Thursday, June 30, 2022

This week's interesting finds

This week in charts

U.S. savings back down

Japanese quantitative easing

Netflix Disrupted Entertainment With Binge Viewing. Now Can It Avoid Disruption Itself?

This company that became an outlier when it ditched the conventions of television has become the outlier of the streaming world by sticking to the Netflix way. Bingeing alone doesn’t explain the company’s success over the past decade, but it was the singular phenomenon that distinguished Netflix and revolutionized Hollywood, as streaming television replaced the movie business and music industry as the defining cultural force of our time.

So what happens when the disrupters get disrupted? How do successful companies respond when the conditions of their early success change—and can they? To binge, or not to binge?

These are the fundamental questions facing Netflix as one of the biggest winners in the pandemic economy has become the year’s biggest loser in the ailing S&P 500. The answers might just force this proudly iconoclastic company to swallow its pride.

U.S. corn-based ethanol worse for the climate than gasoline, study finds

“Corn ethanol is not a climate-friendly fuel,” said Dr. Tyler Lark, assistant scientist at University of Wisconsin-Madison Center for Sustainability and the Global Environment and lead author of the study.

The research, which was funded in part by the National Wildlife Federation and U.S. Department of Energy, found that ethanol is likely at least 24% more carbon-intensive than gasoline due to emissions resulting from land use changes to grow corn, along with processing and combustion.

Geoff Cooper, president and CEO of the Renewable Fuels Association, the ethanol trade lobby, called the study "completely fictional and erroneous," arguing the authors used "worst-case assumptions [and] cherry-picked data."

Under the U.S. Renewable Fuel Standard (RFS), a law enacted in 2005, the nation's oil refiners are required to mix some 15 billion gallons of corn-based ethanol into the nation's gasoline annually. The policy was intended to reduce emissions, support farmers, and cut U.S. dependence on energy imports. 

Soaring Global Coal Use Is Obliterating Emission Reductions Achieved in the U.S. Since 2005 

“The surging use of coal around the world shows, once again, that the Iron Law of Electricity remains in force. That law says that people, businesses, and governments will do whatever they have to do to get the electricity they need. The Iron Law matters because the electricity sector is the largest emitter of carbon dioxide emissions. And politicians from China to the Czech Republic are going to do everything they can, including “burning anything” they can find, to avoid blackouts. 

The punchline here is clear: Although the U.S. has been leading the world in cutting its greenhouse gas emissions – in fact, no other country even comes close in terms of absolute reductions -- other countries are not following suit. Furthermore, I’m not arguing that we should quit trying to reduce our emissions. What I am saying is that we must be realistic about the scale and cost of our emissions-reduction efforts and the extent to which those efforts are making a difference in the global scheme. 

I’ll end by repeating the same point I have been making for more than 12 years: renewable energy cannot, will not, be able to meet soaring global energy demand. If the countries of the world are serious about reducing coal use and the emissions that come from burning that carbon-heavy fuel, they need to get serious about N2N: natural gas to nuclear. Both sources are low-carbon, relatively low-cost, scalable, and deployable.”

More on energy

This week’s fun finds

Summer 2022 reading and listening lists – “Trying to forget about inflation” edition

If you’re looking for something to read by the water (whether at a cottage or the public pool because of gas prices), the Investment team book club has some suggestions for you. The two books contain commentary letters that are perfect bite-sized reads in between refills of iced tea or your favourite cold beverage. Although they’re a trip back in time that covers the first 15 years of the millennium, the lessons are timeless.

Don’t turn D-I-Y into D-I-Why?!?

So 12345 isn’t a good password?


Friday, June 24, 2022

This week's interesting finds

What hit our inboxes this week

What helps us sleep at night – part 7

When investors are particularly pessimistic about what the market may do (or is doing), we’re often asked how we sleep at night. Over the years, we’ve put together some things we think about as we try to get some shut eye. Here’s our version of a cup of chamomile tea. 

In the seventh version of the What helps us sleep at night series, Tye, Jeff, George and Claire discuss five businesses held in EdgePoint Global Portfolio and why we believe they are well-positioned to help us ignore the current short-term volatility. 

Europe Still Imports Huge Volumes of Russian Diesel as War Rages

So far this month, the continent has received close to 14 million barrels of diesel-type fuel from countries that used to be part of the Soviet Union, according to Vortexa Ltd. data compiled by Bloomberg. That’s a relatively limited drop-off from pre-war levels earlier this year and the vast majority, if not all, of that fuel originated in Russia.

That may come as a surprise to some, given how many European leaders and oil companies have criticized Russia’s invasion of Ukraine. Less than a week after President Emmanuel Macron and Chancellor Olaf Scholz visited Kyiv in a show of support for Volodymyr Zelenskiy, the data show the biggest buyer of the Russian fuel is France, closely followed by Germany.

How Singapore Got Its Manufacturing Mojo Back

Singapore has aggressively wooed highly automated factories with tax breaks, research partnerships, subsidized worker training and grants to local manufacturers to upgrade operations to better support multinational companies, among other enticements.

There’s a caveat: Singapore’s success has come by automating away many jobs. It has more factory robots per employee than any country other than South Korea, according to the International Federation of Robotics.

The Rich World’s Climate Hypocrisy

The developed world’s response to the global energy crisis has put its hypocritical attitude toward fossil fuels on display. Wealthy countries admonish developing ones to use renewable energy. Last month the Group of Seven went so far as to announce they would no longer fund fossil-fuel development abroad. Meanwhile, Europe and the U.S. are begging Arab nations to expand oil production. Germany is reopening coal power plants, and Spain and Italy are spending big on African gas production. So many European countries have asked Botswana to mine more coal that the nation will more than double its exports.

Britain, Germany push G7 for halt to biofuel mandates to tame food prices

Officials from some G7 countries, including Germany and Britain, will push for temporary waivers on biofuels mandates to combat soaring food prices when leaders from the group of wealthy nations meet on Sunday, three people familiar with the matter told Reuters.

It’s not clear whether there’s broad-based support to temporarily waive biofuel mandates across the G7 members which include Canada, France, Germany, Italy, Japan, Britain and the world’s largest biofuel producer, the United States. Surging oil and gas prices have also increased the demand for energy sourced from crops.

Goldman Sachs Facing SEC Probe of ESG Funds in Asset Management

The Wall Street Journal reported earlier on the investigation of Goldman Sachs. The SEC hasn’t yet put rules in place covering ESG requirements, so the probe may focus on whether Goldman’s disclosures to clients didn’t accurately describe its investment practices, the Journal reported.

The SEC has been warning money managers not to mislead investors about the standards and methods they use for classifying funds as ESG. Behind the scenes, the agency’s staff has been pressing financial firms to show that they’re making good on their promises.

In last year’s first half, the agency set up a task force of enforcement lawyers whose focus includes ESG disclosures. Around the same time, the regulator released a report showing many funds describing themselves as ESG weren’t doing enough to ensure that their marketing rang true.

Timeless Lessons From the 2020-2022 Cycle

Speculation is as old as the hills. Every modern technological innovation has one thing in common — they cause people to lose their minds thinking about how the world is going to change going forward and thus, a financial asset bubble is formed.

Everything is cyclical. Nothing fails quite like success in the stock market and this environment is a perfect example of that. Nothing works always and forever.

Be careful who you take financial advice from. You cannot blindly follow someone’s financial advice simply because they have name recognition or a lot of followers. Do your own homework before taking anyone’s financial advice.

Successful investment plans need to survive down markets too. Every successful investment plan requires some combination of balance, durability and common sense to survive in the long run. And that long run includes both good markets and bad.

Investing is hard. If the markets felt too easy in the latter half of 2020 it’s because they were. Investing can be mind-numbingly simple if you want it to be but it’s never going to be easy.

Why is China’s inflation rate low compared to the US, Europe and Britain?

Chinese officials and academics have attributed the divergence to Western stimulus measures, notably the unprecedented money printing used to save economies battered by the coronavirus pandemic.

Authorities have not disclosed the weighting of China’s CPI basket, which was changed in 2021. However, Huang Wentao, an analyst with China Securities Co, estimated the weighting for food increased to 18.4 per cent, versus 7.8 per cent in the US. For clothing, China’s weight is 6.2 per cent versus 2.8 per cent in the US, according to Huang. Rent accounted for 16.2 per cent, about half the US weighting at 32 per cent, while transport was 10.1 per cent in China, lower than 15.1 per cent in the US, he said.

In addition, the US economy relies heavily on imports of consumer products, whereas China’s massive industrial capability means it has more room to deal with the price hikes for global commodities. Retail sales continued to contract by 6.7 per cent in May, but the pace was slower than the steep fall of 11.1 per cent in April. Pork prices have played a big role in consumer inflation cycles, with an estimated weight of 2.4 per cent in the CPI basket. Prices for pork, the staple meat on Chinese tables, fell 37 per cent from a year earlier in the first five months of 2022.

This week’s fun finds

100 pennies = $4.99

Walmart rubbing it in

The importance of the percentage sign

Exposure vs. mastery

In the world of Zen, Tao and the martial arts, there is a phrase, “Beginner’s Mind.”  The beginner is humble, curious, completely open, trusting, willing, and without criticism.  The beginner tries, fails, then tries again… endlessly.

Somewhere, in that endless repetitive trying, failing and making small progress, something we might call “Mastery” begins to appear…

Not even perhaps, to the practitioner, but to those who witness the evolution.

That is why “Mastery” is never announced by the student, but recognized and awarded by the teacher.

Friday, June 17, 2022

This week's interesting finds

This week in charts

Consumer spending

A shortage of workers?

Inflation – Canada vs. the world

Canadian housing affordability 


Microsoft Poised to Sit Out TV’s Upfront Market

The technology giant has been telling TV networks and media buyers that it intends to bypass TV’s annual haggle for commercial inventory, according to four executives familiar with recent discussions. The company behind such products and services as Windows, LinkedIn, the Halo video games and Surface tablets instead favors taking its chances in what is known as TV’s “scatter” market, the purchase of ad time bought closer to run date.

Microsoft seems to feel that it needs to be cautious in trying to sell consumers expensive hardware and other tech goods at a time when the stock market is churning, according to two of these executives, and when people may be fretting about loosening their purse strings. Each year, as part of the upfront, U.S. TV networks try to sell the bulk of their commercial inventory in advance, and advertisers who do so can lock in prices in case they rise later in the year.

Microsoft spent around $294.8 million on TV advertising in 2021, according to Kantar, a tracker of ad spending. Of that amount, the bulk — around $164.2 million — went to broadcast TV, with another nearly $128 million earmarked for cable TV. Microsoft spent around $2.7 million on Spanish-language TV in 2021, according to Kantar. One media buyer suggested any decision by Microsoft to bump spending would likely affect TV’s sports-advertising market, where the tech giant is a regular customer.

This week’s fun finds

If the world was made up of 100 people, what would the breakdown be?

A Stanford Psychologist Says He’s Cracked the Code of One-Hit Wonders

Berg compiled a data set of more than 3 million songs released from 1959 to 2010 and pulled out the biggest hits. He used an algorithm developed by the company EchoNest to measure the songs’ sonic features, including key, tempo, and danceability. This allowed him to quantify how similar a given hit is to the contemporary popular-music landscape (which he calls “novelty”), and the musical diversity of an artist’s body of work (“variety”).

“Novelty is a double-edged sword,” Berg told me. “Being very different from the mainstream is really, really bad for your likelihood of initially making a hit when you’re not well known. But once you have a hit, novelty suddenly becomes a huge asset that is likely to sustain your success.” Mass audiences are drawn to what’s familiar, but they become loyal to what’s consistently distinct.

Friday, June 10, 2022

This week's interesting finds

This week in charts

A tale of two pandemics

Inflation’s room to grow

Highflying Tiger Global Humbled by Unraveling of Giant Tech Bet

Tiger Global Management rode the tech boom like no other investment firm. It was funding more startups than any other U.S. investor when the market peaked last year, and had tens of billions of dollars from pensions, endowments and rich clients riding on some of Silicon Valley’s hottest stocks.

Fueling Tiger’s rise was a double-barreled business: A stock-picking arm put money mostly into public companies, while its venture-capital funds invested in startups throughout the world. Both bet bigger on tech as the market crested, leaving the firm exposed on both fronts.

At the end of April, the rout had wiped out roughly two-thirds of the gains Tiger had made in those stock funds since its founding, estimates money manager LCH Investments.

Tiger, led by 46-year-old founder Charles “Chase” Coleman, stood out in the frenzy. Its venture-capital business in March raised a $12.7 billion fund, one of the industry’s largest ever. Tiger overall invested in 361 deals in 2021, up from 16 deals for all of 2017, more than any other U.S. manager, according to research firm PitchBook Data Inc. It often outflanked longstanding venture firms by moving faster and agreeing to more generous terms with startups—sometimes offering money to companies hours after meeting, some startup founders say.

The holes in holistic ESG indices

ESG investing has, of course, taken Wall Street by storm. Well over $2tn has been invested in funds offered by a host of firms purporting to promote the environment, social good and enlightened governance.

Many ESG funds are narrowly targeted. There are funds comprised of low-carbon stocks, funds that exclude tobacco, funds adhering to Catholic values and to Sharia law. They telegraph their mission plainly just as do traditional ones specializing in high-tech stocks or banking.

But this is not where the ESG industry is headed. The action now is in so-called holistic indices that attempt to assess corporations’ every attitude or behavior and boil it down to a single metric. Call it the goodness standard.

One issue with holistic indices is the sheer number of categories. S&P Global’s Corporate Sustainability Assessment, a road map of what it assesses, runs to 253 pages, little of it reading like an Ian McEwan. “We just implemented [a new screen] in the last two months,” Reid Steadman, global head of ESG and innovation, noted. “Views of sustainability are evolving.”

The challenge is magnified by the incoherence of weighing so many disparate qualitative factors against each other. There is simply no objective way to balance an exemplary record on labor relations or gender pay equity against a high carbon footprint (the trees don’t care).

A further problem is the subjective nature of assessments. S&P determined that nuclear power was not “renewable”; some would disagree. It pays attention to human rights but did not exclude Apple, which counts China as a major supplier. It considers not just corporate deeds but reputations.

‘Liquidity is terrible’: poor trading conditions fuel Wall Street tumult

Liquidity across US markets is now at its worst level since the early days of the pandemic in 2020, according to investors and big US banks who say money managers are struggling to execute trades without affecting prices.

Relatively small deals worth just $50mn could knock the price or prompt a rally in exchange traded funds and index futures contracts that typically trade hands without causing major ripples, said Michael Edwards, deputy chief investment officer of hedge fund Weiss Multi-Strategy Advisers.

This week’s fun finds

By the numbers – population

EdgePointer of the month – June 2022

Our recent website refresh inspired us to update our internal partner bios to reflect who they are today. First up is one of our longest-tenured EdgePointers (and our unofficial Chief Cultural Officer), Sandro.


Sandro is responsible for client administration support for our private client group (PCG).  He ensures a smooth on-boarding process for new clients.

If there's anything that could make Sandro speechless, we haven't found it yet. Our cultural Renaissance man can converse about cinema, shows, music, books and sports. When the " Sandman" isn't at his desk, he can be found at stadiums, concert halls or taking part in wide-ranging discussions in the lunchroom. Words can be cheap (no matter how many Sandro uses). Fortunately for the rest of us, he often leads by example by doing things like organizing group outings during the Toronto International Film Festival or hitting lead off for our softball team. He's been a part of EdgePoint since almost the beginning and met several of the early partners working alongside them at the "old shop". Sandro is proof that our culture is something that develops over time not overnight, and we're thankful that he keeps spreading it to both our internal and external partners.

For those who haven’t had the chance to hear his latest recommendations, here are some of his past favourites (in no particular order) direct from the Sandman himself:

Revolver (The Beatles): I was a late comer to understanding the greatness of the Beatles but once I did, they blew me away. Such creativity – musically and lyrically!

London Calling (The Clash): Love their attitude and the way they combined reggae, ska and punk into their own style. “Train in Vain” not originally listed on the sleeve might be my favourite song of all time.

OK Computer (Radiohead): I listened to this album endlessly in the late 90s on my drives up to my sister’s cottage. Every song on the record is amazing. “Let Down” and “No Surprises” are my personal favourites.

Is This It? (The Strokes): Every song is under four minutes of pure rock heaven. They reinvented the sights and sounds of music in NYC before the streets were cleaned up by Mayor Rudy G.

Sandro's other unofficial jobs include tour guide, political junkie and, unsurprisingly, movie critic. He earned his BA in Political Science from York University.

Friday, June 3, 2022

This week's interesting finds

This week in charts 

Giving up gains   

Retail investor flows   

Alberta’s growth is back   

Organic lithium-ion batteries one step closer to becoming reality

A recent discovery by researchers at Japan’s Tohoku University and the University of California, Los Angeles has moved the needle one step closer to realizing metal-free, high-energy, and inexpensive batteries by using a small organic molecule, croconic acid. 

In a paper published in Advanced Science, the researchers explain that unlike conventional lithium-ion batteries, which are highly dependent on materials such as cobalt and lithium, organic batteries exploit naturally abundant elements such as carbon, hydrogen, nitrogen, and oxygen. 

In addition, organic batteries have greater theoretical capacities than conventional lithium-ion batteries because their use of organic materials renders them lightweight. 

Most reported organic batteries to date, however, possess a relatively low (1-3V) working voltage. This means that increasing organic batteries’ voltage will lead to higher energy density batteries. 

Knowing this, the Tohoku University and UCLA groups set up to study croconic acid and found that when used as a lithium-ion battery cathode material, it maintains a strong working voltage of around 4 V.   

Why Nordstrom Steamed Ahead as Old Navy Sank

Goodbye, sweatpants; hello, dress pants. 

A clear signal from apparel retailers reporting results lately is that customers are finally starting to dress like adults again. But, just as with the customers they attract, there are haves and have-nots: Brands with higher price tags are feeling much less of a pinch from inflation than affordable ones. 

Among Gap’s portfolio of brands, Banana Republic, which sells dressier, work-relevant clothes, saw sales in the quarter ended April 30 grow 24% compared with a year earlier while sales for more value-, comfort-focused Old Navy declined 19%, compounded by self-inflicted inventory woes. Sales of women’s suiting, dresses and skirts at Banana Republic grew 62%, while men’s suit sales nearly doubled. Urban Outfitters saw its pricier brands, Anthropologie and Free People, fare far better last quarter than its namesake brand, which caters to younger buyers. 

A similar dynamic played out among department stores. Macy’s saw sales at its luxury department-store chain Bloomingdale’s rise 27% last quarter compared with 10% at its namesake chain. Macy’s Chief Executive Officer Jeffrey Gennette said on an earnings call on Thursday that luxury sales were a “standout” for the business, noting that shopping among high-income consumers has so far remained less affected by inflation. Nordstrom, another luxury department-store chain, saw sales in its quarter ended April 30 surge nearly 19% or almost twice the gain analysts polled by FactSet had expected. 

It isn’t entirely surprising that higher earning consumers—who were more likely to have worked remotely during the pandemic—are now shopping for clothes that go along with their travel, socializing and back-to-office plans. With hybrid working arrangements likely to become the norm for office workers, returnees might splurge on fewer but fancier items.   

This week’s fun finds 

Physicists just rewrote a foundational rule for nuclear fusion reactors that could unleash twice the power

Future fusion reactions inside tokamaks could produce much more energy than previously thought, thanks to groundbreaking new research that found a foundational law for such reactors was wrong. 

The research, led by physicists from the Swiss Plasma Center at École Polytechnique Fédérale de Lausanne (EFPL), has determined that the maximum hydrogen fuel density is about twice the “Greenwald Limit” – an estimate derived from experiments more than 30 years ago. 

The discovery that fusion reactors can actually work with hydrogen plasma densities that are much higher than the Greenwald Limit they are built for will influence the operation of the massive ITER tokamak being built in southern France, and greatly affect the designs of ITER's successors, called the Demonstration power plant (DEMO) fusion reactors, said physicist Paolo Ricci at the Swiss Plasma Center. 

Future fusion 

Donut-shaped tokamaks are the one of the most promising designs for nuclear fusion reactors that could one day be used to generate electricity for power grids. 

Scientists have worked for more than 50 years to make controlled fusion a reality; unlike nuclear fission, which makes energy from smashing apart very large atomic nuclei, nuclear fusion could generate even more energy by joining very small nuclei together. 

The fusion process creates much less radioactive waste than fission, and the neutron-rich hydrogen it uses for its fuel is comparatively easy to obtain. 

The same process powers stars like the sun, which is why controlled fusion is likened to a “star in a jar;” but because the very high pressure at the heart of a star isn’t feasible on Earth, fusion reactions down here require temperatures hotter than the sun to operate. 

Several fusion power projects are now at an advanced stage, and some researchers think the first tokamak to generate electricity for the grid could be working by 2030, Live Science previously reported. 

How to know what you really want

Claire, a smart, ambitious student at Tulane University in Louisiana, was on track to have her pick of law schools, but she decided she’d like to get some real-world experience – and have some fun – in New Orleans first. She landed a job as a paralegal, spending her days researching expert witnesses to defend Big Pharma cases, and that’s when the crisis came. Claire had always loved cooking and learning about humanity through cuisine. She was like a female Anthony Bourdain trapped inside an overworked paralegal, and it was slowly making her life miserable. 

She began to entertain thoughts of leaving the law firm and working in a kitchen or a coffee shop until she could figure out how to make a career out of her lifelong interest in food. But doubts haunted her. What would other people think? Maybe she’s not that driven. Maybe she’s not that smart, after all. Maybe she’s lazy. What other people expected her to want to do – and her ability to meet those expectations – began to determine her self-worth. 

Many people face dilemmas like Claire’s. Each of us is occasionally overwhelmed by a multitude of competing desires: pursue job offer A or B? Start a new relationship or stay single? Sign up to run a marathon, or enjoy not getting up early to train? But life is full of marathons, and they don’t necessarily involve running. It’s good to know which desires to pursue and which ones to leave behind – to know which marathons are worth running. 

Desire is a social process – it is mimetic When it comes to understanding the mystery of desire, one contemporary thinker stands above all others: the French social theorist René Girard, a historian-turned-polymath who came to the United States shortly after the Second World War and taught at numerous US universities, including Johns Hopkins and Stanford. By the time he died in 2015, he had been named to the Académie Française and was considered one of the greatest minds of the 20th century. 

Girard realized one peculiar feature of desire: ‘We would like our desires to come from our deepest selves, our personal depths,’ he said, ‘but if it did, it would not be desire. Desire is always for something we feel we lack.’ Girard noted that desire is not, as we often imagine it, something that we ourselves fully control. It is not something that we can generate or manufacture on our own. It is largely the product of a social process.

Friday, May 27, 2022

This week's interesting finds

EdgePoint’s inaugural responsible investing report

Since the inception of EdgePoint, ESG considerations and compounding wealth for our investors have been intertwined.  Building on our history, we took steps to formalize our approach of ESG integration.

We hope you enjoy the read!

Talk is cheap…but making the wrong decision can be expensive

You can't choose your family, but you can choose to work with someone who has your best interests in mind. Strong relationships, no matter who they're with, are built during difficult times. The right financial advisor is the one who can help you select the investments that are the best fit for your long-term goals AND keep you committed to them during periods when your emotions can be your biggest enemy. Don't turn DIY investing into "D-I-Why?!?"

Although we’ve not spent a dollar on traditional marketing since inception, that doesn’t mean we can’t have some fun and wonder what an EdgePoint commercial would look like.

This week in charts

Greed & fear: history of asset bubbles in one chart

U.S. wheat planting advancing at the lowest rate in 20 years and only at 49% complete relative to 83% average 

Howard Marks Memo: Bull market rhymes

The Lessons As always for students of investing, what matters most isn’t what events transpired in a given period of time, but what we can learn from these events.  And there’s a lot to be learned from the trends in 2020-21 that rhymed with those in previous cycles. 

In bull markets:

  • Optimism builds around the things that are doing spectacularly well.
  • The impact is strongest when the upswing arises from a particularly depressed base in terms of psychology and prices.
  • Bull market psychology is accompanied by a lack of worry and a high level of risk tolerance, and thus highly aggressive behavior.  Risk-bearing is rewarded, and the need for thorough diligence is ignored.
  • High returns reinforce belief in the new, the unlikely, and the optimistic.  When the crowd becomes convinced of those things’ merit, they tend to conclude “there’s no price too high.”
  • These influences cool eventually, after they (and prices) have reached unsustainable levels.
  • Elevated markets are vulnerable to exogenous events, like Russia’s invasion of Ukraine.
  • The assets that rose the most –   and the investors who over-weighted them – often experience painful reversals.

These are themes I’ve seen play out numerous times during my career.  None of them relates exclusively to fundamental developments.  Rather, their causes are largely psychological, and the way psychology works is unlikely to change.  That’s why I’m sure that as long as humans are involved in the investment process, we’ll see them recur time and time again.And, as a reminder, since the major ups   and downs of the markets are primarily driven by psychology, it’s clear that market movements can only be predicted, if ever, when prices are at absurd highs or lows.

Amazon Aims to Sublet, End Warehouse Leases as Online Sales Cool Inc., stuck with too much warehouse capacity now that the surge in pandemic-era shopping has faded, is looking to sublet at least 10 million square feet of space and could vacate even more by ending leases with landlords, according to people familiar with the situation. 

The excess capacity includes warehouses in New York, New Jersey, Southern California and Atlanta, said the people, who requested anonymity because they’re not authorized to speak about the deals. The surfeit of space could far exceed 10 million square feet, two of the people said, with one saying it could be triple that. Another person close to the deliberations said a final estimate on the square footage to be vacated hasn’t been reached and that the figure remains in flux.

Amazon could try to negotiate lease terminations with existing landlords, including Prologis Inc., an industrial real estate developer that counts the e-commerce giant as its biggest tenant, two of the people said.

Western Canada apartment rents to continue to rise

Economic and population growth will push apartment rents higher in all three major Western Canada markets, Vancouver, Edmonton and Calgary, during the coming year.

However, the three cities start at different baselines and face different challenges, according to speakers at this week’s Western Canada Apartment Investment Conference in Edmonton.

 Shenoor Jadavji, founder and president of Vancouver-based Lotus Capital Corp., suggested apartment supply will be a major factor for the city as 40,000 students and up to 52,000 new people come into the market.

Vancouver developers say slow approvals and bureaucracy at the municipal level are a major challenge in getting projects off the ground. “We have three projects on the way that are all at the city or municipality level. They’ve been there for four or five years,” said Jadavji. Meanwhile construction costs and the cost of borrowing have increased.

Calgary and Edmonton aren’t struggling with delays in municipal approvals and land costs. However, inflation, supply chain issues, rising borrowing rates and a shortage of skilled construction labour all apply to the Alberta cities as they do across the country.

“In Vancouver, an average person pays 75 per cent of their income on accommodation,” said Jadavji. “In Alberta, it’s 20 to 30 per cent.”

Calgary experienced a drop in vacancy rates between 2021 and Q1 2022, said Ferreira. The rates are running at 2.9 per cent for stabilized properties and 5.7 per cent when new projects are factored in. Zonda Urban figures show average rent per unit for concrete properties at $2,076 or $2.41 per square foot and $1,725, or $2.36 per square foot for wood-frame buildings. Ferreira says Calgary has had plenty of new product coming into the market but it has been steadily absorbed. “As a result, we don’t see the market as oversupplied and we can’t foresee it as oversupplied.”

This week’s fun find

“Most big, deeply satisfying accomplishments in life take at least five years to achieve. This can include building a business, cultivating a loving relationship, writing a book, getting in the best shape of your life, raising a family, and more.

Five years is a long time. It is much slower than most of us would like. If you accept the reality of slow progress, you have every reason to take action today. If you resist the reality of slow progress, five years from now you'll simply be five years older and still looking for a shortcut.” – James Clear, weekly newsletter.

The medical power of hypnosis

When David Spiegel was told his next patient was waiting for him, he didn't need to ask the room number. He could hear her wheezing from halfway down the hall.

Entering the patient's room, he saw a 16-year-old girl with red hair sitting bolt upright in bed, knuckles white, in the midst of an asthma attack. By her side, her mother was crying. It was the third time the girl had been hospitalised for asthma in as many months.

Spiegel was a medical student on a paediatric rotation at Boston Children's Hospital in Massachusetts, US, in 1970. As part of his training, he was also taking a class in clinical hypnosis.

The young asthma patient's medical team had already tried to dilate her airways with injections of adrenaline. After two shots, the girl's attack was not subsiding. Spiegel didn't know what else to do. "Do you want to learn a breathing exercise?" he asked her.

She nodded, and so Spiegel hypnotised his first patient. Once the girl had entered the trance-like state characteristic of hypnosis, Spiegel was ready to make a suggestion – the "active ingredient" of hypnotic treatment, typically a carefully worded statement that will produce an involuntary response. But as the girl sat in bed, calm and focused, Spiegel wondered what suggestion he should make. They hadn't got to asthma in his hypnosis class yet.

"So I came up with something," Spiegel tells me, as he recalls the case. "I said, 'Each breath you take will be a little deeper and a little easier.'"

The improvisation worked. Within five minutes, the patient's wheezing had stopped and she was lying back in her bed, breathing comfortably. Her mother was no longer crying.

It was a formative encounter for doctor and patient. The girl grew up to train as a respiratory therapist, while Spiegel embarked on a career in clinical hypnosis. Over the next 50 years, he would go on to found the Center for Integrative Medicine at Stanford University and, by his reckoning, hypnotise more than 7,000 patients.

The Weirdest Coaching Staff in Baseball Has Made the Giants a Powerhouse

Fernando Perez studied creative writing at Columbia University and is the author of essays that have been published in prominent literary magazines. Mark Hallberg spent years working as a teacher and administrator at schools in Saudi Arabia and the United Arab Emirates. Dustin Lind has a doctorate in physical therapy.  

These are a few of the people on the unconventional coaching staff who have helped transform the San Francisco Giants into a powerhouse and disrupted a sport that traditionally hasn’t taken well to outsiders. The Giants were the surprise of the National League last season, winning 107 games and ending the Los Angeles Dodgers’ streak of eight consecutive division titles. It’s been more of the same early in 2022, with San Francisco again looking like a serious World Series contender. 

The Giants accomplished all of this while being guided by a group of coaches unlike any other in the history of baseball—and their unexpected success is forcing the industry to rethink just who is qualified to wear a major-league uniform.

“We hire a staff with the mind-set that a more diverse coaching staff gives us a better chance to win,” Giants manager Gabe Kapler said. “If you want to have a wide variety of human beings for players to connect with, you can’t have them all cut from the same cloth.”

That way of thinking would’ve been considered radical for much of the last 150 years. Conventional wisdom has long dictated that in order for a coach to gain the respect of players, he needed to have professional playing experience. “The longer you were around,” veteran pitcher Alex Wood said, “the more credibility you had.”

To Kapler, that attitude never made much sense, especially in the era of analytics. The data revolution that has changed the game has largely been driven by outsiders in the front office, so bringing people with unorthodox backgrounds into the clubhouse seemed like a natural progression. 

Friday, May 20, 2022

This week's interesting finds

14th annual Cymbria Investor Day

It's only been two days since we hosted our 14th annual Cymbria Investor Day, but we wanted to share a video of the insights from CEO Patrick Farmer and the Investment team for those who couldn't attend. Discussion focused on finding businesses they believe can double in value over the next five to seven years. There are examples of buying companies using proprietary insights that haven't yet been recognized by the market. As well as some of the unique investments that could happen only due to the flexibility afforded by Cymbria's unique structure.

Cymbria's 2022 spring collection

If you're reading this, then you understand the importance of diversity. This is why we've brought you a tastefully eclectic set of merchandise that allows you to show your appreciation for our investment approach without hurting fees by asking us for freebies. There's an updated book, a t-shirt, mugs (both for those staying in one place and on the go) and even...honey? We hope you'll "bee" as excited as we are about them.

This week in charts

Wheat exporters

India bans most wheat exports, adding to concerns of global food insecurity

India, the world’s second-largest wheat producer, has banned exports of the grain with some exceptions, a move that could compound a worldwide shortfall worsened by the war in Ukraine and exacerbate an already dire forecast for hunger across the globe.

The war has interrupted wheat production in Ukraine and Russia, which are major suppliers. Fighting and blockades in the Black Sea have disrupted transport of the grain. And poor harvests in China, along with a heat wave in India and drought in other countries, have further snarled global supply.

India has about 10 percent of the world’s grain reserves, according to data from the United States Department of Agriculture, a large surplus resulting from its heavy subsidizing of its farmers. It has been seen for months as a country that could help make up for global supply shortages.

But agricultural experts said that an ongoing heat wave and rising temperatures could affect the harvest this year, which could be a factor in why the government changed course and imposed a ban on the exports.

The Commerce Ministry notice on Friday said that wheat exports were immediately banned, with some exceptions, because a sudden spike in the crop’s price had threatened India’s food security. Limited exports will be allowed at the request of individual governments whose own food supply is vulnerable, the notice said.

OPEC+ Misses Production Target By Whopping 2.7 Million Bpd

OPEC continues to undershoot its oil production target in the OPEC+ deal, failing in April to boost output as much as required by the agreement.

All 13 members of OPEC – including Iran, Libya, and Venezuela exempted from the OPEC+ deal – saw their production rise by just 153,000 barrels per day (bpd) collectively, to 28.648 million bpd in April, the organization’s Monthly Oil Market Report (MOMR) showed on Thursday.

The top three OPEC producers, Saudi Arabia, Iraq and the UAE, saw the highest increases in their respective oil production last month, while output in Libya plunged by 161,000 bpd to below 1 million bpd, at 913,000 bpd, according to OPEC’s secondary sources.

Libyan oilfields and terminals have again been under blockade in recent weeks amid protests, clashes, and disputes over the distribution of oil revenues in the country with two rival governments, with incumbent Prime Minister Abdul Hamid Dbeibah refusing to step down for newly sworn-in eastern Prime Minister Fathi Bashaga.

Excluding Libya and the other two producers exempted from the OPEC+ deal, the ten OPEC members bound by the agreement saw their collective production at 24.464 million bpd in April, OPEC’s figures showed. This compares with a collective quota for OPEC-10 of 25.315 million bpd for last month.

The gap is more than 800,000 bpd, mostly due to severe underperformance from African members Angola and Nigeria, which have been pumping 300,000 bpd-400,000 bpd below quotas each, for months, due to a lack of investment and capacity.

Podcast “Masters in Business: Boaz Weinstein on Credit Investments” (Duration: approximately 84 min)

Bloomberg Radio host Barry Ritholtz speaks with Boaz Weinstein, who is founder and chief investment officer of Saba Captal Management. Prior to launching Saba as an independent firm in 2009, Weinstein was co-head of global credit trading at Deutsche Bank, where he founded Saba Principal Strategies as a proprietary trading group in 1998. Weinstein first came to public notice as the fund manager on the other side of the derivatives trade from the London Whale, which ultimately cost JPMorgan Chase & Co. losses of at least $6.2 billion in 2012.

This week’s fun find

Imitate, then Innovate

It’s counterintuitive, but the more we imitate others, the faster we can discover our unique style. In the entertainment world, there’s a long lineage of comedians who tried to copy each other, failed, and became great themselves: Johnny Carson tried to copy Jack Benny, but failed and won six Emmy awards. Then, David Letterman tried to copy Johnny Carson, but failed and became one of America’s great television hosts.

Reflecting on his own influences, Conan O’Brien said: “It is our failure to become our perceived ideal that ultimately defines us and makes us unique.” 

Modern creators do the opposite though. They refuse to imitate others and stubbornly insist on originality, which they hold as their highest virtue — even when it comes at the expense of quality. They might deny their ambition toward originality when you talk to them, but they reveal it in their actions. In general, creators spend much less time imitating their heroes than they do trying to make something new. I call it the Originality Disease — a pervasive plague that makes creators feel scared to imitate other people’s styles.  

The problem may be worst among writers, who speak about their craft with levels of mystery that are usually reserved for the numinous. Writers would be smart to learn from other fields, though. 

Where does this Originality Disease come from? 

I have three explanations. 

The first is pretty clear: misunderstanding inspiration. Some of the juiciest inspiration comes from admiring (and maybe even reverse-engineering) other people’s work. But many people think inspiration needs to strike out of thin air, like a bolt of lightning. They fear that the Muses of novelty won’t visit them if their mind is contaminated with what’s been done before. In blind pursuit of originality, they avoid studying anything that’s come before them out of a fear of tainting their minds with the stain of influence. Rather than standing on the shoulders of people who’ve come before them, they look within themselves for a breakthrough idea.

The second is more subtle: fetishizing originality. I think this part of the disease comes from academia, where people do study those who’ve come before them—but only so they can do something different. Since scholarly journals insist on original contributions, academics are incentivized to study things nobody else is studying. The challenge, though, is that originality and usefulness are not the same thing. I worry that academics are so focused on checking the “nobody’s ever written about this before” box that they sometimes forget to make useful contributions to human knowledge. 

The third is pure conjecture: self-obsession. Perhaps our Originality Disease has its roots in Freud’s work, which still underpins our model of human psychology. To the extent that ideas like the ego and the subconscious seem trivial, it’s only because they’ve been so influential. Freud’s ideas basically went viral, and as they did, made their way to Salvador Dalí who led Europe’s surrealist painting movement. Instead of trying to capture reality like the Realists or interpret it like the Impressionists, the Surrealists went inwards and painted the landscape of their own consciousness. They rejected logic and reason in favor of dream-inspired visions. 

Friday, May 13, 2022

This week's interesting finds

This week in charts

Price of used cars

Big Investors Reconsider Oil and Gas Upside as Supplies Remain Tight

Big investors are starting to warm to energy.

For more than five years, endowments, pension funds and other so-called institutional investors shunned the oil-and-gas industry because of big losses and concerns about climate change.

Now some investors are coming back as energy emerges as the stock market’s best performer—the S&P 500 Energy Sector Index is up 40% so far in 2022—and projections that the world might face shortages in the years ahead suggest continued near-term upside for those willing to bet on fossil-fuel producers

The lack of new investment is one reason oil and gas supplies haven’t kept up with surging demand and the loss of output caused by the Russian invasion of Ukraine.

The short-term factors and a growing realization that new supplies will be crucial, even as the world transitions to cleaner energy sources, have some investors reconsidering their aversion to energy. 

New money could boost production, though there are other factors limiting supply. And any increase in investments will likely be modest, as some groups such as college endowments or public pension funds continue to stay away.

Last year, when the Houston private-equity firm Quantum Energy Partners met with big investors ahead of a potential new fund launch, it heard concerns that the transition to cleaner energy sources meant there would be little need for new oil and gas development, says Wil VanLoh, Quantum’s founder.

After the Ukraine war began and European nations started feeling pressure to locate new energy supplies, Quantum began fielding calls from many of those same investors—they were expressing interest in oil and gas once again. The firm recently began fundraising for a new fund with a target size of $5.6 billion. Quantum also plans to start an energy-credit fund in the midst of growing interest from investors.

“The difference in tone and receptivity since the Russian invasion has been amazing—it has been a 180-degree change in three months,” says Mr. VanLoh. “Last year, we had to convince people the oil and gas business would be around in five to seven years.”

U.S. East Coast Diesel Supply Is Running on Fumes

The horizon south of the Statue of Liberty is interrupted by the silhouettes of several oil-tank farms. New York harbor is the home of Wall Street and financial wizardry, but it’s also the place where old-school oil traders still buy and sell refined petroleum products the old way, by the gallon, setting benchmark prices. In the 1990s, Morgan Stanley’s Olav Refvik controlled so many of those tank farms that he was known as “the king of New York harbor.” If Refvik was still trading today, he would find his tanks nearly dry: Diesel, the harbor’s most basic fuel, is very scarce.

Last week, East coast inventories of diesel plunged to the lowest seasonal level since government records started more than 30 years ago. The shortage caused a crisis in the diesel market, sending wholesale and retail diesel prices to an all-time high. Diesel is today more expensive in America that it was in 2008, when the price of crude oil surged to nearly $150 a barrel compared with little more than $100 currently. 

Diesel is the workhorse of the global economy. It’s used everywhere to keep trucks, tractors, freight trains and factories moving. And its ubiquity means the increase in its price will exacerbate global inflationary pressures.

From central bank interest rates to supermarket prices, a lot hinges on diesel. On Tuesday, average U.S. retail diesel prices posted the fifth-consecutive fresh daily record, surging above $5.3 per gallon, up nearly 75% from a year ago. The price spike is worse on the Eastern seaboard, where diesel retails now for more than $6 per gallon, nearly double 2021’s price.

Netflix Tells Employees Ads May Come by the End of 2022

Netflix could introduce its lower-priced ad-supported tier by the end of the year, a more accelerated timeline than originally indicated, the company told employees in a recent note.

In the note, Netflix executives said they were aiming to introduce the ad tier in the final three months of the year, said two people who shared details of the communication on the condition of anonymity to describe internal company discussions. The note also said Netflix planned to begin cracking down on password sharing among its subscriber base around the same time, the people said.

Last month, Netflix stunned the media industry and Madison Avenue when it revealed that it would begin offering a lower-priced subscription featuring ads, after years of publicly stating that commercials would never be seen on the streaming platform.

But Netflix is facing significant business challenges. In announcing first-quarter earnings last month, Netflix said it lost 200,000 subscribers in the first three months of the year — the first time that has happened in a decade — and expected to lose two million more in the months to come. Since the subscriber announcement, Netflix’s share price has dropped sharply, wiping away roughly $70 billion in the company’s market capitalization.

This week’s fun finds

Reading Better

One of the benefits of reading is that it allows you to master the best of what other people have already figured out. This is only true if you can remember and apply the lessons and insights from what you read.

Levels of Reading

Reading the words on the page (or screen) is the easy part. We learned how to do this in elementary school. The problem is this is the only way we learned to read.

Tailoring how you read to what you read makes more sense. Not everything needs to be read with the same intensity. Some books only deserve a skim, while others deserve your complete attention. How much effort you put in relates to what you’re reading and why you’re reading it.

The Levels of Reading offer four different approaches to reading (from easiest to hardest). Most of our time will be spent between levels 2 and 3.

  1. Reading to Entertain — The level of reading taught in our elementary schools.
  2. Reading to Inform — A superficial read. You skim, dive in and out, and get a feel for the book and get the gist of things.
  3. Reading to Understand — The real workhorse of reading. This is a thorough reading where you chew on things and digest them.
  4. Reading to Master — If you just read one book on a topic odds are you have a lot of blind spots in your knowledge. Synoptical reading is reading a variety of books and articles on the same topic, finding and evaluating the contradictions, and forming an opinion.

The Blank Sheet

The single biggest change you can make to getting more out of the books you read is using the blank sheet method. Over the years I’ve tested multiple approaches and this one works best for simplicity and effectiveness — it will 10x your comprehension overnight.

Here’s how it works:

  1. Before you start reading a new book, take out a blank sheet of paper. Write down what you know about the book / subject you’re about to read — a mind map if you will.
  2. After you finish a reading session, spend a few minutes adding to the map with a different color.
  3. Before you start your next reading session, review the page.
  4. When you’re done reading, put these ‘blank sheets’ into a binder that you periodically review.

The blank sheet primes your brain for what you’re about to read and shows you what you’re learning. When you first start with a blank sheet, you’re forced to search your memory and put on paper what you know (or what you think you know) about a subject. As you read, you literally see that knowledge grow as you add new knowledge to the foundation. Often, you’ll even remove things you thought you knew.

Reviewing what you knew about a subject, as well as what you learned before a reading session not only improves memory and recall but helps connects ideas. Most of the early connections come from putting the authors’ raw material onto your foundation.

When in Rome: The Ancient History of Traditional Shaving

Despite our common view of our Stone Age ancestors having big, full, poorly maintained beards, they actually are the ones who started out our shaving journey. It is believed that Stone Age men started shaving 100,000 years ago by using clam shells like tweezers and pulling out their beard hair. About 60,000 years ago, man discovered shaving, and started using sharpened obsidian and clam shells to shave their beards.

Ancient Rome

Roman men took a liking to shaving with a passion, and Julius Caesar is reported to have had his beard hair plucked out with tweezers (which still sounds like a step forward from rubbing a pumice stone all over your face).

Young Roman men would celebrate their first shave with a party as a way to welcome in adulthood. The novacila was used for shaving, the pumice stone made an appearance again to help rub off stubble, and afterwards, massage oils and perfumes would be used to soften the skin.

Ancient Egypt

Egypt is hot. Very hot. And living in that kind of heat with long hair can be particularly uncomfortable (as anyone with long hair in high summer already knows). According to Herodotus, all Egyptians, men and women, lower and upper classes, would shave their entire bodies from top to toe.

If this is the case, why don’t we see depictions of completely bald Egyptians in their art? Going completely bare-headed was considered to be a social faux pas, and of course, is not very comfortable with the desert sun beating down on your uncovered head. Having hair was still fashionable, just not very practical. So the Egyptians would craft fake wigs, and even beards, to wear.

Ancient Greece

Take a look at Ancient Greek busts, and you’ll see that beards abound. Greeks were extremely proud of their beards and put a lot of importance on them. They would only cut their beards during mourning periods, and if you lost your beard, it was considered shameful.

That all changed when Alexander the Great came along, though. He encouraged his soldiers to cut their beards so that they couldn’t be grabbed by the enemy if it came to hand-to-hand combat. Alexander’s influence quickly made shaving more fashionable, and razor technology took a leap forward. Shaving razors were soon made out of copper or iron and looked much closer to the straight razors we know today.