In October of 2019, I found myself at a career crossroads. For someone as wordy as I am, the succinctness of this post says a lot.
There has only been one other time in my life I felt as lost and devoid of purpose as I was that day in October and that was after being fired in 2012, the topic of my book “What the F@&K is Wrong with Everybody Else? What They Didn’t Teach You in Business School.” As I wrote then and believe to this day: your career is a river. You jump in at the beginning and while some people go fast and some people go slow, the reality is you have no idea where the turns and bends and breaks that will occur along the way. All you can control is making the best of every interaction along the way and know that in time, you will see everyone again when you all reach to the ocean and the inevitable end.
It took me 18 months to write the book and to rediscover myself and purpose. I embraced the me that would ultimately co-found two companies, coach my kids in hockey, golf and lacrosse, join the PTA and fully embrace my “unique” approach to life, personified by this selfie I took in 2016 outside a Roswell, New Mexico IHOP.
I woke up at 1 am to drive 7.5 hours for a 45 minute breakfast to try and buy a 640 acre lease. We met for an hour, got the deal in principle done and as I was getting back in my car to drive back to Denver, I saw the alien. I don’t know what possessed me to run across the highway to take the picture that ultimately became my LinkedIn profile picture and my logo but to me, that picture accurately represented the battle between DRW the character and David, the human. Sometimes symbiotic, sometimes destructive, the two were and are, always wrestling.
With no job and no idea what to do to keep myself busy in November 2019, I let the #hottakeoftheday expand to fill the void, writing and researching, going on CNBC and Bloomberg TV, starting a podcast, and getting in Twitter fights defending the valuation of CDEV, Callon and PDC as my absolute can’t miss top picks. Boy, would a coma from then until now have been a financial windfall!
As we know in oil and gas, timing is everything and commodity prices make or break companies. It’s the reason why, when only 6 months later, when coronavirus would wreck havoc on the global economy, friendships and the way many of us looked at the world, I studied it so intently. Predict the path of COVID, and know what would happen to oil and gas prices and the companies that depend on it.
When I started writing about it in February of 2020, I was deeply perplexed. Amazingly my conclusion was that the market was F’d. Why I didn’t sell everything that day remains a very big mystery to me. I do know why I am virtually 100% cash today, excluding being long AF oil and gas.
If you’ve read any of my writing before COVID, you know I was a fairly cynical guy. But, the global response to COVID sent me into a pretty dark place and tested the limits of that cynicism. Writing is a mirror to the soul, and you can see even in late March of 2020 when I wrote this post warning of second order consequences, the tone speaks volumes as to where I was headed. I wore panties as a mask (which got me called a misogynist of all things), I disobeyed every “rule” that was put in place which only feed my rebelliousness, and I got late night texts from angry men primarily accusing me of wanting to kill their grandmothers and hoping I would die instead. Not to be dismayed, I wrote as if the fate of the world depended on me. It didn’t. The rock is the rock.
I know that even prior to COVID, it wasn’t like I was making a lot of friends writing the #hottakeoftheday, calling out management teams behavior, running a tongue in cheek activist campaign on CDEV (congrats on the merger with Colgate, btw, love it…), and generally saying the quiet part out loud with a flare and Overton window that probably made me come off as flippant, dismissive and disrespectful. For many reasons, some of which I still don’t truly understand, I was happy to make the trade off between disliked and misunderstood but being amusing and thought provoking. But, for all the fun and hopefully some good it has brought, DRW the character was very often overshadowed David, the human. As a defense mechanism, my empathy hit and continues to trend at all time lows. I do care a lot about people, it’s just easier if I pretend that I don’t.
Although correlation isn’t causation, what I’m most proud of is that many more people in industry have stood up to make their voices heard in the last few years. I am totally against censorship and while freedom of speech isn’t freedom of consequence, we need more voices of dissent and discussion to get better as a society. Now that social media isn’t as taboo as it was in 2018 when I started, there is so much great content that often times, I hit the like button and put my computer away for the day. I commend everyone who is sharing their knowledge and wisdom in a time of cancel culture and censorship. But storm clouds are brewing again and I feel compelled to once again speak up.
We have all seen the last 2.5 years unfold and the demon child it gave birth to is taking form: ESG. Climate. COVID. Bailouts. Inflation. Division. Censorship. And regrettably, the politicians and capital providers who have driven all these remain firmly at the wheel, with the World Economic Forum acting as some hydra whisperer. The results are clear. It’s bad.
But of all the bad, I feel most compelled to warn about Europe. It is really, really, really bad. If electricity used to be 4% of a companies cost, it is now 40%. Businesses that make real goods don’t have 36% margin to play with when labor costs rise, input costs rise, and demand due to a recession, fall. So businesses close. People lose jobs. With no income, what do you do? In the U.S. 43% of people don’t have $400 for an emergency. Government shot all the financial bullets it had in the battle against COVID, for which we have nothing to show as the virus prepares for it’s worst season yet (the be only difference this time is the media won’t cover it because it would result in too much crow…), and you can’t inflate your way out of an energy AND food crisis. 70% of fertilizer plants in Europe are offline and Ukraine, the breadbasket of the world, missed it’s growing season. Russia is flaring gas rather than sell it to Germany and can turn off the supply any day they see fit.
Politicians are begging people to consume less but in Europe, that won’t be enough. Rolling blackouts are coming to California this weekend, as consumers have been asked to raise their thermostat to 78 F and not charge their electric vehicles after 4 pm (doesn’t anyone drive to work in California??) . The irony that last week they are banning the sale of new combustion engine cars in 2035 is not missed.
I fear what comes next: Energy Lockdowns 2.0. The last time, world oil demand went from 100 mmbo/d to 65 mmbo/d. Prices hit -37/bbl. Is it that far fetched to believe that they could do it again? And, what are the second order consequences of that with inflation already running at 9%?
I am usually early, and usually ignore the human emotion element in decision making, but if I lost my job, saw my utility bills increase 300-700%, saw food prices up 20% and had a mortgage to pay and kids to feed… well, it wouldn’t be pretty. The only path forward is to remove Russian sanctions and get oil and gas moving freely into Europe. The best actual thinkers I read, of which Doomberg is amongst the best, are all highlighting just how bad this issue is.
In hindsight, our expectation that Western leaders would awaken to the laws of physics was terribly mistaken. Instead, they have behaved as though they have leverage over Putin, not the other way around. Despite already skyrocketing energy prices, Nord Stream 2 was canceled, adding further strain to the EU’s depleting energy options. Emboldened by the cards handed to him by his geopolitical opponents, Putin invaded Ukraine. The West’s response – attempting to sanction Putin’s energy from global markets – was quite literally the dumbest option available, akin to sawing off your own hand in the middle of a boxing match.
In the past week, the market for European electricity broke, begging the question of exactly who is being sanctioned by whom. Forward-year prices for baseload power in Germany skyrocketed to over €1,000 per MWh before crashing by more than a third a day later. The same contract was selling for €45 per MWh less than two years ago. The imminent crisis is now undeniably laid bare for all to see. How will Europe navigate the upcoming winter? Will logic, sanity, and genuine leadership take hold, or will the same fools who rushed into this mess double down on their foolishness?
If goods don’t cross borders, soldiers will. And the Russians have nukes. There are only 60 days before winter arrives in Europe. There isn’t much time for logic and sanity to return.
On the bright side, Arkansas and Oklahoma are incredible states and I highly recommend visiting before winter arrives.
One of you best posts ever, David. The worldwide energy situation is FUBAR on steroids cloaked in a suicide bomber vest connected to a timer. But, you are right. OK and AR are incredible states, and I head to OKC tomorrow for some soccer. Cheers!