Wednesday, January 22, 2025

Wednesday Morning Links

  • America will be a manufacturing nation once again, and we have something that no other manufacturing nation will ever have — the largest amount of oil and gas of any country on earth — and we are going to use it. We’ll use it. We will bring prices down, fill our strategic reserves up again right to the top, and export American energy all over the world. We will be a rich nation again, and it is that liquid gold under our feet that will help to do it. [The Inaugural Address]
  • I think what you're seeing there is the fact that 100 basis points lower rates have sponsors excited about dusting off some projects, signing a term sheet, and getting ready to move forward. And frankly, I think the election has stimulated enthusiasm and excitement about the US economy with the expectation that we're headed into a more pro-business constructive environment that's going to be good for economic growth. So we're getting those vibes from our customers and seeing that. So we're feeling cautiously optimistic about loan growth in 2025, even knowing we're going to still be dealing with a big bunch of headwinds from RESG payoffs because 2025 is the third year following the record 2022 origination year in RESG. [Bank OZK]
  • The biomass accumulation rate is something like 0.5 mm/year (1/64th of an inch), which doesn’t sound like much, until you realize that 20 years of accumulation is equivalent to coating the entire forest in a layer of gasoline 1/4” thick. This is not hyperbole, drought resistant trees including eucalypts and creosote secrete volatile oils to help retain moisture, contributing to their combustibility. [Casey Handmer]
  • Healthcare will be the consumption category most increased by demographic shifts, with spending on healthcare per capita increasing between 5 and 29 percent as a result of changes in age mix alone. In Japan, the average person will spend 5 percent more on healthcare per year in 2050 compared with 2023, considering only the age mix shift. In the United States, per capita healthcare consumption could increase by 8 percent, or $380 billion in 2050, solely as a result of the shift in age mix. [McKinsey Global Institute]
  • These developments made it possible to replace thick, heavy walls of stone and brick with thin, light curtain walls made of glass and aluminum. And while this style of construction was indeed championed by modernist architects, it also had decisive advantages from a real estate developer’s perspective. The most obvious was cost. A glass and metal curtain wall wasn’t necessarily all that much cheaper than one made of brick in terms of the materials themselves, but it was much thinner and lighter. Its thinness meant that for two equally sized floor plates, the curtain wall framed one would have more rentable square feet than the stone or brick one. This more than made up for the fact that the thin curtain walls had worse insulation and were more expensive to heat and cool than masonry walls. [Construction Physics]
  • The stock market is pricing portfolios of American homes at a hefty discount to what houses are changing hands for in the open market. Shares of single-family landlords Invitation Homes and American Homes 4 Rent are trading at 35% and 20% discounts to their net asset values, respectively, according to real-estate analytics firm Green Street. Invitation Homes’ stock has traded at a particularly large discount to NAV since interest rates began to rise in early 2022, but the gap has widened by 10 percentage points in the past year. [WSJ]
  • Whereas if your MacBook Pro was made by the California Department of Computing, you can only imagine it. I’m sorry, I’m here in this building, and I keep forgetting to make my best argument for monarchy, which is that people trust The New York Times more than any other source in the world, and how is The New York Times managed? It is a fifth-generation hereditary absolute monarchy. And this was very much the vision of the early progressives, by the way. [NYT
  • Curtis Yarvin is mistaken when he says that Apple can produce iPhones because it's a monarchy. There are millions of firms ("monarchies") in the world that can't produce anything nearly as impressive as iPhones, from the laundromat down the street to Boeing. Apple is the result of a decades long evolutionary process facilitated by the market which uplifts the very best culture, talent, processes, and ideas in the entire world. And the moment Apple slips, it'll get replaced (the average lifespan of a Fortune 500 is 15 years). Governments just don't work this way. Xi Jinping isn't competing again a million counterfactual Chinese leaders who didn't do Zero-COVID, avoided deflation, didn't kill the tech industry, and were awake to AGI. He can fuck up as much as he wants. If a monarch happens to be competent, like Lee Kuan Yew, it's merely by chance, not due to some intrinsic selection mechanism of monarchy that we can replicate. You are just as likely to get brutal dictators like Mao and Stalin by chance - this is not a reasonable gamble to take with the lives of hundreds of millions of citizens. Apple is indeed a wonderfully competent organization - if we want more of the world to be run competently, we should delegate more functions to the market, which is constantly and ruthlessly sizing down incompetence. [Dwarkesh Patel]

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