This week's interesting finds

This week in charts

Homeowner equity by province

Home price to income - Toronto

Home price to income by country

Mortgage payments vs. income – Canadian cities

Commodities vs. bonds – 10-year rolling annualized returns

Tech credit spreads vs. Oracle 5-year credit default swaps (CDS)

U.S. IPOs

Asset mix by household income

Russel 2000 Index returns

The Untold Story of Charlie Munger’s Final Years

Charlie Munger owned a house with spectacular ocean views in Montecito, Calif. The Berkshire Hathaway vice chairman had designed the entire gated community, which locals called “Mungerville.” At one point, he told a friend he expected to spend his last years there.

Instead, Munger chose to remain in his longtime home in Los Angeles. The place didn’t even have air conditioning. During a heat wave three years ago, friends brought electric fans and bags of ice to cool his library.

Munger didn’t care. The home was close to people he liked and projects he found stimulating. Rather than a quiet life by the sea, Munger spent his final years chasing gutsy investments, forging unlikely friendships and facing new challenges.

When Munger died two years ago, weeks before his 100th birthday, the billionaire investor was among the nation’s most beloved businessmen, celebrated for his wit and wisdom—and the role he played helping Warren Buffett build Berkshire Hathaway into a trillion-dollar company.

The unexpected last chapter of Munger’s life is less well-known. In the year before his death, Munger made over $50 million from a bet on an out-of-favor industry he had shunned for 60 years. He revved up his real-estate activities, working with a young neighbor to place big, long-term wagers, unusual for a nonagenarian. He faced down health challenges and wrestled with the future.

“Even a week or two before passing away, he was asking questions such as, ‘Does Moore’s Law apply in the age of AI?’” recalls his friend Jamie Montgomery, referring to whether artificial intelligence would see exponential gains like those experienced in computational power.

Friends and family say Munger’s eventful last period offers lessons for investors—and a blueprint for how to age with grace, equanimity and purpose.

“To the day he died, that mind was running,” says Munger’s stepson, Hal Borthwick. “He never stopped learning.”

This week’s fun finds

This week, Product Manager Olivia F. organized a moai from one of Toronto’s legendary Italian sandwich shops (est. 1984). There were three kinds of sandwiches, a variety of salads and even a panettone. We all left stuffed and even saw some of the World Cup pool draws!

The Math Shows Jackson Pollock Painted Like a Child Would

Jackson Pollock’s paintings look like beautiful accidents. The 20th-century painter spilled, drizzled, and flung paint from brushes, cans, syringes, and sticks at canvases laid out on the floor in seemingly haphazard and unchoreographed fashion. The resulting blizzards of emotion and color dazzled audiences and made him famous.

But while art lovers admire the work, scientists have long aimed to understand the laws that govern them—in part to help devise tools that could help distinguish his paintings from imitations. Recently, one international team set out to see whether his process was closer to how children or adults might paint. To answer that question, they asked a group of adults aged 18 to 25 and children aged 4 to 6 to make paintings in the style of Pollock, by pouring paint onto canvases.

The researchers found that the kids’ paintings made in this manner resembled genuine Pollacks more than did those from adult painters. They published their results in Frontiers in Physics.

To arrive at this conclusion the scientists used two forms of statistical analysis: fractal analysis and lacunarity. Whereas fractal analysis measures complexity, lacunarity reveals something more subtle: the rhythm and space in a complex network. Measuring lacunarity has helped scientists understand natural systems such as galaxies in the universe. They also asked people to rate the finished paintings, and used their findings to assess two famous art works: No. 14, by Jackson Pollock, and Young Man Intrigued by the Flight of a Non-Euclidean Fly, by Max Ernst, who used his own distinct paint pouring technique.

The researchers found that the children’s art featured lower fractal dimensions and higher lacunarity—they were simpler, with less detailed fine structure, and showed more clumping, with larger gaps between clumps. Adult paintings showed the opposite: higher fractal dimensions and lower lacunarity. In other words, the adult works had more complex detailed patterns, while the lines of paint were more evenly spread out.

This week's interesting finds

This week in charts

The Big 5 vs. S&P Energy: CAPEX as a share of operating cash flow

Asset-light vs. asset-heavy companies

Market capitalization – asset-light vs. asset-heavy companies

S&P 500 index market capitalization by sector since 1980

Predictive power of valuation entry points over various holding periods

S&P 500 Index Real Estate sub-industry weights

Relative P/E of Health Care vs. S&P 500 Index at historic lows

Health Care mergers & acquisitions deal counts

Drug development time savings – with and without the use of A.I.

Share buybacks announced but not executed

Retail investors buying gold

Keeping cool: heat a key challenge for data centers and AI

The global boom in data centers as companies increasingly outsource information storage and ramp up use of energy-intensive artificial intelligence is creating a key challenge for the industry - how to keep cool.

An outage at the world's biggest exchange operator CME Group from late Thursday that halted trade on its popular currency platform and in futures spanning foreign exchange, commodities, Treasuries and stocks has put a spotlight on data centers overheating.

The problem was a cooling issue at data centers operated by Dallas-headquartered CyrusOne, which operates more than 55 centers in the U.S., Europe and Japan.

What causes the heat?

High-powered AI and cloud servers crunching data need huge amounts of power, which gives off intense heat that traditional air cooling systems are often unable to cool properly.

Data centers contain racks of servers stacked together which are constantly turned on, consuming power. As they heat up, they require constant cooling.

What can data center operators do about it?

More data centers are looking to use water or specialized coolants instead of air cooling, as liquid cooling can be 3,000 times more efficient than air at removing heat.

Liquid cooling however can create its own challenges, including potential leaks, corrosion and the need for specialized maintenance. It can also be water intensive.

Companies are looking to find ways to reduce outside coolants. Microsoft last year launched a new data center design that consumes zero water for cooling.

According to the company, its new technologies recycle water through a closed loop, circulating between the servers and chillers to dissipate heat without needing a fresh supply.

There are also systems to recover and reuse waste heat from data centers.

How common are outages linked to cooling issues?

Mewton said that in general data center outages were "extremely uncommon" because of contractual requirements for operators to keep them almost always online.

"You need to be up more than 99.99% of the time sometimes," he said.

While outages overall were fairly unusual, specific issues directly affecting cooling systems were "even rarer", Mewton said. "What I most often hear (about) is obviously power issues," he said.

A wave of deal-making for data center cooling

The global appetite for data centers has sparked a wave of deal-making across the industry as companies race to build capacity to meet the surge in power and cooling needs.

Law firm White and Case estimates that up to 40% of total energy consumption in data centers is spent on cooling them down, making it a big business.

This week’s fun finds

Last weekend our office transformed into a holiday playground for EdgePointers' kids. They bounced in an inflatable castle, had their faces painted and created their own art canvases. An afternoon packed with laughter and seasonal cheer!

How Your Brain Creates ‘Aha’ Moments and Why They Stick

Insights are not limited to geniuses: We have these cognitive experiences all the time when solving riddles or dealing with social or intellectual problems. They are distinct from analytical problem-solving, such as the process of doing formulaic algebra, in which you arrive at a solution slowly and gradually as if you’re getting warmer. Instead, insights often follow periods of confusion. You never feel as if you’re getting warmer; rather, you go from cold to hot, seemingly in an instant. Or, as the neuropsychologist Donald Hebb, known for his work building neurobiological models of learning, wrote in the 1940s, sometimes “learning occurs as a single jump, an all-or-none affair.”

An abrupt cognitive shift in how the mind understands information is known as a representational change. Although researchers have inferred sudden shifts in understanding from the behavior of subjects, they have not pinned down how the brain supports representational change.

During moments of insight, representational change typically occurs, said John Kounios, a cognitive neuroscientist at Drexel University and co-author of the book The Eureka Factor: Aha Moments, Creative Insight, and the Brain. “The question is: How is it occurring?”

This week's interesting finds

 Our holiday gift guide - 2025 edition

Snow already showed up this year, so we figured, "Why wait for Black Friday?". We’re unwrapping our favourite EdgePointer gift picks early because good ideas shouldn’t sit in storage.

 

This week in charts

Consumer spending gaps

Wage and salary growth

Content authors – Human vs. A.I.

Revenue and capital expenditure comparison – Generative A.I. vs. cloud

2024 stock-based compensation by sector

Japan inflation rate

Chinese overseas loans by income group

High-tech facility construction

Capital expenditure comparison

Auto insurance premiums

India gold ETF flows

Source of systemic credit events – BofA Global Fund Manager Survey

‘Uranium prices have skyrocketed’: Canada at core of uranium squeeze

A global rush to lock in nuclear fuel is putting fresh pressure on Canada, the world’s second largest producer of uranium.

Prices for the critical mineral are surging as utilities in the U.S., Europe, and Asia rush to secure long-term supply to fuel power plants, which is increasingly seen as a solution to climate change and power for data centres.

With sanctions on Russian uranium and the world’s top producer Kazakhstan facing its own mining challenges, Canada sits at the centre of the uranium squeeze with high grade deposits in Saskatchewan. But can it meet the world’s demand?

Actually, it’s in “great shape to step up to the ball,” Brooke Thackray, research analyst at Global X, told BNN Bloomberg. “There really are not a lot of places to get uranium.”

“The U.S. is extremely dependent on Canada, and it’s going to become more dependent on Canada,” said Thackray.

Canada produces 13 per cent of the world’s uranium according to Natural Resources Canada, and it knows it stands to benefit.

Is Canada ramping up?

Even with soaring demand, Cameco, a leading uranium producer, does not plan to ramp up its production aggressively unless it locks in more contracts.

The company said it is sitting on “tier-one uranium mining assets that are licensed, permitted, long-lived, and proven, with capacity to expand,” but stressed that it does “not produce speculative pounds of uranium based on demand estimates.”

In fact, Cameco announced it is reducing its forecasted output in its McArthur River/Key Lake operation from 18 million pounds of concentrate to approximately 15 million because of operational delays.

Canada has the mineral, the companies, and government support. But the reality is, scaling output is slow, expensive and constrained by labour and permitting, said Charlton.

A ‘funny, funny market’

Unlike oil or copper, uranium demand is mostly hard wired into long term reactor fleets.

“Uranium is a funny, funny market. It’s totally unique,” said Thackray.

He said while companies know what the supply and demand is, the price of the mineral still moves around and the industry is well aware of a looming uranium deficit in 2035.

“So there’s a game of chicken going on,” said Thackray “Because we know we’re going to go into the deficit, and we need more nuclear power.”

He said the AI industry’s biggest bottleneck right now is energy, which it is trying to fill with natural gas.

Another supercycle?

Thackray says today’s environment feels a lot like the period leading into the last supercycle in the 90s to the early 2000s, when tech dominated market attention until a shock revealed shortages in copper, uranium and oil.

He cautions the path won’t be smooth and uranium equities can drop sharply, but argues the long-term setup is strong because “we don’t have enough uranium.”

He also says large caps like Cameco tend to benefit first, but smaller players such as NexGen Energy tend to perform better later in the cycle.

Cameco’s $80 billion deal with the U.S. government to build nuclear reactors, and its refining capacity gives it an even stronger footing as demand grow, he said.

Utilities with “multi-billion dollar fixed cost” reactors must buy fuel regardless of price, while producers gain from selling more at higher levels."

“Ultimately, high uranium prices help the nuclear industry,” he said.

Small modular reactors and AI centres

Right now, Canada has five operating uranium mines in Northern Saskatchewan and three proposed mining projects.

“Prices were very depressed for most of the last decade. Everyone was expecting it to turn around. It took longer to turn around than people thought it would,” said Pierre Gratton, president and CEO of the Mining Association of Canada.

Gratton pointed to China’s nuclear build out as a key driver.

“Reactors take forever to build, but it’s now starting to kick in and uranium prices have skyrocketed,” said Gratton.

He said the next demand will be driven by small modular reactors, or SMRs, as provinces like Saskatchewan and Alberta look for non-emitting alternatives to coal and gas.

Both Thackray and Gratton point to a second wave behind that: data centres and artificial intelligence. 

By 2040, Thackray said, “they’re going to need double the amount of nuclear fuel for the reactors.”

 

This week’s fun finds 

The office is beginning to warm up for the holidays. There’s so much to celebrate working among such wonderful partners! 

62 Modern Tree Houses Climb to Architectural Heights

The arboreal designs featured in TASCHEN’s new book aren’t your dad’s Home Depot box variety. Uniquely stunning, all 62 structures in Modern Tree Houses respond to the surrounding environment, whether a tiny, winterized pod for escaping the snow or a split-level playground complete with climbing ropes and nests. Built by architects and amateurs alike, each dwelling is varied in material, layout, purpose, and aesthetic, although all thrive because of their proximity to nature’s beauty.

This week's interesting finds

17 years of unwavering commitment to our investors

When EdgePoint was launched in November 2008, we made a simple promise to put our investors first. 

Seventeen years later, that commitment remains at the heart of everything we do.

This week in charts

Corporates yielding less than government bonds

Spending on data center construction

Relative performance of Quality Stocks vs. the market

Residential electricity prices

S&P 500 Index – sector composition since 1970

U.S. high-yield bond and leveraged loan universe

Leveraged loan index and high-yield bond index sector breakdown

M&A volume - % of private equity

Small credit rating providers

Privately-rated securities

Ratings per analyst

S&P 500 Index Concentration concentration at record levels

S&P 500 Index – Momentum crowding at the 98.9th percentile

BlackRock Faces 100% Loss on Private Loan, Adding to Credit Market Pain

About a month ago, BlackRock Inc. deemed the private debt it had extended to Renovo Home Partners, a struggling home improvement company, to be worth 100 cents on the dollar. As of last week, the firm had a new assessment: zero.

The drastic revision comes as Dallas-based Renovo — a roll-up of regional kitchen and bathroom remodeling businesses created by private equity firm Audax Group in 2022 — abruptly filed for bankruptcy last week, indicating it plans to shut down.

BlackRock held the majority of Renovo’s roughly $150 million of private debt, while Apollo Global Management Inc.’s MidCap Financial and Oaktree Capital Management held smaller chunks, according to people with knowledge of the matter, who asked not to be identified discussing a private transaction.

It was no mystery Renovo was in a tough spot. In April, lenders had agreed to take losses and convert some of their loans into equity as part of a recapitalization that was supposed to give the company a chance to turn its business around, the people said. In the third quarter, they also allowed for deferred cash interest payments on its restructured debt, an arrangement known as payment-in-kind, regulatory filings show.

Yet at the end of September, funds managed by BlackRock and MidCap Financial were still marking the new Renovo debt at par, which typically indicates investors expect to be paid back in full.

It took only a few weeks for the situation to quickly unravel.

While the Renovo debt represents a sliver of total assets for the three lenders, its sudden collapse strikes at the heart of what critics see as a major vulnerability in the private credit market: the disconnect between the valuation of illiquid loans and the performance of the underlying companies. Zips Car Wash similarly enjoyed marks that were near par from its private credit lenders months before filing for bankruptcy earlier this year.

It also comes in the wake of the collapses of subprime auto lender Tricolor Holdings and car-parts manufacturer First Brands Group, which have caught investors off guard. They’ve stoked fears there could be more pain to come in credit markets and led Wall Street executives to trade shots as to who is to blame for poor underwriting standards.

Renovo’s main borrowing entity, HomeRenew Buyer Inc., filed for Chapter 7 bankruptcy last week, listing liabilities of between $100 million and $500 million and assets of under $50,000.

This week’s fun finds

With the weather turning colder, Jin (with an assist from Adam) brought the heat with a Hakka moai. Many of us broke into smiles at the spread (and a few broke into a sweat), but everyone went back to their desks full.

The Hidden Math of Ocean Waves Crashes Into View

The best perk of Alberto Maspero’s job, he says, is the view from his window. Situated on a hill above the ancient port city of Trieste, Italy, his office at the International School for Advanced Studies overlooks a broad bay at the northern tip of the Adriatic Sea. “It’s very inspiring,” the mathematician said. “For sure the most beautiful view I’ve ever had.”

Italians call Trieste la città della bora, after its famed “bora” wind, which blows erratically down off the Alps and over the city. When the bora is strong enough, it drives the waves into reverse. Instead of breaking against the docks, they stream away from the city, back toward the open sea.

But they never actually get there. Watching from his window on these gusty days, Maspero can see the retreating waves slowly disperse as they exit the port, eventually giving way to a calm, still surface.

The equations that mathematicians use to study the flow of water and other fluids — which Leonhard Euler first wrote down nearly 300 years ago — look simple enough. If you know the location and velocity of each droplet of water, and simplify the math by assuming there’s no internal friction, or viscosity, then solving Euler’s equations will allow you to predict how the water will evolve over any time period. The rich menagerie of phenomena we see in the world’s oceans — tsunamis, whirlpools, riptides — are all solutions to Euler’s equations.

But the equations are usually impossible to solve. Even one of the simplest and most common kinds of solutions — one that describes a steady train of gently rolling waves — is a mathematical nightmare to extract from Euler’s equations. Until about 30 years ago, the bulk of what we knew about these waves came only from a mix of real-world observations and guesswork. For the most part, proofs seemed like a fantasy.