This past weekend we were down at my parent’s house. My two younger brothers both have birthdays close to one another so we celebrated them together. Being cool uncles, my brothers let their nieces choose the theme of the party.

My aunt went to pick up the birthday cake and the baker, probably expecting to hear a cute story about twin boys, asked how old the birthday boys were turning.
“Twenty Nine and Thirty One” responded my Aunt.

By Charles Ruff, CFA

Leigh and Adam Are Out With Their Latest Quarterly Update.

The Distortions of Cheap Energy – by Leigh R. Goehring & Adam A. Rozencwajg

As always, it is thorough, well-researched, and contrarian. I don’t agree with all their conclusions but for me these letters are a must-read. So much of what I read is rehashed, regurgitated junk. At least G&R’s writing makes you think! It’s a longer read but very worthwhile.

Cheap Energy as a Driver of Green Energy

  • Quite a controversial take but an interesting one nonetheless.
  • I agree that the total energy efficiency of a wind turbine is probably worse than a nuclear or gas-fired powerplant.
    • What I disagree with, however, is that G&R ignore the externalities such as pollution.
    • Also, ignored is that fact that based on G&R’s own “S-Curve” idea, developed economies need less energy. Gains in efficiency and orientation towards services rather than manufacturing means that a developed GDP gets more GDP dollars (for lack of a better unit of measurement) for each unit of energy.
      • Said differently, perhaps developed economies can easily afford the reduction in energy efficiency posed by “renewables”

    OPEC and the Myth of Spare Capacity

    • I absolutely agree with them here. OPEC’s relevance is predicated upon spare capacity. There is plenty of evidence suggesting that OPEC is having production issues. I have not seen any evidence that OPEC truly has the spare capacity they claim.
    • The only places where I can see oil output rising significantly are Iraq, Iran, and Venezuela. Iraq’s production is still recovering from the war and ISIS. Iran still has issues with sanctions. Venezuela is more humanitarian crisis than country but if this reverses and capital flows back in, Venezuela’s production could grow.

Third Point Investor Letter

REMINDER: Mentioning a stock is not a recommendation to buy. See full disclosure below.

Third Point: Fourth Quarter 2021 Investor Letter

Third Point generated lots of headlines last week when they called out what they see as embedded value in Amazon.

  • Kudos to Third Point for their investment in Accenture (ACN). We agree with their analysis on all counts and ACN is a core holding in Novem Capital Appreciation.
    • Third Point bought in at $366/share… we initiated our position closer to $260 over a year ago. I won’t even mention the savings of paying 40bps instead of 2& 20 to Dan Loeb…

Re: Ukraine

I’ve already passed along my thoughts and the situation is changing by the hour. I don’t see much value-add in re-hashing headlines, rumors, and speculations.
If you are looking for a good place to follow the Russia Ukraine situation, check out Ian Bremmer at GZERO World.

And yes, I believe in the ghost of Kyiv.

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