May

10

Today, we are witnessing a tug-of-war within America’s deregulated power markets. It's between those advocating for free-market operations and state policymakers intervening in those markets. In the process, consumers of all kinds are paying unnecessarily high prices. Let me explain:

In deregulated power markets, energy producers are theoretically dispatched in economic order based on their production costs, excluding owners' capital costs. The last producer to clear the market sets the market-clearing price. In general, this order begins with producers with the lowest marginal costs—such as wind and solar—and ends with the least efficient assets that use the highest-cost fuel: typically oil, coal, or inefficient natural gas plants.

When markets attract more cost-leading producers, costlier assets are sidelined, and market-clearing prices fall. Even if cost leaders offer intermittent availability, consumers benefit on average because their aggregate energy costs decline.

Data centers consume massive amounts of electricity (and water). The global buildout of thousands of new data centers has increased demand for power generation. As a result, power markets now reward higher-cost producers that rely on expensive fuels. Consequently, market-clearing prices are rising, and consumers are paying more. As clearing prices rise, cost leaders' margins also increase.

A potential solution to higher power prices is to increase the number of cost-leading producers. Even if new cost leaders offer intermittent production, the strategy benefits consumers through lower average clearing prices, though backup sourcing merits consideration. This approach creates winners and losers: owners of costlier production assets lose when average clearing prices fall. Consequently, the costliest market participants oppose the introduction of new cost leaders.

In January 2025, the Trump administration began implementing policies to restrict investments in cost-leading production. The administration rescinded permits for wind projects and, by April 2026, had negotiated about $2 billion in payouts to compensate investors to walk away from permitted and partially completed offshore wind projects. Additionally, since August 2025, the Pentagon has delayed reviews of165 onshore wind projects (30 GW of capacity), citing unspecified national security concerns.

When energy policy restricts cost-leading producers from participating in markets, consumers pay higher energy prices. This dynamic creates competing interests: while owners of costlier generation assets benefit from reduced competition, all electricity consumers—including data center operators—face higher costs.

The solution is straightforward: remove the barriers. Instead of spending $2 billion in taxpayer dollars to prevent investment, use those same funds (or none) to let the market allocate resources based on market forces. If permitted, capital will flow to cost-leading producers in response to the buildout and rising prices.

Bud Conrad writes:

I'll add some less-discussed items: We all know that about 20% less oil is flowing out of the Strait. But the Ukraine war is hidden behind the I run daily policy changes. Both the Russian and Ukraine sides have escalated massively since the beginning of April by doubling their daily barrage of drones and missiles. Specifically, the energy generation systems of both sides are being attacked, and the relatively less noticed is that Russian refineries and ports have been getting hammered. The result is that, while Russia has reserves, its ability to deliver amid already reduced supplies has been damaged. Nobody knows how much, but multiple cities deep into Russia have been attacked with huge clouds of smoke. St. Petersburg ports and some cities 2,000 Km into Russia have been damaged.

It takes up to 2 months to get tankers from the Persian Gulf to customers. So to restart, it will take something like that time, from the Strait opening. Oil production from most Gulf states has been attacked and stopped, and it will take more than months to restart. The US Strategic Petroleum Reserve is adding supply but cannot continue much longer, since it was already depleted, in an attempt to keep prices low to weaken Russia during the Ukraine war. In the tit for tat between Zalen ski and Moscow, Russia asked for a ceasefire on the Memorial Parade March 9 (Tomorrow), which has already been rejected by Ukraine, and Russia has announced plans to attack the center of Kiev with Oreshiks.

The pressure for oil prices to go much higher seems obvious.

May

7

The US consumer sentiment surveys have become completely politicized and useless for economic analysis. When Biden was president, respondents who preferred the Republicans said they felt very bad about the economy. After Trump was elected, they felt very optimistic. Respondents who preferred the Democrats did the opposite. And yet bad consumer sentiment as expressed in surveys never turned into action. Consumers did not actually reduce spending.

Larry Williams suggests:

Use this one then:

Business Tendency Surveys (Manufacturing): Confidence Indicators: Composite Indicators: National Indicator for United States (BSCICP02USM460S) | FRED | St. Louis Fed

May

5

The Strategy of Conflict (pdf), by Thomas C. Schelling

At the beginning of the book he says that some ppl just thrive on conflicts - the more the better basically. That is true within corporations as well, everywhere we can see it on world stage.

– THE RETARDED SCIENCE OF INTERNATIONAL STRATEGY

Among diverse theories of conflict—corresponding to the diverse meanings of the word “conflict” — a main dividing line is between those that treat conflict as a pathological state and seek its causes and treatment, and those that take conflict for granted and study the behavior associated with it. Among the latter there is a further division between those that examine the participants in a conflict in all their complexity—with regard to both “rational” and “irrational” behavior, conscious and unconscious, and to motivations as well as to calculations—and those that focus on the more rational, conscious, artful kind of behavior. Crudely speaking, the latter treat conflict as a kind of contest, in which the participants are trying to “win.”

May

4

What Makes a Trading Strategy Work?

In quant trading finding an alpha is not enough.

What is the edge you have that others do not?

A backtest is not the hard part.

The hard part is explaining why the opportunity exists, why others have not competed it away, and why it should continue to exist in the future.

In practice, most real strategy edges come from one or more of these: …

Some good discussion in the comments also. In response to a question about spinoffs:

Tad Haley Spinoffs are one of the best examples of an opportunity that can be visible without being equally tradable.

The edge is often not in spotting the situation. It is in understanding who has to sell, who cannot own it, who can actually fund and hold it, and how long the implementation friction lasts.

That brings in mandate and tolerance, liquidity, balance sheet, and constraints all at once. Information still matters, especially in separating flow-driven weakness from real fundamental weakness, but a lot of the opportunity exists because the natural ownership base is temporarily broken.

Larry Williams responds:

Is it really that complex? You find out what fundamental conditions drive a market. Maybe it's supply, maybe it's good earnings, and take advantage of that impact.

Zubin Al Genubi comments:

Its good to understand market structure in addition to stats. Structure is changing from a few years ago.

Nils Poertner adds:

Excellent, Yes Zubin. Also the trader may change and develop a bit of an ego after yrs of success….that is why trading requires constant shedding of false personality.

Asindu Drileba writes:

I have also come across three recurring reasons why some edges still exist.

Liquidity: So common in the Bitcoin markets, more in smaller cryptos markets. I have heard people with serious AUM complain about how the can't deploy $30m positions. But small specs don't have this problem.

Impatience: Even though some long term strategies like following the drift, indexing, work people are impatient, often demanding salary like consistency from the market like Robert Bacon suggests.

High stress strategies: Some people are patient, though can't handle strategies that are profitable, but have a very high frequency of losses. I have suggested some (buy) options strategies to my friends, but they just can't endure the 70% to 90% losing rates.

Larry Williams writes:

The big edge is to think forward, to see the future before other people do there are fundamental facts to this game, like insider buying. Mister Brush has written so much about. There are advantages, and they're very simple.

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