US Ready To Protect Asian Allies With Nukes, Biden Official Says In Tokyo
It’s a hugely alarming scenario when world leaders and government officials representing nuclear-armed superpowers appear to increasingly be spouting nuclear rhetoric and warnings in an almost casual manner.
US Deputy Secretary of State Wendy Sherman on Tuesday said Washington is ready to protect its Asian allies using nukes if they came under attack, spelling out the US would deploy its “nuclear, conventional and missile defense.”
Washington “will use the full range of US defense capabilities to defend our allies, including nuclear, conventional and missile defense capabilities,” the deputy secretary told a Tuesday meeting with South Korean and Japanese officials, ahead of a series of talks this week. She hailed America’s commitment to defense of Seoul and Tokyo as “ironclad”.
The region is currently on edge after early this week South Korea announced that its intelligence concluded Pyongyang has finalized preparations for what will be its first nuclear test in a half-decade. These warnings of an imminent North Korean nuclear test have been growing louder since early August, with the US backing Seoul’s assessment.
Sherman in her comments condemned the recent series of ballistic missile launches by North Korea, calling the record number of tests over the course of the year “deeply irresponsible, dangerous, and destabilizing.”
One of the more provocative among the latest tests saw a ballistic missile soar over Japan itself. The Asian officials meeting with Sherman in Tokyo agreed that Pyongyang is “creating serious tension on the Korean Peninsula.”
U.S. to cooperate with South Korea, Japan for Taiwan’s self-defense – Dep. Secy. of State Wendy Sherman.
I didn’t hear Sherman’s counterparts second that assertion. Also haven’t heard Seoul and Tokyo have policies to provide for Taiwan’s self-defense. https://t.co/TgUgpS83As
Patrol ships from the north and south exchanged warning fire along the shared marine-time border on Monday in but the latest sign tensions are at boiling point. The north is meanwhile angry that the US military has in the last month stepped up its presence in waters off the peninsula, while participating in joint military drills with South Korea.
Forget Musk’s Tunnels, Early Tesla Investor Seeds First-Ever eVTOL Car
We’ve come across many companies debuting futuristic designs of electric vertical take-off and landing (eVTOL) aircraft. Some have even tested (see: here & here) and/or have begun selling eVTOLs on the market (see: here). But when it comes to a driveable eVTOL, Alef Aeronautics has a revolutionary design.
California-based Alef is the only eVTOL with street-driving capabilities. Alef’s Model A prototype was first unveiled last Wednesday.
The Alef Model A is not a distant dream, expected to enter series production with first deliveries in 4Q25. The cost of the eVTOL that drives on roads and soars over traffic starts at around $300,000. It has a driving range of 200 miles and flies about 110 miles.
Reuters said, “The unusual appearance—which features a body that flips on its side to become the wing after lift-off—is just one aspect that attracted Tim Draper, an early investor in Elon Musk’s Tesla Inc and SpaceX whose Draper Associates Fund V has backed Alef with $3 million in seed money.”
Draper told Reuters via email: “The design is extraordinary. The sides of the car become the wings when the plane goes horizontal.”
In a company release, Alef’s CEO, Jim Dukhovny, said the eVTOL is a “modern solution for both urban and rural transportation needs in the 21st century because it is the fastest and most convenient transport ever created from the point of origin to the final destination. By enabling consumers to choose driving or flying mode, the Alef flying car allows the optimal path depending on road conditions, weather and infrastructure.”
Dukhovny told CNET: “We can actually solve all traffic in the world for the next hundred years.”
… and there goes Elon Musk’s idea of building tunnels to reduce major cities’ traffic congestion problems.
Putin’s ‘Viceroy Of The Donbas’ & Top Confidant Seen As Likely Successor To Presidency
During the opening months of the Ukraine war top US generals and officials went on record predicting that the conflict is likely to drag on for “years” to come. For example a headline in March observed it will turn into a quagmire, and that lawmakers at the Capitol were briefed “it is likely to last 10, 15, or 20 years.”
And now, fast-forward to the invasion’s eight-month mark, where it does look to be settling in to a protracted stalemated situation. All the while speculation over the future of “Putin’s war” and even his personal health abounds, with sensational headlines such as this in the UK Times this month: “Putin at 70: isolated, irrational and fearing for his health.”
Speculation over whether the 70-year old Putin will stay in power (and good health) long enough to see his own war in neighboring Ukraine through to a conclusion has naturally given way to questions over a potential successor for leadership, at a moment US and EU sanctions and global condemnation have left Russia more isolated than ever, and at the same time power under Putin’s administration has become the most centralized since the collapse of the USSR.
A fresh report in The Telegraph this week suggests that a career politician and Kremlin insider is likely Putin’s top pick to inherit power, as he was singularly hailed for overseeing the ‘successful’ annexation of the four occupied regions of Ukraine. “For 60-year-old Sergei Kiriyenko, this was the culmination of a mission that he’d been given by Putin,”the report introduces. “Everybody was celebrating and he’d played a major role in the enlargement of Russia.”
“Kiriyenko was in charge of referendums in these regions even if it was the FSB that managed them in the end,” said think tank analyst and Russia-watcher Tatiana Stanovaya. The Telegraph observes, “And now, perhaps mischievously, Kyrylo Budanov, Ukraine’s military spy chief, has said that Putin is even lining up the loyal Mr Kiriyenko as a successor.”
The report gives a further snapshot of Kiriyenko’s early political career, who in the late 1990’s served as prime minister under Boris Yeltsin, as follows:
Nobody knows the paranoid Putin’s succession plans but the Russian leader trusts Mr Kiriyenko, who has made the philosophical journey from supporting Western liberalism in the 1990s to promoting Putin’s authoritarianism now.
A technocrat and a follower of the philosopher-founder of the Moscow Methodological Circle, which believes that people and society can be programmed, Mr Kiriyenko has had to rely on patronage from more powerful Russians to make his career.
He was appointed Russia’s youngest prime minister at the age of 35 in 1998 by then-president Boris Yeltsin on the suggestion of Boris Nemtsov, the poster boy of Russian liberalism who was murdered on a bridge next to the Kremlin in 2015.
Currently he serves as First Deputy Chief of Staff of the Presidential Administration of Russia – a role he’s occupied all the way back to 2016, when he was appointed by Putin. Some European outlets have lately dubbed him the ‘Viceroy of the Donas’ for his role in the annexation votes in eastern Ukraine.
Kiriyenko is also considered the man who is personally responsible for Putin’s path to the presidency, being the first to put him forward to head up the FSB intelligence agency under Yeltsin in 1998.
France24 recently featured the following description of Kiriyenko: “The bald and stern-faced 60-year-old entered Putin’s deepest inner circle in 2016, when he was named first deputy head of the presidential office.”
His influence has only grown alongside Putin’s in the meantime, as France24 writes further, “Since then, and thanks to the convenient catch-all title he was given, Putin has been able to task him with any mission he desires, including last week’s sham referendums in the disputed regions in Ukraine, according to American geopolitical think tank GlobalSecurity.org.”
As for Kiriyenko playing the role of personal envoy overseeing political assimilation of occupied regions of Ukraine, this has seen some very “hands on” moments. The Telegraph notes that recently, “Videos show him inspecting damage to the Crimea Bridge and unveiling a statue of a patriotic granny in Mariupol, the Ukraine city that Russian forces had bombed to the ground.”
However, the report also concludes there are reasons to think that his power won’t outlast Putin’s own… “But Mr Kiriyenko doesn’t have his own power base and no influence within Russia’s powerful security services. His closeness to Putin is a strength and weakness, said Prof Petrov.”
Petrov told the publication, “He is strong now because of his proximity to Putin but with Putin weakening this could change,” as it remains that Kiriyenko “is a tool, a loyal tool for his boss.”
Newly published federal data reveals that close to a hundred individuals listed on the FBI terror watchlist have been apprehended at the Southern border in the last year, a record high and a huge uptick in recent months.
The Customs and Border Protection agency data, released without fanfare on Friday night, reveals that so far this year 98 individuals apprehended attempting to get into the U.S. at the southern border were suspected terrorists or closely affiliated with terrorist organizations.
BREAKING ~ FRI PM DUMP ~ @CBP rls record-breaking migrant encounter numbers for Sept – 227,547 – bringing the FY22 total to: 2,378,944 – the highest ever in history.
The figure has jumped from just 27 in early April.
In September alone, 20 terror suspects were arrested on the border, up from 12 in August.
The data was highlighted by Fox News reporter Bill Melugin in a report this week, as he noted that the figure is almost four times the previous five years combined:
BREAKING: There were 20 arrests of known or suspected terrorists on the FBI’s terror watchlist at the border in September, according to new CBP numbers.
FY’22 ended with 98 terror watchlist arrests.
That’s almost quadruple the previous 5 years combined.
Previous data from 2019 indicated that zero terror suspects had been encountered at the border.
If you would like to view the numbers for yourself, here is a CBP link to the data. Scroll down to the “Terrorist Screening Dataset Encounters”, and look at Border Patrol arrests (in between ports of entry), OFO is ports of entry which is CBP, not BP. https://t.co/RqigZLtdrt
As Melugin previously highlighted, CBP sources say there have been more than half a million ‘gotaways’ this year alone (that figure is now close to 600,000), and close to a million since the beginning of last year, begging the question how many of them were on the terror watchlist and are now roaming around the country freely?
The number of migrants encountered at the border now stands at almost 2.4 million for the year, with over 227,000 in September alone.
BORDER RECAP
– 227,547 migrant encounters in September ‘22, highest Sept. ever recorded.
– 2.37 million encounters in FY’22, the highest fiscal year ever recorded.
– 856 migrant deaths at border in FY’22, highest ever recorded.
– 599,000 *known* gotaways in FY’22.@FoxNews
Responding to the latest data release, Sen. Rob Portman (R-OH), the top Republican on the Senate Homeland Security and Governmental Affairs Committee, said in a statement Monday “Our adversaries know they can enter our country through our failed border.”
Sen. Shelley Moore Capito (R-WV), the top Republican on the Senate homeland security appropriations subcommittee, added that the Border Patrol is “overrun” and the “consequences of these lax enforcement actions should concern every single American.”
In addition, the new data shows that Feds seized close to 15 thousand pounds of fentanyl from smugglers attempting to get it across the border, seven times as much compared to five years ago.
One port of entry, one weekend. 5 major fentanyl smuggling busts by CBP. https://t.co/t78zlMmYqc
HAPPENING NOW: @TxDPS disrupted a human smuggling attempt on IH 35 in Cotulla. The driver attempted to smuggle 60+ illegal immigrants concealed inside a dump truck. Driver arrested & illegal immigrants turned over to #USBP – more details to come. #OperationLoneStarpic.twitter.com/7AbYwP2AFg
The driver, seen smirking in a photo, was an 18-year-old U.S. citizen, per @TxDPS. They say he had 10 bundles of what turned out to be 240lbs of marijuana. The other drug smugglers successfully made it back to Mexico without apprehension. @FoxNewspic.twitter.com/s6cQMFBjVu
In the age of mass Silicon Valley censorship It is crucial that we stay in touch. We need you to sign up for our free newsletter here. Support our sponsor – Turbo Force – a supercharged boost of clean energy without the comedown. Also, we urgently need your financial support here.
Earlier this week, Republican Sen. Marco Rubio stood his ground on a debate stage at the Lake Worth campus of Palm Beach College. His opponent is seasoned Democratic lawmaker Val Demings, a black congresswoman and former police chief, and the discussion had turned to abortion rights – terrain that Democrats believe favor them and give Demings and other Senate candidates a chance to alter the expected outcome of the 2022 midterms.
“I’m 100% pro-life not because I want to deny anyone their rights but because I believe that innocent human life is worthy of the protection under the law,” Rubio said. While noting he has supported legislation that includes exceptions for rape, incest, and the mother’s health, he then went on offense, arguing that “the extremist on abortion in this campaign” is his opponent.
Like Democrats around the country, Demings had been running ads hitting her Republican opponent on abortion for more than a month. During their debate, Rubio delivered his rebuttal. “She supports no restrictions, no limitations of any kind – she’s against a four-month ban, she voted against a five-month ban,” he said. “She supports taxpayer-funded abortion on demand for any reason any time up until the moment of birth.”
Demings, the former chief of police in Orlando who investigated rape and incest cases while in uniform, was equally forceful in her response. She accused Rubio of being dishonest with Florida voters because he had previously said he personally opposes all abortions without exceptions, including for victims of rape and incest. “How gullible do you think Florida voters are?” she retorted.
Both sides strongly articulated their points and defended their views. But Rubio’s decision to come out swinging won rave reviews from pro-life groups. For months, these advocates have pressed Republicans to fight fire with fire when it comes to abortion because, they argued, Americans’ positions on the issue are much more nuanced than many topline poll results have shown.
“It’s a basic rule of politics that you identify the contrast with your opponent, and you leverage it to your advantage,” Marjorie Dannenfelser, president of Susan B. Anthony Pro-Life America, told RealClearPolitics. “I think that after a little bit of clearing of the throat, our candidates are doing an excellent job. And in places where they don’t do that the abortion issue may get the better of them, but in places where they do, they’ll gain the advantage.”
Yet, if this summer’s headlines were to be believed, Republicans were doing far more serious faltering than minor throat-clearing.
“In sprint to November, Democrats seize on shifting landscape over abortion: No issue has upended the battle for Congress and state races so abruptly,” the Washington Post proclaimed in early September.
“‘Pink Wave’ Poised to Upend Republican Midterm Prospects,” proclaimed U.S. News & World Report, citing a surge in women planning to vote in November.
In the weeks following the Supreme Court’s late June decision to overturn Roe v. Wade, Democrats aggressively took the fight to Republicans, many of whom either downplayed their anti-abortion stances or sought to avoid the topic altogether. Democrats were especially jubilant in late August after Republicans lost a special election in a swing New York district in which their candidate laid out clear battle lines on abortion.
“Republicans can say good-bye to their ‘Red Wave’ because voters are clearly coming out in force to elect a pro-choice majority to Congress this November,” declared Sean Patrick Maloney, chairman of the Democratic Congressional Campaign Committee. .
In the final sprint toward November, however, Maloney himself is in a more competitive race than expected, against GOP Assemblyman Mike Lawler in a newly redrawn district. Nearly every poll shows that voters’ concerns over inflation and the economy are greatly surpassing any other issue in the race, including abortion.
A few weeks ago, the political dynamic shifted as inflation continued to climb, and many economists predicted that the economy is on the brink of a recession. Several prominent voices on the left, including veteran strategist James Carville and Sen. Bernie Sanders, started warning fellow Democrats that their hyper-focus on abortion could backfire.
“It’s a good issue. But if you just sit there and they’re pummeling you on crime and pummeling you on cost of living, you’ve got to be more aggressive than just yelling abortion every other word,” Carville told the Associated Press.
There was plenty of criticism on the right too, as anti-abortion groups griped that GOP candidates were overreacting to the Dobbs decision by cowering in fear and hoping the issue would somehow just go away.
Dannenfelser and others pointed to what they cast as encouraging data from a late June Harvard CAPS/Harris poll on the question of where Americans stand on late-term abortions. Even amid the huge media outcry over the overturning of Roe, 72% of Americans agreed that abortion should be banned no later than 15 weeks, while only 10% said it should be allowed up until viability, when the fetus can live outside the womb – or approximately 24 weeks.
Anti-abortion advocates argue that the findings directly undermine the Women’s Health Protection Act, which would enshrine Roe v. Wade protections into law and make abortion legal until the point of viability. Every House Democrat except one voted for the bill in the wake of Dobbs, but the measure sank in the Senate, where Republicans opposed it.
After the poll results were released, abortion opponents pressed Republicans to turn the tables and force Democrats to define precisely when during pregnancy they would draw the line and say abortion should be barred. “If candidates support laws that permit abortion all the way up to birth, they are out of step with the American public, and Republicans should not be afraid to call them out on it,” Dannenfelser wrote in a Washington Post op-ed in late August.
Over the last month, J.D. Vance and Blake Masters, as well as Rep. Ted Budd, GOP candidates running for Senate in Ohio, Arizona, and North Carolina, respectively, have been doing just that – vigorously defended their pro-life positions while calling on their Democratic opponents to define theirs more precisely.
“[Ryan] says he wants to codify Roe … he voted for a piece of legislation that would have overturned Roe and required abortion on demand at 40 weeks for fully elective reasons,” Vance said during his debate with Democrat Rep. Tim Ryan in mid-October. “He also voted for a piece of legislation that would have prevented doctors from providing medical care to babies who survived botched abortions.”
All three – Vance, Masters, and Budd – have remained ahead by roughly the same margin or have strengthened their standing in the polls. Other GOP candidates – from those running for governor to others trying to knock off Democratic House incumbents – have also sharpened their anti-abortion rhetoric in recent weeks. In some key battleground states, however, the abortion issue has put Republican candidates at a disadvantage.
During the Georgia Senate debate last week, football great Herschel Walker took Democratic Sen. Raphael Warnock to task for what he cast as extreme abortion positions. But the issue was already causing Walker trouble after a former girlfriend accused him of asking her to have an abortion and paying for it. Walker has denied the story, but his standing in the polls has ticked down a few points from when the story first broke.
Adam Laxalt, Nevada’s former attorney general who is trying to unseat Sen. Catherine Cortez Masto in the decidedly pro-choice Silver State, is running a careful, focused campaign on the economy. Instead of pressing his opponent to define her limits on abortion, he’s accusing Democrats of mistakenly using all their energy and resources to make the midterms an abortion referendum when voters are far more worried about the skyrocketing cost of living.
Laxalt has promised to oppose a national abortion ban and said Nevada will remain a pro-choice state, arguing that the state level is where abortion should be decided. Aside from a few races, however, most Republicans appear to be finding their footing on abortion, while Democrats show no indication of taking their foot off the gas.
Three weeks ahead of the election, President Biden promised to codify Roe v. Wade if Democrats win the midterms – a pledge he could only keep if the party wins several more seats in the Senate and avoids the off-year midterm losses that so many of his predecessors have suffered. Ahead of his speech, Planned Parenthood, EMILY’s List and NARAL sent out a press release reminding reporters that they had pledged to spend an unprecedented $150 million mobilizing and energizing voters around the country “at levels never seen.”
Abortion rights activists argue that Republicans like Rubio and other unabashedly pro-life conservatives are throwing up smokescreens by focusing on late-term abortions to distract from their previously stated beliefs that there should be no exceptions for rape, incest, or the mother’s health.
“What they’re doing now is a clever political trick to try to change the subject and say a little bit about abortion and just move on,” Christina Reynolds, a spokeswoman for EMILY’s List, told RCP. “I hope that voters see through it and understand that, and we’re working to make sure they understand the real positions of people [in office or campaigning for office] and what they actually plan to do.”
Late-term abortions occur in a very small number of cases that usually involve “incredibly tragic medical issues and decisions that women need to make on their own with their doctors,” she said, adding that the decision comes down to whether you want the government involved in those decisions. Even if economic issues are front and center in voters’ minds, Democrats say they will keep fighting on abortion because it helps turn out the vote in an election year when their party is facing severe headwinds.
“We were facing a significant enthusiasm gap, and the Dobbs decision changed that almost overnight,” Reynolds said. “It’s energized people who maybe wouldn’t have otherwise turned out … it reminded us that you’ve got to get out there and fight in every election. People were talking about a huge Republican wave, and I don’t think we’re going to see that.”
Only the election returns – and the exit polls – will tell us for sure, but for now, both sides are using whatever abortion ammunition they have at their disposal. While Democrats up and down the ballot continue hammering away on the issue in television ads and debates, many Republicans are finally standing their ground, firing off their salvos with new confidence.
After Sending Out 240,000 Unverified Ballots, Pennsylvania Now Warns Of ‘Delays’ Counting Midterm Votes
Here we go again…
Just one day after 15 Pennsylvania House Republicans sent a letter to acting Secretary of State Leigh Chapman demanding to know why 240,000 unverified ballots had been mailed out (“which, according to the law, must be set aside and not counted for the 2022 General Election unless the voter produces lD,” the lawmakers wrote), Chapman revealed that there will likely be delays posting the results after the midterm elections.
“It’s really important for us to get accurate information about the election process in Pennsylvania,” Chapman said during a virtual conference, where she said it would likely take ‘several days’ to count and certify the votes.
“So voters and the public know that when there are delays in counting, it doesn’t mean that there’s anything nefarious happening. It’s just what the law is in Pennsylvania.”
According to Chapman, the delays would be attributed to poll workers not being able to pre-canvas, or count mail-in ballots prior to election day.
She also encouraged voters to go ahead and send in their ballots, contrary to Republican messaging which urged voters to hold onto their mail-in ballots and turn them in to their local board of elections on election day – which Chapman said could (somehow) cause voters to become disenfranchised.
“We have heard that there’s messaging out there in Pennsylvania, as far as instructing voters to hold onto their mail-in ballots,” she said, adding “As part of our voter education campaign, we encourage voters to request that mail-in ballot now and return it as soon as possible. We don’t want voters to delay.”
Chapman took the opportunity to convey concerns she says stem from ‘misinformation’ – threats to interrupt voting and calls to delay the sending of mail-in ballots.
While she didn’t detail a specific incident, Chapman said there have been reports of threats aimed at the voting process throughout the state. She promised that her office has worked to investigate any threat made toward a free and fair election.
“Since I’ve been in office in January, we have constantly met with the FBI and Homeland Security just to talk through what the current threat landscape is and tools that we can give our counties to make sure that they have physical security protection as well as cyber security protection,” she said.
“So it’s been great to partner with both the federal and state law enforcement organizations. We are in constant communication with them and it’s a situation that we are monitoring,” Chapman added. –Lehigh Valley News
According to Chapman, over 1.2 million mail-in ballots have been requested across the state, and 43% – or 556,000, have been returned.
So does that mean that nearly 25% of mail-in ballots sent out were unverified?
This is the latest from Harris Kupperman, founder of Praetorian Capital, a hedge fund focused on using macro trends to guide stock selection. Mr. Kupperman is also the chief adventurer at Adventures in Capitalism, a website that details his investments and travels.
I published recent thoughts from Harris just days ago, in a post outlining his thoughts on why the Fed has backed themselves into a corner they can’t get out of.
Harris is one of my favorite Twitter follows and I find his opinions – especially on macro and commodities – to be extremely resourceful. I’m certain my readers will find the same. I was excited when he offered up his latest investor letter to Fringe Finance, which is published in part below.
Harris On Markets and Macro
I have genuinely been surprised at the vigor with which the Federal Reserve has raised rates in their campaign to quash inflation. For my entire investing career, the Fed has been dovish, standing by and ready to reassure speculators at every market gyration. For the first time in my career, they’re actively targeting the stock market in an effort to create a recession and reduce the “wealth effect” when it comes to consumer spending. This is a terrifying policy change that was unexpected by most market observers—including myself.
At the same time, I feel that they have no real heart for this campaign. As political animals, they’ll be forced to pivot after they succeed in breaking something. Unfortunately, breaking something may lead to scary outcomes in the shorter term and we’ve kept our exposures at reduced levels until it is clear that they’re ready to pivot. When they do pivot, I believe that energy will be the primary beneficiary as both oil and uranium currently exhibit structural deficits that will be difficult to overcome absent substantial increases in capital spending.
In fact, I think that the magnitude of the movements in energy pricing will stun people who are accustomed to gradual changes in commodity price regimes. If anything, the volatility in European energy prices ought to be a wake-up call for all market participants. It would seem that with structural deficits and rapidly growing demand, the rules have adjusted, and many investors are unprepared for the change. To me, this creates opportunity.
Unfortunately for the Fed, higher energy prices will feed into higher structural inflation levels and at some point, the Fed will have to decide if they want to continue fighting inflation (which is likely impossible to quash outside of a global depression that dramatically reduces energy demand) or if they want to adjust their mandate and accept an increased level of inflation. Despite them clinging to their inflation-fighting mandate all year, I believe they have no desire to inflict a depression on voters. They’ll eventually pivot and accept dramatically higher inflation levels, while continuing to subsidize interest rates to avert the depression that they seem fixated on creating. As a result, we have continued to increase our exposure to US housing on this pullback, as that will be a prime beneficiary of this set of macroeconomic outcomes.
Thoughts On Portfolio Valuations
Despite only experiencing a -2.87% net decline (performance net of fees) in our fund since the start of the year, many of our largest positions have experienced far more dramatic declines and now represent unusual value. As a way of demonstrating the magnitude of the declines, as of the end of the third quarter, these are our top 5 positions and the declines experienced from their peak price points during 2022.
Now, you should be asking yourself how it is possible that so many positions have declined dramatically, yet the fund hasn’t performed demonstrably worse. The answer would be a combination of continued gains from the Event-Driven book, realized gains on a number of profitable investments and loss mitigation strategies when trading around core positions. Additionally, we did not own BLDR or BNO at the start of the year, so they are new additions, purchased at depressed prices. Absent these factors, our returns for the year would have been a good deal worse. While the percentage decline from the peak price in a year, is a somewhat arbitrary way to think about a portfolio’s return, I think it is important to point out that the portfolio itself is doing a whole lot better than its larger components. Additionally, the magnitude of the declines from the peak prices is likely indicative of the relative value inherent in our portfolio.
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As an absolute performance vehicle, I believe that a benchmark would be a foolish metric to use when referencing this fund’s performance. At the same time, it’s hard to ignore the fact that many global equity and bond markets are down dramatically, and our fund is down a good deal less despite being more than 100% net long for most of the year and rarely utilizing shorts or hedges. I believe this is due to my constant focus on sectors that are positively inflecting with strong macro tailwinds. History has shown that despite what happens in global economics or geopolitics, there is always a bull market somewhere. The key is to identify those bull markets and then find the components within those markets that offer exponential upside with a reduced opportunity for a permanent loss of capital. Discipline in this regard often trumps simple valuation, as cheap stocks can always get cheaper. Meanwhile, those with strong tailwinds rarely stay cheap for long.
As a result of focusing on inflecting trends, we’ve side-stepped a good deal of the carnage in global risk markets, while capturing returns from the Event-Driven book. As a result, I think that we’ve set ourselves up for the continuation of the various trends that we are most fixated on. While history only somewhat repeats when it comes to the markets, my experience has been that strong trends often struggle to produce price positive performance during periods of overall market weakness. Then, when there is a pause in the decline of the overall market, those positions that declined the least with the broader market, tend to lead the next charge higher. The overall strength of many of our positions is indicative to me that we may be setting up for a similar explosive move higher in our portfolio positions when the market eventually bottoms.
For now, my focus is on avoiding unforced errors, keeping exposure down and being prepared to dramatically increase our exposure to inflation assets when the Fed finally pauses in its rate cycle.
Russian Securities
During last quarter’s letter, I gave an update on our Russian securities positions and noted that we had moved them into a side-pocket and marked them all at zero. Nothing has changed regarding the side-pocket or the mark on the positions. However, we did succeed in removing the GDR wrapper from 3 of our Russian positions and now own Russian shares. Our fourth position is a Cypriot company and thus far, we have not been capable of removing the GDR wrapper. Fortunately, it does not appear to be at the same risk of disappearing if we do not remove the wrapper.
While it may require some time until we can liquidate these positions, we believe that we’ll ultimately realize sizable gains on them.
Position Review (top 5 position weightings at quarter end from largest to smallest)
Uranium Basket (Entities holding physical uranium along with production and exploration companies)
It may take some time still, but I believe that society will eventually settle on nuclear power as a compromise solution for baseload power generation. This will come at a time when there is a deficit of uranium production, compared with growing demand. As aboveground stocks are consumed, uranium prices should appreciate towards the marginal cost of production. Additionally, there is currently an entity named Sprott Physical Uranium Trust (U-U – Canada) that is aggressively issuing shares through an At-The-Market offering, or ATM, in order to purchase uranium (we are long this entity). I believe that these uranium purchases will accelerate the price realization function by sequestering much of the available above-ground stockpile at a time when utilities have run down their inventories and need substantial purchases to re-stock. The combination of these factors ought to lead to a dramatic increase in the price of uranium as it will take at least two years for incremental supply to come online—even if the re-start decision were made today.
While most of our exposure to physical uranium is within the Sprott trust, because it allows us to express this view with reduced risk, we also own shares of Kazatomprom (KAP – UK). I am well aware that mining is one of the riskiest businesses out there, but Kazatomprom is the lowest-cost diversified producer globally, with incredible scale in what is a highly-consolidated industry. At the same time, I recognize that we take on certain risks when owning a company engaged in mineral extraction, especially in a country like Kazakhstan that can be politically unstable at times. That said, I believe that the recent change in government will do little to impact the operating environment in Kazakhstan, though the tax rate may expand moderately.
Ironically, uranium will be a prime beneficiary of sanctions on Russia as Russia is one of the world’s largest enrichers of uranium. As the West is forced to enrich more of the uranium that ultimately goes into reactors, underfeeding of tails will flip to an overfeeding of tails. The net effect could be anywhere between 10% and 30% of the global supply of uranium disappearing—which may dramatically accelerate the timing of my thesis while increasing the ultimate magnitude of the upward swing in uranium prices.
Energy Services Basket (Positions Not Currently Disclosed)
In 2020 when oil traded below zero, drilling activity ground to a halt and many energy service providers declared bankruptcy. Many of these businesses had teetered on the verge of bankruptcy for years due to reduced demand and over-leveraged balance sheets. The bankruptcies led to consolidation and reduced future industry capacity, removing future competition in the recovery.
With oil prices now at multi-year highs, I believe that demand for drilling and other services will recover. While producers have been slow to increase spending on exploration, despite dramatic recoveries in energy prices, I believe that this only extends the timing on the thesis. In the end, the only way to reduce energy prices is to see a dramatic increase in global oilfield services spending. Any postponement of this spending only leads to higher prices and more wealth transfer from the global economy to the oil producers, which will likely end up resulting in an increase in spending on exploration and production.
We purchased many of these positions at fractions of the equipment’s replacement cost, despite restored balance sheets and positive operating cash flow. As spending in the sector recovers, I believe that the potential for cash flow will become more apparent and this equipment will trade up to valuations closer to replacement cost.
Oil Futures, Futures and ETF Options and Call Spreads
I believe that years of reduced capital expenditures, along with ESG restricting capital access, combined with Western governments that are openly hostile to fossil fuels, have created an environment for dramatically higher oil prices. While we could purchase oil producers, I feel it is far more conservative to simply own the physical commodity itself. We own December 2025 oil futures, along with various futures calls and call spreads, an ETF and ETF call options and call spreads. I believe that this leveraged play on oil gives us the most upside to oil and ultimately inflation, while exposing us to reduced risk when compared to producers.
St. Joe (JOE – USA)
JOE owns approximately 175,000 acres in the Florida Panhandle. It has been widely known that JOE traded for a tiny fraction of its liquidation value for years, but without a catalyst, it was always perceived to be “dead money.”
Over the past few years, the population of the Panhandle has hit a critical mass where the Panhandle now has a center of gravity that is attracting people who want to live in one of the prettiest places in the country, with zero state income taxes and few of the problems of large cities.
The oddity of the current disdain for so-called “value investments” is that many of them are growing quite fast. I believe that JOE will grow revenue at 30% to 50% each year for the foreseeable future, with earnings growing at a much faster clip. Meanwhile, I believe the shares trade at a single-digit multiple on Adjusted Funds from Operations (AFFO) looking out to 2024, while substantial asset value is tossed in for free.
Besides the valuation, growth, and high Return on Invested Capital (ROIC) of the business, why else do I like JOE? For starters, land tends to appreciate rapidly during periods of high inflation— particularly an inflationary period where interest rates are likely to remain suppressed by the Federal Reserve. More importantly, I believe we are about to witness a massive population migration as people with means choose to flee big cities for somewhere peaceful.
I suspect that every convulsion of urban chaos and/or tax-the-rich scheming will launch JOE shares higher, and it will ultimately be seen as the way to “play” the stream of very wealthy refugees fleeing for somewhere better.
Builders FirstSource (BLDR – USA)
Builders FirstSource produces and distributes building materials, primarily for the home building industry. It trades at a low-single digit cash flow multiple on recent earnings and is using that cash flow to rapidly repurchase shares. One could say that the low multiple is due to peak cyclical earnings. I take a different view and believe that we’re in the early stages of a long-term housing boom caused by migration to low tax states along with a catch-up phase as home construction rates were below trendline over the past decade.
I believe that the US needs in excess of 1 million new single-family homes each year, just to provide for population growth, ignoring the other factors. As a result, this business does not appear to be at peak earnings; instead, I believe we are seeing a new baseline for earnings—though the earnings will be quite volatile—particularly if interest rates remain elevated or increase further.
Summary
In summary, during the third quarter of 2022, the fund experienced a pullback in many of its core positions. I have used this pullback to moderately increase a number of our positions, which has increased our overall exposure. Our exposure is a bit more concentrated in inflation, particularly in energy, than I’d normally expect it to be, but those are also my favorite themes. We’ve expressed this view through instruments like physical uranium, long-dated oil futures and futures options, energy equipment services companies, and land plays, which I believe should have a reduced risk of permanent impairment.
I also believe we are in the early stages of this inflationary boom and while there will be sizable volatility going forward, we are positioned well.
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Nothing set forth herein shall constitute an offer to sell any securities or constitute a solicitation of an offer to purchase any securities. Any such offer to sell or solicitation of an offer to purchase shall be made only by formal offering documents for Praetorian Capital Fund LLC (the “Fund”) which include, among others, a confidential offering memorandum, operating agreement and subscription agreement. Such formal offering documents contain additional information not set forth herein, including information regarding certain risks of investing in the Fund, which are material to any decision to invest in the Fund.
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QTR’s Disclaimer:I am an idiot and often get things wrong and lose money. I may own or transact in any names mentioned in this piece at any time without warning. This is not a recommendation to buy or sell any stocks or securities, just my opinions. I often lose money on positions I trade/invest in. I may add any name mentioned in this article and sell any name mentioned in this piece at any time, without further warning. None of this is a solicitation to buy or sell securities. These positions can change immediately as soon as I publish this, with or without notice. You are on your own. Do not make decisions based on my blog. I exist on the fringe. The publisher does not guarantee the accuracy or completeness of the information provided in this page. These are not the opinions of any of my employers, partners, or associates. I did my best to be honest about my disclosures but can’t guarantee I am right; I write these posts after a couple beers sometimes. Also, I just straight up get shit wrong a lot. I mention it twice because it’s that important. I have no business relationship with Harris and am not an investor with him.
Supreme Court Justice Samuel Alito said the leak earlier this year of a draft opinion reversing Roe v. Wade made conservative justices “targets for assassination” and changed the atmosphere at the court.
Alito’s comments came during a moderated conversation at the Heritage Foundation in the nation’s capital on Oct. 25. At the end of the discussion, Alito was given Heritage’s Defender of the Constitution Award.
At the event, Alito also lamented the lack of freedom of speech in higher education, said legal precedent was overrated as a means of deciding cases and said that the court’s Citizens United ruling years ago allowing corporations to fund political campaigns has been misunderstood by critics.
The leak took place while the court’s members were considering how to rule in Dobbs v. Jackson Women’s Health Organization.
An early version of Alito’s draft majority opinion in Dobbs made its way to the media, an unprecedented leak of a full high court opinion. Politico published the draft document dated Feb. 10 on May 2 without disclosing its source. In both the draft and the final version of the Dobbs decision issued June 24, the court overturned Roe v. Wade, the 1973 precedent that legalized abortion nationwide. The Dobbs ruling, which held that there is no constitutional right to abortion, returned the regulation of abortion to the states. In Dobbs, the court also reversed a related 1992 precedent, Planned Parenthood of Southeastern Pennsylvania v. Casey, which declared that a woman had a right to obtain an abortion before fetal viability without undue interference from the state.
The leak “was a great betrayal of trust by somebody,” Alito said, without providing any new information about the leak investigation being conducted by court officials. Suspicions and theories abound, but the identity of the leaker or leakers is still unknown.
“It certainly changed the atmosphere at the court for the remainder of the last term. The leak also made those of us who were thought to be in the majority in support of overruling Roe and Casey targets for assassination because it gave people a rational reason to think they could prevent that from happening by killing one of us.”
Police stand outside the home of Associate Justice Brett Kavanaugh as pro-abortion advocates protest in Chevy Chase, Md., on May 11, 2022. (Kevin Dietsch/Getty Images)
Alito noted that a man has been charged in connection with a plot to assassinate Justice Brett Kavanaugh, but refused to say more because the matter is still before the courts.
Hostility to Free Speech
Alito said he was concerned about hostility to free speech in colleges and universities.
Based on reports he has read, the situation is “pretty abysmal, and it’s really dangerous for our future as a united democratic country.”
“We depend on freedom of speech … [which] is essential. Colleges and universities should be setting the example, and law schools should be setting the example for the university because our adversary system is based on the principle that the best way to get at the truth is to have a strong presentation of opposing views, so law students should be free to speak their minds without worrying about the consequences.
“And they should have their ideas tested in rational debate and if law schools are not doing that and according to these reports, some of them are not doing that, they are really not carrying out their responsibility.”
Alito’s comments came after two federal judges appointed by then-President Donald Trump vowed in recent weeks not to hire judicial clerks from Yale Law School because they say its campus is dominated by cancel culture. The two judges are James Ho of the U.S. Court of Appeals for the 5th Circuit and Elizabeth Branch of the U.S. Court of Appeals for the 11th Circuit.
Ho was incensed by the treatment of Kristen Waggoner of the conservative Alliance Defending Freedom at a March 10 event at the law school. Students physically threatened and shouted down Waggoner during a panel discussion about Uzuegbunam v. Preczewski in which the Supreme Court found another college violated students’ right to religious free speech on campus. Waggoner was their lawyer.
According to National Review, 14 federal judges have joined the Yale boycott.
Alito also defended the court’s decision in Citizens United v. FEC (2010), which held that the free speech protections of the First Amendment applied not only to individuals but also to corporations, nonprofits, and labor unions.
The ruling, which has been bitterly attacked by the left for more than a decade, struck down part of the Bipartisan Campaign Reform Act of 2002 that forbade independent expenditure-funded “electioneering communication” by such organizations within 30 days of a primary election or 60 days of a general election, or from making any expenditure advocating the election or defeat of a candidate at any time.
The case arose when Citizens United, a conservative not-for-profit corporation, wanted to broadcast a film it made critical of then-presidential candidate Hillary Clinton before the Democratic Party’s presidential primaries in 2008.
Alito said that Citizens United “held that a little corporation, Citizens United, had the right to talk about the qualifications of a candidate for high public office in the period shortly before the election—that goes to the very core of what the First Amendment protects.
“The main popular criticism of the decision that you hear is … that freedom of speech applies to human beings. It doesn’t apply to corporations. To this day, I think you can get bumper stickers that make the point. And I think to ordinary people, it has immediate appeal.”
But what would it mean if corporations were denied freedom of speech, the justice asked rhetorically.
For those who have been keeping an eye on silver, things are getting a little tight.
Earlier Wednesday we noted a report from Ronan Manly of BullionStar.com, who revealed that more than 50% of deliverable silver on COMEX is suddenly ‘not available.’ Manly brought up this Oct. 19 tweet from metals expert Nicky Shiels, who said of delegates in attendance at the annual LBMA (Gold) conference in Lisbon; “they are mildly bearish Gold for the year ahead ($1830 by 2023s conference) but super bullish Silver ($28.30!) as the focus was on physical tightness driven by unprecedented demand.“
Just attended the annual LBMA (Gold) conference in Lisbon. Polling takeaways from delegates: they are mildly bearish Gold for the year ahead ($1830 by 2023s conference) but super bullish Silver ($28.30!) as the focus was on physical tightness driven by unprecedented demand
Second, the spot market for silver remains in backwardation – meaning that the spot price of silver is above the futures price, which indicates an extremely strong demand for physical metal right now. ..
And as teh chart below shows, while silver futures have gone nowhere in the last four months, the price of physical coins has been soaring…
Demand has become so strong that, as the chart below shows, the extent of the physical silver percentage premium over spot is almost unprecedented…
Self-inflicted wounds create teachable moments, but the architects of America’s current energy crisis are learning all the wrong lessons.
Skyrocketing energy costs are one of America’s harsh post-Covid realities. And with one in four American households struggling to pay for their energy needs before Covid, policymakers should have set their sights on making energy more affordable for more Americans.
Instead, as Joseph Toomey points out in his new report RealClearEnergy report, Energy Inflation Was by Design, policymakers squeezed supply everywhere they could, so it would become impossible to meet demand.
From the beginning, the Biden administration has prioritized restricting access to the fuels that power nearly 80% of America’s economy and roughly three-quarters of American homes. Revoking permits for the long-embattled Keystone XL Pipeline was one of President Biden’s first executive orders, making it harder and more dangerous to transport Canadian fossil fuels to American refineries. This decision was all the more hypocritical when, weeks later, President Biden gave his approval of Russia’s Nord Stream 2 pipeline to Germany.
In a like manner, the Biden administration is helping speed up the closure of the refineries that turn oil into gasoline. Escalating biofuel mandates are signaling to refineries to close up shop, as blending levels are reaching unsustainably high levels. Moreover, the Environmental Protection Agency’s (EPA’s) revoking of biofuel waivers for small refineries will only cause more refining capacity to buckle under those mandates’ costly weight. Gasoline and diesel refining capacity has been declining for decades, and is in no position to reverse course.
The Biden administration is simultaneously cracking down on drilling for the fuels that power everyday life. One quarter of America’s oil and gas is produced from federal property by way of leasing drilling rights to companies. However, the Biden administration recently cut onshore drilling leases by 80%, as well as notably curtailing offshore drilling. For the leases that were not cut, the Interior Department significantly increased royalty fees, making federal lands a less attractive drilling option, as well as allowing lawsuits to delay several already-purchased leases based on environmentally and economically squishy climate change metrics.
On private lands the situation is no different, as the EPA is attempting to regulate oil and gas drilling out of business. The EPA lacks the authority to ban fracking on private lands, but is considering using burdensome ozone standards to stifle drilling in the Permian Basin. The Permian Basin in Texas and New Mexico is America’s most productive oil and gas field, accounting for 40% of America’s oil production and 20% of its natural gas supply. Taking the end use of these products into consideration, the EPA’s rules could jeopardize 25% of the country’s gasoline supply.
The Biden administration’s more stringent power plant regulations would prove deleterious to grid stability, too. Several of the nation’s power grid operators have opposed the EPA’s proposed aggressive power plant regulations, as forcing reliable fossil fuel generation out of service invites risks to grid stability. In fact, grid operators have pushed for keeping soon-to-be-retired coal plants operating longer for this very reason.
Nor is the pressure resulting from a staunch campaign against fossil fuels limited to domestic policy. Rather than increasing American oil production, President Biden has, hat in hand, approached Venezuela and OPEC with the goal of boosting oil production. Despite the stated goal of curbing fossil fuel production being reducing CO2 emissions, these policies overlook the role that American-made fossil fuels have to play in reducing global CO2 emissions. American oil and gas has lower lifecycle emissions than top competitors, and boosting exports can enrich Americans while draining dictators’ war chests.
In its latest move, the Biden administration is resorting again to draining the Strategic Petroleum Reserve, this time to its lowest level in 40 years, in a last-ditch effort to lower gasoline prices before the November election. Periodically releasing oil from the country’s strategic reserves to score political points is not an energy policy strategy, especially when that oil ends up in China.
The international embarrassment and domestic hardship resulting from the Biden administration’s decisions should be a clue to change course, but learning the right lesson is not on the syllabus for the policymakers responsible. As Toomey points out in his report, creating a hostile policy environment that leads to the ending of fossil fuels is the real motive behind the web of energy policies the Biden administration is spinning.
Indeed, Marlo Lewis also confirms all of this on RealClearEnergy: the disastrous outcomes of these rushed climate policies are a feature of the system, not a bug.
