#119 - Planet Labs is Indexing Earth, Billdr a Marketplace for Home Renovations, B-Schools Go In-House, and a Letter to the National Energy Minister
In this week's episode of Reformed Millennials, Broc and Joel revisit the topic of inflation and a concept that might explain why inflation numbers are lower in the coastal cities. They also talk about the space industry through the lens of a company that recently went public called Planet Labs, a little about the great resignation, and lastly about a Canadian Startup called Billdr that's working on Alberta's favourite past time, home renovations.
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👉 For specific investment questions or advice contact Joel @ Gold Investment Management.
Even official inflation readings are at record levels.
Interest perked up last week.
Most financials consolidated recent gains. XLF is looking primed for a breakout. Metals were on fire.
XME has built a big base near its 10-year highs, led by stocks like FCX, X, AA, ALB, LTHM.
Even gold and silver are pushing higher. If interest rates continue to rise, financials and metals should outperform.
In the meantime, the tech sector is not showing any worries about inflation. The biggest companies are getting bigger and more dominant – AAPL, AMZN, FB, MSFT, NVDA, TSLA, GOOGL, SHOP, AMD. There are also new tech leaders that broke out on strong earnings like ABNB, RBLX, DASH, DOCN, U. In other words, market sentiment is bullish and the slight dips are getting bought.
Cleantech is still a major market theme. Rivian’s IPO stirred speculative juices. If you don’t want the volatility of individual stocks but want to have exposure to this strong trend, PBW is one way to approach it. It’s an ETF that gives you access to electric vehicles, batteries, charging stations, solar, fuel cells, renewable utilities, etc.
Cannabis stocks managed to make a higher low and are now starting to trend higher. MSOS provides good exposure to U.S.-based companies. Some individual players that are currently in play – TLRY, MSOS, CGC, VFF, GRWG, ACB, etc.
Fun Market History:
Historic market cap losses from peak to bankruptcy:
Worldcom - $180bn
Enron - $70bn
Lehman - $60bn
Tesla loss last Monday - $140bn
A letter to the National Energy Minister
Many people get caught up in the following two narratives:
Oil is bad and can be replaced by renewables!
We can't live without it. THE SUN!
We don't care about either. The most important thing to understand is that both are true...ish
As an investor in Alberta and beyond we find it much more productive to consider how energy consumption can and will change in the coming decades.
We've said it before - "The energy companies of today will lead the green energy revolution of tomorrow."
from the article
Every single day:
the world consumes about 100 million barrels and demand is now back to pre-COVID levels despite jet fuel usage (8 per cent of total use) remaining weak due to lingering inconveniences such as quarantines and expensive testing requirements.
According to the BP Statistical Review, of the 100 million barrels per day of daily usage:
60 million are for transportation (27 million by cars, 18 million in heavy hauling trucks, 8 million in planes, and the rest in ships and public transit).
Just how big of a feat will it be to convert a staggering 1.45 billion vehicles, 29,000 aircraft, and 54,000 ships to renewable fuel sources, and what is the timeline for them to reach critical scale?
For cars, the obvious alternative is electrification and in many countries, all new car sales must be emissions free (from the tailpipe, not necessarily the power source) by 2035. Electric car sales were approximately 5 million units in 2020 and while this number will steadily increase as more automakers develop new models at varying price points, how long will it take not just for electric car sales to gain meaningful share of news sales but to displace the 1.4 billion existing install base which will continue to grow for years to come (here’s a hint…the Energy Information Administration recently projected that the U.S. internal combustion car fleet won’t peak until 2038)?
MINING AND MINERALS:
What of the need to materially increase power generation capabilities to meet this new source of demand (the U.S. would have to roughly double its total energy power), while some simultaneously seek to entirely decarbonize their existing power grid by 2035? How will this massive undertaking occur when many basic raw elements, which are absolutely essential for increasing power generation and building car batteries, are entering into structural deficits such as copper, estimated by Royal Bank of Canada to be at a 32 per cent deficit by 2030, or nickel supply estimated by Rapidan to fall short of demand by 2024?
NARRATIVE OF A FALLING DEMAND CURVE FOR PETROCHEMICALS
The world’s population today is approximately 7.7 billion and according to the United Nations is set to grow by 2 billion people by 2050, the time when the world is meant to reach “net zero” emissions status. With developed countries such as Canada, the United States, and Japan reaching peak population, the addition of 2 billion people will largely occur in Africa and Asia, areas of the world where living standards today are low yet are set to rise and this has a direct read through to how much hydrocarbons they will consume.
The average person in the world consumes only five barrels of oil per year yet in the United States, where higher living standards translates to higher hydrocarbon demand, that number is roughly 21. Thus, as the world’s population grows by 26 per cent and with it average hydrocarbon usage per person, how is it fathomable that the global demand for such things as plastics, fertilizer, mined metals for electronics, and specialty chemicals will fall?
As the clouds of energy ignorance begin to part, it should be increasingly clear: the demand for oil will continue to grow and likely only peaking sometime in the 2030s, yet we will all be using oil for the rest of our lifetimes. With energy stocks trading at their lowest valuation levels in history and literally zero value being placed on long-dated reserves the opportunity lies in buying value for nothing and waiting for the inevitable rerating. Given a very strong macro backdrop for oil and meaningful shareholder returns being recently announced by companies, the wait will no longer be a long one.
💸Reformed Millennials - Post of The Week
from Morgan Housel
For me - if you aren't willing to adapt and continue to iterate and improve your thinking, you will lose. I constantly need to remind myself of this.
Key takeaway Morgan gets from writing this piece:
No age has a monopoly on insight, and different levels of experience offer different kinds of lessons. Vishal Khandelwal recently wrote that old guys don’t understand tech, but young guys don’t understand risk. Another way to put it is: everyone has something to teach.
Below are my favorite clips from the article attached
EXPERTISE HAS A SHELF LIFE:
Some expertise is timeless. A few behaviors always repeat. They’re often the most important things to pay attention to.
But most things evolve and evolve faster than people’s beliefs. It’s a tricky thing that leads to a long history of older generations whose success came from understanding the new rules of their era not recognizing that the rules may have changed again.
Investor Dean Williams once said,
“Expertise is great, but it has a bad side effect. It tends to create an inability to accept new ideas.”
If you appreciate how much the world evolves you can appreciate how important that advice can be.
1990'S VS. NOW:
Marc Andreessen explained how this has worked in tech: “All of the ideas that people had in the 1990s were basically all correct. They were just early.” The infrastructure necessary to make most tech businesses work didn’t exist in the 1990s. But it does exist today. So almost every business plan that was mocked for being a ridiculous idea that failed is now, 20 years later, a viable industry.
Pets.com was mocked, but Chewy is now a $30 billion business. Webvan failed, but Instacart and UberEats are now thriving. eToys was a joke, but now look at Amazon. Some of the biggest businesses of the last 10 years are all in industries that were the starkest examples of stupidity 20 years ago.
INVESTING TODAY VS. YESTERDAY:
“Don’t buy stocks when the P/E ratio is over 20” was a good lesson to learn from the 1970s when interest rates were 7%, the Fed hadn’t yet learned what it’s capable of, and most businesses were cyclical manufacturing companies vs. asset-light digital services. Is it relevant today? At a broad, philosophical level, yes. In practical terms, probably not. In the same sense, buying stocks at all seemed like nothing but speculation in the 1920s because corporate disclosures were so opaque. By the 1970s that had changed, and you could begin to make rational, calculated long-term decisions that put the odds in your favor.
What was foolish to one generation was smart to the next, but the older generation’s views lag. Every generation goes through this. Every generation fights it.
Planet Labs is Google Earth 2.0. Google owns 10% and sold them all their satellites and backed the PIPE.
Indexing the Earth is just like Indexing the Internet.
🌊 Canadian Companies To Peruse🌊
Billdr - “Billdr supports you with your home renovation project from start to finish. From scope definition and contractor selection to project completion, we’re with you every step of the way.” - Montreal company that raised a $3.7m seed round, currently has 19 employees.
🔮Best Links of The Week🔮
5 traits of multi-bagger stocks - from Thomas Chua @ Steady Compounding
Renewable energy is the 2nd most used energy source in the USA - It accounts for 21% of all electricity. Greenbriar Capital has a 400MW solar project in Alberta which has the best solar radiation in Canada plus another in Puerto Rico where prices are 400% higher than the mainland! I smell MARGINS*!
Serving the entire Health Ecosystem - By connecting and empowering patients, doctors, providers and enterprises, CloudMD has leveraged their revolutionary proprietary healthcare tech platform into a growth machine with multiple revenue streams. With an annualized run rate of $155M, and projected profitability this year CloudMD is taking its digital health platform to SCALE and expanding rapidly*!
The metaverse isn't here yet… Until it is - digital advertising finances the internet.
Inspired by our Business Breakdowns podcast, Web3 Breakdowns will be fully dedicated to the emerging ecosystem around blockchains, crypto assets, and everything that makes up Web3.
EY hires 200-300 MBA graduates every year - They have a workforce of 312000 people. Last year they introduced an in-house MBA program.