Description

Buy YCA

(optional: borrowing GBP)

Some things are believed because they are demonstrably true. But many other things are believed simply because they have been asserted repeatedly - and repetition has been accepted as a substitute for evidence. - Thomas Sowell

The shortness of time spent on this trade, 30 minutes (though years of knowledge in the electricity sector), is in line with the timeframe I see for this handsome risk reward (week to a month):

• North Stream was sabotaged. This is incredibly bullish uranium:

• uncertainty of energy scarcity has changed into certainty of scarcity. Prolonging existing nukes in the margin is now almost certain.

• sabotage changes policymaker psychology further towards fear of further scarcity (further supplies can be sabotaged)

• A general fear of energy scarcity not only keeps the existing nukes running, but more importantly, it will add to the changing philosophy from “just-in-time” paradigm (already in shatters since CV-19) to a restocking. Nuclear energy is the only energy source you can easily stock up for energy security for decades (which indeed e.g. the Japanese have done). For most of energy-poor Europe, TINA in terms of energy security (hence the same solution 50 y ago).

• The BOE just announced a bond purchase program to defend the solvency of pension funds. What will this do to pound sterling however? (hence the currency crisis leg of this trade) 

• YCA NAV discount has increased since the last published one:

• YCA NAV (slide 7) on 2nd of September was 4.64 GBP per share

• GBP fell almost 10% in dollar terms ever since, while Ur price only fell 4%

• YCA fell almost 5% since this date in GBP terms

⇒ YCA NAV discount (using this dirty method) = 20%

• While YCA carries an almost 1% holdco annual expenses, management has a history of buying back shares when NAV discount exceeded 10% 

Abundant energy times created stupid policies of low energy-return-on-energy-invested: solar & wind dogmatism 

Energy scarce times will create policies for high-energy-return-on-energy invested technologies: nuclear (2x order of magnitudes higher)

Risks

* another media circus centering around nuclear non-event incidents

* further lies and anti-logic on nuclear energy from PhD energy ministers in Children Books (Germany) and Africa Studies (Belgium) - mitigant: pitchforks

* the biggest risk: an e-communist world government (think Trudeau and the PhDs above) where lies around energy and hydrogen are rampant: a world where all non-electrified energy will be from hydrogen, except we don't actually succeed in building 200X more solar & wind vs what we built (ever): the energy needed to account for all hydrogen losses - mitigant: you will own nothing & be happy anyway

 * emotional biases from the author (with unfortunately skin in the game). The stops of nuclear plants will literally kill thousands of poor people in other continents through the fertilizer shutdowns linkage. One 1000MW plant provides electricity for 2 million households. For those still interested in depopulating for ecological reasons: African Studies funding might not be secured either.

Interesting Literature: Vaclav Smil (the mental model of EROEI ratio in particular), Goehring & Rozencwaig letters, Bill Gates

Generating more energy, not less, increases quality of life for all

 

Catalyst

Physics deniers walking into the wall of physics (for no blackouts to happen, multiple things have to go right simultaneously. increasing intermittent generation has to remain balanced every second, in every local node, and energy deficits are not allowed to happen)

Humanity figures out the right policies eventually (see also: covid)