Margin Call

Don't look now, but ERCOT's summer capacity forecast isn't too promising with peak demand projected to hit a new record of over 77,000 MW. Will ERCOT have a summer version of their winter woes? Identifying the root cause of Texas power problems isn't as easy as many are led to believe, but just how many factors are contributing to situation, and why does the PUCT seem so out of sorts? How is it that an electric energy market that was once touted as one of the best in North America, is now being exposed as a hotbed of corruption and cronyism?

Is green (energy) the new black (for oil demand)? Gas demand may fall, but diesel demand more than offsets losses from electrification. Narratives are often written by those in power, but who benefits and what is the impact to oil price? If economic incentives are discouraged to produce traditional energy, how does this impact price and the environment? These topics and more explored by George P. and Eric Dixon, a senior physical and financial oil trader of nearly 20 years.

Gas demand may fall, but diesel demand more than offsets losses from electrification. Narratives are often written by those in power, but who benefits and what is the impact to oil price? If economic incentives are discouraged to produce traditional energy, how does this impact price and the environment? These topics and more explored by George P. and Eric Dixon, a senior physical and financial oil trader of nearly 20 years .

- We wanted to understand what really happened with grid operations during the Polar Vortex, so we called on Josh. - What we discovered will surprise and shock you even more. - You can be mad or you can be informed. - This is part 1 of a multi-part episode.

There is a talent gap in trading given the changes in the market. We talk about how someone starts a career in trading today. We also talk about how organizations should be looking to find and retain talent in today's environment. The secular trends causing the talent shortage. We also tackle the challenge of achieving diversity of thought and backgrounds in commodity trading. Links: www.hcinsider.com www.humancapital.global

We explore the history of the talent side of the commodity cycles. From the early days of merchant trading to banking led energy trading and now back to merchant traders and all the events that changed the mix of the participants in energy/commodity trading. We also talk about how compensation has changed over this time and expectations of people working in trading organizations. Links: www.HCinsider.com www.humancapital.global

Topics: - Crude oil prices - Inflation scaring up commodity super cycle - Woke financing - the demonization of Oil & Gas - A preview of our next couple of episodes

Topics: - Context of the electric grid problems in Texas last week is the distortive nature of renewables in the generation mix. - We cover the role renewables have played in the fuel supply in the Ethanol and Biodiesel industries. - How government subsidized renewables have created a rent seeking monster in big agriculture, who are now a permanent part of the fuel mix. - How renewable fuel prices have distorted market structure and led to higher than normal fuel prices which is simply passed through to the consumer. - How the mechanism to track renewable fuels (RINS) has been a Rube Goldberg-ian system of epic incompetence, fraud and ultimately imposed such high compliance costs on refiners that the oil industry has spent the better part of the last few years begging the EPA for waivers to avoid bankruptcy. - Explanation of the “Rinsanity events” References: https://www.reuters.com/article/us-usa-ethanol/u-s-refiners-plagued-by-rinsanity-see-half-step-on-biofuels-idUSBRE97605420130807

- A discussion following the Presidential EO dated 1/20/2021 revoking permit for Keystone XL pipeline - Clarification of the extent of the permit - a section from Edmonton, AB to Steele City, NE - We discuss what Enbridge has done to date in adding capacity from Canada to Cushing, OK. And why this matters. - Is this really a big deal or simply a political football for all sides? - Are democrat policies good for the oil industry that has tended to exhibit signs of Prader- Willi Syndrome when left to its own devices? References https://www.whitehouse.gov/briefing-room/presidential-actions/2021/01/20/executive-order-protecting-public-health-and-environment-and-restoring-science-to-tackle-climate-crisis/ https://rbnenergy.com/with-or-without-you-how-will-keystone-xls-latest-setback-impact-canadian-crude-oil-producers https://en.wikipedia.org/wiki/Prader%E2%80%93Willi_syndrome#:~:text=Prader%E2%80%93Willi%20syndrome%20(PWS),obesity%20and%20type%202%20diabetes.

Continuation of the GME short squeeze and fallout one week later. Who really was the predator and the prey in this situation? Are financial markets rigged against the retail investor? - Institutions Paying for retail order flow. Free Commission brokerage is like free social media. The customer is the product being sold into an execution advantage/front running scam. We explore looking at trading as a dynamic playing field. Which is why most great traders are great poker players as well.

Pop up episode to talk about the recent price action relating to Gamestop shares on the equity exchanges. Retail versus the elite investors. Hedge Funds taking a serious beating from the unwashed masses. We explore how this little dust up is a microcosm of the sentiment in the country between the street and the elite institutions.

We look at the ramifications of blockchain and crypto currencies and what needs to happen for them to scale to challenge the existing order. What does the transition to a Peer to Peer network for transactions do to third party facilitators of commerce like banks and credit cards? What are the benefits of this happening? What are the drawbacks? How will the existing orders that are considered natural order of things like the international currency system and inter-bank payments network (SWIFT) react to this disruption?

We take a trip through the following: - History of crypto-anarchists and cypher-punks from the 1980s. Founding developers of DoD sponsored ARPANET, the predecessor to the Internet. - The protocol used to create BitGold that became Bitcoin - The paradigm for understanding value is usually via visual sensory input or because everyone agrees that something is of value. Now we are changing the way we see value. - Cryptocurrencies are undiscovered country that has its foot in the old and the new. - It has aims to be a currency but currently functioning as a commodity - mimicking electronic gold. - What are fundamentals driving Bitcoin prices today? What are the other variants tied to blockchain technology and how do they differ from Bitcoin? What is blockchain? - Bitcoin resembles the internet in the early stages of its development. It is a means of exchanging value and keeping records of transactions. - Government intervention (SEC lawsuit against XRP foundation) into the development of bitcoin.

- An old testament biblical style story of rise, pride and ensuing fall. - Center of an era filled with Young smart and ambitious people working at these uber trading firms in Houston that dominated energy trading around the world. Downtown renaissance. Energy firms were putting technology innovations out that rivaled what Silicon Valley was doing at that time. - They were visioning the future - Broadband trading. Did a deal with Blockbuster that was a pre-runner to Netflix. - Energy industry lost its swagger when Enron collapsed. - Note how despite the speed and size of Enron's fall, Fed did not have to get involved, no systemic risk, no bailouts for institutions. Goes back to the point that energy markets have natural self correcting mechanisms + Enron's fall had more to do with accounting/financing than the corruption of the markets they engaged with and created. - Separate fact from myth. Why so many today owe their livelihood to the risks that Enron took to be successful. - Ultimate first mover advantage. An aggressive appetite for risk. - NGPA - removal of federal price controls at well head and FERC Order 363 unbundling gas supply from gas delivery. Without that no choice in electricity providers that we enjoy today. - Ken Lay's role in lobbying for deregulation and his connection to the Bush family. - They did not fail from being successful traders but from financial leverage. - Enron online and the financialization of core markets of energy trading. - The conflict of being a “super local” in the physical markets for gas and power. How they would push their market position and view of market positions. - Valuing optionality of assets, securitizing them - meant that you did not have to own the asset to operate in the energy markets.

Topics: - CFTC interim staff report on negative WTI Futures prices released 11/23/20 - Already causing dissension amongst CFTC commissioners for not being prescriptive enough to point fingers at those who may have benefited - Reads like a freshman economics book report. “Dog ate my homework.” - The faustian bargain struck with Algorithms for market liquidity leads to jump events. - Vitol agrees to pay a record $135MM fine to settle bribery charges in Brazil, Ecuador and Mexico with the US DOJ. - Charged with FCPA violations stemming from 2008 to 2014 for $8MM bribes paid to fraudulently win fuel oil tenders with NOCs - Ghost of Marc Rich looms over his children References: https://www.justice.gov/opa/pr/vitol-inc-agrees-pay-over-135-million-resolve-foreign-bribery-case https://www.bloomberg.com/news/articles/2020-12-08/-an-mba-in-corruption-how-top-oil-trader-paid-bribes-for-years https://www.cftc.gov/MarketReports/StaffReports/index.htm

The journey goes deeper into the mechanism of markets and how futures markets work. The global network of energy markets and how they are self correcting because of relationships of product value over time, location and quality.

Topics: - Market context and musings - The Turtles (Richard Dennis and Bill Eckhardt - Original Duke Brothers of “Trading Places bet” fame) - Marc Rich (Sanctions busting and the rise of the Swiss Trading Giants) - Andrew Hall & Phibro. Mr. $100MM - John W. Henry. Exploiting edge. From commodity futures to the Boston Red Sox and Liverpool FC - Bill James, Sabermetrics & Moneyball References: Money Ball - https://www.amazon.com/Moneyball-Art-Winning-Unfair-Game/dp/0393324818/ref=sr_1_2?dchild=1&keywords=moneyball&qid=1604263470&sr=8-2 The King of Oil - https://www.amazon.com/King-Oil-Secret-Lives-Marc/dp/031265068X/ref=sr_1_1?dchild=1&keywords=the+king+of+oil&qid=1604263508&sr=8-1 Sabermetrics - https://www.amazon.com/Bill-James-Historical-Baseball-Abstract/dp/0743227220/ref=sr_1_13?dchild=1&keywords=sabermetrics&qid=1604263540&sr=8-13 The Market Wizards - https://www.amazon.com/Market-Wizards-Updated-Interviews-Traders/dp/1118273052/ref=sr_1_4?crid=6MTVBTN36CED&dchild=1&keywords=market+wizards&qid=1604263811&sprefix=market+%2Caps%2C212&sr=8-4 The New Market Wizards - https://www.amazon.com/New-Market-Wizards-Conversations-Americas/dp/0887306675/ref=sr_1_5?crid=6MTVBTN36CED&dchild=1&keywords=market+wizards&qid=1604263843&sprefix=market+%2Caps%2C212&sr=8-5 Trading Places - https://www.imdb.com/title/tt0086465/ When Genius Failed - https://www.amazon.com/When-Genius-Failed-Long-Term-Management/dp/0375758259/ref=sr_1_1?crid=XHTG6HNC4C4J&dchild=1&keywords=when+genius+failed&qid=1604377667&sprefix=when+gen%2Caps%2C194&sr=8-1

Topics: - Market context/musings - Price of first barrel of crude pulled at Titusville in context. Or “Whale oil was the butterfly that unleashed the Tsunami.” - The seven sisters. - Rockefeller and Standard Oil, Louis Brandeis & Teddy Roosevelt - “Standard Oil of NJ and Standard Oil of California” - War machines. First Lord of the Admiralty - Winston Churchill. “Why did Hitler invade the Balkans? Why did the Japanese Invade Burma? Why were we in Iraq? Why are the Turks fucking around in the Agean?” The Anglo Persian Oil Company - “Or why the Iranians hate our guts” - Aramco = Arab American Oil Company References: The Prize Book: https://www.amazon.com/Prize-Epic-Quest-Money-Power/dp/1439110123/ref=sr_1_1?dchild=1&keywords=the+prize&qid=1604263621&sr=8-1 Videos: https://www.amazon.com/Our-Plan/dp/B01M11EMKD/ref=sr_1_2?dchild=1&keywords=the+prize&qid=1604263657&sr=8-2

Welcome to margin call Connect with George Connect with Alex This is Margin Call – A podcast that explores the oil markets. We pull the pieces together to talk about how every cut of the barrel is marketed and why prices behave the way they do. With your guides Alex Chandy and “Big” George Paraskevpoulos.Topics: – Introduction to Alex and George – Prologue – what are we about and what this podcast is about – 4/20/20 – Facts and set up (system and market) – What went wrong.  How did the system break? – What are the implications – future problems this causes (moral hazard) – Segue to history of energy markets – just a chapter in a 3 century story that is still being written.   Show Links Sign up for our newsletter: The RoundupSubscribe to Digital Wildcatters on YoutubeFollow Digital Wildcatters on Facebook