Category: Missives

Thanks to reading Spencer Jakab’s book, “The Revolution That Wasn’t”, we’ve been thinking about what it is like to be in a short position when overwhelming demand affects prices. The Strategic Petroleum Reserve (SPR) was created for our National Defense and/or a temporary crisis in oil production. So far, it was effectively used by President Biden to calm oil prices down when they hit $120 per barrel. The Reserve currently holds around 500 million barrels of oil, down from the normal 700 million barrels. […]

What has taken place in 2022 is nothing short of a man-made problem. The question is if you looked upriver, could this have been avoided? While it could be argued that Putin invading Ukraine was unexpected, the policy decisions and structure of the global energy markets have been shaped for years. It reads like the lamp in the movie A Christmas Story: Fragile. Besides structural issues, there have been pressures imposed on these structures that were unforeseen when they were built. These were exactly the pressures that caused what we now know as Chernobyl. […]

[…] This bear market is designed to punish mass foolishness in everything from FAANG stocks, glam tech stocks, high price-to-sales up and comers, meme stocks, SPAC/IPOs, cryptocurrencies and the list goes on! We even revived the meme trading in the recent bear market rally. Why are we sure it is a bear market rally? It was led by the same foolishness that triggered the bear market in the first place. Investors are gluttons for punishment in this cycle. […] 

We believe one of the hardest things to do in common stock investing is to hold winners for a long time. This is especially true with what are normally cyclical industries. In our view, we are suffering through the “slings and arrows” of a major price correction in the secular oil bull market that started in the spring of 2020. Is this the end of oil driving the inflation problem, which has led the Federal Reserve Board into a major tightening cycle? Is this the shortest bear market to cure a financial euphoria episode in history, and should we all go back to nothing but FAANG stocks? […]

[…] Ideological thinking has run amok in the allocation of capital. This has transpired from government edicts and will, a typical creator of a bubble. It is promoted by the promoters, who are another element of bubbles. Their love child is what we now refer to in the investment business as ESG. […]

We are getting questioned constantly on how long this bear market in U.S. stocks will continue. It’s a reasonable question, and as we always do, we look back at the most similar situations and view the depth and length of the most analogous bear markets of the last 60 years. […]

[…] Chairman and largest shareholder, Harold Hamm, is trying to own our shares of Continental Resources (CLR US) at a price of $70. We’ve seen it trade above there in the open market in the last month. How strange? Warren Buffett is bidding on a regular basis to buy shares of Occidental Petroleum (OXY) from other existing shareholders. The stock isn’t sprinting higher on this news. How strange? These are historically control investors who don’t mind playing for keeps. […]

Someone once said, “Better than being smart is knowing who is!” Over the last few weeks, three of the richest and most successful businessmen in the U.S. have let us know what they think about being in the oil and gas business. Warren Buffett, Jerry Jones and Harold Hamm are instructing us in a special way and we at Smead Capital Management are happy to be instructed. It is a trifecta that any good handicapper couldn’t pass up. […]

Over the last four years, we have argued that the glamour monopoly technology companies have a low multiplier effect in the U.S. economy. At the same time, home ownership and the creation of new homes has historically been a powerful driver of economic activity. With interest rates normalizing and the stock market punishing the prior financial euphoria, how can we invest to succeed in the coming five to ten years? What does the chart below tell us about how much the stock market will impact the economy going forward? […]

We are approximately six to twelve months into a bear market in stocks and bonds. This bear market is the natural consequence of the financial euphoria episode which preceded it. How do wise long-term investors handle these cold stretches in the stock market? Why is it worth fighting through these stock market corrections? How should we as investors behave in a process which takes time, courage and patience? […]