đ§ Will The Energy Crisis Destroy The West?
How decades of reckless energy policy has caused an energy crisis, the loss of several important industries, and the ceding of geopolitical and economic power in the west.
In todayâs letter:
An overview of how decades of reckless energy policy has caused an energy crisis, the loss of several important industries, and the ceding of geopolitical and economic power in the west.
On edge and increasing size in your investments.
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Will The Energy Crisis Destroy The West?
Due to a failure in leadership, an aggressive push toward renewable energy, and drastically reducing the production of traditional energy the world is currently experiencing skyrocketing energy prices which will most likely lead to a full-blown energy crisis. The consequences will be devastating to the economy AND our push to decrease carbon emissions, and this will reverberate for years.Â
It doesnât take much in inelastic commodity markets to make prices spike drastically. By crippling our energy supply, we are making energy a lot more expensive. And that doesnât just mean it will be more expensive to drive your car or heat your home - everything gets more expensive when the price of energy rises since everything requires energy to be produced. That includes everything from clothes to food. Itâs inflation caused by energy shortages.
Not only are runaway energy prices a catalyst for scarcity, inflation and shortages. Western and industrialized economies are as a result ceding geopolitical and economic power to Russia and Middle Eastern countries as those economies gain influence when energy supply dwindles.
We are also practically giving away entire industries as a result of imposing extremely strict regulations in the west, while not upholding our trading partners, like China, to the same standards which has a ripple effect across our entire economy.
To learn more about what Iâm talking about, check out the video below (Hit like and subscribe, it helps out a lot)!
On Edge and Increasing Bet Size
In blackjack, your edge against the dealer depends on the cards remaining in the deck. When a fresh deck of cards is played, your edge is 0 and during play your edge increases or decreases depending on what cards are left in the deck.
If more low cards are left in the deck, the dealer has the edge. If more high cards are left, you have the edge. Very seldom do you achieve a high running card count (i.e. you have an edge against the dealer). But when you do you bet big.
At least theoretically. Counting cards is illegal at casinos, but itâs not illegal in investing where the same principals apply.
Good opportunities are rare and amazing businessess are even more rare. Businessess come and go and disruption happens frequently. Even the best investors make wrong calls and invest in businessess that arenât as good as they think. However, good businessess tend to continue to compound over time.
Time increases your knowledge of a company, giving you an edge over the competition and the possibility to achieve above-average returns over the long run. This will let you determine if increasing your bet size will let you achieve a higher return on investment or if a higher return on investment is available elsewhere.
While chasing new investments and opportunities is more exciting, itâs like leaving your current blackjack table where you have a high running card count to play at a table where the count is unknown. This is why you want to increase the bet size on the high performing businesses you already own.
Concentration is scary and will entice investors to diversify their portfolio even if it means adding worse companies. It is much better, and less risky, to own fewer assets with a high running card count because increasing bet size when you have a high count is inherently lower risk than moving to a table where the count is unknown.
Most investors mentally anchor to their entry price on an investment (anchor bias), however a company will be an even better investment than the first buy if e.g. the price is up 10x, but the companyâs prospects are up 20x.
Every time youâre enticed to make a new investment, you should ask yourself âWhatâs my count there compared to at my current table?â.
End
Thatâs all from me folks. If you enjoyed this letter please share it with your friends. Itâs free.
Until next time,
Fabian