“We’re out of everything” – OWTW


If you’ve been around during the dot-com craze, you’ll remember market darling Sun Microsystems.

We put the dot in dot-com” was their marketing slogan. As it turned out, they really did put the dot in dot-com (though not in the way they’d probably hoped).

This quote from CEO Scott McNealy is classic:

At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?

It highlights perfectly why the idea of buying the high-flying growth names — no matter how compelling — just doesn’t appeal to us intellectually. Nah, we prefer looking for deep value opportunities, wherever they might present themselves.


Feels like a lifetime ago, when — back in February 2020 — we started warning that lockdowns will bring about inflation and shortages. Fast forward to today, and this pesky stuff is now part of our daily lives. We recently set up a dedicated inflation channel in our Insider private forum, where members can share their own experiences with all things “transitory”.

Member David shared this fascinating video from a grocery store in Moscow in 1989.

Who would’ve thought that those barren shelves will be so familiar to all of us some three decades later?

But don’t worry… The pointy shoes tell us it’s going to get better — but only after it gets worse (yes, really).


While on the topic of shortages, the following quote from Goldman Sachs’ head of commodities, Jeff Curie caught our eye:

Jeff Currie, the closely-followed head of commodities research at Goldman Sachs Group Inc., says he’s never seen commodity markets pricing in the shortages they are right now.

“I’ve been doing this for 30 years and I’ve never seen markets like this,” Currie said in a Bloomberg TV interview. “This is a molecule crisis. We’re out of everything, I don’t care if it’s oil, gas, coal, copper, aluminum, you name it we’re out of it.”

If you’re a long-term reader, this will be nothing new. The prolonged supply destruction in pretty much every commodity out there is starting to rear its ugly head. As a result, the magnitude of the bull market currently underway in commodities will surprise even the biggest bulls.

To remind you of just how extreme the disconnect between market sectors is, here is the commodities to S&P 500 ratio. Never in history have we seen such extremes.


Meanwhile, the woke train keeps on rolling…

The article goes on to explain:

New York’s state pension fund will sell $238 million worth of stock and debt it holds across 21 shale oil and gas companies including Chesapeake Energy Corp, Hess Corp (HES.N) and Pioneer Natural Resources (PXD.N), saying they have not shown they are ready to move to a low-emissions economy.

You might be asking yourself, where does this all stop.

As we say around here, everyone is a greenie until it hurts their pocket. We dug up an old issue of Insider Weekly from a year ago where we said:

The ESG crusade shows no signs of letting up — probably not until oil is at $150 a barrel, geopolitical power vacuums are being filled (wars potentially), and governments are talking about energy security that we’ll have an about turn. The probability though is that by then it will be too late. Lack of capex on replacing reserves will ensure a repeat of the 1970’s oil crisis. Don’t laugh, we are headed there!

It’s worth pointing out that oil was trading at $60 per barrel when we wrote that. It’s flirting with $90 today — so 50% higher. And if anything, the fundamentals in energy got even more screwed up during that time.


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Have a great weekend!


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