HorizonKinetics
@HorizonKinetics
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Wealth management and thought leadership. #HorizonKineticsResearch #HorizonKineticsJapan #HKMutualFunds #HorizonKineticsETFs
New York, NY
Joined April 2011
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Murray Stahl discusses the Horizon Kinetics philosophy, process, and investment discipline, the challenges and opportunities he sees in the market, and some investments for the long term.
#inflation
#valueinvesting
#HorizonKineticsResearch
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12
60
Observation
#45
:
Lost refining capacity since March 2020
Since mid-2020, the United States has lost the ability to process over 1 million barrels of crude per day. This is the largest drop on record.
28
198
661
Observation
#61
During the 73 years between Marcus Aurelius’s reign ending in 180 CE and the beginning of the reign of Emperor Gallienus, the denarius silver coin was periodically debased – by mixing in a cheaper base metal, like lead – from 75% silver to only 5%.
19
114
403
Observation
#67
The pattern of drawdowns from the Strategic Petroleum Reserve since the beginning of 2021 is unsustainable. The 283 million barrels released took 25 years to accumulate. Can these be replaced? Will they?
22
95
306
Observation
#63
Prevailing rates will replace the low rates on outstanding debt as securities mature and are replaced by higher interest paper. This will happen sooner than one might think - about half the Federal Debt Outstanding matures in the next 3 years.
#inflation
8
63
244
Observation
#72
Does oil demand fall during periods of economic contraction?
Not usually; in fact, it rarely materially contracts at all.
6
51
212
1/7
The last ~13 years was a boon, in the form of expanding profit margins, to consumer goods companies (flat to lower sugar & wheat prices, pork & palm oil, plastics, aluminum & steel, oil, etc, etc). That’s not happening again. YTD-Nov 2021: the CRB Index is up 19%.
1
54
193
Observation
#71
Oil consumption in the non-OECD world is rising, as those countries look to traditional fuels to drive economic development. The likely result: higher global oil demand.
#inflation
6
36
155
Observation
#34
Are markets a buy yet?
Warren Buffett has called US market cap/GDP the best measure of where valuations stand. Roughly speaking, markets are undervalued if the ratio is < 85%; fairly valued 85% to 115%; and overvalued > 115%. Current reading: 170%.
14
35
145
Observation
#57
In the first three quarters of 2022, global equity and debt markets lost $92T in value. Consider that global GDP for 2021 totaled $96.3T (Source: IMF). Compare to 2008, when global markets lost $17T in the first three quarters, while 2007 global GDP was $58T.
6
48
134
Fund manager Horizon Kinetics bets on land and crypto as inflation rises (Financial Times 7/28/2021)
#HKMutualFunds
2
24
136
The CPI is not a true measure of inflation.
Contrary to general understanding, the CPI does NOT measure the general – the experienced – price level, nor is it designed to.
8
39
133
Observation
#82
:
Headlines about money supply growth turning negative and CPI growth slowing only tell part of the story. Aggregate levels paint a different picture: M2 remains 35% higher than in early 2020, while the CPI level is 19% higher.
#HorizonKineticsResearch
11
42
128
Observation
#59
The global rise in
#inflation
is especially pronounced in non-OECD countries. A strong US dollar and rising energy prices are exacerbating existing pressures.
10
26
124
The Zombie 7’s debt levels have reached positively spooky heights. These levels are unsustainable – eventually, bond vigilantes will take action. The results may be frightening.
Happy Halloween!
9
33
126
Observation
#24
:
In January, we noted that essential commodity
#inflation
will become more and more of an issue if prices continue to rise.
Here we check in again two months later.
4
37
121
Observation
#73
Almost the entirety of investment trading is a zero-sum game. The only consistent class of beneficiaries over time are the fee-takers, or croupiers of the trading markets.
5
25
121
Observation
#37
In the last 2 months, diesel prices have decoupled from the price of West Texas Intermediate crude. Low global distillate inventories, low refinery capacity, high utilization, and the invasion of Ukraine have driven abnormal crack spreads on end-products.
8
20
118
To know the night/day difference between asset-light (royalty) commodity companies vs. commodity producers or commodity prices – the power of sustainable, high ROE – look at periods of extended commodity price declines:
$FNV vs $NEM, $TPL vs $XOM, $MSB vs $CLF
#HKhardAssets
9
34
119
Observation
#33
Since 2014, commodity capital expenditures (as represented by S&P Global Natural Resources Index constituents) are down 57%, while US GDP is up 34% on a nominal basis. Commodity Capex is now below 1% of US GDP.
1
33
115
Given the significant capital and regulatory constraints on energy companies, it is unlikely that this will be easily remedied. The US is currently at 95% capacity utilization heading into July.
8
28
111
Last month, FactSet reported that a record 197 S&P 500 companies cited the term “
#inflation
” in their 1st quarter earnings call. The prior record was 163 companies. Apparently, this database goes back to 2010.
5
23
103
Total U.S. federal debt just passed $30 trillion and amounts to over 130% of U.S. GDP. The effective federal interest rate is 1.7%. Raising this effective rate by just 1% would add over $300 billion in interest expense to the budget, or another 1.3% of GDP.
8
33
101
Observation
#47
Oil and natural gas production growth in the past year haven’t matched rig count increases.
Why? Most production today is via horizontal drilling; this extracts smaller volumes and depletes more rapidly than vertical wells absent ongoing CapEx.
8
23
100
The Japanese stock market is reattaining its previous peak, but with superior fundamentals, lower valuations, and newly established transparency & corporate governance.
#HorizonKineticsResearch
#HorizonKineticsJapan
6
15
100
Observation
#81
While annual deficit levels have retreated from the highs reached during the COVID-19 pandemic, the cumulative deficit continues to mount. The Congressional Budget Office forecasts growing annual deficits for the next decade, meaning a higher debt burden for
6
27
98
Observation
#58
Factors like drought and fertilizer shortages have strained agricultural commodity production. Though somewhat recovered recently, projected year-end stocks for many commodities are down, leaving the global food supply vulnerable to any further supply shock.
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19
88
Observation
#80
Over the past 20 years, securities exchanges have outperformed the economies and major stock indexes of just about every nation, not just the U.S., to a remarkable degree.
2
13
83
Murray Stahl believes a decades-long inflation cycle is likely - interview with Grant's Interest Rate Observer
$INFL - The
#Inflation
Beneficiaries ETF.
#HorizonKineticsETFs
3
26
71
Horizon Kinetics Small Cap Opportunities Fund $KSCOX highlighted in Investor’s Business Daily
@IBDinvestors
#HKMutualFunds
2
8
63
The price of Lithium Carbonate appreciated by 496% in 2021. Year-to-date, it is up another 29%. We estimate there is enough global lithium supply to transition just 4% of the world’s internal combustion engines.
^
4
21
73
we are proud to have been a part of bringing $TPL corporate governance to the new millennium.
Congratulations to all who have contributed to this milestone in the history of Texas Pacific Land!
#oilandgas
1
3
67
Over the past 73 years, the US Dollar also lost over 91% purchasing power through persistent debasement. Currency devaluation is hardly a new phenomenon.
0
7
69
7/7
What’s beginning to happen with natural gas now is quite possibly a preview of the same dynamic with oil, once inventories are drawn down. Will the US have oil costs go up ~300% as well, so +$150/barrel oil?
3
11
63
We are excited to announce the launch of our first ETF. Inflation Beneficiaries ETF (Symbol: INFL) began trading on NYSE today! It seeks to invest in companies that we believe will benefit from rising inflation. Visit our website at:
$INFL
#inflationETF
2
11
58
CPI reads ~1%, while key non-energy, non-metals
#commodities
look like this. And
#energy
and
#metals
don’t look much different.
#inflation
0
19
62
Hot off the press: The 7th Volume of the Horizon Kinetics 2020 Compendium Compilation is out. To know our research is to know us.
#HKresearch
55
3
60
Murray Stahl in Value Investor Insight - Worth the Time: Murray describes his investment philosophy and process, addresses the challenges and opportunities he sees in the market now (and those he expects as we look ahead), and reviews some investments that he believes will
2
11
56
What Does Sam Zell Know That Wall St. Doesn’t?
$ELS $BXP $SPG
#RealEstateInvestments
#ValueInvesting
2
16
58
Observation
#62
The scale of projected Federal Interest Expense in 2025 is staggering.
#inflation
4
20
59
DPR is the Drilling Productivity Report which refers to the oil producing regions:
Anadarko, Appalachia, Bakken, Eagle, Ford, Haynesville, Niobrara, and Permian
Seems to me like DUCs should be getting more attention than they are.
Chart via
@ycharts
.
23
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274
1
6
54
Observation
#27
In the first months of 2022, the Energy sector weighting in the S&P500 jumped from <3% to 4%. In 1980, at the height of the Iranian crisis, after advancing 83% during the year, it was 28%.
Even relative to the modest levels of the 1990s, the current weight is low:
3
23
57
Some straight facts about the FAANG stocks.
The 1-Percenters: the 5 stocks that are 22% of the S&P 500, and some facts & figures
#sp500
$amzn $aapl $fb $googl $msft
1
3
51
- Texas Pacific Land Trust ($TPL) Shareholder Presentation by Horizon Kinetics - April 2019
0
10
55
As 2020 comes to a close, the recent growth in M1 as of 12/14 has been remarkable
#inflation
#govtdebt
5
23
53
Observation
#49
Not all prices have the same drivers. Cyclical drivers may obscure structural factors, and will impact prices very differently in a slowing economy.
We discuss the investment implications in the semi-annual INFL commentary. $INFL
#inflation
11
7
52
Observation
#52
The Empire State Mfg Survey Diffusion Index is at levels seen during the 2008 Global Financial Crisis. New York’s enormous population drives consumption across other regions. Are merchants and producers going to reorder inventory given this negative sentiment?
2
13
49
Horizon Kinetics, a fundamental value money manager invests in
#bitcoin
$GBTC via
@BarronsOnline
0
10
51
Bought a 10-year Treasury index 20 years ago?
The index returned a plenty-adequate 5.4% rate of return. The government says, adjusting for the CPI, that return was 3.3%. An independent, ‘unmanaged’ basket of goods/services, the Big Mac Index, says the real return was just 1.1%
2
9
47
How important is energy: key ingredient in the production of every single nation – without energy nothing that has metal, plastic, silicon (wafers/chips), cement, or rare earth elements can be made.
1
12
47
Is timing everything?
132 years after its formation, 100y after having the 1st oil well in the Permian, 93y after NYSE listing, 25y after our first research report, and just before ringing in 2021 ->
3
5
48
Observation
#56
As the approximately $24T of US Treasury marketable debt held by the public is replaced by higher coupon paper, Federal interest expense will more than double from current levels (assuming constant debt levels and current prevailing rates are applied).
5
19
45
Perspective is not all that hard to come by... you just step back and look.
#oilandgas
'The market capitalization of Tesla is today roughly the same size as that of the entire S&P 500 Oil sector, which includes the majors, independents, drillers, service companies AND refiners.' by
@dylangrice
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59
150
1
7
43
There’s the
#CPI
, which people believe is
#inflation
, but isn’t. And there’s the McDonald’s Big Mac. The price of this real-world diversified “basket” of goods and services includes commodity costs (beef, wheat…) transportation costs, real estate, labor and marketing…
2
8
44
Letter from our Founders - March 24th, 2020
0
7
42
Observation
#39
There are many types of crude; refineries are configured for a specific type, and cannot just swap in another. Heavy oil refineries source primarily from Russia, Canada, and Venezuela. If Russia is blocked by sanctions, Texas oil cannot replace that supply.
1
17
41
Observation
#77
NYSE equity trading growth has slowed in recent years. But NYSE is now only one business line within the Intercontinental Exchange.
1
16
40
Our New Commentary:
When is A P/E Not a P/E, or How To Turn 90 into 22 in Three Easy Steps
#ETFs
$QQQ
1
17
42
Historically unprecedented regulatory changes in Japan appear to be altering a 75-year insular cycle of protected corporate structure. A unique subset of uncorrelated & non-indexed companies is emerging.
White Paper (all 4 parts)
3
4
42
Observation
#66
Though headline CPI growth is moderating, we are not out of the woods. Central banks are painted into a corner: whichever policy path they choose leads to structural
#inflation
.
0
8
30
To know us is to know our research. Royalties are an as-yet unrecognized asset allocation tool; yet, the value and attractiveness of this asset class are likely to become increasingly apparent. Our white paper on Royalties as an Asset Class is now available; please contact
0
6
38
Part 1 of 4: The Japanese Market You Know and the One You Don’t. Underneath Japanese multinational companies, emerges a unique subset, what we believe is a value investment opportunity in Japan.
#HorizonKineticsJapan
2
7
38
Observation
#30
US shale production will continue to decline and inventories will tighten if drilling doesn’t increase in earnest. Crude oil inventories at Cushing (ex SPR) are 40% below 5-year average levels.
#inflation
0
12
37
Observation
#55
Higher interest rates are largely credited with reducing
#inflation
of the 1970s, but the impact of new commodity and labor supply from China, Russia and other emerging nations is rarely considered.
2
9
34
Observation
#43
Higher energy prices drive higher food prices.
Though influenced by geography and crop, 40-50% of variable costs stem from energy requirements. Diesel for machinery and electricity for irrigation are clear needs, but fertilizers and agrichemicals are less obvious.
4
8
37
The U.S. already spends over $500 billion in interest and is facing rising costs of entitlement programs. Smooth transition?
0
5
37
Thanks
@GrantsPub
for a stimulating day:
a ‘club’ for exchange of ideas and open minds!
Our Presentation:
0
9
36
‘The Greatest Bubble Ever’ (Passive ETF Investing) podcast with HK's S.Bregman
@jessefelder
#ETFs
#SP500
0
9
33
HK 2021 Q1 Commentary:
When investments are too large, or too high...Are they? To trim, or not to trim, that is the question. How to know? A discussion of presumed-but-unexamined rules of portfolio management.
$TPL
#bitcoin
0
11
35
2/7
A decade of declining commodity prices led to much lower capital investment: in energy, industrial+ metals, other commodities – drawing down reserves AND capacity. They require very long investment cycles to meet rising demand. “Structural supply shortage” is a SERIOUS term
2
5
35
Observation
#60
Headline
#inflation
may be slowing, but new price increases are off a higher base. As a result, the experience for consumers will continue to be painful.
3
11
35
Observation
#42
We are seeing the highest finished motor gasoline prices on record. The United States currently spends about $1.86 billion on gasoline daily (as of June 6, 2022). That is almost $800 million above the 5-year average and a yearly cost of $677 billion.
3
13
34
If you suspect those periods are cherry-picked to show royalty companies in a flattering light, the following shows a standardized, longer cycle.
0
4
35
Horizon Kinetics, publishing cryptocurrency related research since 2015, has launched a new cryptocurrency webpage:
0
8
33
At Horizon Kinetics, we are concerned about
#inflation
. Looking at the US monetary aggregate M2, primarily driven by
#COVIDstimulus
, the recent growth is larger than any time since 1960. As the
#economy
recovers, we may indeed see “too much money pushing too few goods”.
2
9
32
Royalties will be more valuable than ever under sustained
#inflation
: commodity prices are likely to rise, and royalty profits are largely insulated from rising operating costs.
1
6
34
Milton Friedman:
"The reason we have
#inflation
... is because these pieces of paper are growing more rapidly than the quantity of good and services produced."
at 22:55 below:
1
7
31
The IT sector is back to its Dot-com bubble peak weighting in the S&P 500 Index, though a casual observer may not realize it.
In 2018 and 2023, GICS reclassified many of the largest IT companies to other sectors.
3
11
33
An Alternate View:
20 years ago (5/31/2001), $1m bought a 10-yr Treasury that yielded 5.43%, for yearly income of $54,300. Now (as of 5/28/2021), that $1m yields 1.58%, or $15,800. So, one’s income is down 71%.
2
10
33
This is a change from 20 years ago, when vertical wells would have simply kept producing in the near-term, even if new funding or drilling leases were not obtained. Yet another structural inflationary pressure point.
#inflation
1
2
32
HorizonKinetics Co-Founder Peter Doyle discusses indexation, inflation, and stores of value
@APompliano
#ValueInvesting
$tpl
#bitcoin
0
5
26
Observation
#64
The demand for metals/minerals will change (and rise) dramatically during a transition to new energy sources. Current supply is insufficient to meet this growing demand.
#inflation
1
9
26
Our goal for 2021 is to have frequent posts regarding market data and statistics that Horizon Kinetics finds of interest. If you have specific questions, please DM us and, if possible, we will reply in a future post
2
1
30
Video of Steven Bregman presenting at Grant’s (Interest Rate Observer) Fall '16 Conf on The
#ETF
Divide
@GrantsPub
1
6
28
In 1980, the world used 83k TerraWatt hours of energy. 60% was
#oilandgas
. In 2019, the world used 159k TerraWatt Hours of energy. 58% was oil and gas. While reduced demand may be true in the US, globally there is still a large and growing demand.
#energyconsumption
0
6
28
HK’s Peter Doyle: a conversation with Daniel Prince,
@princey1976
, about wealth management in the age of record global money creation
#inflation
#bitcoin
#hardassets
3
4
27
In an interview with Value Investor Insight, James Davolos discusses what he thinks investors are missing about
#inflation
and the types of businesses he expects to thrive in an inflationary environment.
$INFL
4
10
25
Observation
#31
Just the beginning? Historically CPI lags PPI, as companies pass on price increases to consumers over time.
#inflation
2
6
28
4,000 years ago, the Hammurabi Code set
#InterestRates
of 20%. Amidst war and civil war, Napoleon borrowed at 6%, and Lincoln borrowed at 7%. We are now at lowest rates ever. Guess there’s no bond risk in the world.
When does “ever” or ‘historical extreme’ become a hint?
1
8
26
Portfolo Manager James Davolos discusses changes in the investment landscape
@WSJ
#HKMutualFunds
- $WWNPX $KSCOX
3
8
26
Observation
#48
Bottlenecks in the Shipping Industry
In the past seven years, the number of active shipyards has declined by 45%, and some of the remaining shipyards have also diminished in size, leading to significant port congestion, delays, and increases in shipping costs.
3
13
26
4/7
A backdrop for where the world is today: observe the first critical commodity seeing a demand/supply imbalance: Natural Gas.
Why? Energy is demand inelastic: when you need it, you need it now. If sufficient supply is unavailable, then price determines the new equilibrium.
1
5
27
HorizonKinetics joins
@KeithMcCullough
to discuss
#inflation
Wednesday, June 9 @ 1pm EST
GAME ON!
In June,
@KeithMcCullough
will host discussions with 4 sharp investors.
About what?
Investing During A Rising Inflationary Tide
James Davolos
@HorizonKinetics
Prof
@steve_hanke
David
@EconguyRosie
Rosenberg
@JeffSnider_AIP
Don't miss this:
7
9
40
1
10
25
Observation
#51
Though commodities prices eased in July, high input prices are among many factors negatively impacting food supply globally. Fertilizer supply constraints threaten crops around the world, potentially contributing to a food shortage.
#inflation
0
8
25