Wall Street Is Finally Going to Make Money Off the Permian

Re:Wall Street Is Finally Going to Make Money Off the Permian by cellis on Thursday April 27, 2023 @09:09PM (#35736427)

Au contraire, it's simple math. If I invest 1 dollar in 2010, and get back 50 cents in 2020, I have in fact lost 50% of my money over that time period. It's the same as any other asset class.For example, If you're a portfolio manager and you invest in a biotech startup index and only 5% of them produce drugs, you would likely lose 50% or more of your money over 10 years, and there's no accounting for "maybe they'll have a breakthrough later", as you need your capital back due to capital calls or redemptions or whatever.

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Re:Wall Street Is Finally Going to Make Money Off the Permian by prepend on Thursday April 27, 2023 @09:41PM (#35736617)

So if you buy a municipal bond for $1 on 2010 and it’s only yielded $.50 by 2020 have you in fact lost 50% of your money? Of course not.

No one interested in investing looks at money so simplistically.

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Re:Wall Street Is Finally Going to Make Money Off the Permian by jjeaff on Thursday April 27, 2023 @10:00PM (#35736731)

Investors would consider $0.50 return on $1 over 10 years to be a loss. Money isn't free and that same dollar invested in an sp 500 index fund would have yielded $2.50 for that same time period.

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Re:Wall Street Is Finally Going to Make Money Off the Permian by dghlsakjg on Thursday April 27, 2023 @10:31PM (#35736897)

You are misusing the terms yield and return, and seem to have a misunderstanding of how a muni bond works.

A muni bond would have yielded $.50, but you still have the underlying asset, so it isn't a loss, its a guaranteed return of 50% every 10 yrs, until the bond matures (you get your $1 back) or is defaulted on.

The SP500 doesn't guarantee anything, and there are 10 yr periods where it has negative growth.

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Re:Wall Street Is Finally Going to Make Money Off the Permian by jjeaff on Friday April 28, 2023 @09:59PM (#35749297)

No, I used the term yield correctly. $1 in the sp 500 over that time period would have increased to $3.50. Or a yield of $2.50 while maintaining the underlying asset of $1.

As for it being a muni bond, the risk is low but still there. Municipalities do in fact default sometimes.

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Re:Wall Street Is Finally Going to Make Money Off the Permian by prepend on Friday April 28, 2023 @06:55AM (#35739697)

It depends on the investors. Yes, the s&p returned more in this period, it usually does, but not always.

There’s reasons why other investments exist and one is the risk of the investment. Municipal bonds are really stable and some investors just want predictable returns and will sacrifice overall returns for stability and lower risk.

Oil investments aren’t municipal bonds, but I expect most oil investors want stable returns.

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Re:Wall Street Is Finally Going to Make Money Off the Permian by refurb on Friday April 28, 2023 @12:21AM (#35737447)

In your example that's assuming it's a coupon bond, but many (especially the tax free ones) are zero coupon.

So if you buy a $1M bond for $850k, but then interest rates go up and the value of the bond drops to $650k, then you've lost money through opportunity cost, but you'll still get your $1M at maturity.

Not that different with oil fields. If you assume it will produce X barrels, but only produces 20%*X barrels, not only is the money you're making lower, but the value of the oil field also drops (since its value is dependent upon production potential).

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Re:Wall Street Is Finally Going to Make Money Off the Permian by prepend on Friday April 28, 2023 @06:53AM (#35739676)

But that’s not what happened with these oil investments. The coupon paid out 50% over 10 years which is what like a 4% annual return, not very good.

But this info isn’t enough to decide anything without the current value of the investment. If the investment is $0 then that’s horrible. If it’s $1 then it’s paid out 50% over ten years so not that great. But if it’s $2, then that’s a good investment.

The fact that this crucial information is missing from the article makes me think the author is an idiot or excluding it because it doesn’t support his position.

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Re:Wall Street Is Finally Going to Make Money Off the Permian by foota on Thursday April 27, 2023 @09:18PM (#35736478)

But if there's an expected value from the rest of your investment that you're not counting, then it's not an honest way of looking at things.

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Re:Wall Street Is Finally Going to Make Money Off the Permian by kevviiinn on Thursday April 27, 2023 @09:40PM (#35736614)

Expected is not realised

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Re:Wall Street Is Finally Going to Make Money Off the Permian by foota on Thursday April 27, 2023 @10:56PM (#35737019)

Sure, but it's also not a loss.

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Re:Wall Street Is Finally Going to Make Money Off the Permian by whatever1 on Thursday April 27, 2023 @10:03PM (#35736750)

You realize that a typical oilfield project takes 10 years to start producing the first barrel of oil right?

You generate assets during that period and the potential to pump oil. Same way that you invest money to a startup with 0 revenues.

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Re:Wall Street Is Finally Going to Make Money Off the Permian by slashdev on Thursday April 27, 2023 @11:16PM (#35737106)

Not in shale. That’s measured in as little as months.

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Re:Wall Street Is Finally Going to Make Money Off the Permian by bigger_cheese on Thursday April 27, 2023 @11:29PM (#35737173)

I don't think it is that simple as claiming a 50% loss for the business you have things like inflation and depreciation of the business assets (such as the drilling equipment) which makes it a lot more murky.

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