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Here’s What Hedge Funds Are Up To
Regular readers are all too familiar with my opinion of hedge funds and active management in general: Paying someone to gamble your money on a fool's errand is a profoundly silly proposition.
I say that knowing full well that my audience is comprised in no small part of money managers and the good folks on Wall Street who service their prime brokerage needs, among other "God's work."
I'd apologize, but I'm not sorry. The fact is, anyone with a college education and a willingness to read a Jack
As someone whose background involves the energy sector, the idea that hedge funds are long utes as an expression of what’s basically “Long Load Growth” makes me want to both laugh and cry. You want to know if electric utilities are making profits? Look at NG. Higher NG = higher profits. It’s counter-intuitivie, but it’s because NG sets the marginal price of power a high percentage of the time. Utilities are long baseload–whether it’s coal, or nuclear, or hyrdro, or these days, on-peak solar. All the while, combined-cycle gas generators are the marginal megawatt, so they set the price, and if NG is sitting around the all-time lows (as it is right now), it doesn’t matter how fast load is growing, the price of power is in the shitter, and so are utilities’ margins.
The amount of my life I spent watching these numbers on a 5 second refresh… woof. https://www.pjm.com/markets-and-operations/ops-analysis/dispatch-rates
I do not know but it would seem to me that training could be done during periods of excess power. Be that wind, solar or some combination.
However I have heard rumors of crypto miners buying nuclear, coal and hydro assets. I have also seen how these assets can be paired with solar and short duration batteries to provide reliable power. I am curious of any take in the energy transition and how customers and productions assets are paired real time.
I do not know if these trends are enough to effect NG pricing as you suggest was certainly reality a few years ago. However are utilities making money with all the solar they added? The installed base is still a small amount of solar, but additions of solar are significant.
Depreciation and the “model race” run 24/7 so there’s incentive to keep the GPUs running around the clock.
One trader theme is micro-reactors co-located with data centers. How realistic this is, I don’t know.
Renewables have been a frustrating investment theme over the past few years. (See TAN chart.) Maybe it’s bottomed out.
Micro reactors are an extremely expensive way to go and depreciate over 30+ years, if you can wait 20 years for the power. If cost is truly not the issue, Maybe more cost effective to use oil fired simple cycle to produce peak power for 1-3 years during the race.