This is a great question. The problem with passive financial investing (where you direct money, but are not involved in any operational decisions) is that it’s inherently a bet FOR civilizational adequacy—it only takes a partial collapse (or corruption or not-collapse-but-stupid-equilibrium-change) to keep you from getting paid.
I know nothing about the coal business, but I can imagine they’re already so leveraged that a slight drop in prices will kill them. I can imagine regulatory risks that shut them down (or nationalize their profits by environmental or tax mechanisms). I can imagine that many of the public companies are operators rather than owners of the underlying mineral rights, and most of the long-term value is locked up in private companies and trusts.
It’s also possible that this is a market failure, and ESG and other irrational capital allocation has made this a great opportunity. I don’t know how I’d get to the truth of it (or more formally, how I’d update from my EMH-on-average-but-highly-variant-per-company prior for this industry), without a LOT of effort and some amount of insider knowledge.
The problem with passive financial investing (where you direct money, but are not involved in any operational decisions) is that it’s inherently a bet FOR civilizational adequacy—it only takes a partial collapse (or corruption or not-collapse-but-stupid-equilibrium-change) to keep you from getting paid.
That’s a good point. Apparently I’m still a believer in civilizational adequacy, at least to this extent! But a lot of this is just lack of alternatives, right? Even if I was to become an owner-operator, my money could still be regulated/taxed/nationalized away, and it’s riskier in other ways (e.g., less diversified).
I know nothing about the coal business, but I can imagine they’re already so leveraged that a slight drop in prices will kill them. I can imagine regulatory risks that shut them down (or nationalize their profits by environmental or tax mechanisms). I can imagine that many of the public companies are operators rather than owners of the underlying mineral rights, and most of the long-term value is locked up in private companies and trusts.
Only the middle one is a real issue.
It’s also possible that this is a market failure, and ESG and other irrational capital allocation has made this a great opportunity. I don’t know how I’d get to the truth of it (or more formally, how I’d update from my EMH-on-average-but-highly-variant-per-company prior for this industry), without a LOT of effort and some amount of insider knowledge.
Yeah, I don’t know how to do it without a lot of effort either. (The “insider knowledge” I have came from following a former professional coal industry analyst who often shares his views on Twitter and in Twitter Spaces. Seems to be enough so far, but hopefully I’m not just fooling myself / gotten lucky.)
This is a great question. The problem with passive financial investing (where you direct money, but are not involved in any operational decisions) is that it’s inherently a bet FOR civilizational adequacy—it only takes a partial collapse (or corruption or not-collapse-but-stupid-equilibrium-change) to keep you from getting paid.
I know nothing about the coal business, but I can imagine they’re already so leveraged that a slight drop in prices will kill them. I can imagine regulatory risks that shut them down (or nationalize their profits by environmental or tax mechanisms). I can imagine that many of the public companies are operators rather than owners of the underlying mineral rights, and most of the long-term value is locked up in private companies and trusts.
It’s also possible that this is a market failure, and ESG and other irrational capital allocation has made this a great opportunity. I don’t know how I’d get to the truth of it (or more formally, how I’d update from my EMH-on-average-but-highly-variant-per-company prior for this industry), without a LOT of effort and some amount of insider knowledge.
That’s a good point. Apparently I’m still a believer in civilizational adequacy, at least to this extent! But a lot of this is just lack of alternatives, right? Even if I was to become an owner-operator, my money could still be regulated/taxed/nationalized away, and it’s riskier in other ways (e.g., less diversified).
Only the middle one is a real issue.
Yeah, I don’t know how to do it without a lot of effort either. (The “insider knowledge” I have came from following a former professional coal industry analyst who often shares his views on Twitter and in Twitter Spaces. Seems to be enough so far, but hopefully I’m not just fooling myself / gotten lucky.)