Canada's energy industry

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Human development: fueled by energy - Chris Slubicki, CEO of Modern Resources Inc. (Link)

Chris Slubicki provides an objective perspective of the global and Canadian energy industries. Canadians are benefiting greatly today because we had the courage to build in the past.The world needs energy and no one is better at providing it then Canada. Chris concludes with great examples in Canadian history where we had to courage to build. We need to step up again and build. 

Government policies have made Canada less attractive to investment in energy industry (Link)
U.S based, Devon Energy adds to the exodus of foreign oil and gas companies leaving the Canadian oil patch. Devon Energy has roots in Canada dating back to 1998 and opened its first facility in 2007. Their Canadian operation represented about 24% of their overall production with 750 employees in Canada. The company is leaving Canada to complete its“transformation to a high-return U.S. oil growth business". According to the 2018 Global Petroleum Survey, the U.S. is the most attractive region for oil and gas investment, while Canada now ranks fourth.

Misfits. Unnecessary power plants. Aging stock market

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Listen to the story behind "The Incredibles" and the power of misfits (Link)
Pixar was founded on a disruptive vision. Their leaders fervently believed it was never too early to throw your own recipe out the window. Pixar founder Steve Jobs wanted to keep raising the bar—bigger hits, longer run times—so he picked a couple of outsiders to drive a shakeup. So they hired Brad Brid who was just fired from Disney. Brad hated being told “that’s the way we’ve always done it” as he believed you needed to continually shake things up. Brad joined Pixar with an idea that was far beyond what Pixar had ever done. That idea was The Incredibles, which required animating a whole family with super powers..Pixar had never animated humans before because the coding behind creating a realistic animated human was something viewed as impossible in CG animation. Brad searched Pixar’s ranks for people who were frustrated with the status quo and willing to give Brads idea a try. It turns out Brad was onto something as his new team of frustrated individuals was super motivated to develop fresh new solutions and wanted to bring Brads incredible idea to life. The Incredibles went onto gross over $600 million and win two Oscars. Not bad for a misfit like Brad. 

California is building unnecessary power plants (Link)
California uses 2.6% less electricity annually from the power grid now than in 2008, despite this reduction residential and business customers are paying $6.8 billion more for power than they did then. The added cost to customers will total many billions of dollars over the next two decades, because regulators have approved higher rates for years to come so utilities can recoup the expense of building new plants. California regulators have for years allowed power companies to go on a building spree, vastly expanding the potential electricity supply in the state. Today the gap between what Californians pay to turn on their lights versus the rest of the country has nearly doubled. California has this tradition of astonishingly bad decisions.

How did the U.S. stock market get so old? (Link)
The average age of companies listed on US exchanges has been steadily rising for three decades. Now it’s 20 years which is almost twice the average in 1997, during the dot-com craze. The trend toward fewer and older companies has been developing for years. Firms are staying private for longer, and initial public offerings—once a rite of passage for a successful startup—get done later. Once companies do list, they quickly become prey. In a market dominated by megacaps, behemoths swallow up competitors with ease.

Weekend catchup

Your weekend edge - catch up with this week's readings:

Get the Edge - Click here to view an archive of investment education, daily musings, book recommendations and more.
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Not caring: A unique and powerful skill (Link)
If you can remain dispassionate about what people think of you while you’re trying to get an outcome, or about the noise around you during the process, you have an advantage that 1 out of  100,000 has in the industry. 
- Not caring about looking dumb when you’re confident others are being dumber.
- Not caring about your reputation after you change your mind. 
- Not caring about not having no explanation for the majority of events.

Figure out what you can control and obsess over it. Identify what doesn’t matter and ignore it. Determine what you’re incapable of and stay away from it.Have room for error. Plan on things not going according to plan.

Advice from Charlie Munger : 2019 Daily Journal AGM (Link)
We’ve done better than average and now there’s a question why has that happened? The answer is pretty simple. We tried to do less. We never had the illusion we could just hire a bunch of bright young people and they would know more than anybody about canned soup and aerospace and utilities and so on and so on. We always realized that if we worked very hard, we could find a few things where we were right and the few things were enough and that that was a reasonable expectation. Audio recording here.

Only one constant in investing (Link)
You have to understand that there are no physical laws at work in investing. And the future is uncertain, and vague, and random. And psychology dominates. Richard Feynman said, "Physics would be much harder if electrons had feelings." You come in the room, you flip up the switch, and the lights go on. Because the electrons flow from the switch to the lights. They never flow the other way. They never go on strike. They never fall asleep. They never say, ‘Ah today I don’t feel like flowing from the switch to the light.'

You can use all the numbers, tables, and data visualizations you want, but you still won’t be able to quantify the only law in investing: everything is determined by your own behavior. Everything comes back to how you react to information.

Google vs. Amazon (Link)
Steve Yegge spent years at both Amazon and Google. His famous posting from 2011 gives an insiders look what Amazon was able to figure out early on and what hindered Google. Google did nearly everything better than Amazon, yet Amazon continued to be more successful. The difference came down to products vs. platforms and Amazon’s CEO Bezos was fierce about building platforms and Google didn't understand this. Products are always built on top of platforms. Platforms are all about long-term thinking. The power of a platform comes from the variety and sophistication of the products it enables. Bezos realized long before the vast majority of Amazonians that Amazon needs to be a platform.

What Happened When I Bought a House With Solar Panels (Link)
I’d soon learn that the system was tied to the title of the house. It appeared that if we bought Jug’s place, we’d have to assume his lease arrangement with Sunrun. On consumer review sites and in local news reports, rueful customers warn others to stay away from TPO solar offered by Sunrun and other companies. State attorneys general and politicians have fielded complaints from people who say they were sold expensive systems they can’t afford after signing contracts they didn’t understand; or are paying more now on their electricity bills, not less as promised; or are having trouble selling their homes because potential buyers are turned off, just as I was. (Customers of Sunrun and other companies must sign binding arbitration clauses, barring them from suing or joining in class actions.) Salespeople would cherry-pick data, skim over crucial details, and prioritize speed above all, he told me. A trainer from California who listened in on hundreds of sales calls for quality control estimated that 60 % of customers knew no more than half of what they were signing up for and 10 % had no clue.

Booming used car market?
The average price of a used car is now about $20,000 for the first time in history. What's driving the trend? The declining number of older used cars and the increasing number of late-model leased cars hitting the used car market are driving prices higher. These late model cars are newer which means they generally sell for a higher price which is helping to drive the profits of used cars sales higher. The increasing number of used cars is also a money maker for dealership's parts and services departments which represent about 40% of  dealership's used car department profits.

Relative sizes of world stock markets 1899 vs 2019 (Link)
At the start of the 20th century, the UK equity market was the largest in the world, accounting for a quarter of world capitalization, dominating even the US market (15%). Germany (13%). Of the US firms listed in 1900, over 80% of their value was in industries that are today small or extinct. Today the US equity market us the largest in the world, accounting for 50% of world capitalization with the UK now under 6%.

World energy consumption through 2040
Fossil fuels projected to remain the largest energy source with natural gas, renewables and petroleum liquids being the fastest growing energy sources. Asia is projected to have the largest increase in energy use of non-OECD regions.

Used cars. Constants in investing. EdgePoint culture

Get the Edge - Click here to view an archive of investment education, daily musings, book recommendations and more.
_________________

Only one constant in investing (Link)
You have to understand that there are no physical laws at work in investing. And the future is uncertain, and vague, and random. And psychology dominates. Richard Feynman said, "Physics would be much harder if electrons had feelings." You come in the room, you flip up the switch, and the lights go on. Because the electrons flow from the switch to the lights. They never flow the other way. They never go on strike. They never fall asleep. They never say, ‘Ah today I don’t feel like flowing from the switch to the light.'

You can use all the numbers, tables, and data visualizations you want, but you still won’t be able to quantify the only law in investing: everything is determined by your own behavior. Everything comes back to how you react to information.

Booming used car market?
The average price of a used car is now about $20,000 for the first time in history. What's driving the trend? The declining number of older used cars and the increasing number of late-model leased cars hitting the used car market are driving prices higher. These late model cars are newer which means they generally sell for a higher price which is helping to drive the profits of used cars sales higher. The increasing number of used cars is also a money maker for dealership's parts and services departments which represent about 40% of  dealership's used car department profits.

Pancake Tuesday and Robert's 6th anniversary!

The power of not caring I Charlie Munger I World energy consumption

Get the Edge - Click here to view an archive of investment education, daily musings, book recommendations and more.
_________________

Not caring: A unique and powerful skill (Link)
If you can remain dispassionate about what people think of you while you’re trying to get an outcome, or about the noise around you during the process, you have an advantage that 1 out of  100,000 has in the industry. 
- Not caring about looking dumb when you’re confident others are being dumber.
- Not caring about your reputation after you change your mind. 
- Not caring about not having no explanation for the majority of events.

Figure out what you can control and obsess over it. Identify what doesn’t matter and ignore it. Determine what you’re incapable of and stay away from it.Have room for error. Plan on things not going according to plan.

Advice from Charlie Munger : 2019 Daily Journal AGM (Link)
We’ve done better than average and now there’s a question why has that happened? The answer is pretty simple. We tried to do less. We never had the illusion we could just hire a bunch of bright young people and they would know more than anybody about canned soup and aerospace and utilities and so on and so on. We always realized that if we worked very hard, we could find a few things where we were right and the few things were enough and that that was a reasonable expectation. Audio recording here

World energy consumption through 2040
Fossil fuels projected to remain the largest energy source with natural gas, renewables and petroleum liquids being the fastest growing energy sources. Asia is projected to have the largest increase in energy use of non-OECD regions.

Google vs. Amazon. World stock markets 1899 vs 2019. Solar Panels.

Get the Edge - Click here to view an archive of investment education, daily musings, book recommendations and more.
_________________

Google vs. Amazon (Link)
Steve Yegge spent years at both Amazon and Google. His famous posting from 2011 gives an insiders look what Amazon was able to figure out early on and what hindered Google. Google did nearly everything better than Amazon, yet Amazon continued to be more successful. The difference came down to products vs. platforms and Amazon’s CEO Bezos was fierce about building platforms and Google didn't understand this. Products are always built on top of platforms. Platforms are all about long-term thinking. The power of a platform comes from the variety and sophistication of the products it enables. Bezos realized long before the vast majority of Amazonians that Amazon needs to be a platform.

Relative sizes of world stock markets 1899 vs 2019 (Link)
At the start of the 20th century, the UK equity market was the largest in the world, accounting for a quarter of world capitalization, dominating even the US market (15%). Germany (13%). Of the US firms listed in 1900, over 80% of their value was in industries that are today small or extinct. Today the US equity market us the largest in the world, accounting for 50% of world capitalization with the UK now under 6%.

What Happened When I Bought a House With Solar Panels (Link)
I’d soon learn that the system was tied to the title of the house. It appeared that if we bought Jug’s place, we’d have to assume his lease arrangement with Sunrun. On consumer review sites and in local news reports, rueful customers warn others to stay away from TPO solar offered by Sunrun and other companies. State attorneys general and politicians have fielded complaints from people who say they were sold expensive systems they can’t afford after signing contracts they didn’t understand; or are paying more now on their electricity bills, not less as promised; or are having trouble selling their homes because potential buyers are turned off, just as I was. (Customers of Sunrun and other companies must sign binding arbitration clauses, barring them from suing or joining in class actions.) Salespeople would cherry-pick data, skim over crucial details, and prioritize speed above all, he told me. A trainer from California who listened in on hundreds of sales calls for quality control estimated that 60 % of customers knew no more than half of what they were signing up for and 10 % had no clue.

Weekend catch up

Your weekend edge - catch up with this week's readings:

Get the Edge - Click here to view an archive of investment education, daily musings, book recommendations and more.
_________________

Life lessons from Blackstone's Byron Wien (Link)
- If you want to be successful and live a long, stimulating life, keep yourself at risk intellectually all the time.
- The hard way is always the right way.
- Don’t try to be better than your competitors, try to be different.
- If it pays the most, you’re lucky. If it doesn’t, take it anyway, I took a severe pay cut to take each of the two best jobs I’ve ever had, and they both turned out to be exceptionally rewarding financially.

Don’t ask for his macro forecast - Howard Marks (Link)
“I don’t think anybody can consistently know the economy, interest rates, currencies, and the direction of the markets better than anybody else. So I swear off forecasting, and one of the elements in Oaktree’s investment philosophy is that we do not base our investments on macro forecasts. That doesn’t mean we’re indifferent to the macro, and our approach is, rather than depend on forecasts of the future, we depend on reading the present. I believe one of the greatest predictors of what the market’s going to do, or influences on what the market’s going to do, is where it stands in the various cycles, and if we can have an idea when the market is at an extreme position, I believe that can help us increase or decrease our aggressiveness or defensiveness in a timely fashion.”

The greatest investor you’ve never heard (Link)
Herb Wertheim may be the greatest individual investor the world has never heard. This once optometrist is a testament to the power of compounding as well as to the resilience of American innovation. Like Warren Buffett, Wertheim believes firmly in doubling down when his high-conviction picks go against him. Instead of concentrating on the metrics in financial statements, Wertheim is devoted to reading patents and spends two six-hour blocks each week poring over technical tomes. “What’s more important to me is, what is your intellectual capital to be able to grow?” Thanks to his engineering background, the technical nature of optometry and his experience as an inventor, the patent library is Wertheim’s comfort zone. Stocks he invested in based on their impressive patent portfolios include IBM, 3M and Intel.“If you like something at $13 a share, you should like it at $12, $11 or $10 a share, and if a stock continues to go down, and you believe in it and did your research, then you buy more”.

Jim Collins — A rare interview with a reclusive polymath (Link)
You likely know Jim Collins from one of his eight books, including Good to Great. Jim seldom gives interviews, so this is a rare window into an especially curious mind. At the end of every single day, Jim opens a spreadsheet with 3 columns and logs the following:1. What he did that day. 2. The number of creative work hours for that particular day (For the past 30 years, he’s clocked more than 1,000 creative work hours for the whole year). 3. A number: either +2, +1, 0, -1, or -2. indicating his overall emotional state for the day (+2 is the highest – aka a really good day).

What else matters more than future growth? (Link)
A simple question when thinking about future growth. What else matters more than this? Here’s what happened to a bunch of big economies over the last 30 years:

And here’s what happens over the next 30 years. 

America is leaps ahead of others. But if, aging-wise, China and Europe become the equivalent of Japan, and Japan becomes the equivalent of Del Boca Vista, everyone will feel it.

China ranks 86th in UN World Happiness Report (Link)
China ranked 86th - below 70th ranked Libya and 59th ranked Russia! The report noted Chinese rural households were much happier than urban households despite lower incomes. With the economy still growing at high levels you wonder why happiness is decreasing? Not too far behind China, is Venezuela, which is now ranked 102nd in the world down from 20th only 5 years ago.

Relative returns of companies exposed to the US-China trade wars

Gold reserves at major producers over the last 6 years

The problem of declining gold reserves has not been exclusive to Barrick. Many of the world’s largest gold companies including Newmont, Goldcorp Inc., and Kinross Gold Corp. have also seen their reserves fall. In the recent environment, there is a need to increase gold reserves to take advantage of the rising gold prices. This is providing increased incentive for consolidation among gold producers.