drop, commodity demand picks back up, and yo-yo supply/demand here we go. That's why this is a bear market for the broader equity market. There's no solution to the commodity market crisis we are seeing, and this is especially the case with the oil market. The only reason why I'm cautious about oil in the near term is that prices are high enough to dampen demand. But when prices fall, demand picks back up, and the deficit will worsen. [HFI Research]
• Once the market sees what we see, demand is bottoming, then oil prices will start to go back higher further pressuring inflation. This will, in turn, result in the market realizing that inflation has not peaked and that the Fed will have to continue increasing interest rates. The end result will be where energy starts to massively outperform tech. [HFI Research]
  
• The market cap of Suncor is $42 billion and EV is $53 billion. With net earnings of $3.1 billion for the quarter, shares are trading for 3.4 times annualized earnings. The adjusted funds from operations of $4.1 billion for the quarter is an annualized AFFO/EV yield of 31%. Suncor's proved and probable reserves are 5.8 billion barrels, so that's an enterprise value of $9 per barrel. The PV-10 of their proved and probable reserves was $50 billion at year-end 2021, which was calculated based on the $66.56 average WTI price last year. That means the present value of the reserves at a much lower oil price than current WTI covers almost all of the current enterprise value and puts a $3 billion enterprise value on the refining and marketing operations which earned $2.2 billion after tax in 2021 (and $1.6 billion this quarter). [CBS]
• Given the inertia of a monetary inflation, bringing it under control to the point that inflation approaches what is now discounted in the markets (2.5%) will require an aggressive tightening of monetary policy over a sustained period, and a significant and sustained weakening of employment markets. As central banks pursue their dual mandate of maximum employment and stable prices, they will not be able to achieve both at the same time and will be forced to choose between too-low growth in order to achieve their desired inflation rate, or too-high inflation in order to achieve their desired employment conditions. In managing through this, we see them toggling back and forth in their prioritization, trying to avoid both an unacceptably deep economic contraction and an unacceptably high inflation rate, culminating in a long period of too-high inflation and too-low growth, i.e., stagflation. [Bridgewater]
• So it is an error to wait around for inspiration, or to demand some feeling of readiness for an undertaking, or for a teacher or some other golden opportunity. I think these slouching inclinations come partly from an overly-systematized experience during childhood school years, and partly from a fear of failure. In fact, when you stop waiting for others—for either their permission or instruction—and instead begin on your own, fumbling through, regardless of how ready you are, this could be considered one of the true beginnings of adulthood. I think there is value in pushing learning and doing as close together as possible. I wish to learn like an apprentice with no fixed master, instead with repeated trial and sharing the results. If no teacher is found along the way, then the mistakes will be my teacher. Every undertaking is a series of questions and experiments. I believe every hard thing you do, for that matter, acts as a multiplier on the rest of your knowledge. [Simon Sarris]
  
• Blake Masters: Well, in theory, better technology makes workers more productive. And more productive workers can command higher wages, which ultimately should make it easier to raise a family on one income. The problem is that  technological ‘progress’ in the last forty or fifty years has been mostly confined to the information technology sector, and this has actually only made it harder and harder for people to connect and raise families. Think of the kind of technology we have now: ubiquitous smartphones, Netflix, apps delivering bespoke marijuana products right to your door, etc; that’s not the kind of tech that encourages people to build relationships, because these technologies are designed to make people ‘escape’ rather than connect. Even dating apps, which are nominally about cultivating romance and connections between men and women, turn out to be pretty transactional and soulless. All of this enables a sad techno-culture that is basically hyper-individualistic and anti-family. I know a lot of CEOs and software designers in Silicon Valley who don’t even let their own kids near a smartphone. So no, I don’t think this kind of technology has much of a role in fixing these problems. Technology that actually made us more prosperous and productive? That’s a different story. [im1776]
• Thanks to all of the jet charter companies having their best years ever (they and their clients all standing under a shower of federal cash), the level of staffing and service at FBOs is high anywhere that a Gulfstream might land. Air Traffic Control was operating smoothly and provided VFR advisories for the entire trip except for the last 40 miles into the Oshkosh area. The rental car crisis seems to have abated as long as you’re willing to pay 100 Bidies per day for a car that used to be $50 per day. Ubers, too, were plentiful (Indianapolis and Chattanooga). [Phil G]
• They've lost 90% of their market cap. Apple Watch has, in some ways, helped the Rolexes and the Omega's of the world because Rolex and Omega and TAG Heuer, they are luxury to most people. They're clearly expensive. They start around 5,000 bucks instead of around one, like some of the other folks do. That's the baseline now. Now, you want a Rolex, Omega, TAG Heuer or above or nothing. You don't want the Shinola anymore. You don't want the Fossil anymore. And I think Apple Watch was a big, big player in that. [link]
• He wrote the screenplays for most of the 37 feature films he directed, many of which are today considered classics: The Maltese Falcon (1941), The Treasure of the Sierra Madre (1948), The Asphalt Jungle (1950), The African Queen (1951), The Misfits (1961), Fat City (1972), The Man Who Would Be King (1975) and Prizzi's Honor (1985). [John Huston]
• In all the articles I read about AI in the mainstream media, I tend to sympathize with the poor racist robots who keep getting condemned for Noticing Patterns. Machine Learning systems remind me a lot of myself. They go out and read a lot of crime statistics and book reviews and the like and keep coming up with theories about how the world works that make The Establishment extremely mad because they tend to use Occam’s Razor instead of Occam’s Butterknife. [Sailer]
• Cenovus Energy Inc., through its U.S. operating business, has reached an agreement to purchase bp’s 50% interest in the bp-Husky Toledo Refinery in Ohio. Cenovus has owned the other 50% of the refinery since its combination with Husky Energy in 2021. Cenovus’s U.S. operating business will assume operatorship from bp upon closing of the transaction, which is expected before the end of 2022, dependent on the satisfaction of closing conditions. Total consideration includes US$300 million in cash, subject to customary closing adjustments, plus the value of inventory. In addition, the parties have signed a multi-year product supply agreement. “Fully owning the Toledo Refinery provides a unique opportunity to further integrate our heavy oil production and refining capabilities,” said Alex Pourbaix, Cenovus President & Chief Executive Officer. “Operating the refinery will open up additional synergies and capital efficiency opportunities, including connectivity with our nearby Lima Refinery. This transaction solidifies our refining footprint in the U.S. Midwest and increases our ability to capture margin throughout the value chain.” The transaction will give Cenovus an additional 80,000 barrels per day (bbls/d) of downstream throughput capacity, including 45,000 bbls/d of heavy oil refining capacity. [Cenovus]
• A month after departure from England, it became clear that SUHAILI had a very serious leak, forcing him to pump the bilges twice a day. On a calm day off the coast of West Africa, he went over the side with mask and snorkel and discovered two long gaps in the planking on each side of the keel, and they moved with the rolling of the boat. Over a cigarette, he considered the nature of the problem and what he might be able to do about it. (Skilled maintainers advise never trying to solve a new or complex problem without a thorough mulling first.) If it was a structural issue, it could cause the boat to eventually break apart, but she had been overbuilt of strong India teak, and maybe it was just a matter of caulking the gaps – if he could figure out how to do it all by himself at sea. Dressing in a dark shirt and jeans to hide his white body from potential sharks, he dove down and tried wedging strips of cotton caulking into the gaps. But five feet underwater, he couldn’t hold his breath long enough to secure the caulking in place. He thought some more. Then he cut a 1- 1/2inch canvas strip seven feet long, sewed caulking to one side of it, coated it with Stockholm tar, and pushed tacks through the canvas every six inches. With a hammer he kept suspended below the hull, he was able to pound in the tacks to hold the caulking in place, but he could only manage one tack at a time before having to surface to breathe. It took two hours. Then, worried that the canvas strip might tear off eventually, he cut a long strip of copper that could be nailed over it. Meanwhile a shark had arrived and was circling the boat. He fetched his rifle, shot the shark, and watched it sink out of sight, apparently without attracting other sharks. He went back into the chilly water hoping that was so. He was successful with the copper strip, but the wind came up, and he had to postpone sealing the second gap until another calm several days later. When that one was done, his leak was fixed. Sometimes maintenance involves shooting the shark. [Stewart Brand]
• A single dose of horse paste containing 20mg Ivermectin taken in the first day or so of the infection will cure you very shortly, and if taken prophylactically because you have close contact with Covid cases, gives you protection for a month or so. If taken after a few days, not so effective. In that case you might want to keep on taking it, though it has little effect after the first week or few days. Nicotine is also effective, and, unlike Ivermectin, effective later in the infection. Get a patch if you failed to take Ivermectin promptly. And all the usual stuff, vitamin D and balanced divalent salts, in particular zinc. [Jim]
• Cardiovascular effects were found in 29.24% of patients, ranging from tachycardia, palpitation, and myopericarditis. Myopericarditis was confirmed in one patient after vaccination. Two patients had suspected pericarditis and four patients had suspected subclinical myocarditis. Conclusion: Cardiovascular effects in adolescents after BNT162b2 mRNA COVID-19 vaccination included tachycardia, palpitation, and myocarditis. The clinical presentation of myopericarditis after vaccination was usually mild, with all cases fully recovering within 14 days. Hence, adolescents receiving mRNA vaccines should be monitored for side effects. [link]