Friday Haymaker
In The Ring - August 18th, 2023
Everything Under the Sun… and Blowing In The Wind
“We are stuck with technology when what we really want is just stuff that works.” -Douglas Adams
“We find that many investors still believe there is no amount of US Federal debt where…debt levels go from ‘debt is deflationary’ to ‘debt is inflationary’ as Central Bank must print cash to prevent default risk as US interest expense rises above US tax receipts.” -Luke Gromen, author of Forest for the Trees“
“Accepting the absurdity of everything around us is one step, a necessary experience: it should not become a dead end. It arouses a revolt that can become fruitful.” -Albert Camus
To learn more about Evergreen Gavekal, where the Haymaker himself serves as Co-CIO, click below.
When it comes to energy, I’m definitely an all-of-the-above kind of guy. Yet, my suspicion is that many Haymaker readers (and Evergreen Gavekal clients) believe I’m a sucker for fossil fuels. It’s true that I believe oil and natural gas have been unfairly stigmatized. Yet, among my strongest convictions is that burning coal and wood to produce electricity is one of the worst things humanity can do to the environment.
Similarly, I’m not a fan of heavily relying on renewables to fuel the global economy. The inherent intermittency of wind and solar are problematic when it comes to providing baseload power. The extreme reliance on China for much of the photovoltaic supply chain is another major drawback. The increasingly creaky electric grid is an additional serious challenge. But, as I’ve written in the past, no fuel source is perfect. In my view, wind and solar can play important roles in satisfying the planet’s insatiable demand for energy, even though they fall vastly short of nuclear power’s energy density.
As the developing world continues to develop, its energy usage (both in aggregate and on a per capita basis) is headed in a decidedly northerly direction. The world is going to need as many viable sources of energy generation as it can marshal. This is particularly true once coal begins to fade as one of the most heavily utilized fuels for electricity production. (Sadly, that trend is once again heading the wrong way.)
When it comes to oil and gas, it’s no secret that I’m a fan of midstream energy investments. They have often been ranked in our Champions section though, on July 14th, we downgraded them to Contender (aka, hold) due to how well they’ve performed, including this year. With their 7%-type distributions factored in, they’ve generated about 15% for 2023. The main energy ETF, XLE, has produced about half that return.