Matthew Lekushoff |


You'd think between a looming trade war with China, high turnover in his administration, and a persistent porn star problem, President Trump had enough on his plate. Then, the last two weeks happened.

Since our last letter: His personal lawyer's offices were raided by the FBI; James Comey, former fired director of said agency, came out with his book (spoiler alert: Trump isn't the good guy); at only 48, Republican Speaker of the House, Paul Ryan, announced his "retirement" before the party's anticipated trouncing, sorry, November elections; and the U.S. launched a missile strike at Syria in response to recent chemical attacks on citizens.

Miraculously, the U.S. and international markets are holding relatively steady.

That's not to imply everything is rosy, however. The TSX is in negative territory for its year-to-date, and is just a smidge higher than its January 1, 2017 level. Most other markets remain close to even this year, while emerging markets ---- after falling the last two weeks -----  are up marginally for 2018.

On the slightly brighter side, as expected in times of uncertainty, gold has been relatively strong this year. Should the geopolitical landscape become more precarious, it's reasonable to expect the yellow metal to benefit further as investors look for safe havens. This is one of the primary reasons we've been long-term holders of gold.

Perhaps the biggest surprise of the last two weeks is oil's tremendous rally. The price of WTI crude is currently 15% higher on the year. It's always difficult to know why, but the financial press primarily attributes it to the shrinking global surplus, Saudi Arabia's desire for higher prices, and the recent geopolitical volatility.

Unfortunately, Canadian and U.S. energy producers have not enjoyed the same price appreciation, sitting just above their January 1 values. The unexpected divergence between the rising commodity prices and languishing energy stocks is beginning to attract attention. It's reasonable to expect the price of energy and energy stocks to converge at some point in the future. Should oil prices remain steady or rise, this would be very bullish for energy stocks.

Why we invest in energy companies

You may be wondering why we invest in energy companies, as opposed to the commodity itself.  Relative to its weight and volume, gold is much more expensive than oil. Roughly 2.5 million times more expensive. As you can imagine, this makes the challenges of storing and transporting oil considerably different, and more expensive. This expense is ultimately passed on to investors, especially those wanting to invest in the spot (current) price of oil.

In short, because of this massive expense, there aren't good options to invest in the spot price of oil without high and somewhat unpredictable fees, unless you want to get into buying options. Gold, on the other hand, can easily be invested in, as it's relatively cheap to store.


Half Asleep in Frog Pajamas  by Tom Robbins: I read this book almost 20 years ago and loved it for the absurd plot and clever prose. On my recent re-read, I found a few parts enjoyable, but otherwise lacking-----   to my tastes, at least. It's a good reminder of how tastes and opinions can change as we age.
Edgedancer: From the Stormlight Archive  by Brandon Sanderson: At 272 pages, Edgedancer is practically a novella in the Stormlight Archive series-----  the previous books were well over 1,000 pages. Its relative shortness is due to the author wanting to expand on the storyline of a character he didn't have time for in the first two books. And like those first books in the series, this one was thoroughly enjoyable! 
Tweetstorm on the messiness of history  by Taylor Person: This tweetstorm reminds us that history is messy, and knowing history won't enable you to predict the future.
First Principles: The Building Blocks of True Knowledge  by Farnam Street: Great thinkers rarely accept the status quo as the way to do things. By going to first principles, you can improve your thinking by breaking things down to their simplest components and starting anew. Why don't more people do it? Because it's hard work and you'll often be criticized for proposing something radically different. This is a great read-----  it won't be my last.
The Art of Letting Other People Have Your Way: Negotiating Secrets from Chris Voss  by Farnam Street: A wide-ranging conversation with Chris Voss, a professional negotiator.
Beware, fellow plutocrats, the pitchforks are coming  by Nick Hanauer: Nick Hanauer is rich...very rich! But he is worried about the dramatic levels of income inequality in the developed world, especially the U.S. This TED Talk stands as his warning to his fellow plutocrats.
Histomap: Visualizing the 4,000 Year History of Global Power by Visual Capitalist: When looking at a map of the world, it's easy to assume the future will look similar to the present. This infographic, going back to 2,000 BCE, will convince you otherwise.


"I must be willing to give up what I am in order to become what I will be."
 -----  Albert Einstein

  • Sadly, Barbara Bush, wife of 41st President of the United States and mother of 43rd passed away Tuesday.

Matthew Lekushoff

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