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The world of markets is a fascinating and frustrating place. And not necessarily in that order. It's also humbling, especially when you first start paying attention...
One big frustration is people just not understanding things. It's not THE frustration. We can't expect other people to understand everything. Nobody (including us) has infinite knowledge.
It's more the realisation that people shouldn't be so f**king confident when they've got no insight or experience of the things they're commenting on.
The Prosecution Presents Exhibit A - The Shouty Critic
You don't have to watch the clip. You've probably seen it all before (with different pantomime characters). This isn't a complaint about the 'stars of the show' here either.
It's about the state of politics, and the level of 'debate'. Just two people shouting/talking past each other again.
Did anyone come out of this better informed? Or is it more likely that viewers will each feel like their team won (and that's all that matters)...?
The comment on JRM's 'interests in the fossil fuel industry via Odey' just screams "I don't understand how any of this works".
Which is fine. Everyday people don't need to understand all of this.
But maybe that's a better starting point if you're going to speculate over someone's interests and motives...? If you're trying to understand what they do and why?
Staggeringly, JRM (and anyone else) can have vested interests in the fossil fuel industry by just, you know, buying shares in energy companies. No conspiracy is required.
Again, it's hard to take much issue with people not understanding things, there are only so many hours in the day...
Unless it's wilful ignorance. Which, it seems is becoming more common (and absolutely fair game).
See, there's a world of information at our fingertips, but if all you're looking to prove is that bad person is bad, you're not trying to become informed.
You're trying to prove yourself right. Intellectual masturbation. And it's entered a raging bull (ball?) market, which unfortunately means...
Intellectual Curiosity Enters Bear Market
... the natural desire to learn new things, understand the inner workings, and take a deep dive into subjects that others may find tiresome or burdening.
The media that former generations used to rely on for unbiased information is long extinct for this purpose. 24 hour news cycles made sure of that.
Instead we get infinite variations of this 👇
You're a Liar, You're to Blame, You're Greedy & The Politics of Envy
Playing the blame and outrage game solves nothing. Even worse, it absolutely murders any chance of understanding more about how the world actually works.
We've all seen variations of these headlines over the past 12 months 👇
"It’s time to take on the profiteers who are holding the public to ransom"
YEAH! Making money is a sin. How dare these companies charge us more for things that are essential to our everyday lives - it should just be free - what do I even pay my taxes for?
OK, an actual quote...
Natural resources like oil and gas, wind, sun, and hydropower belong to all of us if they belong to anyone—but right now a handful of shareholders are profiting while ordinary households suffer.
On some level, you can see the point. BUT if the natural resources belong to all of us, why don't we simply club together, invest in developing machinery, pay for the engineers & geologists to do a bit of research, sort the government licensing to extract these resources, plus invest some transport & storage facilities for our well-earned bounty?
If I pitched you this as a startup idea, would you invest?
There's NO risk of bankruptcy whatsoever, I promise... 😒
So, we generally don't understand how things work, and we completely take this stuff for granted now.
When the UK energy market was privatised in the '80s, it wasn't with a profit motive. The market simply hadn't worked properly for a long time...
Three day work weeks and regular blackouts (electricity rationing) were a part of life in the 70's.
Imagine only being able to get your food home delivered on three out of seven days, and on some of those days Netflix wouldn't even work!! Euuurgh dystopian or what?!
Now we have time to worry ourselves about what we call these natural resources instead...
I wanted to share a recent example (that was the inspiration behind this note). The following was written by an energy/power trader at RISQ... 👇
The Danish news outlets (lead by Finans, but closely followed by DR - Danmarks Radio and EnergiWatch) seems to just blindly bash the way the energy markets work. This, without even knowing how the market as a whole is put together.
They didn't even care to ask - they printed the narrative "these guys make money, these guys are bad".
Such a common media theme it's almost beyond parody. Zero interest in facts or impartiality...
The fact of the matter is, that if you play by the book, you ONLY make money, if you help the market. If power is needed, the price will go up. If you bought power, you can sell this off to help the market. Vice versa the other way around.
If there is a need of power, and you owe power to the market, you have to fill that hole, with power that is more costly to you, and you would lose money. It's as simple as that.
Sounds remarkably like a typical business. Be useful to make money, but there are risks...
Now, the individual consumers reference the spot price. Which is obtained by solving an optimization problem, that includes many variables. But most importantly, it includes the need/surplus of power in the surrounding countries. The surge in prices last year, was a product of French Nuclear plants being out for service, droughts in Norway, Italy, Austria etc. causing a shift in available production capacity.
Soooo, the most BASIC laws of supply and demand and not profiteering? Astonishing.
It was NOT a product of some trading house doing mad speculation.
That would simply be impossible. This is a game, that is closely tied to physics. Power cant be stored (for long), and hence the price will closely follow this balance.
However much the media wants to, they can't change that.
That 8 people have been accused of abusing the market, 47 CHP (Combined Heat & Power) plants have been accused of forming a cartel, and that a few employees are looking at getting (by all standards) a large payout, does not constitute anything being wrong with the market.
If we buy that narrative, what are we going to do with the politicians who mis-use the law?
If you need help with adding context, I'm open for a call. But this one-sided bashing has to end.
On this, we totally agree. As Oscar Wilde said, the cynic knows the price of everything and the value of nothing.
And if you don't understand the value of markets, you're probably not paying attention 👇