Thursday Night Links

• We are still in the opening innings of the reversal in value versus growth, but today was a big drawdown for growth investors. Do you even hear any of them questioning themselves? From what I can see, they are blaming macro factors and not considering the strategic factor bet. [CBS] 
  
• This is a good paper from commodities investor Goehring & Rozencwajg. One point it makes is that while the unit economics of drilling for oil are attractive right now, the economics of spending that same sum on buying back stock are even more appealing. Low multiples are both a tax on capital expenditure (each incremental dollar of capex produces less market value than it otherwise would) and a subsidy to buybacks (if the stock is trading at a discount to its fair valuation, buybacks make it cheaper). A very off-the-wall policy proposal for fixing this would be to expand the strategic petroleum reserve's mandate, and allow it to not just buy physical oil but to buy huge amounts of stock in oil companies, too. The SPR is a special kind of investor with an unusual utility function: their mandate is cheap oil (at least at times when it's expensive), and one way to indirectly produce it is to ensure that the substitute good of oil-related equities isn't so competitively cheap. In the event that oil prices rise, owning those equities is a hedge against refilling the SPR on less advantageous terms. And if oil stocks underperform, it also means the SPR doesn't need as much money. The current value of the SPR is about $30bn, but it's been worth upwards of $100bn in the past, and $100bn is enough to buy 10% of every company in the S&P 500 energy index, which would probably have a market impact. T. Boone Pickens once joked that the cheapest place to drill for oil was on the floor of the New York Stock Exchange. If that's the case, organizations committed to a stable and cheap supply of oil should adjust incentives accordingly. [The Diff]
• The hardest part of traversing Nevada was undoubtedly the desolation. Back east we often had a town for breakfast, lunch, and dinner, with plenty of places to hide from the sun and wind. In Nevada, we were forced to ride huge chunks of milage just to reach the next town. Coupled with the 2-4 1,500ft mountain passes per ride, we were in rough shape by the end of this section. We typically road between 60-85 miles between towns, so we had to haul more water weight than usual, which only made the climbs tougher. During this section, I was very much in “biking mode.” That vision in my head that encourages me to stop and create photos was all but silent, replaced by the desire for cold chocolate milk and shelter. Continuous pedaling was the only way to convert this daydream to reality. [Chris Hytha]
  
• I believe spike protein toxicity is the most universal reaction to the vaccines. Whereas autoimmunity is not a typical response to them, circulating spike protein is the universal response. The most likely mechanisms of spike protein toxicity are in acting as a pore-forming toxin, increasing the production of breakdown-resistant clots, and binding to ACE2 receptors to drive increases in hypertension. Spike protein toxicity and autoimmunity are not mutually exclusive, but the causation starts with the spike protein. Spike protein toxicity will cause tissue damage, and tissue damage often causes autoimmunity. [Chris Masterjohn]
• Actual working business applications of blockchain were really, really hard to find. Plenty of blockchain products were on offer, characterized as “polished”, “robust”, “production-ready”, and “regulator-approved”. But if you looked hard at their customer stories, it got pretty vaporous pretty fast. The throughput of proof-of-waste blockchains was just as bad as we thought. In practice, the technology is a database. Everyone who did anything had some sort of a database structure mapped over the actual blockchain, with the usual B-trees and so on. It wasn’t obvious how anything would be different if there were something other than a blockchain behind the B-trees. The Australian Stock Exchange was betting the farm on blockchain, which seemed to prove this was no joke. A huge, almost incomprehensible, volume of venture capital was flowing into the sector, and that money was localized in the Finance sector, specifically in Manhattan. AWS was already making a lot of money off blockchain. All these venture-financed companies had to build out infrastructure, and most of them were all-in on cloud, either AWS or GCP (don’t think Azure got much of that biz). So there was a serious flow of cash from VC firms into AWS. [Tim Bray] 
• The Great War is my favorite to study, both because I like dumb stuff, and it was the dumbest war ever, and because it was the dawn of the modern world. Everything about modern life can trace its origins to the era of 1914-1919; all the bad, all the good, all the stupid and what little cleverness there is all comes from that time. Other than the invention of antibiotics, we really haven’t appreciably advanced beyond that era: something we can’t see now because we have iphones and the internet, but something future historians will consider as obvious as the fact that the Dark Ages started with the sack of Rome. Just as Western Civilization staggered and faded after the fall of Rome, Western Civilization has never really recovered from the shock of the Great War. Cultures which endured and developed over a thousand years were wiped out, never to return again. Western culture, abstract thought and artistic development: nothing important has developed since 1919; we’re still reeling from the shock. If you want to understand the present: contemporary history started in 1914. The battleship isn’t a bad place to nose around and figure out where we are and how we got there. [Scott Locklin]
  
• PM USA has entered into a JV with a subsidiary of JT, Japan Tobacco International (JTI), for the U.S. marketing and commercialization of HTS products. HTS products are defined in the JV as products that include both (i) a tobacco heating device intended to heat the consumable without combusting and (ii) a consumable that meets the definition of a cigarette under the U.S. Federal Cigarette Labeling and Advertising Act. JT is a leading international tobacco company and currently sells Ploom HTS products in four countries. JT launched its most recent HTS device, Ploom X, in Japan last year and since its introduction, JT has doubled its share of the Japanese HTS segment. The JV is structured to exist in perpetuity and establishes Horizon Innovations LLC (Horizon), which is responsible for the U.S. commercialization of current and future HTS products owned by either party. The parties expect to combine their scientific and regulatory expertise to jointly prepare U.S. Food and Drug Administration (FDA) filings for the latest version of Ploom HTS products, which are not currently commercialized. The parties currently expect to submit pre-market tobacco product applications (PMTA) for these products in the first half of 2025. [Altria]
• IQOS HTU volume growth has eclipsed declines in combustible shipments, leading to net shipment volume growth on both a reported and pro forma basis. This demonstrates that IQOS is not just cannibalizing PMI’s legacy volumes but the market as a whole. The company has also updated its FY pro forma outlook to include +2-3% shipment volume growth, up from its previous July outlook of +1.5-2.5%. Along with this, the company continues to exercise favorable pricing. In Q3 2022, combustible product pro forma adjusted net revenues increased by 4.1% on an organic basis due to pricing variance of +4.9%. [Devin LaSarre]
• David Brooks’ Bobos In Paradise is an uneven book. The first sixth is a daring historical thesis that touches on every aspect of 20th-century America. The next five-sixths are the late-90s equivalent of “millennials just want avocado toast!” I’ll review the first sixth here, then see if I can muster enough enthusiasm to get to the rest later. The daring thesis: a 1950s change in Harvard admissions policy destroyed one American aristocracy and created another. Everything else is downstream of the aristocracy, so this changed the whole character of the US. [Scott Alexander]
• The Federal Deposit Insurance Corp. is becoming concerned about mounting unrealized losses in U.S. banks' bond portfolios and the possibility that those losses will have to be realized, according to the regulator's acting chairman. "Right now, our banks have strong liquidity, so they shouldn't have to dispose of those assets," Martin Gruenberg said at a Nov. 30 Senate Banking Committee hearing. "But as the market evolves and banks may have to dispose of those assets, there are substantial unrealized losses that could impact our institutions." Gruenberg, who has been nominated for the permanent chair position, labeled the increase in unrealized losses as a "very substantial" overhang for banks that could soon become "problematic." [S&P Global]
• Thanks to their brilliant success, this little resort community, which will be familiar to some readers as the setting for the 1998 movie The Truman Show, is a landmark in postwar urban design. In two weighty volumes—Visions of Seaside (2013) and the new Reflections on Seaside (2021)—planner-architect Dhiru Thadani provides a highly informative overview of the planning and evolution of the town and its influence on architecture and urban design. The books are composed of short commentaries and reminiscences by professionals involved with or influenced by Seaside’s creation. Each contains a fine essay by the former dean of Yale’s architecture school, Robert A.M. Stern, putting Seaside in historical context. Each volume also includes an instructive look at the spiritual and ethical lessons to be learned from Seaside by Notre Dame architecture professor Philip Bess. For the general reader, however, the books’ most attractive feature will likely be their copious illustrations. [Claremont]