Thursday Night Links

• Perpetual futures, or "perps," require some explanation before an informed judgment can be made about their threat to the regulated securities exchanges. To date, their sole allure seems to be with retail investors. The best way to understand why is to compare perpetuals with actual futures contracts, which to a retail investor are prohibitively cumbersome at every step of the process. First, the primary use for a futures contract is to hedge a legitimate business exposure. A made-up for-instance: a South Korean buyer of a tanker’s worth of oil from the U.S., perhaps a distributor who will simply sell the oil to its local customers, could be a temporary owner of 500,000 barrels of oil. The problem is that the transit time can be as long as three weeks. That’s $40 million of oil subject to daily price risk. This distributor needs the price paid in the U.S. to be the same as when it arrives in South Korea. Otherwise the intended profit margin of the transaction could become a loss. Distributors don’t have much of a profit margin anyway. If the departure date for that trip happened to be this past May 31, the buyer’s selling price by trip's end could have been 20% lower. That ruinous possibility needs to be hedged, and it is done by selling an equivalent amount of oil at the then-current price for delivery in three weeks. The loss on the purchase would be offset by the gain on the futures contract. This contract can’t work without a specific date upon which both parties commit to deliver and take receipt of that oil. It can’t work unless the contract is executed on a regulated exchange that enforces that both parties maintain sufficient collateral to perform. In contrast, a perpetual has no expiration date. And there is no delivery of the underlying physical asset. Therefore, it can’t be used to hedge a business commitment or exposure, and is therefore useless for a commercial customer—and, more broadly, for the economy. It’s a user-friendly, phone-click wager or trading instrument that is very popular among certain retail traders. It’s designed to be. It’s referred to as market gamification. [Horizon Kinetics]
• Just as the government is unlikely to stop printing money, nothing is likely to be done about the proliferation of addictions that displace family life. As Scott Greer points out, voters Left and Right largely want freedom to indulge, and our rentier politicians won’t do anything about it independently when the vice industries are well-funded with lobbyists. In other words, we're going to step on the evolutionary gas and redline natural selection. [The Tom File]
• Everything is going to be ok. Eventually. The Iran war might cause some oil prices to go up, which might cause fertilizer prices to go up, which might cause food prices to go up. But, eventually, in five years or so, assuming the war ends soonish, the Gulf States will have finished repairing their infrastructure. It’s gonna be ok. In the meantime, more people, especially in Australia and Europe will take nice walks to work and / or work from home. And we already need less food these days because Ozempic made people eat less. The economy might have fewer jobs, but on the plus side, that means less fuel for commuters. Wo-hoo! We are going to speedrun a transition to solar power and save the planet from emissions. Thankfully, China makes a lot of cheap solar panels, and they are happy to sell to everyone. [Pasha Kamyshev] 
• Google and Constellation Energy agreed to a sweeping, 20-year nuclear-power deal that would boost output at 11 existing reactors, the latest tie-up between the tech and energy industries to power new data centers. The 890-megawatt power-purchase agreement unveiled by the companies Tuesday involves improvements to Constellation-owned reactors in Illinois, Pennsylvania and New Jersey. The upgrades will provide additional power to the grid that is roughly equivalent to building a new large reactor. The deal is the largest-ever “uprate” project, one that squeezes more power out of existing reactors, between a nuclear power provider and a tech company. [WSJ]
• Base rent for the Data Center Site Area is $6,000 per acre per year, and base rent for the Solar Site Area is $1,000 per acre per year. Base rent for each site area begins only upon the start of construction on that area. The Ground Lease does not require the Company to begin construction by any particular date, and the decision whether and when to begin construction on each site area rests solely with the Company, allowing the Company to secure tenants and financing before rent begins. If construction has not begun on a site area within 48 months after the effective date, the Landlord’s remedy is to terminate the Ground Lease and the purchase option as to that site area. Rent is subject to annual escalation based on a five-year rolling average increase in the Consumer Price Index. The Ground Lease is structured as an absolute triple net lease. [Zone Frontier Inc.]
• But one place Mississippi's Lovely Old Families, and Fine Old Families, whether or not they still had money, were loathe to move to, was Jackson. Jackson was considered to be a backwater, full of crude, crooked, murderous, religion-obsessed descendants of Reconstruction Era Carpetbaggers and Scalawags. Those unsavory types had succeeded in sending the Antebellum Aristocracy fleeing the Capital, following the Civil War. And, until the construction, in the Nineteen Sixties/Seventies, of two large malls, 'The Rest of Mississippi' avoided Jackson, as much as was possible. Until Dallas and Atlanta became "Yankee Cities", Mississippians who were from good families, but who had heavy accents, used to move to those cities, to begin their careers. But when heavy accents became crippling liabilities, those who could not alter their speech, tended to be trapped inside Mississippi, where they would NOT be perceived as ignorant Goobers. After Integration (and the need for private schools - tuition taking all discretionary income, and eating through savings) began killing the state's smaller towns, many young people from Old Families were forced to move to the Jackson area, to get decent jobs. Those young people were horrified by the meanness, social paranoia, crudeness, crookedness, and obsessive religiosity of 'Upper Class' Jacksonians. "Well, some of us moved to Belhaven, which was OK, until 'typical rednecky Jackson social climbers' caught-on, and started moving in around us." But a great many scions of the state's better families began moving out to the wilds of Madison County - planting tall hedges, and basically HIDING. About that time, The Chapel of the Cross (Episcopalian) became THE chic place for young aristos. And Mayor Mary was making Madison into the nicest place in the entire 'Ark-La-Miss' (and truly, the nicest place between Mountain Brook, Alabama, and Highland Park, Texas). [Grandview Gloria]