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Rick Gurner
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Regarding the oil industry and climate experts
Climatologists tell us the Earth is warming and that this will have major downstream effects for all of humanity.

It is good to have this information. Thank you for your service.

Where we run into a issue is when these climatologists demand a certain course of action, attempting to direct other industries where they have no expertise.

When people build expertise in one subject, they often make the mistake of assuming their knowledge expands to fields where it does not.

Many climatologists believe we should completely upend the current energy economy for the sake of technologies that are not yet mature.

This is akin to advocating for a national speed limit of 30 miles an hour. We _could s_ave 10,000 lives every year if we enforced such a speed limit. We would be doing it for the sake of public health. But we would be doing it at a cost very few people would be ok with.

One particular solution, endorsed by one set of experts does not mean that is the only course of action.

Climatologies can say the effects of climate change are real, that they are serious, that climate change is coming.

But that does not make you an expert in economics or politics.

The next step is to involve experts of other fields, to weigh tradeoffs, and to decide on a course of action that that maximizes good over the long term.

If you're looking at a problem that is as large and vexing as climate change, it can't only be the climate experts who are telling us what to do.

This is why I still invest in some oil companies alongside renewables.

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LK-99 Superconducter is probably nothing.
The idea of a superconductor is that it doesn't lose any of its electrical throughput. If you can do that over long distances then you can transfer power from anywhere to anywhere relatively cheaply and easily.

That's the idea anyway.

The short version for LK-99 is that it is probably nothing.

The reports in question date back over 15 years. The only thing that is new is that they were leaked online. A number of institutions within Korea (which is where they were first done) have come out and said that 'at best, they're flawed.'

None of the tests have ever been replicated, even by the team that did the original report.

So there's probably nothing here.

Its just that its getting a bit of fresh air all of a sudden.

If you want to bet on Superconductors, I welcome you do do it. It is one of the material science's breakthroughs that we need if the green transition is really going to stick.

One of the problems we have with the green transition is that you can generate a lot of solar in the Southwest and a lot of wind in the Great Plains, but that's not where most of the American population lives.

Even in the United States where people live "only" a couple thousand miles away from those zones, that is much better than you've got in say, Europe, where you have to go to the Great Eurasian Step for wind, and into the Sahara for Solar.

If you can solve the superconductor and transmission problem, great.

There's also another issue.

In the United States the loose rule of thumb is that if you transport power about 500 miles, it costs almost as much to do that transmission (because of the loss) as it does to generate that power in the first place. So you're generally not going to send electricity very far.

What that means is that in the United States is that most electrical utilities are local. Each town and each county has their own. There are very few large utilities in the United States.

If you want to make solar and wind work at scale, you either need larger and larger entities, or you need the ability to transfer power across jurisdictional lines, especially state and grid boundaries.

Superconductors would in theory allow us to do that technically, but we still need the legal structure to do it.

Now, you can do high voltage lines, which will double, triple, maybe quadruple the distance you can send power in an economically viable matter. But until you can cross the jurisdictional boundaries it doesn't really matter.

So what we need now, even before we get superconductors, is multiple acts of Congress to break down the legal jurisdictions to allow power to be sent large distances.

As soon as Congress does that, a number of states will sue. Because, right now this has been a local and state legal prerogative.

So we need a significant legal overhaul before we can really do the green transition, even if we did have superconductors.

So I'd say start now.

Get the laws changed.

And then hopefully we can have that physical science breakthrough that is necessary to do this over long distances and at scale.
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Dang. I wanted to believe this is real. Are room temperature super conductors something scientists think can theoretically be achieved in the future? Or is this one of those things that goes in the "impossible" bucket?
The U.S. Fed has tightened the most, out of the central banks in charge of the 10 most traded currencies
New Zealand also has raised 5.5%
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The S&P 500 came within 2% of a new all-time high last week
The Nasdaq 100 pulled within 3% of a new all time high as well. Meanwhile, the small-cap Russell 2000 Index (which has been lagging for most of this year) was still a good distance away at 17% below its prior high.

Graphic via Charlie Bilello and YCharts
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Twitter traffic is tanking
Matthew Prince, CEO of Cloudflare, shared a screenshot showing that traffic on Twitter is “tanking.”

User traffic on Twitter has slowed since the launch of Meta’s text-based platform Threads, which has already surpassed 100 million sign-ups since its debut last week.

Threads is being touted by Meta executives as a more positive “public square” for communities “that never really embraced Twitter.

I wonder how long Threads had been in the works at Meta. It takes a while to launch stuff like this. The timing has been great.
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Happy Fed Day to all those who observe
The Fed will announce their latest rate decision at 2:00pm EST today. Conventional wisdom is that we will get a pause, but then a rate hike at the next meeting.

Inflation is still hovering around 4%. That feels pretty good after where we've been, but still a long ways away from the Fed's stated goal of 2%. And the underlying numbers are showing stickiness.

There is one new piece of data for the Fed to chew on this morning, and it is quite interesting, probably supporting of a pause: the Producer Price Index, which was 0.3% in May. Prices for final demand goods were down 1.6%, that is the largest decrease since July. That number is better than expected and another sign that the red hot economy is slowing down, which is kind of the goal of these rate hikes.

Maybe a reason to pause? What is your bet?
What will the Fed do today?
14%Hike 0.25%

7 VotesPoll ended on: 6/15/2023

Why pause just to signal future increases?
Add a comment…
The destruction of earnings power continues
Real (inflation-adjusted) earnings are down for a 26th consecutive month. The longest stretch in US history by far (twice as long as the Global Financial Crisis), and represents 93% of Biden's tenure.

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The Problem With Paying 37x Sales for Nvidia
Disruptive new uses cases pop up every day for Artificial intelligence, making it the topic of conversation in the stock market. This has had a dramatic impact on $NVDA, which specializes in processors that power new AI applications.

  • Nvidia's share price has increased 161% so far this year.
  • Its market cap briefly hit $1 trillion.
  • Nvidia is trading for a whopping 37x sales, 153 times EBITDA, and 204x EPS.

In the past, I have speculated that other companies like $TSLA couldn't sustain growth, and I was wrong. So my opinion that $NVDA will disappoint probably isn't worth much.

Instead, I want to talk about how paying a premium multiple can be consistent with a value-oriented investment approach.

Many value investors focus exclusively on companies that are trading at a low multiple of sales or earnings. But you could look at it a different way;

Instead, simply look to buy businesses for less than they're worth.

Often, these businesses will be unknown or unloved and will therefore trade at low multiples. But sometimes, a stock can be a bargain, even if it trades at a lofty price relative to its current performance.

Consider a company like Costco $COST. Investors could have paid a healthy 40x trailing earnings for Costco at any point since 2002 and still earned at least a 10% compounded return. Or look at Amazon $AMZN and Booking Holdings $BKNG, where early investors could have paid 40 times sales and still achieved attractive long-term returns.

It's tempting to look at those success stories and conclude that quality is the only factor that matters for long-term investors. But these companies are the rare exception— not the rule. Amazon and Booking both endured brutal periods when their share prices plummeted more than 90%. And for every Amazon and Booking, there are dozens of examples in which paying a premium price produced poor performance.

One potential analog for Nvidia is Cisco Systems $CSCO, a company whose hardware enabled the creation of the internet. Like Nvidia, Cisco's valuation surged in a short period of time, ultimately reaching a peak of 36.8x trailing sales in early 2000. But demand for Cisco's networking products declined during the dot-com bust, and the company faced more competition than investors anticipated. Cisco has proven to be a strong and durable business that produces plenty of free cash flow, but its share price remains well below those dot-com-era levels even more than two decades later.

It's not sufficient for a business to have strong competitive advantages, sound financials, and a shareholder-friendly management team. Stocks must also be attractively priced relative to a conservative forecast of their future performance. You must invest with a margin of safety in order to limit losses when your investment thesis doesn't play out as you'd expect.

It's entirely possible that Nvidia will prove to be a market-beating investment from current prices. But buying a company at 37x sales requires quite a lot to go right for quite a while. Any slip-up in execution, increase in competition, or shift in geopolitical conditions, and the stock will likely get slammed. I'd rather be conservative in terms of both the modeling assumptions and the price.
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