Monday Night Links

• All kidding aside, though, the best way to know where you fall in America’s class system is to pay attention to which part of Fussell’s book make you feel uncomfortably seen. When you cringe and say, “Oh gosh, how did he know?!” that’s when you’ve found your your people. [Mr. and Mrs. Psmith’s Bookshelf] 
• This is the most common theory of Bitcoin, especially among the cryptocurrency’s supporters (the most avid of whom are called “maximalists”). In fact, this was the original idea of Bitcoin — it was supposed to replace fiat currencies like the U.S. dollar. Generally, money isn’t a very good investment. Even if money didn’t depreciate via inflation, it still wouldn’t go up in value very fast — even if there was steady deflation, the cash wouldn’t offer the returns of, say, the stock market, or a house. Those things are risky, and thus their returns will always be higher than that of cash. Instead, the case for really spectacular Bitcoin returns is that Bitcoin is not now money, but will eventually be money. If this is true, then demand for Bitcoin will eventually be much, much, much higher than it is now, since people will need it to buy everything. Higher demand will mean much higher prices. In other words, the idea is that by buying Bitcoin now, you’re getting in on the ground floor of the future currency of the land. [Noah Smith]
• Wyden is no shrinking violet when it comes to making big bets. His fund is the single largest shareholder in Houston’s RCI Hospitality, operator of over 40 gentlemen’s clubs and parent company of Rick’s Cabaret. Wyden built his 10% position beginning in late April 2020, when the coronavirus led investors to believe that in a world of masks and social distancing, a company built on drunken bachelor parties and lap dances was toast. But Wyden reckoned that as the pandemic ebbed there would be pent-up demand for RCI’s clubs, many located in Florida and Texas, and that they would reopen fast. Another plus: It’s exceedingly difficult to obtain a strip club license, meaning the company has a deep moat around its business. [Forbes]
• As it happens, RICK fell seventy percent, and Wyden went maximally contrarian, catching the falling knife on the belief that pent-up demand would soon catapult the stock. And what initially looked like a doofus move turned out to be genius. Within a year, RICK climbed sevenfold, and Wyden’s fund assets increased to $350 million. His share? $100 million. Now, knowing well that these newfound riches do get taxed at some point, Wyden waved goodbye to NYC and fled to Miami, where he got busy right away. He built a $4.1 million home, flipped it for a $1.4 million profit, and then bought a larger, waterfront mansion for $13.88 million. The thirty-seven-year-old hedge funder was on top of the world and claimed in an interview with Forbes, “If I never raise another dollar again, I’m going to become a multibillionaire.” [Waterboy Stocks]
• Similarly, in one of many, often repetitive, and laudatory (toward President Trump) but superfluous allegations, the pleader states, “‘The Apprentice’ represented the cultural magnitude of President Trump’s singular brilliance, which captured the [Z]eitgeist of our time.” [PRESIDENT DONALD J. TRUMP v. NEW YORK TIMES COMPANY]
• There is something discomfiting about watching Rudy Giuliani perform “I’m a Little Teapot” for a few hundred dollars. Or George Santos, the disgraced congressman, filming wry videos on demand to mark birthdays or provide pep talks. But British politician Nigel Farage hasn’t just mastered the business of selling short video greetings on the Cameo website. He has turned it into one of the main planks in his campaign to become the U.K.’s next prime minister. [WSJ]
• In his 2008 book The Logic of Life, Tim Harford uses a slightly different phrase describing the uncorrupt in corrupt organizations with a similar meaning. "Your option to escape means you can’t be relied upon." I have seen this phenomenon in a number of different organizational situations that I and my family members have experienced throughout our lives. Organizations like employees who are dependent upon the organization. Thy fear independent employees. For example, I was rejected for the first civilian job I applied for: a real estate agent at a prestigious firm. They had an application that, to a large extent, was designed to determine how independent you were. The woman who interviewed me was unhappy, and said so, about my West Point education, significant savings account, the fact that I already owned rental property, and had no wife and kids to support. She frankly told me that the best salesmen were over a financial barrel, had nowhere else to turn, and had to hustle to pay their many bills. In other words, things I thought should be considered virtues were, instead, considered unattractive—simply because they put me in a position where I was able to resist the boss’s demands. [John T Reed]
• The maximal number of face turns needed to solve any instance of the Rubik's Cube is 20, and the maximal number of quarter turns is 26. These numbers are also the diameters of the corresponding Cayley graphs of the Rubik's Cube group. In STM (slice turn metric) the minimal number of turns is unknown, lower bound being 18 and upper bound being 20. [Optimal solutions for the Rubik's Cube]
• For anybody who’s been under a rock the last 5+ years, the writing is on the wall that Li batteries have won for hours-to-days and perhaps even days-to-weeks energy storage. Solar PV plus Li batteries are poised to change the world. The missing piece as everyone knows is in longer duration storage. But long duration energy storage is a fundamentally weak business. The money you make in energy storage is proportional to the number of times you get to sell energy per year, so as durations increase, profits dry up. Imagine a theoretical dirt cheap electrochemical battery made entirely of pig iron. You can approximate cost as CapEx per unit of energy / cycles * discount factor. Even if the battery were made out of the cheapest and most abundant metal on our planet you’d still be out of the money: ($0.35/kWh energy content of iron) / (1 cycle per year for 20 years) * 4.5 (15% discount rate) = meaningful arbitrage only with seasonal electricity price swings > $0.10/kWh. And of course real batteries cost much more than the constituent materials, don’t give back all of the energy you put in, and have other imperfections in proportion to how cheaply you make them... seasonal energy storage is hard! [Orca Sciences]

Tuesday Morning Links

• There is nothing better than the beginning of a new wave, when the opportunities to envision, invent, and build world-changing companies leads to money, fame, and glory. But there is nothing more dangerous for investors and entrepreneurs than wishful thinking. The lessons learned from investing in tech over the last 50 years are not the right ones to apply now. The way to invest in AI is to think through the implications of knowledge workers becoming more efficient, to imagine what markets this efficiency unlocks, and to invest in those. For decades, the way to make money was to bet on what the new thing was. Now, you have to bet on the opportunities it opens up. [Jerry Neumann] 
• The capital cycle approach would tell you that you want to avoid the companies and sectors that are spending the most on capex right now - certainly in relative terms, but probably also in absolute terms. So, it's obviously not a great sign that the tech companies are in a capex arms race and are the biggest capex spenders in the entire economy. Nor is it a good sign that those companies' valuations are so expensive. [Credit Bubble Stocks] 
• The answer may be found in a combination of factors: high barriers to entry due to permitting restrictions for landfills; asset intensive networks which are regulated, and which can have monopoly-like characteristics within a local region; inelastic demand where customers appear to be relatively price-insensitive given that waste disposal is a necessity and may represent a small part of operating expenses; and industry consolidation, through which the main players have successfully improved route densities, improving returns within their fixed asset networks. Pricing power has been the outcome of these factors and has been the key to revenue growth in recent years – waste disposal pricing has far outpaced inflation. [Robert Anstey]
• The subtext to our prior article related to the systematic undervaluation of those assets endowed with large reserves and favourable geology since, over time, the value of the assets increases as they benefit from the steepening and upward shift in the cost curves of projects facing greater technical and geological challenges. Capex inflation is nonlinear throughout the cost curve, leading to a disproportionate increase in the economic value of large, low-cost reserve bases over time. With absolute capital requirements for new mines elevated relative to the base capital employed in producing assets, and the time to bring new projects on stream stretching beyond a decade, the execution risk associated with such ‘greenfield’ projects increases along both the time and cost planes. For the company (read equity holder) considering such greenfield investment, the required rate of return is therefore greater than when projects could be brought on line within a shorter timeframe. [Alex Duffy]
• Although a complete shift to BEVs would be negative for PGM demand, specifically palladium which is most heavily exposed to gasoline auto catalysts, rising penetration of hybrid vehicles is less
  cataclysmic as the majority of the toxic emissions which PGM based catalysts seek to remove occur upon ignition. Hybrid vehicles, with ‘stop/start’ technology, require a higher platinum loading per catalyst than is the case for an ICE equivalent. Since ICE engines remain in excess of 80% of global auto production and the rate of BEV share gains is slowing, the obituary for PGM catalysts may have be premature. PGMs also have other uses with jewellery accounting for 20% of platinum demand and other industrial uses a further 35%. In addition, while BEVs impact light passenger vehicles, it is unclear how such technology would apply to the global truck fleet which requires a higher PGM loading. [Alex Duffy]
• Being able supply an abundance of food to front line troops is arguably the best sign of military excellence. Munitions get priority. So if you can supply your combat troops with hot food with a decent variety, it’s a major flex of your logistical sophistication. In WWII, the US Navy built ice cream barges that would produce ice cream at scale for US forces. The Japanese military couldn’t even imagine doing something like that. It would have stressed their supply networks too much. Same with the US military delivering Burger King to the most remote bases in Afghanistan or wherever. When you see this stuff showing up, you know you are dealing with a seriously capable military. [TheMindScourge]
• A Tricolor ABS issuance this year showed that more than two-thirds of its borrowers lacked a credit score. For those with credit scores, the average was 614. More than half didn’t have a drivers’ license, which suggests they may lack permanent legal status. President Trump’s deportations raise the chances of a surge in defaults by migrants who leave their debts behind as they leave the U.S. [WSJ]
• Phillips 66 (NYSE: PSX) announced today that it has entered into a definitive agreement to acquire the remaining 50% ownership interest in WRB Refining LP from subsidiaries of Cenovus Energy Inc. for total cash consideration of $1.4 billion, subject to customary purchase price adjustments. WRB Refining LP is a 50/50 joint venture between Phillips 66 and Cenovus Energy Inc. that owns the Wood River refinery in Roxana, Illinois, and the Borger refinery in Borger, Texas. Phillips 66 has operated both facilities since the inception of the joint venture in 2007. [Phillips 66 Company]