Interesting Question about Realty Income (O)

One of the reasons why Realty Income used to trade at a premium valuation is because it was highly specialized and it had achieved a great track record in its niche. But now it is stepping out of it. Last year, it started investing in casinos Then, it invested in vertical farming.After that, it acquired Spirit Realty Capital (SRC), which significantly expanded its industrial property portfolio. Now, it is investing in data centers… What’s next? Is there anything Realty Income wouldn’t go into?

Mining Industry: Where The Fat Lies.

Think about the activists who want to save the earth by reducing carbon based fuels versus the activists who will spend years litigating to stop ecological damage due to mineral harvesting. Then there are other factors at work such as waste processing capacity. Some of the green social activist forces are diametrically opposed to each other. Is Green vs Green perhaps similar to Jarndyce v Jarndyce? Will the turmoil last decades or perhaps centuries? How does this affect the economics of transportation and energy, and the distribution of wealth between the haves and the have-nots? To me it really is not obvious.

What I think is this can only be modeled by a system of differential equations. In university in my senior year I took a graduate level course involving systems simulation. I have also done simulations of material transport in cell biology. Consequently I believe a simulation model of economic factors in battery production may be the only way to accurately predict the future of the EV in society.

But, I don’t know anybody who does system simulation or system engineering. My colleagues in school, and one or two professors are the only ones I ever met who think this way.

Everyone else just has an opinion based on a tiny silo of data. So, if I dismiss your opinion on the EV industry please don’t take it personally. I merely fail to see you as credible until you can show me your models. Write the software, obtain the results, publish a paper for review, and then you have a starting place for discussion.

Mr Market Meets Spike Dragon.

So it looks like on Feb 22 UAN spiked, probably upon announcement of a $10.50 dividend. This after a period of doldrums based on energy volatility and lack of retail faith. As Mr Market spread the word the price rose and rose to about $117. Then this morning, the day of the ex date, we see a plunge to $103, and the market is riding at just under $106 at about the level of the Feb 22 spike.

Hmmm. I am going to rake in the dividend.

But it is clear the time to buy, for believers, was in the $92 (and under) doldrums. It took faith. At the time I was rotating to less risk and did not want to overweight on fertilizer. Natural gas was high at the time and faith was thin fumes found somewhere in the stratosphere.

This is play money for me and it is not for the faint of heart. Still, I suppose I am addicted. The world will starve without this mineral being added to grain crops.

The only question is how to safely play the volatility. Not whether, but how.

Endless War

How can America defend Sweden? It’s out of ammo. Can it even defend Taiwan?

My take is geo-economic turmoil just got vastly worse. Food supplies will suffer. This will affect energy and fertilizer stocks.

For background material start with:

Rebekah Koffler is the president of Doctrine & Strategy Consulting, a former DIA intelligence officer, and the author of  “Putin’s Playbook: Russia’s Secret Plan to Defeat America.” She also wrote the foreword for “Zelensky: The Unlikely Ukrainian Hero.

Simpler Covered Calls For A Recession

CATEGORY: Investing

Yesterday I sold 700 shares of STOR which yields about 5% and has been lingering in my portfolio due to it’s recently having been acquired. Pondering where to put this cash as we stare into a possible recession in 2023 I have been thinking about JEPI which could be a limited risk way to earn more than 5%. JEPI yields about 11% and pays monthly. So today, Jan 5, 2022, I added some JEPI.

JEPI holds about 100 stocks and sells covered calls on them in order to derive income. How well do they perform in a recession compared to any other investment? Very good question. We shall see how that works out. But my view is in order to be diversified I need a variety of strategies that counter balance each other. If we get a 20% to 30% market drop it will be time to rotate to SPY. The alternative is to hold cash. At 10% inflation cash loses because of 100% guarantee of loss ( equals 100% risk factor) and JEPI wins.

Of course I could overweight on energy or tobacco or beer or BDC’s (business development companies) – but that would not represent diversification. And that too increases risk

Investing 2023 and Workforce Shortage

Category: Investing

There is a shortage of workers. Minnesota, for example, has lost 95000 workers and that is projected to increase in 2023. But consumer demand is increasing. For example, baby boomers are demanding more services as they age.

This will cause wages to rise. That will cause companies to pass on the cost in the form of price increases. This adds to inflation. Inflation will continue and increase. The fed will respond with higher interest rates to hold down inflation.

There is likely to be a recession, and banks are now predicting recession.

The stock market will sag into lower stock prices.

As a dividend growth style investor I will be looking to add stocks as the prices sag. The dividends will have a higher rate. So I am looking for stocks that have a pattern of dividend growth over time and under all market conditions, with a view on dividend safety. I like to see a dividend safety rating of B or higher but a return that beats inflation. I also like to see a high quant rating and a buy or strong buy recommendation. And I am striving to stay diversified.

Over the New Year as the market has been sagging I have been nibbling. In a day of all red I start looking for buying opportunities because everything is on sale.

As a recently retired person I have a fixed income stream of “retired income” made up of the usual (use your imagination) which I shall call I1. My goal on my investment portfolio, which is 100% tax deferred, is to have my annual dividends I2 be greater than I1.

I2 > I1.

This ignores ROI or “return on investment” because that depends on stock prices which of course fluctuate up and down with the market.

My available money M each year is M = I1+I2 without selling any of my portfolio. That is the basic idea of having a portfolio. That has been my goal all alone. To replace my income from my working years.

There are a lot of other factors in motion, but workforce oversupply is gone and so is cheap labor. These are not transients – they are structural problems. I think everyone saw this coming but everyone has been intoxicated by media nonsense rather than analysis.

Keep calm and keep thinking.

Wind Draughts

Primary Category: …Energy…

An investor writes:

“I wrote this article  for the Australian edition of the British magazine Spectator a couple of weeks back. In essence, academics are FINALLY starting to realise that wind droughts are an issue with intermittent systems and studying them. As the article notes some work has been done in the UK, where it is known, for example, that some years back the wind made no contribution to the UK grid for nine days, and there were serious deficits during another drought at the end of last year. These wind droughts are an extreme event like cyclones or rain droughts. I saw some material recently on wind droughts in the US but I seem to have mislaid it. Perhaps someone has access? As for Australia there has been limited work to suggest that wind droughts in a given year might last for up to 36 hours. But that’s just from one year of data. As noted in the article there is no way to store enough power to tide the grids over such long periods. Australia is building one water dam project called Snowy 2.0 (after the region) but a fully renewables network would need at least six of seven. In any case the blindness of policy makers to this issue to date is just extraordinary. “

This got me to thinking.

My take: Storage of transient energy remains an issue. Tesla’s power wall is based on lithium battery technology and what counts here is Mega-Joules/Kg. ie, energy density of the storage mechanism. Also the economics of the life cycle of mining all the way through waste disposal and the the cost of each step.

I recently mentioned a physicist who remarked on TV about the subject of chemical based “replaceable energy storage cells”, ie, battery units, for personal road vehicles. There is a physical limit to that energy density. This was in a conversation about Tesla, which uses lithium battery technology. I simply pointed out the existence of the physicist’s remarks. And was instantly set upon by a protagonist of the original poster who was “triggered” by the point. We never did get around to addressing the actual issue, mainly because I do not respond to off the wall aspersions and argumentum ad-hominum attacks directed at third party people. And there were plenty of those from this particular protagonist.

The physicist had a real point. There are physical limits to chemical energy density and there is no “magic technology” that will save chemical batteries. There are alternative replaceable storage cell designs based on non-chemical energy storage and these are in research phases. And one could discuss those. But for the time being Tesla as a current product is not based on any of these.

And we have to beware red-herring arguments and be careful to compare apple to apples (not apples to oranges).

There are possibilities for building personal electric vehicles if the energy density problem could be solved. It is not going to be Iron Man’s fusion battery strapped to your chest, however. Wouldn’t that be nice if it were?

Major issues in personal vehicles are:

  • How far can you drive before recharging?
  • How much time is required to recharge?
  • Availability of recharging equipment?
  • Ultimate energy source of the recharge. Where did it come from? Where was it stored?

The Beat Goes On

The public is being told that in the near future everyone will be driving a vehicle powered by electric motors which run off chemical based batteries and these in turn will be powered by wind power and solar panels which store the energy in an energy infrastructure that easily distributes to resupply the personal vehicles. That is the main drumbeat. And humanity will be saved from climate change. Problem is, this is not credible. The drumbeat also includes elements of “if you don’t believe the drumbeat you must be a trog who is against science.” That is a non-sequitor.

Of course there are other sources of energy. among these are:

  • Hydro
  • Geothermal
  • Nuclear
  • Fossil Fuels

Systems Analysis

As a physics major turned engineer I believe these issues require an approach of systems analysis. In other words they are problem sets in systems analysis. All aspects must be solved simultaneously for society to be able to utilize any given solution set. Systems engineering is one of the types of jobs that I do. This type of thinking is particularly important for policy makers. Unfortunately most public debate ignores systems analysis and focuses on just one aspect of the problem set. This is naive thinking. When someone demonstrates such thinking I usually refuse to speak with them because it becomes a waste of time.

Areas I am interested in:

Capacitive power cells powered by fuel cells. Why? Higher energy density. Higher energy discharge capability. Fueling is rapid and fueling stations can be made readily available.

Hydrogen power.

Something more exotic.

These are completely separate discussions than vehicles powered by lithium power cells.

The above might answer how to build personal vehicles. But neither of the above answer the question of where the initial power comes from or how is the energy stored and transferred for availability to vehicles.

My experience is that folks who are in love with electric cars tend to focus only on the one aspect they care about and ignore the other issues entirely. And they seem to resent any questions about those aspects.

Now, wind draughts are one tiny aspect of energy gathering systems. Wind power freezing over in Texas or Minnesota is another such topic. These systems tend to be under-engineered and fail. The overall energy grid needs to be able to deal with such transient effects.

I plan to say something about large stationary power storage systems … soon.


This is interesting commentary.

Investors – just turn off the media.

Warren Buffet says to his investors in 2019:

“When it comes to marging debt, even if your borrowings are small and your positions aren’t immediately threatened by the pluncging market, your mind may well become rattled by scary headlines and breathless commentary. And an unsettled mind will not make good decisions.”

The same holds true for almost every area of life. It does not matter who slapped who. Pigs wallow. So turn off the drive by media, the scary headlines, the unceasing breathless commentary, and find something else to think about. Don’t get rattled just because the media wants to grab your attention.

Facebook Destroyed My Investments

Meta plunged 45% in 2022!!!!

20% of my portfolio is in VOO, which is an S&P 500 ETF. Advised to do this by Buffet because it has best 5 year performance over time.

I didnt know I owned Apple, Amazon, Facebook. S&P 500 weights these at 6.85%. Yikes!!!!
I am soooo glad I did not own individual shares in any of these FANG stocks or tech stocks.

Meanwhile, a reviewer says of VOO that the index actually makes an investor more impervious to such mistakes:

Investing Thoughts, April 8 2022

Commodities have room to soar by another 40 percent on top of the gains in recent months, as investors could pour more money into raw materials as a hedge against the highest inflation in 40 years, JPMorgan Chase & Co says.

“In the current juncture, where the need for inflation hedges is more elevated, it is conceivable to see longer-term commodity allocations eventually rising above 1% of total financial assets globally, surpassing the previous highs,” JPMorgan strategists led by Nikolaos Panigirtzoglou wrote in a note to clients this week, as carried by Bloomberg.

Higher money allocations to the commodities asset class “would imply another 30% to 40% upside for commodities from here,” all else being equal, JPMorgan noted.

So far this year, commodities have rallied amid supply constraints, exacerbated by the Russian war in Ukraine. Brent Crude prices have rallied by 30 percent year to date and reached their highest price since 2008 in March when panic gripped market participants.

Key metals have also rallied amid high demand in the energy transition and concerns that supply from Russia—a major producer of some of those metals—could be disrupted in the wake of increasingly tighter sanctions against Moscow.

Prices of lithium, a key component of EV batteries, have nearly doubled this year as commodities soared after Putin’s invasion of Ukraine.

Now JPMorgan says that commodities have further room to rise.

Particularly for oil, Goldman Sachs is also bullish. There is “absolutely” a supply problem in the sector, Jeff Currie, global head of commodities at Goldman Sachs, told Bloomberg on Wednesday.

There are broad-based supply constraints in oil producers, particularly non-core OPEC, Currie said. Every producer except for Saudi Arabia and the UAE is producing less today than they were in 2020, he added. Throw in the Russian shock, and the supply constraints are the most severe in decades, since the 1970s, according to Currie.

The record release of U.S. Strategic Petroleum Reserve (SPR) “is still insufficient to be able to deal with the scale of the problem,” he noted.

Trading Action April 6 2022

Yesterday I sold 20 CF at 104.50 and put in a limit trade on CF to sell 40 CF at 105. Got it first thing this morning. Later sold another 40 at market of 108. I entered a limit order to buy 80 at 102 in another account.

The fertilizer/AG/materials market has been crazy volatile. I have long positions in CF,MOS,LXU,UAN,ADM,BG,IPI,NTR. And I trade the volatility in these as they remain volatile.